The American International Building, located in New York, NY.
The American International Building, located in New York, NY. (Dan Nguyen/Flickr)

In one of the largest settlements in private securities litigation related to the financial crisis, American International Group Inc. has agreed to pay $960 million to resolve claims that it misled shareholders about its subprime exposure.

The settlement, first announced by AIG in a regulatory filing on Monday, resolves a batch of investor class actions consolidated in U.S. district court in Manhattan. Plaintiffs lawyers were seeking certification of a class of investors who purchased AIG stock and bonds in the two years leading up to its massive stock drop and government bailout on September 16, 2008.

Weil, Gotshal & Manges represented AIG. Barrack Rodos & Bacine, and the Michigan-based Miller Law Firm served as court-appointed colead counsel. The sole court-appointed lead plaintiff is the State of Michigan Retirement Systems. The plaintiffs firms on Monday pegged the settlement figure at $970.5 million—more than the $960 million AIG acknowledged in its regulatory filing. It wasn’t immediately clear how the additional $10.5 million is apportioned among the defendants.

AIG’s bailout made it an easy target for investor litigation. Shareholder class action firms filed at least eight complaints against the insurer that year, alleging that its disclosures in press releases and stock offerings had painted an overly rosy picture of its potential losses from mortgage-backed securities and credit default swaps. Also named as defendants were the company’s executives, its underwriters and its auditor PricewaterhouseCoopers.

Judge Laura Taylor Swain denied a motion to dismiss in 2010. At the end of fact discovery in 2013, Swain trimmed claims against AIG and dismissed PwC from the case. In January 2014, with the issue of class certification already briefed, the judge agreed to stay the case pending the outcome of the U.S. Supreme Court’s ruling in Halliburton Co. v. Erica P. John Fund, a case that offered the justices a chance to abolish a doctrine underpinning the AIG case and most other securities class actions. AIG’s lawyers at Weil, led by Joseph Allerhand, billed Halliburton as a potential “game-changer,” but the decision was a major letdown for defense lawyers, as we reported here.

Rather than wait for Swain to rule on class cert in the wake of the Supreme Court’s decision, AIG cut a deal. According to Monday’s filing, the deal was reached on July 15 with the help of a court-appointed mediator. The settlement must still be approved by the judge. In an email, plaintiffs counsel M. Ryan Jarnagin of the Miller Law Firm wrote that the underwriter defendants are covered by AIG’s settlement.

Barrack Rodos partner Robert Hoffman said in a statement that the settlement “is one of the largest ever achieved in the absence of a criminal indictment or an SEC enforcement action, and demonstrates the importance of private securities litigation as a means of recovery for injured investors.”