772 F.3d 125
2d Cir.2014Background
- This appeal challenges district court approval of a $2.425 billion class settlement with Bank of America in a Securities Act/Exchange Act class action tied to the BoA–Merrill Lynch merger and disclosures.
- Plaintiffs allege BoA and Merrill Lynch executives misled investors prior to the December 2008 merger vote, concealing Merrill Lynch’s large losses and bonus arrangements.
- Following consolidation under Rule 23 and PSLRA, the district court certified the class and approved notice of the settlement.
- After notice, several nonnamed class members objected to the settlement, including objections to attorneys’ fees, costs, and notice adequacy.
- The district court conducted a hearing and concluded the notice satisfied due process, Rule 23, and PSLRA requirements, and that the fee/expense allocations were reasonable; the court approved the settlement, which the objectors appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the district court abused its discretion approving the settlement. | Objectors contend the fee/cost structure and notice were not reasonable. | BoA and lead plaintiffs argue the settlement and fee-plan fall within the court’s broad discretion and meet Goldberger standards. | No abuse of discretion; settlement approved. |
| Whether the notice satisfied PSLRA and due process requirements. | Objectors claim notice failed to adequately disclose costs and fees. | Notice identified potential costs and explained basis; complied with PSLRA and Rule 23. | Notice complies with PSLRA and due process. |
| Whether reimbursement of litigation costs to representative plaintiffs complied with 15 U.S.C. § 78u-4(a)(4). | Costs were excessive or improperly described in the notice. | Costs were reasonable, including lost wages, supported by affidavits. | Costs reasonable; reimbursement approved. |
| Whether the Notice’s ‘Statement of Average Amount of Damages Per Share’ was constitutionally adequate. | Disputed damages per share require explicit per-share figure in notice. | Statute requires disclosure of issues in dispute, not necessarily the per-share amount. | Notice satisfied PSLRA by stating disputes over damages without per-share amount. |
| Whether the proposed Attorneys’ Fees award was within permissible bounds. | Fees should be capped or scrutinized beyond the district court’s discretion. | Fees determined under Goldberger criteria and in line with class-action norms; no abuse of discretion. | Fees approved within range of permissible discretion. |
Key Cases Cited
- Masters v. Wilhelmina Model Agency, Inc., 473 F.3d 423 (2d Cir. 2007) (abuse of discretion standard in class settlements)
- McReynolds v. Richards-Cantave, 588 F.3d 790 (2d Cir. 2009) (fair, reasonable, and adequate settlement standard)
- Zervos v. Verizon New York, Inc., 252 F.3d 163 (2d Cir. 2001) (range of permissible decisions for district courts)
- In re American Int’l Grp., Inc. Sec. Litig., 452 Fed.Appx. 75 (2d Cir. 2012) (summary order on PSLRA notice requirements)
- Wal-Mart Stores, Inc. v. Visa U.S.A., Inc., 396 F.3d 96 (2d Cir. 2005) (notice adequacy and fiduciary duties in class actions)
- In re Cendant Corp. Litig., 264 F.3d 201 (3d Cir. 2001) (notice and due process in class action settlements)
- Goldberger v. Integrated Res., Inc., 209 F.3d 43 (2d Cir. 2000) (fee awards in common fund/class actions standards)