Newby, et al v. Enron Corporation

United States Court of Appeals
Fifth Circuit
F I L E D
December 15, 2004
Charles R. Fulbruge III
Clerk
In the
United States Court of Appeals
for the Fifth Circuit
_______________
m 04-20001
_______________
MARK NEWBY, ET AL.,
Plaintiffs,
MARK NEWBY; THE REGENTS OF THE UNIVERSITY OF CALIFORNIA,
Plaintiffs-Appellees,
VERSUS
ENRON CORPORATION, ET AL.,
Defendants,
ANDERSEN-UNITED KINGDOM; ANDERSEN-BRAZIL;
ARTHUR ANDERSEN & COMPANY INDIA; ANDERSEN WORLDWIDE SC,
Defendants-Appellees,
VERSUS
RINIS TRAVEL SERVICE INC. PROFIT SHARING TRUST UA 6-1-1989;
MICHAEL J. RINIS, IRRA,
Intervenor Plaintiffs-Appellants,

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SETTLEMENT CLASS MEMBERS; JAMES H. ALLEN, JR.; BURTON W. CARLSON, JR.;
MICHAEL T. DEFREECE; MARCIA A. DEFREECE; ANDREW E. KRINOCK;
PHYLLIS A. KRINOCK; PARTCOM LIMITED PARTNERSHIP;
REED PARTNERS LP,
FORMERLY KNOWN AS REED FAMILY LIMITED PARTNERSHIP;
F. WALKER TUCEI; JUNE P. TUCEI; ROMAN H. UHING;
ALVERA A. UHING; VIETS FAMILY ASSOCIATES LLP,
Appellants.
* * * * * * * * * * * * * * *
PAMELA M. TITTLE, ETC., ET AL.,
Plaintiffs,
PAMELA M. TITTLE,
ON BEHALF OF HERSELF AND A CLASS OF PERSONS SIMILARLY SITUATED,
AND ON BEHALF OF THE ENRON CORPORATION SAVINGS PLAN,
THE ENRON CORPORATION EMPLOYEES STOCK OWNERSHIP PLAN,
AND THE ENRON CORPORATION CASH BALANCE PLAN,
Plaintiffs-Appellees
VERSUS
ENRON CORPORATION, ET AL.,
Defendants.
* * * * * * * * * * * * * * *

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WASHINGTON STATE INVESTMENT BOARD, ET AL.
Plaintiffs,
VERSUS
KENNETH L. LAY, ET AL.,
Defendants.
* * * * * * * * * * * * * * *
ABBEY NATIONAL TREASURY SERVICES PLC,
Plaintiff,
VERSUS
CREDIT SUISSE FIRST BOSTON CORPORATION; ET AL.,
Defendants.
_________________________
Appeals from the United States District Court
for the Southern District of Texas
_________________________

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Before SMITH, STEWART, AND PRADO,
Circuit Judges.
JERRY E. SMITH, Circuit Judge:
This appeal concerns a variety of securities
class actions stemming from the downfall of
Enron Corporation. These actions have simi-
lar substantive claims, but they differ with
respect to the definition of the putative class.
Appellants, a subset of members of the puta-
tive class in Newby v. Enron Corp., No.
H-01-CV-3624 (S.D. Tex.), timely objected to
the proposed partial settlement with defendant
Andersen Worldwide Societe Cooperative
(“AWSC”)1 and most of its member firms.
The district court held a “fairness hearing”
before approving the settlement. The objec-
tors from the putative Newby class (the “Ob-
jectors”) appeal the decision to approve the
$40 million partial settlement (the “Partial Set-
tlement”). Finding no error, we affirm.
I.
In the interest of clarity, we divide our fac-
tual summary into three sections. They are
(1) a brief synopsis of the financial events sur-
rounding the collapse of Enron Corporation
(“Enron”) and those leading to the associated
litigation; (2) a discussion of the relationship
between AWSC and its affiliated Andersen
firms (the “Member Firms”); and (3) the terms
of the Partial Settlement.
A.
Throughout the 1990’s Enron sold natural
gas, electricity, and communications products
to a variety of customers. Its share price
soared through mid-2001, partially as a result
of promising financial reports. The meteoric
rise of Enron stock allowed industry insiders
to reap windfall gains. The bubble burst on
October 16, 2001, when Enron announced a
shocking $618 million loss for the quarter, a
figure attributable to the company’s decision
to reduce falsely inflated income and report
concealed losses from earlier accounting peri-
ods. On November 8, 2001, Enron revealed
that its accounting practices violated a number
of laws and industry norms and that audit re-
ports for 1997-2000 were inaccurate. Enron’s
share price fell precipitously, it is now bank-
rupt, and many of its senior officers have been
indicted.
This consolidated appeal concerns a set of
cases arising out of the Enron debacle, among
them Newby, a securities fraud class action,
and Tittle v. Enron Corp., No. H-01-CV-3913
(S.D. Tex.), a related ERISA2 claim alleging
racketeering and negligence. The appeal also
concerns Wash. State Inv. Bd. & Employ-
er-Teamsters Local Nos. 175 and 505 Pension
Trust Fund v. Lay, No. H-02-3401 (S.D. Tex).
B.
The Newby defendants include a number of
AWSC Member Firms, including Arthur An-
dersen LLP (“Andersen U.S.”), an entity not
party to the Partial Settlement. The plaintiffs
lodged detailed and extensive allegations
against a variety of Andersen business entities.
These claims stemmed primarily from allegedly
defective accounting procedures and audits.
The Partial Settlement before us today
involves (1) the plaintiffs in the Newby, Tittle,
and Washington State Investment Board ac-
tions (the “Actions”) and (2) the “Settling De-
fendants” (AWSC and the “Foreign Member
1 Because AWSC is now in liquidation, the full
name of the defendants is AWSC Societe Coop-
erative, en liquidation.
2 Employee Retirement Income Security Act of
1974, 29 U.S.C. § 1001 et seq.

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Firms,” with the term “Foreign Member
Firms” denoting all AWSC Anderson affiliates
excluding Andersen U.S.).
AWSC is a limited liability Swiss societe
cooperative, a business entity with no Am-
erican corporate analogue, formed under the
Swiss Code of Obligations and domiciled in
Geneva, Switzerland. AWSC coordinated the
Andersen accounting network. Each Member
Firm was formed under the laws of its domi-
ciliary. A separate contract governed every
individual relationship between AWSC and
each member firm, including the Foreign
Member Firms.3 AWSC did not provide pro-
fessional services to clients and its primary
(but not exclusive) responsibilities involved
establishing the professional standards by
which the Member Firms were to abide.4
C.
In August 2002 the representative plaintiffs
in the Actions (together, the “Representative
Plaintiffs”) agreed to a $40 million partial set-
tlement with AWSC and the Member Firms,
excluding Andersen U.S. The parties submit-
ted their Stipulation of Partial Settlement for
$40 million in July 2003 and, in late Septem-
ber, several groups intervened to object to the
Partial Settlement. After an October fairness
hearing, the district court entered the judgment
approving the settlement. Two groups of ob-
jectors (the “Rinis” and “Allen” objectors)
timely appealed. The relevant terms of the
Partial Settlement to which the district court
gave preliminary approval are as follows:5
(1) the dismissal with prejudice of all of
plaintiffs’ past, present, and future claims, aris-
ing out of the Enron facts, against Settling
Defendants, including Anderson-United King-
dom, Andersen-Brazil, and Arthur Andersen &
Co. (India), the Foreign Member Firms already
embroiled in litigation;6
(2) the release of plaintiffs’ past, present,
and future claims against successors in interest
to the Settling Defendants;
(3) payment by AWSC of $40 million in
order to establish the “Partial Settlement
Fund,” with the funds placed in escrow so that
they may earn interest during the pendency of
these proceedings;7
(4) the establishment of a $15 million fund
for future court-approved class litigation ex-
penses (the “Litigation Expense Fund”);8
3 The Foreign Member Firms, along with
AWSC, are the defendants that are party to the
Partial Settlement. This group includes those
Member Firms against whom actions were pend-
ing: Anderson-United Kingdom, Andersen-Brazil,
and Arthur Andersen & Co. (India).
4 AWSC’s duties involved the coordination of
activities among the various Member Firms.
AWSC would, for example, facilitate transnational
assistance and accounting among member firms.
AWSC was also responsible for dividing common
costs, such as the costs of running Anderson’s
training center, among the other firms. It could not
earn a profit and performed no audits.
5 These are not all the provisions of the Partial
Settlement. The full agreement is set forth in the
Stipulation of Partial Settlement filed on August
29, 2002.
6 This release does not apply to Andersen U.S.
(Andersen U.S. is not a Settling Defendant).
7 The funds earned about $335,000 in the first
year.
8 Milberg Weiss and other Plaintiffs’ Settlement
(continued...)

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(5) the allocation, through confidential,
binding, and non-appealable arbitration, of the
remaining $25 million (the “Remainder”) be-
tween, on the one hand, the consolidated New-
by and Washington State Investment Board
actions and, on the other, the Tittle action; and
(6) the payment from the Remainder to
Plaintiffs’ Settlement Counsel for as-yet un-
specified but (ultimately) court-approved at-
torneys’ fees.
II.
A.
A district court’s approval of a class action
settlement may be set aside only for abuse of
discretion. See Cotton v. Hinton, 559 F.2d
1326, 1331 (5th Cir. 1997). The district court
was extrao rdinarily meticulous in its analysis
of the Partial Settlement Fund. The Objectors,
on the other hand, continue to engage in what
we can only describe as a maddening pattern
of over-generalization and selective narration.
The gravamen of an approvable proposed
settlement is that it be “fair, adequate, and
reasonable and is not the product of collusion
between the parties.” See id. at 1330 (citing
Young v. Katz, 447 F.2d 431 (5th Cir. 1971)).
The district court faithfully applied a six-factor
test in determining the appropriateness of the
proposed settlement: (1) evidence that the
settlement was obtained by fraud or collusion;
(2) the complexity, expense, and likely dura-
tion of the litigation; (3) the stage of the litiga-
tion and available discovery; (4) the probability
of plaintiffs’ prevailing on the merits; (5) the
range of possible recovery and certainty of
damages; and (6) the opinions of class counsel,
class representatives, and absent class
members. See Reed v. Gen. Motors Corp.,
703 F.2d 170, 172 (5th Cir. 1983); Parker v.
Anderson, 667 F.2d 1204, 1209 (5th Cir.
1982). The various facts pertaining to each of
these elements are set forth in the respective
subsections below.
The Objectors phrase their arguments in a
variety of ways. Essentially, however, they
take issue with certain aspects of the Partial
Settlement pertaining to its fairness, reason-
ableness, and adequacy: (1) the size of settle-
ment; (2) the fraction of the settlement devot-
ed to expenses; (3) the propriety of the ex-
pense bills; (4) that payment to class members
is deferred; and (5) the broad release of suc-
cessors in interest to the Settling Defendants.
B.
The Objectors protest the size of the settle-
ment fund, contending $40 million to be a pal-
try sum in light of the Settling Defendants’ po-
tential liability. Draping this contention in
vague accusations of collusion, they apparently
believe the class representatives and counsel
short-changed the class by failing to secure a
larger settlement. The district court expended
considerable effort delineating the specific
reasons why a substantial recovery against the
Settling Defendants was unlikely. We repeat
them only briefly here.
First, the record reveals that AWSC and the
Foreign Member firms were formed and oper-
ated principally under the laws of a foreign
jurisdiction, rendering the prospect of satisfy-
ing personal jurisdiction requirements a daunt-
ing one. Second, the record reveals that the
Plaintiffs were unlikely to establish even mini-
mal liability on the part of the Settling Defen-
dants. The Objectors’ argument that AWSC
engaged in legally cognizable wrongs rests al-
most entirely on conclusional testimony con- 8(...continued)
Counsel do not currently seek attorney fees.

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tained in two supplementary affidavits.9 The
remainder of the Objectors’ arguments are
premised on pithy statements of worldwide
corporate unity found in marketing materials.
We decline, as did the district court, to afford
those corporate clichés considerable weight.
AWSC identified a number of other courts
rejecting claims against AWSC or Andersen as
a single, worldwide organization. The Ob-
jectors fail to rebut this submission with any
caselaw. The Objectors reason that we should
consider AWSC and the Member Firms to be
a single, worldwide organization because, if
such were not the case, the Objectors argue,
why would the Foreign Member Firms have
contributed to the AWSC settlement?
The answer, provided in much detail during
the fairness hearing, is that they did so not be-
cause of their potential for liability, but be-
cause any potential association with Enron
“poisoned’ opportunities for them to merge
with other companies and to “get on with their
lives.”10 We consider this issue in further de-
tail in the factual insufficiency discussion of
part IV, infra.
Finally, the district court determined that
there would be almost insurmountable prob-
lems collecting any judgment against the Set-
tling Defendants. This is because of, inter
alia, (1) the financial insolvency of AWSC and
many of its member firms and (2) the un-
willingness of foreign sovereigns to enforce
U.S. judgments against them.
Counsel for the Tittle and the Newby plain-
tiffs submitted that the settlement was fair, ad-
equate and reasonable, and in the best interests
of the class. Although at the fairness hearing
lead counsel for the Newby class was hesitant
to state explicitly his belief in the weakness of
the claims against the Settling Defendants,
counsel for the Tittle plaintiffs was more can-
did: “Without the settlement agreement,
which was reached prior to the Court’s ruling
on the motions to dismiss, and after very seri-
ous and often contentious arm’s length negoti-
ations, the Tittle plaintiffs could very well have
had no recovery at all against AWSC.” We
consider the class’s small estimated recovery
sufficient to justify the sum upon which the
plaintiffs and Settling Defendants agreed.
C.
As we have discussed, the Objectors ques-
tion the magnitude of the settlement. In addi-
tion, as we will now examine, they challenge
the fraction ($15 million, or 37.5%) devoted to
the Litigation Expense Fund.
1.
The reasonableness of the expenses in-
curred during the course of the litigation is not
before the court; only the structure of the set-
tlement fund is. As the district court noted,
each round of notice for expenses costs rough-
9 These were the affidavits of Burton Carlson
and Gilbert Viets, who stated that
[AWSC] was the entity in charge of establish-
ing and enforcing accounting and professional
standards as well as quality control techniques
and procedures of, education and training per-
sonnel of, and coordinating client services on a
worldwide basis for, all of its member firms,
including Arthur Andersen LLP and any other
affiliated entities that may have provided pro-
fessional services to Enron.
10 In fact, the Foreign Member Firms had al-
ready settled with the Enron estate in bankruptcy
court.

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8
ly $750,000.11 If the plaintiff class were to
incur that sum each time class counsel with-
draws money for expenses, the administrative
costs would cannibalize much of the Partial
Settlement.
Professor Eric Green, a respected, court-
appointed mediator, suggested the creation of
a litigation expense fund to reduce such re-
dundant and costly notification. Each time
class counsel must withdraw funds for expens-
es associated with future litigation, the court
must approve them. In other words, the $15
million litigation expense fund is neither (1) a
vehicle to finance expenses exclusively asso-
ciated with this $40 million settlement nor
(2) a blank check to class counsel.
2.
The Allen Objectors further argue that re-
covery is highly speculative, but this argument
is both vague and unpersuasive.12 The objec-
tion does not even specifically mention the ex-
pense fund, nor does it invoke any authority
for the proposition that a settlement must al-
ways result in a class award at the time the
settlement is made. Absent some inkling of
why the Litigation Expense Fund is irrational
(particularly in light of the enormous adminis-
trative expense associated with the Enron class
actions), we uphold the district court’s ap-
proval of the litigation defense fund as a sound
exercise of discretion.
3.
The Rinis Objectors submit ten full pages of
faulty accounting. First, they compute the
fraction of the partial settlement attributed to
expenses to be 37.5% by dividing $15 million
by $40 million. They then argue that this frac-
tion is unreasonable in light of much smaller
ratios in other settlements.
The Rinis Objectors inaccurately state the
numerator, because the $15 million Litigation
Expense Fund is not money assigned to class
counsel, but merely a guaranteed pool from
which class counsel may withdraw fundsSSbut
only with the imprimatur of the district court.
If expenses on future litigation do not total
more than $15 million, that money is to be
dispensed to the class.
More importantly, they incorrectly state the
denominator, because the instant agreement is
a partial, rather than final, settlement. We can-
not now state with any confidence what the
denominator will ultimately be, but the final
figure will substantially exceed $40 million.
These two mathematical adjustments bring the
likely ratio of expenses-to-settlement in line
with the cases the Rinis brief cites.
D.
The Objectors contest the propriety of the
expenditures. As the district court noted on
numerous occasions, the propriety of class
11 The Rinis objectors mistakenly calculate the
notification costs as the number of class members
times postage ($407,000), ignoring the costs of
printing notices, publicizing notice in newspapers,
paying claims administrators to oversee the pro-
cess, and printing the notices themselves.
12 This argument consists of two sentences in
their opening brief:
In approving this settlement, the District Court
abused its discretion because it did notSSand
could notSSdetermine what compensation the
class members would actually receive. There
was no basis in the record to conclude that the
settlement proceeds will be used to pay any-
thing but attorney’s fees and expenses. There
was no basis to conclude that the class mem-
bers will receive anything.

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9
counsel’s litigation expenditures was not be-
fore it and is not before us now. The Rinis
Objectors’ references to emptying personal
cookie jars and their backhanded remarks
about crawfish festivals notwithstanding,13 the
application for expenses is only now pending
before the district court. That court will not
summarily award future expenses; notice to
the parties, including an opportunity to chal-
lenge, will accompany each application. Any
emphasis on the propriety of the expenditures
is, at this time, misplaced.
E.
The Objectors argue, on two grounds, that
deferred payment is unreasonable. First, they
contend that the $25 million Remainder leaves
little for the class. Second, they speculate that
the Partial Settlement’s deferral provisions ex-
ist entirely to defer class counsel’s income tax
liability and to remove nominal risks of litiga-
tion involving future costs.
It is untrue that there will be nothing left in
the Remainder for the class members. Class
Counsel has not yet applied for attorney fees,
although it is true that those fees will be de-
ducted from the $25 million Remainder. The
disbursement of the Remainder, however, is
not being deferred because of any delay in
Class Counsel’s submission of attorney fee ap-
plications; rather, it is deferred because the
administrative costs of the disbursement mili-
tate in favor of deferral until the classes settle
with other defendants.14
Second, the speculative accusations that
Class Counsel’s desire to minimize future tax
liability drives the deferral provisions are poor-
ly theorized. The deferral provisions allow
settlement with peripheral defendants, against
whom the substantive claims are quite weak,
to proceed with all possible speed. If the
district court were to reject the deferral mech-
anism, then the plaintiffs could not settle with
the peripheral defendants unless such set-
tlement coincided with settlement against a
principal defendant (so that the proceeds could
be disbursed simultaneously). Vitiating the de-
ferral provisions would harm plaintiffs, who
13 In their opening brief, the Rinis Objectors
state that
[f]lying back and forth across the country 500
times, attending crawfish festivals and attempt-
ing to charge injured class members nearly
$60,000 for the purchase of computer equip-
ment, all contribute to the perception that class
counsel is succumbing to the temptation to use
the sheer catastrophic size of the instant action
as their own personal cookie jar.
The travel expenses are in fact well documented,
and the reference to the crawfish festival during the
fairness hearing was used as a means of ref-
erencing the date of the mediation session and was
not advanced as a reimbursable expense.
14 The Allen Objectors cite to the Class Notice
for the proposition that none of the proceeds from
the settlement will be distributed. That notice says:
Because of the aggregate amount of damages
that Plaintiff’s Settlement Counsel assert were
suffered by Settlement Class Members, it is not
economically feasible to distribute the Gross
Settlement Fund to Settlement Class members
at this time. Plaintiff’s Settlement Counsel
anticipate that such distributions will occur
with additional recoveries against the
remaining Defendants in the Actions.
(Emphasis added.) The Allen Objectors are self-
evidently incorrect. The notice explicitly says that
the proceeds will be distributed in association with
future settlements, not that they will not be
distributed at all.

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10
would forfeit potential sources of recovery and
would harm defendants, who would have to
defend themselves needlessly in court when
there exist viable settlement opportunities.
F.
The Objectors contest the scope of the legal
release. The settlement releases AWSC and
the Foreign Member Firms, and any past, pres-
ent, or future successors in interest, from any
subsequent Enron liability. The release pro-
visions are worded extremely carefully be-
cause, as the record reveals, they were the
most important element of the partial settle-
ment. It bears repeating that no provision of
the Partial Settlement releases Andersen U.S.
from any past or future liability.
Most of the confusion on the release issue
centers on the meaning behind the following
passage, offered by Milberg Weiss attorney
Keith F. Park at the fairness hearing:
[I]n the bargaining process to get to the 40
million, [potential Member Firm or succes-
sor liability] was a chip that was on the
table. We don’t know what it wasSSwe
couldn’t quantify what it was worth. We
frankly didn’t think it was worth that much
in terms of the effort to go after the succes-
sor firms; but we weren’t going to get the
40 million because this money was not
being put up, as I understand, by AWSC.
The rationale for the release is straightforward.
The prospect of recovering against the Foreign
Member Firms was slim because of the
above-cited legal obstacles: personal juris-
diction, liability, and judgment collectability.
Ordinarily, under such circumstances, those
firms would just refuse to settle. They funded
the AWSC settlement in this instance because,
in spite of the negligible likelihood of legal
liability, they were unable to “get on with their
lives” because of their “toxic” association with
the Enron debacle. The release allowed them
to merge with other firms because those firms
no longer feared Enron liability. The releases
were therefore the sine qua non of the
settlement.
The Allen Objectors contest the release in
light of the district court’s failure to order dis-
covery to determine whether valid claims exist
against successor firms. They criticize the
court for accepting the claims about limited
prospects for recovery against successors on
face, but offer no evidence that refutes this
position. They offer as precedent Nat’l Super
Spuds, Inc. v. New York Mercantile Exch., 660
F.2d 9, 18-20 (2d Cir. 1981), for the proposi-
tion that a release that forecloses claims other
than those asserted in litigation is overbroad.
First, Super Spuds is from another circuit
and hence does not bind us. Second, and more
importantly, although the Partial Settlement
does release unidentified successors from a
variety of claims, including those that remain
undisclosed, the Andersen release is not
analogous to that at issue in Super Spuds.
In that case, the release was problematic
because the releasing party did not have the
authority to make the release. The named
plaintiffs represented members of the class
with respect to certain contracts, but released
potential defendants from potential liability as
to others. See id. at 18.
The Representative Plaintiffs, on the other
hand, do not make a broader release than that
to which they are authorized by the terms of
their class representation. Moreover, the Allen
Objectors ignore footnote 7 of Super Spuds,

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11
which identifies the specific circumstances of
the instant settlement as warranting more
permissive treatment.15
The releases do not immunize the successor
firms from liability for their own conduct,
either related or unrelated to the Enron litiga-
tion. They immunize these firms from liability
insofar as that liability would have attached by
virtue of their acquisition of interest in one of
the Foreign Member Firms. The release pro-
visions are carefully crafted to have the same
effect they would have had they been given to
a Foreign Member Firm before merger or
acquisition by a successor.
III.
A.
The scope of discovery to be conducted in
each case rests within the sound discretion of
the district court. See Cotton v. Hinton, 559
F.2d 1326, 1333 (5th Cir. 1977) (citing Burns
v. Thiokol Chem. Corp., 483 F.2d 300 (5th
Cir. 1973)). AWSC argues that the Allen Ob-
jectors did not preserve the discovery error,
thereby waiving it on appeal. If, however, a
litigant raises an argument sufficient for the
district court to rule on it, we consider the er-
ror preserved. See New York Life Ins. Co. v.
Brown, 84 F.3d 137, 141 n.4 (5th Cir. 1996).
In their September 24 objections, the Allen
Objectors requested, albeit in a footnote, fur-
ther discovery.16 This request was not very
precise but, because the Allen Objectors lose
on the merits, the issue is moot.
B.
The Allen Objectors advance two related
discovery arguments. They request discovery
to explore (1) the potential for securing a
judgment against AWSC and the Foreign
Member Firms and (2) the possibility of col-
lusion. The district court did not abuse its dis-
cretion in refusing to order discovery on both
fronts.
“[F]ormal discovery [is not] a necessary
ticket to the bargaining table.” In re Corru-
gated Container Antitrust Litig., 643 F.2d
195, 211 (5th Cir. Apr. 1981). This court, on
several occasions, has rejected precisely the
proposition the Allen Objectors propound: that
“the settlement process is necessarily in-
adequate unless informed by the process of
discovery.” Id. In considering whether a re-
jection of discovery was an abuse of discre-
tion, we consider whether Objectors’ counsel
was “groping in the darkness.” See Cotton,
559 F.2d at 1332.
Generally speaking, a settlement should
stand or fall on the adequacy of its terms. See
Corrugated Container, 643 F.2d at 211. The
overriding theme of our caselaw is that formal
discovery is not necessary as long as (1) the
interests of the class are not prejudiced by the
settlement negotiations and (2) there are sub-
stantial factual bases on which to premise
15 Footnote 7 excepts the situation in which a
settlement releases defendants from class members
subsequently asserting claims relying on a legal
theory different from that relied on in the class
action complaint but relying on the same set of
facts. It goes on to distinguish the facts before that
court from such a situation. See Super Spuds, 660
F.2d at 18 n.7. The Andersen settlement grants
releases only for claims within the set of those
arising out of the facts asserted in the Consolidated
Complaint.
16 That footnote stated, “The Objecting Class
Members request that the Court permit them to
conduct discovery relating to the conduct of the
negotiations and the settlement terms to determine
whether their interests and those of other class
members have been adequately represented.”

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12
settlement.
The Objectors’ first discovery-related argu-
ment relates to the district court’s failure to
order full discovery into the true financial
condition of AWSC and the Foreign Member
Firms. First, the record shows that Plaintiffs’
Counsel undertook a massive analysis of the
circumstances surrounding Defendants’ poten-
tial liability.17 Second, and more importantly,
the financial condition of the firms was beside
the point.
As the district court discussed at length, the
settlement is desirable not necessarily because
the Foreign Member Firms were immediately
insolvent (although there are considerable in-
dications that they were), but because (1) the
court’s personal jurisdiction over them was in
doubt, (2) their ultimate expected liability was
minimal or non-existent, and (3) even if the
court entered judgment against them, collect-
ing the judgments appeared to be an exercise
in legal futility. Assessing the impact of these
variables requires legal analysis, not factual
discovery into the financial condition of the
Settling Defendants.
Plaintiffs’ counsel, defendants, and media-
tor Green concurred with this analysis. The
district court did not abuse its discretion in
determining that discovery into the assets of
the Foreign Member Firms was unnecessary in
light of those figures’ status as a secondary
settlement consideration.
The Objectors’ second contention is that,
by failing to order discovery, the court left un-
explored the possibility that the settlement was
the product of collusion.18 That accusation has
never, at any point in the record, been
advanced with the slightest factual substantia-
tion. Moreover, Green oversaw the court-or-
dered mediation, holding four separate meet-
ings at which the parties hammered out vari-
ous settlement terms. There is no reason to
believe that the Regents of the University of
California, the court-selected lead plaintiff in
Newby and the public body disclosing the set-
tlement, has engaged in anything other than
what the district court described as “highly
professional administration of the litigation, as
have counsel for the Tittle action.”
Finally, in arguing that the court abused its
discretion in denying further discovery, the
Allen Objectors rely on non-binding precedent
from other circuits; even that precedent does
not support the proposition the Objectors
urge. For instance, they cite Ficalora v. Lock-
heed Cal. Co., 751 F.2d 995, 997 (9th Cir.
1985), but that case has to do with a district
court’s failure to analyze an intervenor’s ob-
jection entirely, not a court’s refusal to order
discovery.19 See id.
The Objectors also rely on Girsh v. Jepson,
521 F.2d 153, 157, 159-60 (3d Cir. 1975). In
that case, however, the objector submitted
four carefully delineated interrogatories, see
id. at 157, rather than a generalized, open-end-
ed plea for more evidence along the lines of
that which we confront here. Moreover, the
reviewing court’s analysis in that case was
17 For example, Milberg Weiss attorney Helen
Hodges, counsel to the Regents, submitted a sworn
statement that AWSC and many of the Foreign
Member Firms were on the brink of bankruptcy.
18 The Objectors apparently smell a fix because
of the timing of the preliminary settlement approval
application and the liquidation of AWSC.
19 In fact, neither the word “discover” nor “dis-
covery” appears in the case.

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13
animated primarily by the district court’s fail-
ure to allow the intervenor to participate ef-
fectively in the settlement hearing. See id.
Finally, the Objectors rely on In re Gen.
Motors Corp. Engine Interchange Litig., 594
F.2d 1106, 1123-25 (7th Cir. 1979). There
the court was concerned about “attor-
ney-shopping,” where a person unofficially
representing a plaintiff in negotiations “shops”
a settlement to appease defense counsel. See
id. at 1125.
There are no such concerns in this case.
Not only was there complete clarity regarding
who was representing the plaintiffs at the bar-
gaining table, but there was a court-appointed
neutral mediator who oversaw the negotia-
tions.
IV.
The Objectors contend that the record was
factually insufficient to support the approval.
There is significant overlap between the argu-
ments they make here and those covered under
our discussion in part II of whether the Partial
Settlement terms are facially fair and reason-
able.
We again emphasize that the record was ex-
ceptionally well-developed. Multiple parties
submitted sworn statements regarding the
financial state and legal status of various de-
fendants. Green oversaw a protracted, in-
volved court-appointed mediation. The vari-
ous counsel first submitted their Stipulation of
Partial Settlement in August 2002.
The district court admitted several sets of
objections and responses, conducted a settle-
ment hearing in July, and had a separate fair-
ness hearing in October. Only then did the
court issue findings of fact and conclusions of
law in November. The record contains, in ad-
dition to the entire consolidated complaint, all
of these sworn statements, opinions of coun-
sel, objections, responses, and hearing tran-
scripts. The proposition that the district court
made its findings based on a malnourished
record borders on being frivolous or even
absurd.
A.
Approval of a class action settlement may
be set aside on appeal only for abuse of discre-
tion. See Cotton v. Hinton, 559 F.2d 1326,
1331 (5th Cir. 1997).20 In other words, the
same standard applies without regard to
whether we are reviewing the facial reason-
ableness of the settlement terms or the factual
sufficiency of the record underlying them.
B.
As explained in part II.A, the district court
faithfully applied a six-factor test in determin-
ing the appropriateness of the proposed settle-
ment: (1) evidence that the settlement was ob-
tained by fraud or collusion; (2) the complex-
ity, expanse, and likely duration of the litiga-
tion; (3) the stage of the litigation and avail-
able discovery; (4) the probability of plaintiffs’
prevailing on the merits; (5) the range of
possible recovery and certainty of damages;
and (6) the opinions of class counsel, class
representatives, and absent class members.
See Reed, 703 F.2d at 172; Parker, 667 F.2d
at 1209.
The court considered arguments and found
(1) no concrete evidence of collusion; (2) that
20 The litigants also quibble over whether the
Allen Objectors preserved the error. The Allen
Objectors style this argument as an appeal of the
district court’s credibility determination. Given
our disposition, this issue is moot.

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14
the complexity, duration, and expense of the
impending litigation was, for all parties, enor-
mous; (3) that future discovery would be ex-
pensive but (4) that the plaintiffs chances for
prevailing on the merits remained slim; (5) that
even if plaintiffs were to prevail on the merits,
there are significant jurisdictional obstacles to
recovery; and (6) that Class and Defense
Counsel concurred in the court’s judgment.
There is extensive support in the record for
each proposition, particularly in the transcript
of the fairness hearing. In the remainder of
this discussion we address only the Objectors’
more specific arguments.
C.
The statement of Allen Objectors Burton
Carlson and Gilbert Viets, former Andersen
employees, was submitted in an affidavit:
AWSC was the entity in charge of estab-
lishing and enforcing accounting and pro-
fessional standards, as well as quality con-
trol techniques and procedures of, educat-
ing and training personnel of, and coordi-
nating client services on a worldwide basis
for, all of its member firms, including Ar-
thur Andersen LLP and any other affiliated
entities.21
First, these facts, even if true, were insuffi-
cient to create liability for AWSC when the
same relationship between Andersen U.S. and
AWSC was adjudicated in In re WorldCom,
Inc., 2003 WL 21488087 (S.D.N.Y. June 25,
2003), at *9-*10.22 Moreover, the district
court weighed the Andersen Affidavits against
voluminous material submitted to the court
and delivered at the fairness hearing to the
contrary. These materials contain the consid-
ered opinion of counsel and recitation of
substantial caselaw, both of which strongly
suggest that the Objectors’ prospects for pre-
vailing on the merits are dubious.
The Allen Objectors, of course, argue that
the district court should have accepted the
sworn Andersen Affidavits as accurate or
should have allowed further discovery. It cites
two cases for this proposition, and neither one
is even close to being on point.23 Even assum-
ing arguendo that the court should have cred-
ited the Andersen Affidavits, the Allen Objec-
tors still advance no response to the obstacles
involving personal jurisdiction and collectabili-
ty, not to mention a detailed analysis of the
other five factors used in analyzing the pro-
priety of settlement.
21 Certification, Proof of Membership In Set-
tlement Class and Objections of Gilbert Viets;
Certification, Proof of Membership In Settlement
Class and Objections of Burton W. Carlson (col-
lectively the “Andersen Affidavit”).
22 Admittedly, WorldCom involved a pleading
deficiency: The litigant did not plead a sufficient
relationship between AWSC and Andersen U.S.
WorldCom does, however, strongly suggest that to
create derivative liability, Andersen U.S. must be
found to be some sort of “agent” of AWSC’s. See
WorldCom, 2003 WL 21488087, at *10.
23 In Molina v. Sewell, 983 F.2d 676,681 (5th
Cir. 1993), the court objected to the use by the
Board of Immigration Appeals of off-record facts
to reach a conclusion on an immigration “entry”
claim. The court ruled that the Board abused its
discretion by relying on this off-record evidence
without even admitting sworn testimony in conflict
with it. See id. In Foreman v. Dallas County,
Tex., 193 F.3d 314, 327 (5th Cir. 1999), the cited
text constitutes the panel’s rebuke of the district
court’s failure to credit an affidavit where there
was no conflicting evidence.

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15
D.
The Allen Objectors argue that the district
court gave too much weight to the unsworn
opinions of class counsel. First, there is con-
siderably more material in the record than un-
sworn opinions. Newby Plaintiff Counsel Hel-
en Hodges and the co-lead counsel for the
Tittle class both submitted sworn declarations
expressing concern over the prospect that the
district court would grant the motions to dis-
miss.
Second, the weight the district court at-
tached to the opinions of class counsel, relative
to those of the Allen Objectors, was justified in
light of their superior sophistication. For the
proposition that the court cannot rely so
heavily on the opinions of class counsel, the
Allen Objectors point to Holmes v. Cont’l Can
Co., 706 F.2d 1144 (11th Cir. 1983).
Holmes is non-binding precedent from
another circuit24 and is premised on a set of
facts that differ from those presented here.
Holmes is a class action for back-pay where
the amount of back pay for each class member
was determined entirely by the testimony of
class counsel. See id. at 1149. That reversal
was premised on the fact that the back pay
award was “disproportionate and facially un-
fair.” Id. at 1150. No such circumstances
exist in the instant settlement.25
V.
A.
The Objectors assert a crudely articulated
due process objection. Failure to raise a due
process objection before a district court
waives that objection on appeal. See Keenan
v. Tejeda, 290 F.3d 252, 262 (5th Cir. 2002).
Litigants must allege constitutional violations
with “factual detail and particularity.” Jackson
v. Widnall, 99 F.3d 710, 716 (5th Cir. 1996)
(quoting Schultea v. Wood, 47 F.3d 1427,
1430 (5th Cir. 1995) (en banc)).
The Rinis Objectors assert that they could
not have waived due process because it is the
“bedrock” underlying FED. R. CIV. P. 23.
Parsing the Rinis Objectors’ due process ob-
jections is difficult generally, but this argument
is particularly puzzling. It does not follow
that, merely because considerations underlying
procedural due process protection may be
similar to those driving rule 23, a litigant
cannot waive that protection (what would be
a statutory, not a constitutional protection, no
less) by failing to make the argument in front
of a district court.
The Rinis Objectors then argue that they
actually preserved the error because, although
they did not explicitly invoke due process,
their objections included things such as “a lack
of fairness, adequacy, or reasonableness to the
class. . . .” This phraseology is not particular
enough to justify a conclusion that the Rinis
Objectors preserved the error, particularly
because that phrase is also the operative lang-
uage in lodging a non-constitutional objection
to a settlement.
24 The Allen Objectors also cite a variety of
other district court cases, only some of which were
reviewed by this court.
25 Of course, in one sense the settlement affects
class members disproportionatelySSclass members
with more stock receive a greater windfall than do
those with less. The amount of equity belonging to
a particular stockholder, however, is an objective
index of entitlement to settlement proceeds and
(continued...)
25(...continued)
does not invite the sort of subjectivity with which
the Holmes court was concerned.

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16
B.
Even if we were to decide that the Rinis
Objectors preserved the due process error,
they would lose on the merits. They advance
two vague due process arguments. First, they
argue that the Partial Set tlement violates due
process because the district court cannot at
this time evaluate the expenses it ultimately
will award the plaintiff classes. Second, they
urge that the deferral provisions violate due
process. Neither argument is persuasive.
1.
The Partial Settlement does not purport to
award any costs or fees, so it cannot, as the
Objectors posit, violate due process just by
awarding costs that are impossible for the dis-
trict court to evaluate. The Objectors’ argu-
ment is again premised on a misunderstanding
of what was before the district court.
The court approved the structure of the
Partial Settlement and did not approve any ac-
tual expenses or fees. Portions of the Litiga-
tion Expense Fund are to be disbursed to class
counsel only (1) after the costs have been in-
curred in the litigation; (2) the court reviews
and approves the expenses, using the essential
“Johnson” factors to evaluate reasonableness,
see Johnson v. Ga. Highway Express, Inc.,
488 F.2d 714 (5th Cir. 1974); (3) notice is
given to the parties; (4) notice is given to the
objectors; and (5) all have an opportunity to
challenge the funds sought. Such substantial
procedural protection does not violate princi-
ples of due process.26
2.
In part II.E, we set the forth the justifica-
tion for the deferral provisions in considerable
detail. Those provisions are desirable because
they allow the settlement proceeds to be dis-
bursed only after the administrative costs of
disbursing them become a relatively small frac-
tion of the payment. Deferment also promotes
speedy settlement with peripheral defendants
that, given the economics of disbursement,
would otherwise be unobtainable. The
settlement proceeds will be held only until the
plaintiff classes can secure a more substantial
recovery through resolution of outstanding
claims, and it will then be distributed to class
members.
The rest of the Rinis Objectors’ arguments
merely repeat the contentions regarding ex-
pense propriety that, for reasons discussed
above, are not properly before us today. Giv-
en these considerat ions, we decline to find a
due process violation merely because payment
is not immediate.
AFFIRMED.
26 Plaintiffs’ counsel have not even applied for
fees.

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