If you’ve been following the Manipulation Monitor for a while, you may recall our “Stock Loan Lowdown” series, which covered briefing in Iowa Public Employees’ Retirement System et al. v. Bank of America et al., 17-cv-6221 (KPF) (SDNY). (And if you weren’t around, click this link for a catch-up!) Between ongoing discovery and sealed briefing, we haven’t had much to update recently. That changed last week with the filing of a motion to preliminarily approve a settlement agreement with the Credit Suisse Defendants.
The brief filed in support of the motion describes the settlement as an “icebreaker,” indicating their optimism that this agreement may pave the way for movement with the six other Defendant groups. In addition to an $81 million cash payment, the settlement agreement requires Credit Suisse to “provide cooperation to Plaintiffs in litigating and ultimately trying their case against remaining Defendants.” This cooperation is to include the provision of transactional data, as well as providing up to four witnesses for trial testimony. As set forth in the motion papers, Plaintiffs’ experts had estimated recoverable damages in the action to be in the range of $3.47 billion to $7.5 billion; Credit Suisse’s proportional share (13.5%) of that range would result in damages between $469 million to $1 billion. The settlement, then, represents a recovery of approximately 8% to 17% of Credit Suisse’s proportional share of Plaintiffs’ estimates damages. Given the general risks of litigation, Plaintiffs describe this recovery range as “an excellent result,” particularly because, as the first settlement, it “carries the additional value of potentially helping to spur other parties to settlement.”
In exchange for the settlement payment and cooperation, Plaintiffs agree not only to release their claims against the Credit Suisse Defendants, but also to reduce the amount of “any aggregate monetary final judgment” against the non-settling Defendants by 13.5%.
In a somewhat unusual, though not unprecedented, move, the motion for preliminary approval of the settlement was not accompanied by a motion for preliminary approval of plans for providing notice to the settlement class and for the allocation of settlement funds. Instead, Plaintiffs propose that such “Notice Motion” be filed later, to allow for consultation between Plaintiffs and the Credit Suisse Defendants—the latter acting in accordance with the cooperation requirements of the settlement agreement—in the development of a proposed plan of distribution. Given the amount of effort required by both parties in generating notice and allocation plans, Plaintiff reason that proposed bifurcation avoids potential waste in the event that the court disapproves of any of the core settlement terms set forth in the first motion.
The proposed Settlement Class is defined more broadly that that set forth in the motion for class certification, but closely tracks the definition set forth in the Complaint. The definition encompasses:
[A]ll Persons or entities who, directly or through an agent, entered into Stock Loan Transactions with the Prime Broker Defendants, direct or indirect parents, subsidiaries, or divisions of the Prime Broker Defendants, or the Released Credit Suisse Parties, in the United States from January 7, 2009 through the Execution Date (the “Settlement Class Period”), inclusive.
The motion further defines “Stock Loan Transaction” as:
[A]ny transaction, including any transaction facilitated by a prime broker or agent lender, in which an owner of a stock temporarily lends the stock in exchange for collateral or in which a borrower of a stock provides collateral to temporarily borrow a security, and in which the stock is ultimately returned to the lender at a later date, at which time the lender returns the collateral to the borrower.
This represents a longer class period and is more inclusive of transaction types than the class proposed for the purpose of taking the class through trial, and is described as an effort by Credit Suisse to “seek[] full peace” with respect to the issues.
Finally, Plaintiffs request that their current counsel, Quinn Emanuel Urquhart & Sullivan, LLP and Cohen Milstein Sellers & Toll PLLC, be appointed as counsel for the Settlement Class, and that Epiq Class Action & Claims Solutions and Huntington National Bank be appointed Settlement Administrator and Escrow Agent, respectively.
The Court has scheduled a teleconference for March 4, in advance of setting a date for oral argument. The conference was scheduled to discuss “logistical planning” for argument, including the “format of the proceedings,” so it seems reasonable to assume that a prime question will be “in person or remote?”
We’ll keep this blog updated on further developments in this case, so subscribe below to keep in touch.
This post was written by Alexandra M.C. Douglas.