Former U.S. District Judge Gerald Rosen, the Special Master appointed to investigate alleged improper billing by class plaintiffs’ firms in Arkansas Teacher Retirement System v. State Street Bank and Trust Company, recommended that the firms return up to $10.6 million of the $74.5 million in attorneys’ fees awarded to them after reaching a $300 million settlement in the underlying class action. If upheld, the results of the Judge Rosen’s report will likely have both negative and positive impacts. For example, it may create some barriers to the effective prosecution of plaintiffs’ securities cases, but it also may lead to more detailed scrutiny of fee applications to the benefit of class members.

In his balanced Special Master’s Report, Judge Rosen praised the “skilled and dedicated” plaintiffs’ attorneys for six years of work leading to an “excellent” settlement of a complex case in which plaintiffs alleged that State Street engaged in unfair and deceptive practices in conducting foreign exchange transactions on behalf of its customers while failing to disclose mark-ups to clients from which State Street ultimately benefited.

In fact, Judge Rosen found that, “all other things being equal, the attorneys’ fee award [of nearly $75 million] was fair, reasonable and deserved.” However, according to Judge Rosen, “all other things were not equal.” The investigation—which spanned over 14 months, cost $3.8 million, and encompassed written discovery, production of 200,000 pages of documents, 34 witness interviews and 63 depositions—resulted in, according to Judge Rosen, “a mixed narrative of good intentions, great talent, and undeniable accomplishment and result, undermined by serious albeit inadvertent mistakes compounded by a troubling disdain for candor and transparency that at times crossed the line into outright concealment of important material facts.”

Continue Reading Special Master Recommends Return of $10.6 Million in Attorneys’ Fees to Class Members

In the long-running Halliburton securities litigation, a dispute has arisen between two rival class proponents.   While readers of this blog are no doubt familiar with The Erica P. John Fund, Inc. v. Halliburton Co. case and its two trips to the Supreme Court, there is also a companion case, Magruder v. Halliburton Co.  Both cases were filed in the United States District Court for the Northern District of Texas, and both cases deal with various misrepresentations allegedly made by Halliburton and its CEO, which allegedly harmed the value of stock owned by the class members.  The alleged class period in the Magruder case runs from December 10, 2001 through July 24, 2002, while the Erica P. John Fund case covers an earlier period, July 22, 2009 to December 7, 2001.  Disputes between the two classes have led the proponent of the Magruder class to bring several motions attempting to consolidate the cases and scuttle a potential settlement between Halliburton and the class led by the Erica P. John Fund (the “Fund”).  After the Fund revised the definition of “Released Claims,” the court has preliminary approved the settlement despite the objection.

Continue Reading Dueling Classes Dispute the Breadth of Released Claims in the Halliburton Securities Litigation

The deadline for parties to object to the settlement in the In re Credit Default Swaps Antitrust Litigation, Master Docket No. 13-MD-2476 (DLC) in the Southern District of New York recently passed on February 29, 2016. Unlike in most cases, where parties typically only object to settlements to the extent they allocate attorneys’ fees, several potential settlement class members to this litigation (“CDS Litigation”) have made specific, substantive objections to the potential distribution of settlement funds. In class plaintiffs’ (“Plaintiffs” or “Class Plaintiffs”) memo of law in support of approval of the settlement, Plaintiffs responded forcefully to these objections. Although Judge Denise Cote has yet to decide whether to approve the settlement, it is worth examining these new objections, which may suggest a trend in class-action settlement objections—at least in antitrust cases relating to securities transactions—moving forward. In addition, Plaintiffs’ heavy reliance on experts to create a settlement model may reflect another trend worth keeping an eye on.

Continue Reading Will Antitrust Cases Relating to Securities Transactions Invite More Objections Because of Their Complexity?

A Magistrate Judge for the United States District Court for the District of Massachusetts recently issued a Report and Recommendation (“R&R”) on the Lead Plaintiffs’ Motion for Final Approval of Class Action Settlement and Plan of Allocation in Hill v. State Street Corporation. The recommendation contains language that is useful to institutional investors, as it enumerates what constitutes adequate class representation and proper notice to potential settlement claimants in complex litigation matters. The presiding judge adopted the R&R on January 8, 2015.

This order outlines what is required of a lead plaintiff and its counsel in disseminating settlement notices. The notices need not reach every potential class members, and the plan of dissemination does not need to be perfect. As long as the manner of distribution is reasonably calculated, and as long as the notice itself contains the information outlined in the court’s order, a finding of adequacy in regards to counsel’s performance should survive any objections from aggrieved potential class members. Continue Reading Court Denies Objection to Timeliness of Class Action Settlement Notice Where Method of Dissemination Was Reasonable

In the context of our representation of institutional investors, our experience reveals that they have been confronting an increasingly difficult process in recovering their losses from alleged violations of securities laws.  These are among the developments:

  • The Morrison decision has insulated many large companies in which investors have sustained losses from Federal Securities Laws claims.  While certain avenues to seek redress in foreign jurisdictions have improved, there are still obstacles in many foreign jurisdictions.  Alternatively, filing a separate action in U.S. courts  – without the benefit of Federal securities claims  – has its own set of issues.
  • The claims process itself has become more adversarial.  Electronic filing has enabled claims administrators to be more diligent in rejecting claims or challenging claims for deficiencies.  Deadlines have become tighter.  Failure to cure deficiencies can substantially reduce the value of a claim if not eliminate it.  In addition, counsel for defendants are sometimes participating in the claims process with the intent to reduce valid claims to the smallest number possible.
  • Institutions are solicited to opt out of various class actions.  Opt out proposals require careful analysis not only of the merits of the proposed complaint but also of the institutions’ own transactions.  While the solicitation may be characterized as a “prudent way” to “maximize recovery,” following some of these proposals could place an institution at risk.
  • Institutions should also be aware of the various objections to settlements in which they may be class members.  Some objections – if allowed – would enhance shareholder recovery.  Others are without merit and drain the settlement fund.

Accordingly, we trust that this new “Class Action Recovery – Institutional Investors” blog will alert institutions to events in this developing landscape.