A long-running ERISA class action against Bear Stearns ended with a whimper this week when employees who claimed to have lost $215 million when their retirement savings were invested in Bear Stearns stock agreed to settle for $10 million.
In a motion filed on Tuesday, co-lead counsel for the plaintiffs at Keller Rohrback and Kessler Topaz Meltzer & Check urged Manhattan federal district court judge Robert Sweet to approve the deal, describing it as fair and “an excellent result.”
Bear Stearns, the defunct investment bank acquired by JPMorgan Chase in 2008, was represented by Paul, Weiss, Rifkind, Wharton & Garrison and Steptoe & Johnson. The counsel lineup for individual director and officer defendants included Kramer Levin Naftalis & Frankel; Skadden, Arps, Slate, Meagher & Flom; Simpson Thacher & Bartlett; Schulte Roth & Zabel; Wachtell, Lipton, Rosen & Katz; Greenberg Traurig; and Gibson, Dunn & Crutcher.
Given the case’s procedural history, the employees may be glad they’re in line to get anything. The named plaintiffs originally sued Bear Stearns in March 2008, three days after the bank secured a $25 billion bailout from the Federal Reserve Bank of New York, and the ERISA claims were soon consolidated with related securities fraud and derivative litigation before Judge Sweet. In a 202-page amended complaint filed in July 2009, the employees claimed that the defendants “imprudently permitted the aggressive investment” of plan participants’ savings in Bear Stearns common stock when they knew or should have known that the investment was “unduly risky and imprudent” as a result of the bank’s exposure to mortgage-backed securities and subprime loans.
In January 2011 the judge dismissed the ERISA plaintiffs’ claims, concluding that they hadn’t pleaded that Bear Stearns was conflicted or had breached its duty of loyalty when invested the employee funds in company stock. Judge Sweet allowed the ERISA plaintiffs to file an amended complaint and then extended the defendants’ deadline to file a motion to dismiss pending the settlement.
Bear Stearns’s lead counsel, Brad Karp of Paul Weiss, did not respond to requests for comment. Neither did any of the executives’ attorneys. We also reached out to co-lead plaintiffs’ attorneys David Preminger of Keller Rohrback and Joseph Meltzer of Kessler Topaz, but didn’t hear back. The related securities class action against Bear Stearns is still pending.