Pop quiz: What does Monday’s $730 million bondholder settlement with Citigroup Inc. have in common with Bank of America’s $2.43 billion shareholder settlement last September and the settlement that Wachovia Corp. struck with investors in August 2011?
If you guessed that all three are related to the financial crisis, congratulations. In fact, the three settlements are the largest to date in securities class action litigation sparked by the mortgage meltdown. But they have something else in common: The deals were all reached in cases brought by Bernstein Litowitz Berger & Grossmann, and together they’ve helped the firm surpass a whopping $5 billion in recoveries related to the subprime mess. By our count, that’s a good measure beyond any other securities class action plaintiffs firm.
The proposed Citigroup settlement, outlined in a brief filed by Bernstein Litowitz on Monday, resolves claims that Citi misled purchasers of bonds and preferred stock about its exposure to mortgage-backed assets and its loss reserves. Bernstein Litowitz served as lead counsel for investors in 48 offerings issued between 2006 and 2008, which had a combined value of $71 billion. Two other plaintiffs firms–Kessler Topaz Meltzer & Check and Pomerantz Grossman Hufford Dahlstrom & Gross–also represent the plaintiffs. Paul, Weiss, Rifkind, Wharton & Garrison represents Citi.
We last reported on the case in 2010, when the plaintiffs survived a motion to dismiss.
If approved by U.S. District Judge Sidney Stein in Manhattan, the settlement would rank as the second largest in a securities class action growing out of the financial crisis. The largest remains BofA’s $2.43 billion deal over its Merrill Lynch acquisition last year, followed by the $627 million Wachovia settlement in 2011.
Bernstein Litowitz worked on all three settlements (with co-counsel), as well as on 16 others related to the financial crisis. According to data compiled by the firm, the 19 crisis-era settlements have a combined value of almost $5.5 billion. In comparison, Labaton Sucharow, which ranks close to Bernstein Litowitz in surveys of top securities plaintiffs firms by Cornerstone Research and ISS, boasts $1.7 billion in financial crisis-related recoveries. Robbins Geller Rudman & Dowd, which leads the pack in securities class action settlement volume, couldn’t immediately provide a tally of crisis-era settlements for the firm.
Mega-settlements like the latest Citi deal have become more critical to the securities plaintiffs bar than ever before. According to a Cornerstone Research report released on Wednesday, settlements in excess of $100 million accounted for nearly 75 percent of all settlement dollars in securities class actions in 2012. Cornerstone determined that the average settlement amount in a securities class action in 2012 was $54.7 million, compared to $21.6 million in 2011. The number of court-approved settlements plummeted to a 14-year low, however.