Cendant Corporation, Case No. 98 CV 2055 (JEB)

Stanford University Law School - Securities Class Action Clearinghouse

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA

__________________________________
LEONARD STEINBERG, on behalf of :
himself and all others similarly :
situated, :
:
Plaintiff, : No. 98 CV 2055 (JEB)
: [filed Jun. 12, 1998]
v. :
:
E. KIRK SHELTON, et al., :
:
Defendants. :
__________________________________ :

MOTION OF CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM,
NEW YORK STATE COMMON RETIREMENT FUND AND NEW YORK CITY
PENSION FUNDS FOR APPOINTMENT AS LEAD PLAINTIFFS, AND
APPROVAL OF THEIR SELECTION OF LEAD COUNSEL, PURSUANT TO
SECTION 21D(a)(3)(B) OF THE SECURITIES EXCHANGE ACT OF 1934
AND SECTION 27(a)(3)(B) OF THE SECURITIES ACT OF 1933

Movants California Public Employees' Retirement System

("CalPERS"), New York State Common Retirement Fund (the "CRF"),

and the New York City Pension Funds (the "NYCPF"), collectively

hereafter referred to as the "Public Pension Fund Investors" or

"Movants," by their undersigned attorneys, hereby move, pursuant

to Section 21D(a)(3)(B) of the Securities Exchange Act of 1934,

15 U.S.C. § 78u-4(a)(3)(B), and Section 27(a)(3)(B) of the

Securities Act of 1933, 15 U.S.C. § 77z-1(a)(3)(B), as amended by

Section 101(a) of the Private Securities Litigation Reform Act of

1995, P.L. 104-67, 109 Stat. 737 (the "Reform Act"), for an Order:

(a) appointing Movants as the Lead Plaintiffs in the

above-captioned class action; and

(b) approving Movants' selection of their counsel, the

law firms of Barrack Rodos & Bacine and Bernstein Litowitz Berger

& Grossmann LLP, as Lead Counsel in the action.

This motion is based on the accompanying memorandum of

law, the accompanying Declaration of Counsel, the pleadings filed

in this case and other related cases, and such other written or

oral argument as may be presented to the Court.

Dated: June 12, 1998

Respectfully submitted,

BARRACK, RODOS & BACINE BERNSTEIN LITOWITZ BERGER &
GROSSMANN LLP

/s/ /s/
_________________________ _________________________
Leonard Barrack Max W. Berger
Gerald J. Rodos Daniel L. Berger
Jeffrey W. Golan Jeffrey N. Leibell
3300 Two Commerce Square 1285 Avenue of the Americas
2001 Market Street New York, NY 10019
Philadelphia, Pa. 19103 (212) 554-1400
(215) 963-0600

Attorneys for Movants Attorneys for Movants
California Public Employees' California Public Employees'
Retirement System and New Retirement System, New York
York State Common Retirement State Common Retirement Fund,
Fund, and Proposed Lead and New York City Pension
Counsel Funds, and Proposed Lead
Counsel

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Of Counsel to the New York
City Pension Funds:

Michael D. Hess
Corporation Counsel for the
City of New York
100 Church Street
New York, NY 10007

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IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA

MEMORANDUM OF LAW IN SUPPORT OF MOTION OF CALIFORNIA
PUBLIC EMPLOYEES' RETIREMENT SYSTEM, NEW YORK STATE
COMMON RETIREMENT FUND AND NEW YORK CITY PENSION FUNDS
FOR APPOINTMENT AS LEAD PLAINTIFFS, AND APPROVAL OF THEIR
SELECTION OF LEAD COUNSEL, PURSUANT TO SECTION 21D(a)(3)(B)
OF THE SECURITIES EXCHANGE ACT OF 1934 AND
SECTION 27(a)(3)(B) OF THE SECURITIES ACT OF 1933

Leonard Barrack Max W. Berger
Gerald J. Rodos Daniel L. Berger
Jeffrey W. Golan Jeffrey N. Leibell
BARRACK, RODOS & BACINE BERNSTEIN LITOWITZ BERGER &
3300 Two Commerce Square GROSSMANN LLP
2001 Market Street 1285 Avenue of the Americas
Philadelphia, Pa. 19103 New York, NY 10019
(215) 963-0600 (212) 554-1400

TABLE OF CONTENTS

PAGE

TABLE OF AUTHORITIES . . . . . . . . . . . . . . . . . . . . . ii

I. PRELIMINARY STATEMENT . . . . . . . . . . . . . . . . . . . 1

A. The Movants . . . . . . . . . . . . . . . . . . . . . . 5

B. Cendant Corporation . . . . . . . . . . . . . . . . . . 9

C. The Claims Against Cendant and Its Affiliates . . . . 10

II. ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . 14

A. Movants Should Be Appointed Lead Plaintiffs . . . . . 14

1. The Procedure Required By The Private
Securities Litigation Reform Act of 1995 . . . . 14

2. Movants Satisfy The "Lead Plaintiff"
Requirements of the Act . . . . . . . . . . . . 16

(a) Movants Have Complied With The Act
And Are Entitled To Be Appointed
Lead Plaintiffs . . . . . . . . . . . . . . 16

(b) The Proposed Lead Plaintiffs Have
The Largest Financial Interest In The
Relief Sought By The Putative Class . . . . 17

B. The Court Should Approve Movants' Choice
Of Counsel . . . . . . . . . . . . . . . . . . . . . 23

III. CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . 24

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TABLE OF AUTHORITIES

CASES PAGE(S)

Blaich v. Employee Solutions, Inc.,
No. CIV 97-545-PHX-RGS, slip op.
(D. Ariz., November 24, 1997) . . . . . . . . . . 17, 20, 23

Fischler v. Amsouth Bancorporation,
1997 U.S. Dist. LEXIS 2875
(M.D. Fla., February 6, 1997) . . . . . . . . . . . . . . 21

Gluck v. CellStar Corp.,
976 F. Supp. 542 (N.D. Tex. 1997) . . . . . . . . . . . . 20

Greebel v. FTP Software, Inc.,
939 F. Supp. 57 (D. Mass. 1996) . . . . . . . . . . . 17, 20

Hassine v. Jeffes,
846 F.2d 169 (3d Cir. 1988) . . . . . . . . . . . . . . 21-22

In re Cephalon Securities Litigation,
[1996-97 Transfer Binder] Fed. Sec. L. Rep.
(CCH) ¶ 99,313 (E.D. Pa. 1996) . . . . . . . . . . . . . . 15

In re Electro-Catheter Securities Litigation,
[1987-88 Transfer Binder) Fed. Sec. L. Rep.
(CCH) ¶ 93,643 (D.N.J. 1987) . . . . . . . . . . . . . . . 22

Lax v. First Merchants Acceptance Corp.,
1997 U.S. Dist. LEXIS 11866, 1997 WL 461036
(N.D. Ill., Aug. 6, 1997) . . . . . . . . . . . . . . 15, 21

Lewis v. Curtis,
671 F.2d 779 (3d Cir. 1982) . . . . . . . . . . . . . . . 22

Wetzel v. Liberty Mutual Insurance Co.,
508 F.2d 239 (3d Cir.), cert. denied,
421 U.S. 1011 (1975) . . . . . . . . . . . . . . . . . . . 22

STATUTES

Private Securities Litigation Reform Act of 1995,
P.L. 104-67, 109 Stat. 737 . . . . . . . . . . . . . . . 1, 14

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Securities Act of 1933

Section 11, 15 U.S.C. § 77k . . . . . . . . . . . . . 11, 18

Section 12(a)(2), 15 U.S.C. § 77l(a)(2) . . . . . . . . . 11

Section 27, 15 U.S.C. § 77z . . . . . . . . . . 1, 14, 15, 20

Securities Exchange Act of 1934

Section 10(b), 15 U.S.C. § 78j(b) . . . . . . . . . . . . 10

Section 14(a), 15 U.S.C. § 78(n) . . . . . . . . . . . . . 11

Section 21D, 15 U.S.C. § 78u-4 . . . . . . 1, 14-16, 18-20, 23

RULES

Federal Rules of Civil Procedure

Rule 23 . . . . . . . . . . . . . . . . . . . . . 20, 21, 22

S.E.C. Rule 10b-5, 17 C.F.R. § 240.10b-5 . . . . . . . . . . . 10

MISCELLANEOUS

House Conference Report No. 104-369, 104th Cong. 1st Sess.
(1995), reprinted at 1995 USCC&AN 730 . . . . . . . . . . . . 4, 19

Senate Report No. 104-98, reprinted at 1995 USCC&AN 679 . . . 19-20

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I. PRELIMINARY STATEMENT

Pursuant to Section 21D(a)(3)(B) of the Securities Exchange

Act of 1934, 15 U. S. C. § 78u-4(a)(3)(B), and Section 27(a)(3)(B)

of the Securities Act of 1933, 15 U.S.C. § 77z-1(a)(3)(B), as

amended by Section 101(a) of the Private Securities Litigation

Reform Act of 1995, P.L. 104-67, 109 Stat. 737 (the "Reform

Act"), the California Public Employees' Retirement System

("CalPERS"), the New York State Common Retirement Fund (the

"CRF"), and the New York City Pension Funds (the "NYCPF"),

collectively hereafter referred to as the "Public Pension Fund

Investors" or "Movants," respectfully submit this memorandum in

support of their motion for an Order: (a) appointing the Public

Pension Fund Investors as Lead Plaintiffs in the present class

action pursuant to § 21D(a)(3)(B) of the Securities Exchange Act

of 1934, 15 U.S.C. § 78u-4(a)(3)(B), and § 27(a)(3)(B) of the

Securities Act of 1933, 15 U.S.C. § 77z-1(a)(3)(B), as amended by

the Reform Act; and (b) approving Movants' selection of their

counsel, the law firms of Barrack Rodos & Bacine and Bernstein

Litowitz Berger & Grossmann LLP, as Lead Counsel for plaintiffs

and the Class in this action.

This case is but one of 58 securities law class action cases

that were filed against Cendant Corporation ("Cendant" or the

"Company") and various of its affiliates following Cendant's

announcement, made after the close of business on April 15, 1998,

that it had discovered accounting irregularities within the

Company's membership services segment, which would cause the

Company to reduce its reported 1997 earnings by $100-$115

million, or $0.11-$0.15 per share, compared to its reported 1997

earnings (not including restructuring and unusual charges) of

$872 million, or $1.00 per share.¹ The great majority of these cases -- 52 of the 58 -- are

pending in the District of New Jersey, where Cendant has its

principal place of business. These cases were consolidated under

the caption, In re Cendant Corporation Litigation, Master File

No. 96-1664 (WHW) (D.N.J.), pursuant to an Order entered on May

29, 1998, and are also the subject of a Preliminary Case

Management Order entered the same day. Copies of the two Orders

are attached to the accompanying Declaration of Counsel as

Exhibits 1 and 2. Five cases are pending in the District of

____________________

¹ The April 15 announcement was devastating to holders of
Cendant securities. On April 16, the next day, more than
108 million shares of Cendant common stock were sold as the stock
plunged $16.56 per share from $35.625 per share, to $19.06 per
share, losing 46% of its value in a single day and inflicting
substantial financial loss on purchasers of Cendant stock.
Similar looses in value -- over 25% -- were suffered by holders
of Cendant's other publicly traded securities.

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Connecticut,² and this in the remaining non New Jersey based

case. Because the cases are pending in three different

districts, Movants, under the terms of the Reform Act, are filing

similar lead plaintiff motions in all three forums. However, it

is clear as a matter of judicial efficiency that all of the

related Cendant class cases will be transferred to a single

district for consolidated proceedings.³ The present motion of the Public Pension Fund Investors --

which seek to collectively lead this litigation as well as the

other actions involving Cendant -- is unprecedented. These are

the first cases in which the two largest public pension funds in

the nation, CalPERS and the CRF, have joined with the largest

municipal pension system, the NYCPF, to seek appointment as lead

plaintiffs in class action proceedings brought pursuant to the

Securities Act of 1933 and the Securities Exchange Act of 1934.

____________________

² The five actions pending in the District of Connecticut
are: Kaplan v. Cendant Corp., No. 98 CV 726 (D. Conn.); Yoskowitz
v. Cendant Corp., No. 98 CV 727 (D. Conn.); Goldfarb v. Cendant
Corp., No. 98 CV 728 (D. Conn.); Perkins v. Cendant Corp., No. 98
CV 735 (D. Conn.); and Team Concepts Personnel Inc. v. Cendant
Corp., No. 98 CV 754 (D. Conn.).

³ Movants filed their motion in the New Jersey District
Court on June 11, 1998, and will be filing in the Connecticut
District Court on June 15, 1998.

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The present motion is also precisely what the framers of the

Reform Act hoped to accomplish. The legislative history of the

Reform Act demonstrates that it was intended to encourage

institutional investors, such as CalPERS, the CRF and the NYCPF,

to serve as lead plaintiffs. As the Statement of Managers noted,

the Reform Act was intended "to increase the likelihood that

institutional investors will serve as lead plaintiffs" because,

among other reasons, institutional investors and other class

members with large amounts at stake "will represent the interests

of the plaintiff class more effectively than class members with

small amounts at stake." House Conference Report No. 104-369,

104th Cong. 1st Sess. at 34 (1995), reprinted at 1995 USCC&AN

730, 733.

CalPERS, the CRF and the NYCPF collectively manage over

$340 billion in assets on behalf of millions of governmental

employees and retirees. They have a huge financial stake in this

litigation, having suffered losses in excess of $89 million as a

result of the securities law violations alleged in this and the

other cases against Cendant. Thus, they are precisely the type

of investors that should be appointed as Lead Plaintiffs in this

case.

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A. The Movants

CalPERS

CalPERS is organized pursuant to Title 2, Division 5, Part 3

of the California Government Code. CalPERS is the largest public

pension system in the nation, with more than $141.9 billion in

assets as of April 30, 1998. It provides retirement and health

benefits to more than 1 million State and local public employees,

retirees and their families, from more than 2,400 employers.

CalPERS is governed by a Board of Administration (the "Board"),

which administers multiple California public employee retirement

funds ("Pension Funds") that are trust funds pursuant to the

above referenced Government Code and Article XVI, Section 17 of

the California Constitution. The Board has investment authority

and sole fiduciary responsibility for the management of CalPERS'

assets.

The CRF

The CRF, as established by Article 9 of the New York

Retirement and Social Security Law, holds and invests the assets

of the New York State and Local Employees' Retirement System and

the New York State and Local Police and Fire Retirement System.

The CRF, the second largest public pension fund in the nation,

has approximately 280,000 retirees and 580,000 active members,

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and approximately $105 billion in assets as of March 31, 1998.

H. Carl McCall, the Comptroller of the State of New York, is the

sole trustee of the CRF.

The NYCPF

The NYCPF consist of the actuarial pension systems of New

York City, including the New York City Employees' Retirement

System, the Police and Fire Department Pension Funds, the

Teachers and Board of Education Retirement Systems, and four

variable supplements funds. The NYCPF had over $102 billion in

assets as of March 31, 1998. As of June 30, 1996, the date of

the most recent actuarial valuations for the NYCPF, the NYCPF had

approximately 234,000 retirees and 311,000 active members.

The New York City Teachers' Retirement System ("NYCTRS")

maintains two retirement programs, the Qualified Pension Plan

("QPP") and the Tax-Deferred Annuity Program ("TDA"). The QPP,

established pursuant to Section 13-502 of the Administrative Code

of the City of New York, provides pension benefits to those with

regular appointments to the pedagogical staff of the Board of

Education. The TDA, established pursuant to Internal Revenue

Code Section 403(b), provides a means of deferring income tax

payments on voluntary tax-deferred contributions. NYCTRS had

approximately $ 39.5 billion in assets as of March 31, 1998.

-6-

As of June 30, 1996, the date of the most recent actuarial

valuation for NYCTRS, NYCTRS had approximately 50,000 retirees

and 77,000 active members.

The New York City Fire Department Pension Fund ("FDPF")

provides pension benefits for full-time uniformed employees of

the New York City Fire Department. FDPF had over $5.6 billion in

assets as of March 31, 1998. As of June 30, 1996, the date of

the most recent actuarial valuation for FDPF, FDPF had

approximately 16,000 retirees and 12,000 active members.

The New York City Police Department Pension Fund ("PDPF"),

created pursuant to Local Law 2 of 1940, provides pension

benefits for full-time uniformed employees of the New York City

Police Department. PDPF had over $15.2 billion in assets as of

March 31, 1998. As of June 30, 1996, the date of the most recent

actuarial valuation for PDPF, PDPF had approximately 35,000

retirees and 37,000 active members.

The New York City Board of Education Retirement System

("BERS") provides pension benefits to, among others,

non-pedagogical employees of the Board of Education. BERS had

approximately $1.6 billion in assets as of March 31, 1998. As

of June 30, 1996, the date of the most recent actuarial valuation

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for BERS, BERS had approximately 8,000 retirees and 21,000 active

members.

The New York City Employees' Retirement System ("NYCERS"),

established under Section 12-102 of the Administrative Code of

the City of New York, provides benefits to all New York City

employees who are not eligible to participate in FDPF, PDPF,

NYCTRS or BERS. NYCERS had over $37.4 billion in assets as of

March 31, 1998. As of June 30, 1996, the date of the most recent

actuarial valuation for NYCERS, NYCERS had approximately 125,000

retirees and 164,000 active members.

The New York City Police Officers' Variable Supplements Fund

("POVSF"), New York City Police Superior Officers' Variable

Supplements Fund ("PSOVSF"), New York City Firefighters' Variable

Supplements Fund ("FFVSF") and New York City Fire Officers'

Variable Supplements Fund ("FOVSF") were enacted, pursuant to

enabling State legislation, to provide certain retirees of the

New York City Police Department and the New York City Fire

Department with fixed supplemental benefits from variable

supplements funds. As of March 31, 1998, POVSF had over $1

billion in assets, PSOVSF had over $1.2 billion in assets, FFVSF

had approximately $536 million in assets, and FOVSF had over $282

million in assets.

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The Public Pension Fund Investors (CalPERS, the CRF and the

NYCPF) collectively manage over $340 billion in assets, and

represent as beneficiaries approximately 2,405,000 active

members, retirees and their families. As more fully described

below, their collective financial loss due to the wrongful

conduct of defendants is in excess of $89 million.

B. Cendant Corporation

Cendant is a Delaware corporation that maintains its

principal place of business at 6 Sylvan Way, Parsippany, New

Jersey. The Company was created through the merger of CUC

International Inc. ("CUC") and HFS Incorporated ("HFS") in

December 1997, pursuant to which CUC, the surviving company,

changed its name to Cendant Corporation. The Company provides

all the services formerly provided by CUC and HFS, including

membership-based consumer services, travel services, and real

estate services. The Company's travel and real estate services

operations were primarily derived from HFS, while its membership

operations had been within CUC.

Cendant's travel segment facilitates vacation timeshare

exchanges through Resort Condominiums International, Inc.,

manages corporate and government vehicle fleets, car rental

operations (owning approximately 20% of the capital stock of Avis

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Rent A Car, Inc.), and hotel/motel operations such as Days Inn,

Ramada (in the United States), Howard Johnson, Super 8, and

Travelodge (in North America).

The Company's real estate segment assists in employee

relocation, provides home buyers with mortgages, and franchises

real estate brokerage businesses. Through certain of its

subsidiaries, Cendant franchises real estate brokerage offices

under the CENTURY 21, Coldwell Sanker, and Electronic Realty

Associates real estate brokerage franchise systems.

Cendant's membership services segment, which is now called

the Alliance Marketing division, is the largest consumer

membership business in the world, with some 66.5 million

memberships. The revenue of this group is derived principally

from annual membership fees, which range from $6 to $250.

Membership growth is generated primarily from direct marketing to

consumers, or by reaching consumers through banks, credit card

companies, and travel companies that provide access to new

members as a service enhancement to their own customers.

C. The Claims against Cendant and its Affiliates

This action alleges that Cendant, in violation of Section

10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b),

and Rule l0b-5 promulgated thereunder, 17 C.F.R. 240.10b-5,

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disseminated false and misleading statements to the investing

public regarding its earnings and financial condition. The other

related actions pending in New Jersey and Connecticut allege, in

addition to Section 10(b) claims, additional violations of §§ 11

and 12(a)(2) of the Securities Act of 1933, 15 U.S.C. §§ 77k and

77l(a)(2), and § 14(a) of the Securities Exchange Act of 1934, 15

U.S.C. § 78(n). The truth ultimately was revealed after the

close of business on April 15, 1998, when Cendant announced that

it had discovered accounting irregularities within the Company's

membership services segment, the former business of CUC, which

would cause the Company to reduce its reported 1997 earnings by

$100-$115 million, or by $0.11-$0.15 per share, compared to its

reported 1997 earnings (not including restructuring and unusual

charges) of $872 million, or $1.00 per share. The Company

further announced that it expects 1998 earnings will be reduced

by approximately the same amount from its current levels.

The April 15 announcement was devastating to holders of

Cendant securities. On April 16, the next day, more than

108 million shares of Cendant common stock were sold as the stock

plunged $16.56 per share from $35.625 per share, to $19.06 per

share, losing 46% of its value in a single day and inflicting

substantial financial loss on purchasers of Cendant stock.

-11-

Similar losses in value -- over 25% -- were suffered by holders

of Cendant's other publicly traded securities.

Moreover, during the period immediately before the April 15

announcement, Cendant insiders, including CEO Henry Silverman and

Walter Forbes (Cendant's Chairman and the former Chairman and

Chief Executive of CUC), sold more than 3.8 million shares of

their own Cendant common stock, realizing proceeds in excess of

$143 million. Silverman's insider selling left him owning no

shares whatever.⁴ Although the complaint in the present action asserts a class

period from December 18, 1997, the date of the HFS/CUC merger

through April 15, 1998, most of the complaints filed against

____________________

⁴ On April 21, 1998, Cendant announced that it had
appointed a new chief financial officer for its Alliance
Marketing division. On April 27, 1998, Silverman and Fobes sent
a letter to shareholders in which they reported that Cendant had
terminated the employment of the former chief financial officer
of CUC; that the Board had engaged independent counsel to
investigate the situation, which in turn had hired Arthur
Andersen to conduct a thorough, independent investigation; and
that all accounting, finance, financial reporting, treasury,
budget, systems and control functions had been assigned to the
former HFS financial staff. The letter further identified the
newly appointed co-chair and co-chief executive officers, chief
financial officer and president and chief operating officer of
the Alliance Marketing division. On May 18, 1998, the Company
announced that it had dismissed Ernst & Young, CUC's former
auditor, and that based on the Company's investigation, it will
restate earnings for the past several years. See Exhibit 10 to
the Declaration of Counsel.

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Cendant have asserted claims on behalf of purchasers of Cendant

securities during the period from May 28, 1997 through April 15,

1998.⁵ As shown in the Certifications attached as Exhibits 3-5

to the Declaration of Counsel, the Public Pension Fund Investors

purchased CUC stock during the relevant period prior to the

CUC/HFS merger; acquired Cendant stock by exchanging their HFS

shares for Cendant shares in the merger; and purchased Cendant

stock and other Cendant securities following the merger.

Collectively, Movants suffered estimated recoverable losses in

excess of $89 million.⁶ As set forth below, Movants have

satisfied each of the requirements of the Reform Act and,

therefore, are qualified for appointment as Lead Plaintiffs in

these actions.

____________________

⁵ For ease of reference, we will hereafter refer to the
time period from May 28, 1997 through April 15, 1998, as the
"relevant period." However, Cendant has recently announced that
the accounting irregularities under investigation go back several
years and that the Company will likely restate its financial
statements accordingly. If Movants are appointed as Lead
Plaintiffs, they may, if warranted, assert a Class Period that
commences earlier than May 28, 1997.

⁶ Attached as Exhibits 3-5 to the Declaration of Counsel
are the Certifications signed by Movants, in which they list
their purchases and sales of Cendant securities during the
relevant period. The Movants' losses on the securities they
purchased during the relevant period are approximately $26.9
million for CalPERS; $26.5 million for the CRF; and $35.9 million
for the NYCPF.

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II. ARGUMENT

A. Movants Should Be Appointed Lead Plaintiffs

1. The Procedure Required By The Private
Securities Litigation Reform Act of 1995

The Private Securities Litigation Reform Act of 1995,

P.L. 104-67, 109 Stat. 737 ("Reform Act"), which became law on

December 22, 1995, applies to this case. The Reform Act, inter

alia, amended the Securities Exchange Act of 1934 and the

Securities Act of 1933 by adding new sections specifically

addressing various matters relating to private lawsuits brought

thereunder. More specifically, the Reform Act added a new

Section 21D to the Exchange Act, which is codified as 15 U.S.C. §

78u-4, and a new Section 27 to the Securities Act, which is

codified as 15 U.S.C. § 77z-1. These sections establish a

procedure for the appointment of "Lead Plaintiff" in "each

private action arising under the [Exchange Act or Securities Act]

that is brought as a plaintiff class action pursuant to the

Federal Rules of Civil Procedure." § 21D(a)(1), § 27(a)(1).

First, the plaintiff who files the initial action must

publish a notice to the class, within 20 days of filing the

action, informing class members of their right to file a motion

for appointment as lead plaintiff, §§ 21D(a)(3)(A)(I),

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27(d)(3)(A)(K). The first such notice of which Movants are aware

was published for a case filed in the District of New Jersey on

April 16, 1998, a copy of which is attached to the Declaration of

Counsel as Exhibit 6. Within 60 days after publication of the

notice, any person or group of persons who are members of the

proposed class may apply to the Court to be appointed Lead

Plaintiff, pursuant to § 21D(a)(3)(A)(i)(II).

The Act further provides that within 90 days after

publication of the notice, or as soon as practicable after the

consolidation of multiple related cases if consolidation occurs

after expiration of the 90-day period, the Court shall consider

any motion made by a class member and "shall appoint as lead

plaintiff the member or members of the purported plaintiff class

that the Court determines to be most capable of adequately

representinq the interests of class members." § 21(D)(a)(3)(B)(i)-

(ii). As is evident from this statutory language, a group of

lead plaintiffs may be appointed under the Reform Act. See,

e.g., In re Cephalon Sec. Litig., [1996-97 Transfer Binder] Fed.

Sec. L. Rep. (CCH) ¶ 99,313 at 95,895 (E.D. Pa. 1996); Lax v.

First Merchants Acceptance Corp., 1997 U.S. Dist. LEXIS 11866 at

*17, 1997 WL 461036 at *8 (N.D. Ill., Aug. 6, 1997).

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In determining the "most adequate plaintiff," the Act

provides:

[T]he court shall adopt a presumption that the most
adequate plaintiff in any private action arising under
this title is the person or group of persons that...

(aa) has either filed a complaint or made a motion
in response to a notice...

(bb) in the determination of the court, has the
largest financial interest in the relief sought by
the class; and

(cc) otherwise satisfies the requirements of Rule
23 of the Federal Rules of Civil Procedure.

§ 21D(a)(3)(B)(iii).

As set forth below, Movants constitute the "most adequate

plaintiff."

2. Movants Satisfy The "Lead Plaintiff"
Requirements of the Act

(a) Movants Have Complied With The Act And
Are Entitled To Be Appointed Lead Plaintiffs

Movants herein move the Court to be appointed Lead

Plaintiffs in the present action against Cendant Corporation.

Movants have met the 60-day time period requirements of §

21D(a)(3)(B)(iii), which in this case provides that Lead

Plaintiff motions must be filed by June 15, 1998.

Movants are qualified to represent the proposed class. The

proposed Lead Plaintiffs are CalPERS, the CRF and the NYCPF.

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Each Movant has signified its willingness to serve as a

representative of the class, and has set forth its purchase and

sale information regarding Cendant securities during the relevant

period (see Exhibits 3-5 to the Declaration of Counsel).⁷ In addition, Movants have selected and retained highly

competent counsel to represent the Class. The firm biographies

of Barrack, Rodos & Bacine and Bernstein Litowitz Berger &

Grossmann LLP, Movants' counsel, are attached as Exhibits 7 and 8

to the Declaration of Counsel.

(b) The Proposed Lead Plaintiffs Have
The Largest Financial Interest In
The Relief Sought By The Putative Class

During the relevant period, Movants purchased shares of

Cendant stock and other Cendant securities at prices artificially

inflated by defendants' false and misleading statements and

omissions, and were injured thereby. In the aggregate, Movants

____________________

⁷ Since Movants did not file complaints but are, instead,
proceeding by motion, no certification mandated by § 21D(a)(2)
for parties filing a lawsuit is required. Greebel v. FTP
Software, Inc., 939 F. Supp. 57, 61-62 (D. Mass. 1996); Blaich v.
Employee Solutions, Inc., No. CIV-97-545-PHX-RGS, slip op. at 4
(D. Ariz., Nov. 24, 1997)(Exhibit 9 to Declaration of Counsel).
Nonetheless, the Public Pension Fund Investors have each
submitted a Certification to underscore their commitment to serve
as Lead Plaintiffs in this case, and to provide the information
contained in such certifications to the Court.

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herein have a very significant financial interest in this case,

having suffered estimated recoverable losses in excess of

$89 Million.⁸ As of this filing, Movants have not been served with any

papers on behalf of any other applicant or applicant group for

appointment as Lead Plaintiffs in this case. Nor have Movants

received any notice that any other potential applicant or

applicant group in this case has sustained greater financial

____________________

⁸ 15 U.S.C. 78u-4(e) provides a formula for computing a
Class member's damages for violations of Section 10 (b) , which
includes separate calculations as to securities that have been
sold and securities that are still held. For purchasers who hold
their securities, damages are measured by comparing the purchase
price of the security with its mean trading price during the 90
day period following the corrective disclosure by the Company.
Here, Movants continue to hold a portion of their stock. As 90
days have not passed since the April 15, 1998 announcement,
Movants have utilized a computed retention price (the mean
closing price of Cendant common stock) of $22.906 for the period
April 16, 1998 through and including June 5, 1998, to compute the
losses suffered on purchases of common stock.

Although Section 11 claims are not asserted in the Steinberg
complaint, Movants have further utilized the statutory rule for
Section 11 damages based on claims that they have under the
Securities Act of 1933 for securities that they purchased
pursuant to a registration statement. For the Cendant stock
acquired through the merger of CUC and HFS, the loss per share is
$13 1/16. For the Cendant Feline PRIDES -- other securities
purchased by Movants pursuant to a registration statement --
which acquired on February 25, 1998, the loss per share is $12.44
per unit. Movants have used a first-in first-out methodology for
computing the recoverable losses sustained during the relevant
period.

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losses in connection with the purchase and sale of Cendant

securities during the Class Period. Accordingly, Movants satisfy

all the Reform Act's prerequisites for appointment as Lead

Plaintiffs pursuant to 15 U.S.C. § 78u-4(a)(3)(B).

Moreover, the legislative history of the Act demonstrates

that it was intended to encourage institutional investors, such

as CaLPERS, the CRF and the NYCPF, to serve as Lead Plaintiffs.

As the Statement of Managers for the Reform Act noted:

The Conference Committee seeks to increase the
likelihood that institutional investors will serve as
lead plaintiffs by requiring courts to presume that the
member of the purported class with the largest
financial stake in the relief sought is the "most
adequate plaintiff." ...

The Conference Committee believes that ... in many
cases the beneficiaries of pension funds -- small
investors -- ultimately have the greatest stake in the
outcome of the lawsuit. Cumulatively, these small
investors represent a single large investor interest.
Institutional investors and other class members with
large amounts at stake will represent the interests of
the plaintiff class more effectively than class members
with small amounts at stake.

House Conference Report No. 104-369, 104th Cong. 1st Sess. at 34

(1995), reprinted in 1995 USCC&AN 730, 733. Similarly, the

Senate Report on the Reform Act states in pertinent part:

The Committee believes that increasing the role of
institutional investors in class actions will
ultimately benefit the class and assist the courts. ...

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Institutions with large stakes in class actions have
much the same interests as the plaintiff class
generally.

Senate Report No. 104-98 at 11, reprinted at 1995 USCC&AN 679,

690. See also Greebel v. FTP Software, 939 F. Supp. at 63

(provisions of Act "suggest a presumption that institutional

investors be appointed lead plaintiff"); Gluck v. CellStar Corp.,

976 F. Supp. 542, 548 (N.D. Tex. 1997) ("through the PSLRA,

Congress has unequivocally expressed its preference for

securities fraud litigation to be directed by large institutional

investors"); Blaich v. Employee Solutions, Exhibit 9 at 5 (same).

Under these circumstances, Movants satisfy all the Reform

Act's prerequisites for appointment as Lead Plaintiffs in this

consolidated action, and should be appointed as Lead Plaintiffs

pursuant to §§ 21D(a)(3)(B)(iii) and 27(a)(3)(B)(iii).

In addition to satisfying the requirements set forth above,

Lead Plaintiffs must fulfill the requirements of Rule 23 of the

Federal Rules of Civil Procedure. Rule 23 (a) provides that a

party may serve as a class representative only if the following

four prerequisites are met:

(1) the class is so numerous that joinder of all
members is impracticable, (2) there are questions of

-20-

law or fact common to the class, (3) the claims or
defenses of the representative parties are typical of
the claims or defenses of the class, and (4) the
representative parties will fairly and adequately
protect the interests of the class.

Fed. R. Civ. P. 23(a).

Only two of the four prerequisites to class certification,

typicality and adequacy, directly address individual

characteristics of class representatives. Consequently, in

deciding a motion to serve as lead plaintiff, the Court should

limit its inquiry to the typicality and adequacy prongs of

Rule 23(a), and defer examination of the remaining requirements

until the lead plaintiffs move for class certification. Lax,

1997 U.S. Dist. LEXIS 11866 at *20; Fischler v. Amsouth

Bancorporation, 1997 U.S. Dist. LEXIS 2875, *7-8 (M.D. Fla., Feb.

6, 1997).

Here, Movants satisfy the typicality and adequacy

requirements of Rule 23. Like all other class members, they

purchased Cendant securities during the relevant period at prices

artificially inflated by the false and misleading statements

disseminated by defendants, and were damaged by defendants'

alleged misconduct. Thus, Movants' claims are typical of those

of other class members. See, e.g., Hassine v. Jeffes, 846 F.2d

169, 177 (3d Cir. 1988) (typicality satisfied if representative

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party's individual circumstances are not markedly different or if

the legal theories upon which its claims are based do not differ

from the claims of other class members); In re Electro-Catheter

Securities Litigation, (1987-88 Transfer Binder] Fed. Sec. L.

Rep. (CCH) ¶ 93,643 at 97,931 (D.N.J. 1987) (typicality met if

representative party can "point to the same broad course of

alleged fraudulent conduct" to support a claim for relief).

Movants are also adequate representatives of the Class

within the meaning of Rule 23(a)(4) because they have no

fundamental conflicts with other class members and have retained

highly competent and experienced counsel in this action. Lewis

v. Curtis, 671 F.2d 779, 788 (3d Cir. 1982) (stating two factors

cited above as standard for adequacy under Rule 23(a)(4)); Wetzel

v. Liberty Mutual Insurance Co., 508 F.2d 239, 247 (3d Cir.)

(same), cert. denied, 421 U.S. 1011 (1975).

Thus, in addition to comprising the largest financial

interest and having a compelling incentive to achieve a truly

significant recovery for class members, Movants prima facie

satisfy the typicality (Rule 23(a)(3)) and adequacy

(Rule 23(a)(4)) requirements of Rule 23 of the Federal Rules of

Civil Procedure.

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B. The Court Should Approve Movants' Choice Of Counsel

Pursuant to 15 U.S.C. § 76u-4(a)(3)(B)(v), the proposed Lead

Plaintiffs shall, subject to Court approval, select and retain

counsel to represent the Class. In that regard, Movants have

selected Barrack, Rodos & Bacine and Bernstein Litowitz Berger &

Grossmann LLP to serve as Lead Counsel.

Both of these firms have extensive experience in

successfully prosecuting securities fraud actions, having

frequently appeared in major actions in this and other Courts.

See Firm Biographies attached as Exhibits 7 and 8 to the

Declaration of Counsel. The firms have substantial expertise and

experience in the prosecution of complex securities matters and

class actions, such as are present here. Both firms have further

been recognized recently as appropriate lead counsel in cases

brought since the passage of the Reform Act, including, but not

limited to, the post-Reform Act appointments of Barrack Rodos in

In re 1996 Medaphis Corporation Securities Litigation, No. 1:96-

CV-2088-TWT (N.D. Ga.) (representing the Commonwealth of

Pennsylvania retirement fund and others) and Blaich y. Employee

Solutions, Inc., No. CIV-97-545-PHX-RGS (D. Ariz.) (representing

the City of Philadelphia retirement fund and others), and similar

appointments of Bernstein Litowitz in In re 3Com Securities

-23-

Litigation, Master File No. C 9721083 JW (N.D. Cal.) (representing

the Louisiana School Employees' Retirement System and Louisiana

Municipal Police Employees' Retirement System) and Lisa Dechter

Spiegel v. Physician Computer Network, Inc., No. 2:98-CV-981

(MTB) (D.N.J.) (representing the State of Wisconsin Investment

Board).

III. CONCLUSION

For the foregoing reasons, Movants herein respectfully

request that the Court: (a) appoint the Public Pension Fund

Investors as the Lead Plaintiffs in this action, and (b) appoint

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the law firms of Barrack, Rodos & Bacine and Bernstein Litowitz

Berger & Grossmann LLP as Lead Counsel.

Dated: June 12, 1998

Respectfully submitted,

BARRACK, RODOS & BACINE BERNSTEIN LITOWITZ BERGER &
GROSSMANN LLP

/s/ /s/
By: _________________________ By: _________________________
Leonard Barrack Max W. Berger
Gerald J. Rodos Daniel L. Berger
Jeffrey W. Golan Jeffrey N. Leibell

3300 Two Commerce Square 1285 Avenue of the Americas
2001 Market Street New York, NY 10019
Philadelphia, Pa. 19103 (212) 554-1400
(215) 963-0600

Of Counsel to the New York
City Pension Funds:

Michael D. Hess
Corporation Counsel for the
City of New York
100 Church Street
New York, NY 10007

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CERTIFICATE OF SERVICE

I, Jeffrey W. Golan, a member of the bar of this Court,

hereby certify that a true and correct of the foregoing

Memorandum of Law in Support of Motion of California Public

Employees' Retirement System, New York State Common Retirement

Fund and New York City Pension Funds for Appointment as Lead

Plaintiffs, and Approval of Their Selection of Lead Counsel,

Pursuant to Section 21D(a)(3)(B) of the Securities Exchange Act

of 1934 and Section 27(a)(3)(B) of the Securities Act of 1933 is

being served upon all involved parties by mailing a copy of the

same, first class postage prepaid, as identified in the attached

Service List of Counsel.

Date: June 12, 1998 /s/
_________________________
Jeffrey W. Golan

Source: Scanned paper copy of court-stamped document