United States District Court, S.D. New York
IN RE BEAR STEARNS COMPANIES, INC. SECURITIES, DERIVATIVE, AND ERISA LITIGATION This Document Relates To: Securities Action, 08 Civ. 2793
LABATON SUCHAROW LLP, Thomas A. Dubbs, Esq., James W. Johnson, Esq., Nicole M. Zeiss, Esq., New York, NY, BERMAN DEVALERIO, Joseph J. Tabacco, Jr., Esq. San Francisco, CA, One Liberty Square, Patrick T. Egan, Esq., Boston, MA, Attorneys for Lead Plaintiff State of Michigan Retirement Systems and Class Counsel for the Settlement Class
ROBERT W. SWEET, District Judge.
Lead Plaintiff The State of Michigan Retirement Systems ("Lead Plaintiff") has moved for a distribution order approving administrative determinations and directing distribution of reserved settlement funds. Based on the conclusions set forth below, the motion is granted.
I. Prior Proceedings
The facts and procedures underlying this case is discussed in this Court's November 9, 2012 Opinion and Order, In re Bear Stearns Co., Inc. Secs., Deriy., and ERISA Litig., 909 F.Supp.2d 259 (S.D.N.Y. 2012) (the "November 9, 2012 Opinion"). Accordingly, only facts relevant to this motion will be provided below.
By order dated August 18, 2008, the MDL Panel assigned to this Court a number of actions filed in the United States District Courts for the Southern and Eastern Districts of New York arising from the collapse of investment bank The Bear Stearns Companies Inc. ("Bear Stearns" or the "Company") in March 2008. On January 6, 2009, an Order was issued consolidating all of these actions. The Order appointed lead counsel and lead plaintiffs for each of the three species of actions comprising the consolidated set: (1) those asserting securities claims, (2) those asserting derivative claims and (3) those asserting ERISA claims.
On February 27, 2009, Lead Plaintiff for the securities claims filed a consolidated class action complaint (the "Complaint") alleging, inter alia, that defendants Bear Stearns, James E. Cayne, Alan D. Schwartz, Warren J. Spector, Alan C. Greenberg, Samuel L. Molinaro, Jr., Michael Alix, Jeffrey M. Farber (collectively, the "Bear Stearns Defendants"), and Deloitte & Touche LLP ("Deloitte") had violated federal securities law in that they (i) defrauded investors by overstating the value of Bear Stearns' assets and understating the risks entailed in those assets; and (ii) misled investors concerning the company's liquidity problems.
In June 2012, proposed settlements had been reached with both the Bear Stearns Defendants and Deloitte ("the Settlements"). The Settlements called for the Bear Stearns Defendants to pay $275 million and for Deloitte to pay $19.9 million, for a total settlement amount of $294.9 million ("Settlement Amount") to a settlement fund (the "Net Settlement Fund") which resolved all of the Settlement Class's claims against all defendants. The Court granted preliminary approval to the Settlements via twin preliminary approval orders issued June 13, 2012 (the "Preliminary Approval Orders"). The Court also preliminarily certified the Settlement Class pursuant to Fed.R.Civ.P. 23(a) and (23) (b)(3). On November 9, 2012, this Court approved the motion for final certification of the class, found the proposed settlement as procedurally and substantively fair and approved the proposed plan of allocation ("Plan of Allocation" or "Plan"). In re Bear Stearns, 909 F.Supp.2d at 265-71.
On September 20, 2013, a Corrected Order Approving Administrative Determinations and Directing Payment of Net Settlement Funds (the "First Distribution Order") was entered. The Distribution Order authorized the distribution of 90% of the Net Settlement Funds, with the remaining 10% to be held in reserve (the "Reserve Distribution") to pay a small subset of Proofs of Claim submitted by claimants that required additional processing because of their complexity or extent of supporting documentation ("Claims-in-Process"); the Proofs of Claim of claimants who requested judicial review of the Court-approved claims administrator's, The Garden City Group, Inc. ("GCG"), rejection of their Proofs of Claim ("Disputed Claims"), but that ultimately might be deemed eligible for payment; and any other contingencies. On the same day, GCG made a distribution pursuant to the Distribution Order from the Net Settlement Funds, distributing payments to 15, 500 Authorized Claimants for total proceeds of $230, 329, 766.28, or 90% of the Net Settlement Funds (the "Distribution").
The Distribution Order was modified by the Opinion and Order dated December 12, 2013 ("Modification Order"), which granted absent Settlement Class Member Cancan Limited's motion for intervention and allowed its late-filed Proof of Claim to be accepted.
GCG has reviewed and processed the Claims-in-Process, the Disputed Claims, any new claims received since June 15, 2013 ("New Claims") and any adjustments or revisions to existing claims ("Revised Claims") received. Discussion of these claims has been provided in the Declaration of Stephen J. Cirami ("Cirami Decl."), (MDL No. 08-1963 (RWS), ECF No. 438), and Declaration of Perry S. Carbone ("Carbone Decl."), ( id. , ECF No. 444).
The Lead Plaintiffs filed the instant motion on May 23, 2014. Lead Plaintiffs seek entry of the proposed Order Approving Administrative Determinations and Direction Distribution of Reserved Settlement Funds ("Proposed Reserve Distribution Order" or "Proposed Order"). The Proposed Order adopts the GCG's administrative determinations regarding the Claims-in-Process, New Claims, Revised Claims and Disputed Claims. The Proposed Reserve Distribution Order would (i) approve the administrative determinations of GCG concerning the Claims-in-Process and Disputed Claims; (ii) approve payment to a relatively small number of claimants who filed late but otherwise valid Proofs of Claim after the June 15, 2013 bar date (the New Claims, which include the Cancan claim); (iii) approve payment to a small number of claimants who submitted additional documentation after the June 15, 2013 bar date and whose claims now calculate to a loss recognized under the Plan of Allocation (a "Recognized Loss") or an increased Recognized Loss (the Revised Claims); (iv) direct the distribution of the 10% of the Net Settlement Funds that has been held in reserve; and (v) approve payment of GCG's outstanding fees and expenses incurred in connection with the administration of the Settlements.
The Bear Stearns Defendants and Deloitte have taken no position on the motion or Proposed Order.
Several claimants, in their individual capacities (the "Objecting Claimants"), have objected via letters to the instant motion and Proposed Reserve Distribution Order. Many of the Objecting Claimants are former employees of Bear Stearns who object to the exclusion of Bear Stearns common stock acquired through employee stock options outside of the Class Period, common stock and vested CAP/RSU Plan units that realized an overall market gain during the Class Period, publicly traded call options sold short and unexercised employee stock options.
The instant motion was marked fully submitted on June 11, 2014.
II. Determinations Of GCG
GCG has identified 1, 143 total Claims-in-Process and 22 Disputed Claims. Cirami Decl. ¶¶ 2, 5, n.3. Many of these claims involved unique securities, specifically the CAP/RSU Plan Units. 636 of the 1, 165 Claims-in-Process and Disputed Claims were found to be eligible. Id. ¶ 5. The total Recognized Loss for these eligible claims is $168, 099, 400.68. Id. GCG has submitted a list of the Claims-in-Process that have been provisionally approved for payment ("Claims-in-Process Authorized Claimants" or "Authorized Claimants"). See id., Ex. A.
Since June 15, 2013, GCG has received 139 New Claims. Id. ¶ 10. Subsequent to the Modification Order, GCG was directed by co-lead counsel for Lead Plaintiff, Berman DeValerio and Labaton Sucharow LLP (collectively, "Class Counsel") to provisionally accept all claims received after June 15, 2013 to the extent that GCG determined them to be eligible for payment. Forty five of these late claims calculate to a Recognized Loss totaling $155, 242, 755.36. Id. The Recognized Loss attributable to the claim submitted by Cancan Limited is $140, 929, 370.41. Id. at 6 n.4.
Since June 15, 2013, 42 claimants have provided additional documentation to GCG to support their claims. Id. ¶ 11. GCG has determined that 26 of them now calculate to an above-zero Recognized Loss that previously had zero Recognized Loss and two calculate to an increased Recognized Loss (the "Revised Authorized Claimants"). The revised Recognized Losses for the Revised Authorized Claimants total $1, 347, 572.41, less $21, 804.12 that was awarded to these claimants in the Distribution. Id. The total additional "catch-up" award amount would be approximately $87, 541 after applying the pro-rations from the Distribution. Id.
a. Disputed Claimants
Fifty four claimants (each a "Disputed Claimant") have requested judicial review of GCG's administrative determination of his, her or its Proof of Claim (each a "Disputed Claim"). After being contacted and their questions answered by GaG, 43 of the Disputed Claimants withdrew their requests for judicial review or completed their Proofs of Claim; 11 of the 54 total Disputed Claimants continue to request judicial review of GCG's administrative determinations. Id. ¶ 13. The remaining Disputed Claimants fall into the following categories:
Four of the Disputed Claimants are claimants disputing GCG's determination that they are not Settlement Class Members;
Five of the Disputed Claimants are claimants disputing GCG's determination that their Proofs of Claim do not calculate to a Recognized Loss; and
Two of the Disputed Claimants are claimants disputing GCG's determination of their number of eligible shares.
Id. ¶ 14.
The four Disputed Claimants disputing GCG's determination that they are not settlement class members are as follows:
Disputed Claimant No. 1, Claim 1166077;
Disputed Claimant No. 2, Claim 1000201;
Disputed Claimant No. 3, Claim 1163922; and
Disputed Claimant No. 4, Claim 1000145.
Cirami Decl. ¶ 15.
The five Disputed Claimants disputing GCG's determination that their Proofs of Claim do not calculate to a Recognized Loss or GCG's determination of their number of eligible shares are as follows:
Disputed Claimant No. 5, Claim 1001814;
Disputed Claimant No. 6, Claim 1000435;
Disputed Claimant No. 7, Claim 1000810;
Disputed Claimant No. 8, Claim 1124212; and
Disputed Claimant No. 9, Claim ...