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$50 Million Settlement Reached in MetLife Suit
New York Law Journal
November 10, 2009
MetLife agreed last week to pay $50 million to settle a class action claim that it had defrauded 8.6 million policy holders when it converted from a mutual company in 2000 to one that is publicly traded.
The settlement, which was reached after an Eastern District jury had been selected, was only a fraction of the $8 billion sought by the class (See Notice of Class Action Settlement).
Sources familiar with the case said the settlement was reached after Eastern District Judge Jack B. Weinstein ruled that MetLife could introduce a 103-page decision of the New York State Superintendent of Insurance approving both the conversion itself and the disclosure documents that MetLife had mailed to its policyholders. They also said that during court sessions, Weinstein expressed skepticism about the strength of the plaintiffs' case.
The settlement also resolves a state-court class action pending in Manhattan. The two class actions in New York are the last of nine lawsuits filed against MetLife charging that the conversion was tainted with fraud. The other seven lawsuits were dismissed.
Weinstein set a Dec. 30 hearing on the fairness of the settlement.
Chief Judge Raymond J. Dearie assigned Weinstein to preside over the lawsuit in early October, after Judge Thomas C. Platt, who had handled the case since it was filed in 2000, was injured in an automobile accident. Platt returned to work Monday for the first time since the accident.
The trial was originally scheduled to start on Sept. 8 but was put on hold when less than a week earlier Platt disqualified MetLife's counsel, Debevoise & Plimpton.
The case again headed for trial after the 2nd U.S. Circuit Court of Appeals reversed Platt and reinstated Debevoise as MetLife's counsel.
As much as $20 million of the settlement could be allocated to cover the expenses and fees of the lawyers for the two classes. Jared B. Stamell, of Stamell & Schager in Manhattan, is lead counsel for the federal class in In Re MetLife Demutualization Litigation, 00 cv 2258. Christopher Lovell, of Lovell, Stewart & Halebian in Manhattan, is the lead counsel for the class in the state action, Fiala v. Metropolitan Life Insurance Co., 601181/00.
Lovell said the settlement was the first to result in a monetary award under New York's demutualization law, Insurance Law §7312, which was enacted in 1988.
The case has already gone twice to the Appellate Division, he added, and "under the circumstances the settlement is totally reasonable."
John Calagna, a spokesman for MetLife, stated, "We continue to believe that MetLife had strong defenses to the claims, but we settled the matter to end what had been almost a decade of litigation."
Stamell, the lawyer for the federal class, declined to comment until the fairness hearing is completed.
Class members will not receive direct payments as a result of the settlement. Instead, the amount set aside at the time of the conversion to continue generating dividends for policyholders whose policies entitled them to receive dividends will be augmented by what remains of the $50 million after payment of expenses and attorney's fees.
The settlement also invokes the cy pres doctrine to provide for a $2.5 million payment to a nonprofit health research organization in lieu of compensation to those policyholders who did not have a right to receive dividends.
The class in the federal lawsuit had claimed that MetLife violated federal securities laws by making significant omissions and misleading statements in materials sent to policyholders to win their support for the conversion. A majority of 93 percent approved the conversion in April 2000.
Before ordering a fairness hearing, Weinstein issued an opinion on the proposed settlement, finding it "probable" that the settlement will be found "fair, reasonable and adequate."
According to the formula used in the notice to the class, the federal plaintiffs attorney estimated the class would recover $8 billion if it prevailed on all claims. MetLife's attorneys reported that the federal class would receive nothing even if it prevailed on all its claims.
Lovell, the attorney for the state class, estimated that its claims were worth between $400 million and $1.6 billion.
Weinstein wrote in his opinion that the settlement appears to have reached "an appropriate balance of the risks and benefits for all of those involved in this complex litigation."
The judge had appointed Richard J. Davis, a partner at Weil, Gotshal & Manges, as a special master to explore settlement possibilities with the parties.
