                  FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

In re VERITAS SOFTWARE                  
CORPORATION SECURITIES
LITIGATION.


RICHARD J. PETRONE, on behalf of
himself and others similarly
situated, UNITED FOOD AND
COMMERCIAL WORKERS UNION
LOCAL 880-RETAIL FOOD
EMPLOYEES JOINT PENSION FUND,
CONSTRUCTION INDUSTRY AND
                                             Nos. 05-17393
CARPENTERS JOINT PENSION
                                                  06-15435
TRUST FOR SOUTHERN NEVADA,
HAWAII ELECTRICIANS PENSION                    D.C. No.
FUND, and HAWAII ELECTRICIANS               CV-03-0283 MMC
ANNUITY FUND,                                  OPINION
                Plaintiffs-Appellees,
                 v.
VERITAS SOFTWARE CORPORATION,
GARY L. BLOOM, KENNETH E.
LONCHAR, PAUL A. SALLABERRY,
and MARK LESLIE,
                         Defendants,
                 v.
MICHAEL MALONE,
                 Movant-Appellant.
                                        
        Appeal from the United States District Court
          for the Northern District of California
         Maxine Chesney, District Judge, Presiding

                             9023
9024              IN RE VERITAS SOFTWARE CORP.
                  Argued and Submitted
          May 17, 2007—San Francisco, California

                       Filed July 25, 2007

   Before: Diarmuid F. O’Scannlain and Sandra S. Ikuta,
Circuit Judges, and Leonard B. Sand,* Senior District Judge.

                     Opinion by Judge Sand




   *The Honorable Leonard B. Sand, Senior United States District Judge
for the Southern District of New York, sitting by designation.
9026           IN RE VERITAS SOFTWARE CORP.


                       COUNSEL

I. Stephen Rabin, Rabin & Peckel LLP, New York, New
York, for the movant-appellant.

Patrick J. Coughlin, Sanford Svetcov, Susan K. Alexander,
Jeffrey W. Lawrence, and Maria V. Morris, Lerach Coughlin
Stoia Geller Rudman & Robbins LLP, San Francisco, Califor-
nia, for the plaintiffs-appellees.
                 IN RE VERITAS SOFTWARE CORP.              9027
                          OPINION

SAND, Senior District Judge:

   This case requires the Court to interpret the notice require-
ments of the Private Securities Litigation Reform Act of 1995
(PSLRA), 15 U.S.C. § 78u-4 (2000), when a securities class
action is to be settled. Appellant, a member of the class of
securities holders, appeals from an order of the district court
approving a settlement and plan of allocation, arguing that the
notice of proposed settlement sent to the class was inadequate
under the PSLRA and raising several substantive objections
to the plan of allocation. Appellant also appeals from the dis-
trict court’s order denying his application for attorneys’ fees.
Because we find that the notice did not comply with the
requirements of the PSLRA, we vacate in part and remand.
Because the application was untimely, we affirm the denial of
attorneys’ fees for work performed prior to the fee applica-
tion.

          FACTS AND PRIOR PROCEEDINGS

                    The Underlying Case

   This case stems from the settlement of a class action on
behalf of all persons or entities who purchased publicly traded
securities of VERITAS Software Corporation between Janu-
ary 3, 2001 and January 16, 2003. The complaint alleges that
VERITAS falsely represented that it had entered a $50 mil-
lion deal with AOL, structured to appear as if VERITAS had
sold $50 million in software and services to AOL and had
purchased $20 million in online advertising from AOL. This
“roundtrip” transaction allowed both companies to artificially
inflate their revenues and earnings.

  On November 14, 2002, VERITAS for the first time
revealed in a Form 10-Q that it had been served with a sub-
poena by the Securities Exchange Commission three months
9028              IN RE VERITAS SOFTWARE CORP.
earlier requesting documents related to the transaction with
AOL. The company also stated that it was reviewing its
accounting treatment of the transaction.

   On January 17, 2003, VERITAS restated its financials for
fiscal years 2000 and 2001 to eliminate the improper recogni-
tion of approximately $20 million in revenue from the AOL
transaction.

   Plaintiffs allege that because of the company’s false repre-
sentations, the price of VERITAS securities was artificially
inflated and all who purchased securities at the inflated price
during the class period were injured.

   The class was certified and a group of four union pension
funds were appointed lead plaintiffs with Lerach, Coughlin,
Stoia, Geller, Rudman & Robbins LLP as lead counsel.1 The
district court dismissed the original complaint and the first
amended complaint with leave to amend for failure to allege
scienter adequately. Defendants moved to dismiss the second
amended complaint, but the parties agreed to settle while the
motion was pending.

                     The Initial Settlement

   Lead plaintiffs and defendants agreed to settle the case in
early 2005 for $35 million in cash. Lead plaintiffs maintain
that this figure is about 20% of the maximum amount of dam-
ages they could prove at trial. In the stipulation of settlement,
defendants disclaimed any responsibility for, or desire to
become involved with, the allocation of the settlement pro-
ceeds. The district court preliminarily approved the settlement
  1
    The firm Milberg, Weiss, Bershad, Hynes & Lerach, LLP, was origi-
nally appointed lead counsel. On May 1, 2004, the firm split into two
firms: Milberg, Weiss, Bershad & Schulman, LLP and Lerach, Coughlin,
Stoia, Geller, Rudman & Robbins, LLP. This case went to Lerach
Coughlin.
                 IN RE VERITAS SOFTWARE CORP.                9029
on March 18, 2005 and lead counsel sent notice of the pro-
posed settlement to the class members in late March 2005.
The notice provided that only purchasers of VERITAS com-
mon stock would be able to participate in the settlement,
despite the fact that VERITAS had four other categories of
publicly traded securities (5.25% Notes, 1.856% Notes, call
options, and put options) that were covered by the class
action. The notice represented that the “estimated average
recovery per share will be approximately $0.25.”

Malone’s Initial Objections and the Amended Settlement

   Appellant Michael Malone, a class member, objected to the
initial proposed settlement on the grounds that it unfairly
excluded four classes of VERITAS publicly traded securities
from distribution of settlement funds although they were part
of the class and on the ground that the notice was inadequate
because it provided too short a time to object. In response to
Malone’s objections, the lead plaintiffs and defendants
amended the proposed settlement on May 4, 2005 to include
the other four classes of securities. The amended settlement’s
plan of allocation provided for different distributions of settle-
ment proceeds to holders of the different classes of securities
based on the type of security and the timing of their transac-
tions. On May 6, 2005 a revised notice was sent to the class,
which also stated that the “estimated average recovery per
share of common stock will be approximately $0.25.”

              Malone’s Additional Objections

   The Court received seven objections to the revised pro-
posed settlement out of about 494,000 class members noticed.
Six of those objections were to the size of lead counsel’s fee.
Only Malone objected to the substance of the settlement.
Malone objected to: (1) the payment of settlement proceeds to
so-called “in-and-out traders”—those who bought and sold
their securities prior to VERITAS’s initial disclosure of its
intent to review the accounting of the AOL transaction and
9030                 IN RE VERITAS SOFTWARE CORP.
therefore could not show loss causation under the rule that the
Supreme Court announced in Dura Pharmaceuticals, Inc. v.
Broudo, 544 U.S. 336, 342 (2005); (2) the disparate treatment
of options traders both in imposing a cap of 2% of the net set-
tlement fund on the claims of options traders and precluding
recovery by in-and-out options traders; and (3) a plan of allo-
cation that Malone claimed was inconsistent with the
PSLRA’s method of calculating damages. After a fairness
hearing where Malone raised questions about how possible
damages were calculated and how the estimated average
recovery of $0.25 per share was calculated, the district court
ordered supplemental briefing to explain how these estimates
were derived. In his supplemental papers, Malone maintained
that the estimated average recovery per share if all shares filed
claims would be $0.085. In reply, lead plaintiffs explained
that their estimated average recovery per share of $0.25 was
based on an assumption that only 43% of the class members
would actually file claims (an estimate they said was sup-
ported by a NERA Economic Consulting study showing that
on average about 43% of class action claimants file a claim).2

  2
    At oral argument on appeal, counsel for lead plaintiff asserted that the
estimated average recovery per share of $0.25 was not derived from an
assumption that 43% of class members would make claims, but rather an
assumption that 75-80% would make claims. This contention is nowhere
in the record. Counsel explained that lead plaintiffs’ expert never stated
that he based his calculations on the 43% figure; he merely cited the
NERA study and used the 43% figure to criticize Malone’s expert’s calcu-
lation. In response to lead counsel’s assertion that the $0.25 per share esti-
mate was based on 75-80% of class members making claims, Malone’s
counsel stated at oral argument, “This is the first time I’ve heard about it.
It’s not even in any of the briefs.” In fact, despite lead plaintiffs’ counsel’s
representation to this Court at oral argument that if 75-80% of class mem-
bers participated in the $35 million settlement they would get $0.25 per
share, lead plaintiff’s opposition brief states: “This estimate was based on
an assumption that approximately 43% of class members would file
claims.”
                  IN RE VERITAS SOFTWARE CORP.                9031
   The District Court Order Approving the Settlement

   The district court approved the amended settlement and
plan of allocation in an order issued on November 15, 2005.
Applying the factors in Hanlon v. Chrysler Corp., 150 F.3d
1011, 1026 (9th Cir. 1998), the court determined that the
strength of the case; the risk, expense, complexity, and likely
duration of further litigation; the amount offered in settle-
ment, the extent of discovery, and stage of the proceedings;
and the experience and views of counsel all favored approval.
The court determined that the risk of maintaining class action
status throughout trial and the absence of a governmental par-
ticipant were neutral. In evaluating the reaction of class mem-
bers to the proposed settlement, the court noted that of the
494,000 class members, only Malone had raised substantive
objections to the plan of allocation. The court then addressed
and rejected each of Malone’s objections:

   (1) On the treatment of in-and-out traders, the district court
noted that the initial settlement was reached before Dura was
decided on April 15, 2005, and under prior Ninth Circuit law,
in-and-out traders were entitled to recovery. The court held
that the parties were entitled to settle the action in light of the
risk that the law might change and the settlement allocation
was fair and reasonable in its treatment of in-and-out traders
because it provided for lower recovery for such traders than
for other investors in light of the uncertainty as to whether
they could prove damages.

   (2) On the disparate treatment of options traders, the district
court found that the 2% cap on total options recovery was fair
and reasonable. The court noted the cost and difficulty of cal-
culating options damages and that the 2% cap was roughly
proportional to the total volume of options traded relative to
the volume of stock traded. The court also held that the deci-
sion not to allocate settlement funds to in-and-out options
traders (while at the same time allocating funds to in-and-out
traders of all other classes of securities) was reasonable
9032                IN RE VERITAS SOFTWARE CORP.
because of the cost and difficulty of calculating economic
losses for options and the small amount of damages suffered
by in-and-out options traders.

   (3) On the applicability of the PSLRA’s method of calcu-
lating damages, the district court held that distribution of set-
tlement funds based on the price of the security calculated on
the day of the disclosure instead of calculated according to the
PSLRA’s “90-day bounce back rule”3 was fair and reasonable
even though it would result in payments to some class mem-
bers who could not have recovered at trial. The court reasoned
that the PSLRA rule does not, on its face, apply to settlements
and there was no showing that failure to apply the rule
resulted in significant numbers of class members being over-
compensated to the detriment of the remainder of the class.

   The district court did not address the adequacy of the
revised notice of proposed settlement or the basis of the calcu-
lations of estimated average per share recovery it contained.
The court approved the settlement and plan of allocation,
awarded lead counsel attorneys’ fees of $6 million (reduced
from the $8.1 million they were seeking) plus costs, and
entered judgment on November 15, 2005.
  3
    The PSLRA, 15 U.S.C. § 78u-4(e)(1), limits the amount of damages
that plaintiffs can recover at trial to the difference between the purchase
price and the average trading price during the 90-day period following the
corrective disclosure. This “90-day bounce back rule” (as the parties refer
to it) limits the plaintiffs to rescissory damages and does not calculate
damages based on the single day decline in price, but instead allows the
security an opportunity to recover. Calculation of damages is slightly more
complicated if plaintiffs sell the security within 90 days; damages are
capped at the average trading price between the disclosure date and the
sale date. 15 U.S.C. § 78u-4(e)(2). Malone argues that the failure to apply
the rule unfairly distributes settlement funds to some class members who
would not have been able to recover at trial because they purchased their
shares at a lower price than the 90-day average, but a higher price than the
price on the day after disclosure.
                 IN RE VERITAS SOFTWARE CORP.              9033
                 Malone’s Fee Application

  On December 14, 2005, twenty-nine days after judgment
was entered, Malone’s counsel made an application for an
award of attorneys’ fees of $780,000 and expenses of
$19,087.50. The district court denied the application as fifteen
days too late under Rule 54 of the Federal Rules of Civil Pro-
cedure and found that Malone’s misinterpretation of the
court’s order retaining jurisdiction over fee applications as
extending the fourteen day filing deadline did not constitute
excusable neglect.

   The district court also held that even if the fee application
had been timely, Malone’s counsel would only be entitled to
fees for work connected with his initial objection. Although
the initial objection conferred a substantial benefit on the
class, the fee award would be modest in light of the minimal
number of hours counsel spent preparing the objection. The
court stated that Malone’s counsel would not be entitled to
fees for work connected with the second set of objections
because they were denied and conferred no benefit on the
class. The court did not determine the precise amount of fees
to which Malone’s counsel would have been entitled had his
application been timely filed.

                             ***

  This appeal followed. Lead counsel has already been paid
pursuant to the terms of the settlement agreement, but the pro-
ceeds of the settlement have not been distributed to the class
members and are sitting in escrow pending resolution of this
appeal.

                        DISCUSSION

   On appeal, Malone raises five issues. First, he argues that
the settlement notice was inadequate because it failed to com-
ply with the requirements of the PSLRA. Second, Malone
9034             IN RE VERITAS SOFTWARE CORP.
argues that, in light of Dura, the district court erred by allow-
ing in-and-out traders to participate in the settlement pro-
ceeds. Third, Malone argues that the district court should have
applied the method of calculating damages in the 90-day
bounce back provision of the PSLRA when allocating settle-
ment proceeds. Fourth, Malone argues that the district court’s
disparate treatment of options traders—capping their recovery
at 2% of the net settlement fund and not allowing in-and-out
options traders to recover—was an abuse of discretion.
Finally, Malone argues that the district court abused its discre-
tion in denying his counsel’s fee application because it was
filed fifteen days late.

   This Court reviews a district court’s approval of an alloca-
tion plan in a class action settlement for abuse of discretion.
In re Mego Fin. Corp. Sec. Litig., 213 F.3d 454, 460 (9th Cir.
2000). Any necessary legal questions are reviewed de novo.
In re The Exxon Valdez, 229 F.3d 790, 795 (9th Cir. 2000).
A district court’s decision to deny attorneys’ fees is also
reviewed for abuse of discretion. Barrios v. Cal. Interscholas-
tic Fed’n, 277 F.3d 1128, 1133 (9th Cir. 2002).

   Because the adequacy of the notice is antecedent to the
merits of the settlement, we consider the notice issue first.
See, e.g., In re Corel Corp. Sec. Litig., 293 F. Supp. 2d 484,
491 (E.D. Pa. 2003) (“A decision that notice is appropriate is
required before any inquiry is made into the merits of the set-
tlement itself.”).

Adequacy of the Revised Notice of Proposed Settlement

   Malone argues that the revised notice of proposed settle-
ment was inadequate because it failed to meet the PSLRA
requirement that it provide a calculation of the amount of set-
tlement proposed to be distributed on a per share basis.
Malone argues that the notice was misleading because it cal-
culated the estimated average recovery per share of common
                 IN RE VERITAS SOFTWARE CORP.               9035
stock at $0.25 based on an undisclosed assumption that only
43% of class members would file a claim.

   [1] As a threshold matter, lead plaintiffs argue that this
issue is not preserved for appeal because Malone never raised
it before the district court. A review of the record reveals that
Malone raised the issue of the adequacy of the revised notice
and questioned lead plaintiffs’ method of calculation on at
least three occasions: (1) In his Supplemental Memorandum
in Further Support of his Objections to Proposed Settlement
dated July 25, 2005, Malone questioned the calculations of
lead plaintiffs and asked the court to compel them to disclose
the basis of those calculations; (2) at the Fairness Hearing on
July 29, 2005, Malone questioned the basis of the calculations
and the district court ordered further briefing on the issue; and
(3) in his Memorandum in Further Objection to the Proposed
Plan of Allocation dated September 27, 2005, Malone called
for a revised notice because lead plaintiffs failed to set for-
ward the basis for their calculations. Malone never raised the
specific argument presented here—that the method of calcu-
lating per share recovery based on an undisclosed assumption
that only 43% of the class would file claims violates the
notice requirements of the PSLRA—before the district court
because he never had the opportunity to do so. Lead plaintiffs
did not disclose their method of calculating per share recovery
until the expert declaration accompanying their reply brief
dated October 14, 2005, the last submission before the district
court issued its order approving the settlement and plan of
allocation on November 15, 2005. The district court did not
address the adequacy of notice in its order. In as much as
Malone raised the issue of the adequacy of the notice at every
opportunity he had, he has not waived the issue on appeal.
Whether the notice complied with the requirements of the
PSLRA is a question of law, so a remand to the district court
is not necessary to decide that specific issue in the first
instance.

   [2] The PSLRA requires that every settlement notice must
include a statement of plaintiff recovery: “The amount of the
9036             IN RE VERITAS SOFTWARE CORP.
settlement proposed to be distributed to the parties to the
action, determined in the aggregate and on an average per
share basis.” 15 U.S.C. § 78u-4(a)(7)(A). The notice must
also include a statement of “the average amount of damages
per share that would be recoverable if the plaintiff prevailed
on each claim alleged.” 15 U.S.C. § 78u-4(a)(7)(B).

   [3] It is clear that the purpose of the notice requirement is
to allow class members to evaluate a proposed settlement.
With sufficient notice, class members can compare the recov-
ery per share under the settlement with the potential damages
per share if the class prevailed at trial and weigh the risks and
rewards of proceeding to trial or participating in the proposed
settlement. The Conference Committee Report notes that the
PSLRA requires improved settlement notices to class mem-
bers because “[c]lass members often receive insufficient
notice of the terms of a proposed settlement and, thus, have
no basis to evaluate the settlement.” H.R. Rep. No. 104-369,
at 36 (1995), reprinted in 1995 U.S.C.C.A.N. 730, 735. Sev-
eral courts have noted this purpose in dicta. See, e.g., In re
Indep. Energy Holdings PLC Sec. Litig., 302 F. Supp. 2d 180,
184 (S.D.N.Y. 2003) (“One of the concerns Congress had in
enacting the PSLRA was to ensure that class members
received sufficient, comprehensible notice so they could eval-
uate proposed settlements intelligently.”).

   [4] In this case, the revised notice of proposed settlement
said:

    Depending on the number and type of eligible secur-
    ities that participate in the settlement and when those
    shares were purchased and sold, the estimated aver-
    age payment for common stock will be approxi-
    mately $0.25 for each share before deduction of
    court-approved fees and expenses. The number of
    claimants who send in claims varies widely from
    case to case. If fewer than anticipated Settlement
                    IN RE VERITAS SOFTWARE CORP.                       9037
      Class Members send in a claim form, you could get
      more money.

The $0.25 per share estimate was not based on all class mem-
bers filing claims, but rather on an undisclosed assumption
that only a fraction of class members would actually file their
claims. Even at this late point in the litigation (after the trial
court requested supplemental briefing on the issue and after
briefing and argument on appeal), what that assumption actu-
ally was remains elusive.4 The exact assumption (whether
43% or some other percentage) that lead plaintiffs used, how-
ever, is immaterial to our conclusion here; what matters is that
the assumption was undisclosed and was significantly less
than 100%. According to Malone’s expert, if 100% of the
class members filed claims, the average recovery per share
would be closer to $0.085.5 Malone argues that the PSLRA
  4
     Citing a NERA Economic Consulting study which found that, on aver-
age, only 43% of class members file claims, lead plaintiffs’ expert asserted
in his reply declaration that Malone’s calculation of recovery per share,
which was based on a higher estimate of the number of shares eligible for
recovery and an assumption that 100% of class members would file
claims, would be less reliable than the estimate that lead plaintiff’s expert
provided in the revised notice of proposed settlement. While lead plain-
tiffs’ expert did not explicitly state that he based his estimate on the
assumption that only 43% of class members would file claims, this was
the position that lead plaintiffs took in their opposition brief before this
Court. At oral argument, however, counsel for lead plaintiff stated that the
$0.25 per share estimate in the revised proposed notice was based on an
assumption that 75-80% of class members would file claims—a conten-
tion that is nowhere in the record. See supra note 2.
   5
     Malone’s expert and lead plaintiffs’ expert differ in their calculations
of recovery per share in more ways than just the assumption of how many
class members will file claims. For example, lead plaintiff’s expert asserts
that Malone’s expert inflated the number of shares that were damaged and
therefore eligible for recovery. But both experts acknowledge that the
assumed percentage of class members who will file claims is a major fac-
tor in the calculation. Using lead plaintiffs’ other calculations, but assum-
ing that all class members file claims, Malone estimates that average
recovery per share would be slightly less than $0.11. Using Malone’s
other calculations, but assuming only 43% of class members make claims,
lead plaintiffs estimate that average recovery per share would be about
$0.20.
9038              IN RE VERITAS SOFTWARE CORP.
requires that the average per share recovery be calculated
based on a distribution to all class members. Lead plaintiffs
defend their estimate as one based on a real world assumption
supported by academic literature. They argue that their “more
realistic estimate” satisfies the notice requirements of the
PSLRA. The parties cite no cases interpreting the notice
requirements of the PSLRA. The cases that Malone cites, In
re Charter Communications, Inc. Sec. Litig., No. MDL 1506,
4:02-CV-1186 CAS, 2005 WL 4045741, at *23 (E.D. Mo.
June 30, 2005) and In re Global Crossing Sec. & ERISA
Litig., 225 F.R.D. 436, 450 (S.D.N.Y. 2004), merely note, in
dicta, that notices providing estimated recovery per share
based on every class member filing a claim are consistent
with the requirements of the PSLRA. Interpretation of the
notice requirements of the PSLRA appears to be a question of
first instance in this and all other circuits.

   [5] The PSLRA’s purpose of allowing class members to
evaluate a proposed settlement would be frustrated if lead
plaintiffs could apply undisclosed assumptions to their esti-
mated average recovery per share. Malone’s interpretation
that “the amount of settlement proposed to be distributed to
the parties to the action,” 15 U.S.C. § 78u-4(a)(7)(A) (empha-
sis added), means all of the parties to the action, not some
estimated portion of the parties who are likely to file claims,
is more consistent with the text and the purpose of the statute.
When § 78u-4(a)(7)(A) is read in conjunction with the rest of
§ 78u-4(a)(7), which refers to “the average amount of dam-
ages per share that would be recoverable if the plaintiffs pre-
vailed on each claim alleged,” it appears that Congress was
referring to the amount that each class member would be enti-
tled to—an amount that can only make sense if it is based on
all of the shares in the class.

   [6] The best reading of the PSLRA notice requirements is
that the estimated average recovery per share must be based
on all of the shares in the class. This interpretation has the sal-
utary effect of ensuring uniformity. It is clear that the PSLRA
                   IN RE VERITAS SOFTWARE CORP.                    9039
notice requirements are not satisfied if the per share estimates
are based on undisclosed assumptions that fewer than 100%
of class members will make claims. But nothing in this hold-
ing should preclude proponents of a settlement from also
including estimated average per share recovery based on
explicitly disclosed projections of how many class members
are likely to file claims. We need not now decide whether
notices in class action settlements heretofore filed, which con-
tain an explicit statement that the estimated average recovery
per share is based on a specific disclosed estimate of the per-
centage of class members likely to file claims, violate the
PSLRA notice requirements.

   [7] The notice in this case clearly did not satisfy the
requirements of the PSLRA. Not only did it fail to disclose
that the per share recovery calculations were based on an
assumption that only a fraction of class members would file
claims, the notice was misleading. It implied that the calcula-
tions were based on 100% of the class filing claims. The
notice said that recovery could be greater if fewer than
expected class members filed claims, saying in no uncertain
terms “you could get more money,” but gave no indication of
the possibility that recovery could be less if more class mem-
bers than expected filed claims. In the absence of any disclo-
sure to the contrary, a reasonable class member would
conclude that the per share estimates were based on all of the
class members filing claims.

   While it is not integral to our interpretation of the PSLRA’s
notice requirements, we note that lead plaintiffs’ obfuscation
was not limited to the misleading wording of the notice. Lead
plaintiffs affirmatively misrepresented to the district court that
the per share recovery calculations were based on 100% of the
class filing claims. At a hearing before preliminary approval
of the proposed settlement, counsel for lead plaintiffs
explained to the court that the first notice6 provided that “you
  6
   The notice addressed at this preliminary hearing was eventually super-
ceded after Malone’s initial objections and a revised notice of proposed
9040                 IN RE VERITAS SOFTWARE CORP.
are going to get 25 cents for each share that you make a claim
for if everybody makes a claim.”7 The statement was obvi-
ously not accurate and it may have contributed to the district
court’s decision to approve a notice that did not comply with
the requirements of the PSLRA.

   [8] The absence of adequate notice injects a fatal flaw into
the entire settlement process and undermines the district
court’s analysis of the fairness of the settlement under the
Hanlon factors. While the district court has substantial discre-
tion in approving the details of a class action settlement, it
may not do so without giving class members an adequate
opportunity to object. In this case, where the notice was inad-
equate and overstated the likely recovery per share, it may
have discouraged other objectors from speaking up. The fact
that there was only one objector to the substantive terms of
the settlement—a fact that the district court made much of—
carries little weight in light of the inadequacy of the notice.
Because the revised notice of proposed settlement was inade-

settlement was sent to the class. The notice at issue on this appeal is the
revised notice of proposed settlement, but the wording of the two notices
with regard to average recovery per share is, in all material respects, iden-
tical and lead plaintiffs did nothing, either before or after the issuance of
the revised notice, to correct their earlier misrepresentation to the district
court that the $0.25 per share estimate was based on “everybody” making
a claim.
   7
     At oral argument before this Court, counsel for lead plaintiffs asserted
that this was merely a misstatement by class counsel at a preliminary hear-
ing where no class members were present. We fail to see how the absence
of class members lessens the impact of the misrepresentation on the judge
who must decide whether to approve the notice of proposed settlement.
The statement by class counsel caused the district court to observe “that
sounds like a very small amount of money.” In fact, it was more than
twice the amount recoverable “if everybody makes a claim.” Even if class
counsel merely inadvertently misstated the basis for the $0.25 estimate, it
only serves to highlight how misleading the notice was; the natural infer-
ence from the wording of the notice was that the estimate was based on
everybody making a claim.
                 IN RE VERITAS SOFTWARE CORP.                9041
quate under the PSLRA, we vacate the judgment of the dis-
trict court approving the settlement and plan of allocation and
remand to issue a new notice to the class.

     Substantive Objections to the Plan of Allocation

   Because the district court’s approval of the settlement and
plan of allocation must be vacated and the case remanded to
issue a new notice that complies with the requirements of the
PSLRA, we need not reach the issues that Malone raised in
his substantive objections to the plan, i.e., recovery by in-and-
out traders, the applicability of the PSLRA 90-day bounce
back rule to settlements, or the disparate treatment of options
traders. Accordingly, we express no opinion on these issues.

                  Malone’s Fee Application

    [9] We turn now to whether the district court abused its dis-
cretion in denying Malone’s application for attorneys’ fees
because it was filed 15 days late. Rule 54 of the Federal Rules
of Civil Procedure provides that when a party makes a claim
for attorneys’ fees and related nontaxable expenses, “[u]nless
otherwise provided by statute or order of the court, the motion
must be filed no later than 14 days after entry of judgment.
. . .” Fed. R. Civ. P. 54(d)(2)(B). Malone made an application
for attorneys’ fees 29 days after the entry of judgment.
Malone admits that the delay in filing his application was not
due to neglect, but was a deliberate decision to postpone the
fee application because of the “strange” procedural posture of
the case and to avoid duplicative filings in light of his pending
appeal. Failure to comply with the time limit in Rule 54 is a
sufficient reason to deny a motion for fees absent some com-
pelling showing of good cause. Kona Enterprises, Inc. v.
Estate of Bishop, 229 F.3d 877, 889-90 (9th Cir. 2000).

   Malone makes two arguments why his fee application
should not have been denied as untimely. First, he argues that
the district court expressly retained jurisdiction over fee appli-
9042             IN RE VERITAS SOFTWARE CORP.
cations, thereby extending the 14-day time limit indefinitely.
Second, he argues that, if the court’s retention of jurisdiction
did not extend the deadline, it was at least ambiguous and his
good faith reliance on that interpretation made his late appli-
cation the result of excusable neglect.

  The district court’s final judgment states:

    Without affecting the finality of this Judgment in any
    way, this Court hereby retains continuing jurisdic-
    tion over (a) implementation of this settlement and
    any award or distribution of the Settlement Fund,
    including interest earned thereon; (b) disposition of
    the Settlement Fund; (c) hearing and determining
    applications for attorneys’ fees and expenses in the
    Litigation; and (d) all parties hereto for the purpose
    of construing, enforcing, and administering the Stip-
    ulation.

Malone interprets the district court’s reservation of jurisdic-
tion over fee applications to mean that there was no specific
deadline for filing fee applications. The district court, how-
ever, held that “there is no language even arguably extending
the 14-day deadline for filing a motion for attorneys’ fees.”

   Malone relies on Fresh Kist Produce, L.L.C. v. Choi Corp.,
362 F. Supp. 2d 118, 124-25 (D.D.C. 2005), where a magis-
trate judge held that where the district judge’s order creates a
specific procedure for recovering attorneys’ fees and costs
and sets no specific date for requesting fees, the order pre-
empts the 14-day time limit. The district court distinguished
Fresh Kist because its order did not create a specific proce-
dure for fee requests.

   Malone also argues that if the district court’s order did not
extend the 14-day time limit, then its retention of continuing
jurisdiction was meaningless because it already had jurisdic-
tion to entertain fee requests for 14-days under Rule 54. This
                 IN RE VERITAS SOFTWARE CORP.               9043
argument is unpersuasive. As the district court explained, it
was simply providing a complete listing of the matters over
which it was retaining jurisdiction, “irrespective of whether
such retention was provided for elsewhere as well.” Nothing
in the district court’s order indicated an intent to modify the
default 14-day time limit provided in Rule 54. The district
court did not abuse its discretion in finding that its order had
not extended the deadline to apply for fees.

   Second, Malone argues that because he acted in good faith
reliance on his belief that the district court’s “ambiguous”
order extended the 14-day time limit, his untimely filing was
the result of excusable neglect and should be excused under
Federal Rule of Civil Procedure 6(b). To determine whether
neglect is excusable, a court must consider four factors: “(1)
the danger of prejudice to the opposing party; (2) the length
of the delay and its potential impact on the proceedings; (3)
the reason for the delay; and (4) whether the movant acted in
good faith.” Bateman v. U.S. Postal Serv., 231 F.3d 1220,
1223-24 (9th Cir. 2000) (citing Pioneer Inv. Servs. Co. v.
Brunswick Assocs. Ltd. P’ship, 507 U.S. 380, 395 (1993)).
The district court found that the length of delay was not great
and that the lead plaintiffs had not shown that they were prej-
udiced, but that Malone failed on the third factor—the reason
for the delay. The court found that Malone’s asserted reason
for the delay (set forth in a footnote in his reply brief, not a
sworn declaration) that he deliberately chose to postpone the
fee application because of the awkward procedural posture of
the case and because he thought that the district court’s order
extended the deadline for fee applications, was not neglect at
all and certainly not a compelling showing of good cause.

   [10] In the end, this is a decision committed to the discre-
tion of the district court. While the district court would not
have abused its discretion in granting Malone’s fee applica-
tion, it did not abuse its discretion in denying it. The district
court’s decision denying Malone’s fee application on the
grounds of untimeliness is affirmed. Because the application
9044             IN RE VERITAS SOFTWARE CORP.
was untimely we need not reach the question of whether it
was proper for the district court to decline consideration of the
time Malone’s counsel expended on unsuccessful objections.
This holding is, of course, without prejudice to Malone’s right
to apply to the district court for fees after a new judgment is
issued.

                       CONCLUSION

   For the reasons stated above, the judgment of the district
court is affirmed in part and vacated and remanded in part.
The approval of the settlement and plan of allocation is
vacated and the case is remanded to the district court to issue
a new notice that complies with the requirements of the
PSLRA. The judgment of the district court denying Malone’s
application for attorneys’ fees is affirmed with respect to ser-
vices performed prior to his fee application.

 AFFIRMED IN PART                  AND     VACATED         AND
REMANDED IN PART.
