For Labaton Sucharow, the 2007 subprime mortgage crisis produced a gem. The business litigation firm, with co-counsel from Berman DeValerio, won a $275 million settlement in June for former Bear Stearns Cos. Inc. shareholders headed by the State of Michigan Retirement Systems. The investors alleged that Bear Stearns had misrepresented its financial woes in the year before JPMorgan Chase & Co. bought the firm.
Michael Stocker, one of the Labaton partners on the Bear Stearns case, described it as the “crown jewel” of litigation stemming from the credit crisis. But it wasn’t easy work for Stocker and partners Thomas Dubbs and James Johnson, all based in New York.
As lead firm for Michigan Retirement Systems, Labaton pored through millions of document pages and interviewed almost 100 Bear Stearns employees. Labaton’s deep knowledge of banking helped. “That requires a very high level of sophistication and understanding,” Stocker said. Labaton also secured a $19.9 million settlement with Bear Stearns’ auditor, Deloitte & Touche LLP. Paul, Weiss, Rifkind, Wharton & Garrison chairman Brad Karp, who represented Bear Stearns, declined to comment.
Labaton also sat across the table from Paul Weiss in securing another nine-figure settlement. This time, it represented three Ohio public pension plans, and the settlement was for $725 million. The pension funds claimed that American International Group Inc. had engaged in accounting fraud and bid-rigging. Although the deal became public in 2010, a federal judge didn’t approve it until February.
Stocker, who also worked on the AIG matter, said the case was a “long battle” that included an enormous amount of discovery. Dubbs, as well as New York-based partners Martis Alex and Louis Gottlieb, also worked on the matter.
“It’s a huge accomplishment from a litigation perspective,” Stocker said.
There are inevitable setbacks. Since 2005, courts have dismissed 21 percent of the securities cases Labaton brought, according to the firm, against an average dismissal rate that’s approached 50 percent for such claims in recent years. In one case brought against BankAtlantic Bancorp Inc. (now known as BBX Capital Corp.) over alleged securities fraud, a federal court in Miami in 2011 vacated a jury’s verdict in favor of Labaton’s client, State-Boston Retirement System. The firm is appealing the decision.
“Sometimes we win. Sometimes we lose,” Stocker said. “Unless you take on those hard cases, you’ll be letting down your clients somehow.”