In Re Worldcom, Inc. v. Securities Litigatio

Facts

D announced a massive restatement of its financial statements for 2000 and 2001, spurring numerous class actions and other lawsuits. Virtually all federal litigation was transferred to this Court by the Judicial Panel on Multi-District Litigation. The securities class actions were consolidated on August 15, 2002, and the New York State Common Retirement Fund ('NYSCRF') was selected as the Lead Plaintiff. The Lead Plaintiff filed a Consolidated Class Action Complaint on October 11, 2002. The securities class action, scores of actions filed by individual plaintiffs (the 'Individual Actions'), many of them large pension funds, and other related securities actions were consolidated on December 23, 2002, for pretrial purposes and are referred to as the Securities Litigation. A $2.575 billion Citigroup Settlement was announced in May 2005. Class Members received an August 2, 2004 Notice of the proposed Citigroup Settlement, which also informed them that the opt-out date had been extended to September 1 and gave them instructions on how to submit proofs of claim. A fairness hearing regarding the Citigroup Settlement was held on November 5, 2004, and that settlement was approved in a November 12, 2004 Opinion. The Underwriter Defendants faced Securities Act Section 11 and Section 12(a)(2) liability stemming from massive bond offerings in 2000 (the '2000 Offering') and 2001 (the '2001 Offering'). An Initial settlement with the Director Defendants was for a total of $54 million; notably, the settlement amount included $18 million paid personally by the settling Director Defendants, representing more than twenty percent of those individuals' cumulative net worth, excluding their primary residences, retirement accounts, and certain joint marital property. The balance of the settlement amount, $36 million, represented the Excess Insurers' contribution. The seventeen Underwriter Defendants had coordinated their litigation strategy; as trial approached, however, they procured separate settlement counsel and broke rank. In the period from March 3 through March 16, 2005, settlements totaling $3,427,306,840 were achieved between the Lead Plaintiff and each of the Underwriter Defendants. The Lead Plaintiff and Andersen reached a settlement where Andersen agreed to pay $65 million in cash, plus contingent payments equivalent to 20% of any amount paid out by Andersen to present or former partners and certain other individuals in repayment of any subordinated notes issued in respect of paid-in capital or subordinated loans. A Hearing Order of June 14, 2005 (the 'Hearing Order') established the schedule for final approval of the settlements with the Underwriter Defendants, the Director Defendants, and Andersen, and approved a Summary Notice of Class Settlements ('Summary Notice'); a Summary of Supplemental Plan of Allocation ('Summary Supplemental Plan'); and a full-length Notice of Settlements of Class Action ('Class Notice'), which included the proposed Supplemental Plan of Allocation (the 'Supplemental Plan'). It also extended the deadline by which Class Members could file proofs of claim from March 4, 2005, to August 26, 2005. The Hearing Order required the Lead Plaintiff to begin mailing the Class Notice (with the Supplemental Plan) by July 1, 2005, to those members of the Class who had already filed a proof of claim. Beginning on June 28, the mailings of these documents were made to over 800,000 Class Members who had filed proofs of claim. The Class Notice and Summary Supplemental Plan were mailed at the same time to approximately 3.5 million other potential Class Members. Summary Notices were published in the Wall Street Journal and the New York Times and over the PR Newswire and Bloomberg News in early July. Approximately 834,000 Class Members ultimately filed proofs of claim.

Issues

Rule of Law

Holding and Decision

Legal Analysis

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