Font Size: 
Countrywide, Former Employees Settle Class Action Over Retirement Losses
The National Law Journal
August 31, 2009
A federal judge in Los Angeles has preliminarily approved a $55 million settlement between Countrywide Financial Corp. and its former employees, who were seeking compensation for losses to their retirement plans.
The suit, filed in September 2007, alleged that the officers and directors of Countrywide, which was one of the nation's largest mortgage lenders, violated the Employee Retirement Income Security Act of 1974 by failing in their fiduciary duty to monitor employee retirement funds that were held in company stock. Alvidres v. Countrywide Financial Corp., No. 2:07-cv-05810 (C.D. Calif.).
U.S. District Judge John Walter of the Central District of California approved the settlement on Aug. 24. Final approval is scheduled for Nov. 16.
"We are settling to avoid the cost and uncertainty of further litigation," said Shirley Norton, a spokeswoman for Bank of America Corp., which bought Countrywide last year. Under the terms of the deal, Countrywide did not admit to any wrongdoing.
The settlement covers class members who participated in Countrywide's retirement plan from Jan. 31, 2006, to July 1, 2008.
Lawyers for the individual defendants, who include Countrywide's former directors and officers, including co-founder and former chief executive Angelo R. Mozilo, either declined to comment or did not return calls.
The settlement includes an incentive award to the named plaintiff, Vincent Alvidres, of at least $10,000, plus attorney fees totaling up to 27.5 percent of the settlement fund.
In court documents, plaintiffs attorneys estimated that if they had been successful at trial they might have obtained $257 million. But they noted that the case entailed several challenges, among them identifying an alternative investment that would have done better and proving that the breach occurred as early as Jan. 31, 2006.
"The judge has to say when it would be that a fiduciary would find it was imprudent to hold the stock. Unlike a lot of suits, where there is an exact date, here it's a judgment call," said Lynn Sarko, a partner at Seattle's Keller Rohrback, lead plaintiffs attorney in the case.
It was the first ERISA action to settle with a mortgage lender since the recession began, Sarko said.
Last week, U.S. District Judge Jed S. Rakoff, of the Southern District of New York, gave final approval to a deal whereby Merrill Lynch agreed to pay $75 million to settle ERISA claims related to the credit crisis.
The preliminary approval of the Countrywide settlement came on the same day that Delaware Chancery Court Judge John Noble rejected objections to a settlement between shareholders and Bank of America over its $2.5 billion acquisition of Countrywide.
