So the investors are hitting back, see? we were right all along.
N.Y. Judge Approves State Street’s $90M ERISA Settlement Despite Bank’s Objections
The American Lawyer
October 30, 2009
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There will be no do-over for State Street Bank in an $89.75 million ERISA class action settlement it agreed to in June. On Wednesday, despite the bank’s attempt to renege on the deal, Manhattan federal district court judge Richard Holwell granted preliminary approval to the settlement Wednesday.
Bernstein Litowitz Berger & Grossmann filed the class action complaint in 2007, alleging that State Street breached its fiduciary duty when it made reckless investments in subprime mortgages. On June 25 of this year, the bank received a Wells notice from the Securities and Exchange Commission, which was also engaged in an investigation of its subprime investments. The next day State Street agreed to settle the ERISA class action.
But when plaintiffs’ lawyers moved for preliminary approval of the $89.75 million deal, the bank’s lawyers at Ropes & Gray filed an objection, arguing that State Street’s ongoing negotiations with the SEC make it impossible to determine the fairness of the settlement. State Street tried to persuade Judge Howell, for instance, that class members might receive compensation from a potential settlement between the bank and the SEC — and any such SEC settlement, State Street noted, wouldn’t involve plaintiffs’ attorneys’ fees. Ropes & Gray asked the judge to defer preliminary approval of the ERISA settlement until the SEC case is resolved.
Judge Holwell said no. “The ERISA settlement is, as plaintiffs point out, a bird in the hand,” he wrote, concluding that it was premature to predict what class members might recover in a possible SEC settlement. He also seemed skeptical of State Street’s concern for the class members it allegedly harmed. “Notwithstanding State Street’s laudable efforts to protect the interests of the ERISA plans,” he wrote, “the ongoing SEC negotiations provide no basis for the denial or postponement or preliminary approval.”
Neither State Street counsel Harvey Wolkoff of Ropes & Gray nor plaintiffs’ lawyer William Fredericks of Bernstein Litowitz was immediately available for comment.
This article first appeared on The Am Law Litigation Daily blog on AmericanLawyer.com.