Eastside Holding Inc. v. The Bear Stearns Companies Inc. et al, No. 1:2008cv02793 - Document 325 (S.D.N.Y. 2014)
Court Description: OPINION re: (436 in 1:08-md-01963-RWS) MOTION for Settlement Lead Plaintiff's Motion for a Approval of Reserve Distribution. filed by State of Michigan Retirement Systems. Based on the conclusions set forth above, the motion for a distribution order approving administrative determinations and directing distribution of reserved settlement funds made by Lead Plaintiff is granted. It is so ordered. (Signed by Judge Robert W. Sweet on 7/8/2014) Filed In Associated Cases: 1:08-md-01963-RWS, 1:08-cv-02793-RWS(lmb)
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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK IN RE BEAR STEARNS COMPANIES, INC. SECURITIES, DERIVATIVE, AND ERISA LITIGATION This Document Relates To: Securities Action, 08 Civ. 2793 -------------------------------------------x A P P E A RA N C E S: Attorneys for Lead Plaintiff State of Michigan Retirement Systems and Class Counsel for the Settlement Class LABATON SUCHAROW LLP 140 Broadway New York, NY 10005 By: Thomas A. Dubbs, Esq. James W. Johnson, Esq. Nicole M. Zeiss, Esq. BERMAN DEVALERIO One California St., Suite 900 San Francisco, CA 9411 By: Joseph J. Tabacco, Jr., Esq. One Liberty Square Boston, MA 02109 By: Patrick T. Egan, Esq. 08 MDL 1963 Sweet, D.J. Lead Plaintiff The State of Michigan Retirement Systems ("Lead Plaintiff") administrative reserved has moved for a distribution order approving determinations settlement funds. and Based directing on the distribution conclusions set of forth below, the motion is granted. I. Prior Proceedings The facts and procedures underlying this case discussed in this Court's November 9, 2012 Opinion and Order, re Bear Stearns Co., Inc. Secs., Deriv., and ERISA Litig., Supp. 2d 259 Accordingly, (S.D.N.Y. 2012) (the "November 9, is In 909 F. 2012 Opinion"). only facts relevant to this motion will be provided below. By order dated August 18, to this Court a number of actions 2008, filed the MDL Panel assigned in the United States District Courts for the Southern and Eastern Districts of New York arising from the Companies Inc. January 6, collapse of investment bank The Bear Stearns ("Bear Stearns" or the "Company") in March 2008. On 2009, an Order was issued consolidating all of these actions. The Order appointed lead counsel and lead plaintiffs for 1 each of the three species of actions comprising the consolidated set: ( 1) those asserting securities claims, ( 2) those asserting derivative claims and (3) those asserting ERISA claims. On February 27, 2009, Lead Plaintiff for the securities filed claims "Complaint") James E. alleging, Cayne, Alan action class consolidated a (the complaint inter alia, that defendants Bear Stearns, D. Schwartz, Warren J. Spector, Alan C. Greenberg, Samuel L. Molinaro, Jr., Michael Alix, Jeffrey M. Farber (collectively, Touche LLP the "Bear ("Deloitte") Stearns Defendants") , had violated federal and Deloit te securities & law in that they (i) defrauded investors by overstating the value of Bear Stearns' assets; assets and and (ii) understating misled the investors risks entailed concerning the in those company's liquidity problems. In June 2012, proposed settlements had been reached with both the Bear Stearns Defendants and Deloitte ("the Settlements"). The Settlements called for the Bear Stearns Defendants to pay $275 million and for Deloitte to pay $19.9 settlement amount of $294. 9 million million, for a ("Settlement Amount") total to a settlement fund (the "Net Settlement Fund") which resolved all of 2 the Settlement Class's 1 claims against all defendants. granted approval preliminary the to Settlements The Court via twin preliminary approval orders issued June 13, 2012 (the "Preliminary Approval Orders") . The Court also preliminarily certified the Settlement Class pursuant to Fed. R. Civ. P. 23 (a) and (23) (b) (3). On November 9, certification 2012, of this the Court approved the motion found class, the proposed for fin al settlement as procedurally and substantively fair and approved the proposed plan of allocation ("Plan of Allocation" or "Plan"). In re Bear Stearns, 909 F. Supp. 2d at 265-71. On September Administrative 20, 2013, Determinations and a Corrected Directing Order Payment Approving of Net Settlement Funds (the "First Distribution Order") was entered. The The Settlement Class consists of those who, during the period from December 14, 2006 through March 14, 2008 (the "Class Period"), purchased or otherwise acquired the common stock, other equity securities, or call options of or guaranteed by Bear Stearns, or sold Bear Stearns put options, and were damaged thereby. The Settlement Class also includes all persons who received Bear Stearns Capital Accumulation Plan ("CAP") Units ("CAP Plan Units") and Restricted Stock Units ("RSU Plan Unitsu) (collectively, "CAP/RSU Plan Units") that had fully vested, entitled them to an equivalent number of shares of Bear Stearns common stock upon settlement at the end of the deferral period, during the Class Period, as part of their compensation as an employee with Bear Stearns. Specifically excluded from the Settlement Class are: the Defendants; the officers and directors of Bear Stearns; the members of the immediate families of the Individual Defendants; any firm, trust, partnership, corporation, or entity in which any Defendant has a controlling interest; the legal representatives, heirs, successors-in-interest or assigns of any such excluded Person, and any Person who would otherwise be a Settlement Class member but properly excludes himself, herself, or itself by filing a valid and timely request for exclusion in accordance with the requirements set forth in the notice of settlement. 1 3 Distribution Order authorized the distribution of 90% of the Net Settlement Funds, with the remaining 10% to be held in reserve (the "Reserve Distribution") to pay a small subset of Proofs of Claim submitted by claimants that required additional processing because of their complexity or extent of supporting documentation ("Claims-in-Process"); Proofs review judicial requested the of of Claim the claimants Court-approved administrator's, The Garden City Group, Inc. their Proofs of Claim of who claims ("GCG"), rejection of ("Disputed Claims"), but that ultimately might be deemed eligible for payment; and any other contingencies. On the same day, Distribution Order payments to GCG made a from the Net distribution Settlement 15, 500 Authorized Claimants $230,329,766.28, or 90% of the Net for pursuant Funds, total Settlement to the distributing proceeds Funds of (the "Distribution") . The Distribution Order was modified by the Opinion and Order dated December 12, 2013 ("Modification Order"), which granted absent Settlement Class Member Cancan Limited's motion for intervention and allowed its late-filed accepted. 4 Proof of Claim to be GCG has reviewed and processed the Claims-in-Process, the Disputed Claims, any new claims received since June 15, 2013 ("New Claims") and any adjustments or revisions to existing claims ("Revised Claims") received. Discussion of these claims has been provided in the Declaration of Stephen J. Cirami ("Cirami Deel."), (MDL No. 08-1963 (RWS), ECF No. 438), and Declaration of Perry S. Carbone ("Carbone Deel.") , ECF No. 4 4 4) . (id., The Lead Plaintiffs filed the instant motion on May 23, 2014. Lead Plaintiffs seek entry of the proposed Order Approving Administrative Determinations Reserved Settlement Funds or "Proposed Order"). and Direction Distribution of ("Proposed Reserve Distribution Order" The Proposed Order adopts the GCG's administrative determinations regarding the Claims-in-Process, New Claims, Revised Claims and Disputed Claims. The Proposed Reserve Distribution Order determinations of Disputed Claims; would GCG approve (i) concerning the the administrative Claims-in-Process and (ii) approve payment to a relatively small number of claimants who filed late but otherwise valid Proofs of Claim after the June 15, the Cancan claim) ; 2013 bar date (iii) (the New Claims, approve payment to a which include small number of claimants who submitted additional documentation after the June 15, 2013 bar date and whose claims recognized under the Plan of Allocation 5 now calculate to a loss (a "Recognized Loss") or an increased Recognized Loss (the Revised Claims); (iv) direct the distribution of the 10% of the Net Settlement Funds that has been held in reserve; and (v) approve payment of GCG's outstanding fees and expenses incurred in connection with the administration of the Settlements. The Bear Stearns Defendants and Deloitte have taken no position on the motion or Proposed Order. Several claimants, in their individual capacities (the "Objecting Claimants"), have objected via letters to the instant motion and Proposed Reserve Distribution Order. Many of the Objecting Claimants are former employees of Bear Stearns who object to the exclusion of Bear Stearns common stock acquired through employee stock options outside of the Class Period, common stock and vested CAP/RSU Plan units that realized an overall market gain during the Class Period, publicly traded call options sold short and unexercised employee stock options. The instant motion was marked fully submitted on June 11, 2014. II. Determinations Of GCG 6 GCG has identified 1,143 total Claims-in-Process and 22 ~~ Disputed Claims. Cirami Deel. involved unique securities, 2, 5, n.3. Many of these claims specifically the CAP/RSU Plan Units. 636 of the 1,165 Claims-in-Process and Disputed Claims were found to be eligible. Id. ~ 5. The total eligible claims is $168,099,400.68. Recognized Loss Id. for these GCG has submitted a list of the Claims-in-Process that have been provisionally approved for payment ("Claims-in-Process Authorized Claimants" or "Authorized Claimants"). See id., Ex. A. Since June 15, Id. ~ 2013, GCG has received 139 New Claims. 10. Subsequent to the Modification Order, GCG was directed by co-lead counsel for Lead Plaintiff, Berman DeValerio and Labaton Sucharow LLP (collectively, "Class Counsel") to provisionally accept all claims received after June 15, 2013 to the extent that GCG determined them to be eligible for payment. Forty five of these late claims calculate to a Recognized Loss totaling $155,242,755.36. Id. The Recognized Loss attributable to the claim submitted by Cancan Limited is $140,929,370.41. Since June 15, 2013, 42 Id. at 6 n.4. claimants have provided additional documentation to GCG to support their claims. Id. ~ 11. GCG has determined that 26 of them now calculate to an above-zero Recognized Loss that previously had zero Recognized Loss and two 7 calculate to an increased Recognized Loss (the "Revised Authorized Claimants"). The revised Recognized Losses for the Revised Authorized Claimants total $1,347,572.41, less $21,804.12 that was awarded to these claimants in the Distribution. The Id. total additional "catch-up" award amount would be approximately $87,541 after applying the pro-rations from the Distribution. Id. Disputed Claimants a. Fifty four claimants (each a "Disputed Claimant") have requested judicial review of GCG's administrative determination of his, her or its Proof of Claim (each a "Disputed Claim"). After being contacted and their questions answered by GC.G, 4 3 of the Disputed Claimants withdrew their requests for judicial review or completed their Claimants Proofs continue to of Claim; request administrative determinations. Id. 11 of the judicial <JI 13. 54 total review Disputed of GCG's The remaining Disputed Claimants fall into the following categories: ¢ Four of the Disputed Claimants are claimants disputing GCG's determination that they are not Settlement Class Members; ¢ Five of the Disputed Claimants are claimants disputing GCG' s determination that their Proofs of Claim do not calculate to a Recognized Loss; and ¢ Two of the Disputed Claimants are claimants disputing GCG's 8 determination of their number of eligible shares. Id. gr 14. The four Disputed Claimants disputing GCG's determination that they are not settlement class members are as follows: ¢ Disputed Claimant No. 1, Claim 1166077; ¢ Disputed Claimant No. 2, Claim 1000201; ¢ Disputed Claimant No. 3, Claim 1163922; and ¢ Disputed Claimant No. 4, Claim 1000145. Cirami Deel. gr 15. The five Disputed Claimants disputing GCG's determination that their Proofs of Claim do not calculate to a Recognized Loss or GCG's determination of their number of eligible shares are as follows: ¢ Disputed Claimant No . 5, Claim 1001814; ¢ Disputed Claimant No . 6, Claim 1000435; ¢ Disputed Claimant No . 7, Claim 1000810; ¢ Disputed Claimant No. 8, Claim 1124212; and 9 ¢ Id. Disputed Claimant No. 9, Claim 1208621. ']['][ 17-18. The two Disputed Claimants that contend that additional shares or securities should be eligible for compensation are as follows: ¢ Disputed Claim No. 10, Claim No. 1148039; and ¢ Disputed Claimant No. 11, Claim 1001516. b. Rejection Determinations GCG recommends for rejection of 623 Proofs of Claim (the "Rejected Claims") . Cirami Deel. '][ 22. According to GCG, claimants who timely filed claims or claims after June 15, all 2013 received notification outlining any ineligible conditions and how to cure their claim, if possible. Id. '][ 21. III. Discussion The November 9, 2012 Opinion approved the Plan of Allocation and found that it "is designed to fairly and rationally allocate the settlement funds among claimants 10 [and] is both fair and reasonable." Id. at 270-71. However, the Objecting Claimants oppose the Proposed Reserve Distribution Order based on: (i) the exclusion of unexercised employee stock options; exclusion of unvested CAP /RSU Plan Uni ts; certain CAP /RSU Plan Uni ts exchanged for common stock; call options; (v) an that had (iii) (ii) the the exclusion of fully vested but were not (iv) the exclusion of publicly traded Objecting Claimant's allegedly incorrect classification as an officer/director of Bear Stearns; and (vi) improper or faulty conduct by and conflict of interest issues with Class Counsel and GCG. a. The Objecting Claimants Requests Are Denied 1. Unexercised Employee Option Grants Are Not Covered Under The Plan of Allocation Several Objecting Claimants have filed letters objecting to the exclusion of employee option grants. To the extent that the Objecting Claimants contend that unexercised option grants should be part of the Reserve Distribution, unexercised stock options are not eligible pursuant securities to the for participation Plan of Allocation. in the Settlements Section 25 of the Plan of Allocation sets forth that "[t]o calculate the Recognized Loss on Bear Stearns equity securities, options, or vested stock uni ts purchased/acquired and sold during the Class Period, sales must be 11 matched against purchases/acquisitions during the Class Period This means that sales of Bear Stearns equity securities, options, or vested stock units will be first matched with any preClass Period holdings and then matched with purchases/acquisitions during the Class Period in chronological order. Sales of pre-Class Period purchases shall have no Recognized Loss." Plan of Allocation at 11-12 (emphasis added). For options, "the purchase/sale date is the date of the exercise of the option and the purchase/sale price of the share (emphasis is the added). The exercise price Plan of the of Allocation option." thus at 12 acknowledges no Id. Recognized Loss for unexercised employee options as stock options that remain unexercised throughout the Class Period have no purchase/sale date and no Recognized Loss. Disputed Claimant No. 5 contends that Section 5 of the Plan of Allocation covers unexercised employee options. Section 5 states that the entities who, Settlement Class applied to during the period from December "all 14, persons 2 0 0 6 to or and through March 14, 2008, inclusive, purchased or otherwise acquired the publicly traded common stock or other equity securities, or call options of or guaranteed by Bear Stearns, or sold Bear Stearns put options, either in the open market or pursuant or traceable to a registration Allocation at 5. statement, and were damaged Disputed Claimant No. 12 thereby." Plan of 5 argues that the phrase "publicly traded" applies only to "common stock or other equity securities" and not to "call options". The claimant contends that there was no requirement that options must be publicly traded for participation in the Settlement. The claimant notes that the phrase "publicly traded options" appears nowhere else in the Plan of Allocation. In Pappas v. Bank of Am. 401(k) Plan for Legacy Co., 526 F. App'x 785 challenged (9th the Cir. plan of ("Countrywide"), 2013) allocation in that an action ERISA plan, on similar grounds. The plan argued that due to the inclusion of the phrase "either in the open market registration statement or pursuant or traceable to a . purchased or otherwise acquired [the company's] publicly traded common stock or call options, and/or sold . publicly traded put options (the 'Common Stock Subclass')," a common stock subclass could be either purchased on the open market or acquired pursuant to a traceable registration statement. in the Id. at 789. The Ninth Circuit found the phrase "either open market or pursuant or traceable to a registration statement" limited the settlement to only those who purchased the common stock subclass on the open market during the class period. Id. at 788-89. Common stock not purchased on the open market or transactions that occurred outside of the class period were not included in the settlement. Id. at 789. 13 The Circuit Court based its decision on the lawsuit's operative Securities Exchange Act of 1934 ("Exchange claims. at Id. subclass had Act") Section lO(b) securities 789. to The court concluded that be purchased on the open the class action common market stock because the complaint and class certification order was premised on a fraudon-the-market theory that the company's allegedly fraudulent statements caused fraud on the market by inflating the price of stock purchased in the open market during the class period. Similarly, Id. the Complaint in this action pleads that Bear Stearns allegedly made misstatements and omissions that inflated the price of the stock purchased during the Class Period in violation of Section lO(b), 20(a) and 20A of the Exchange Act. Compl. ~~ 813- 21. Like Countrywide, the language of the Plan of Allocation belies support to Disputed Claimant No. S's reading. Section 5 of the Plan does not present how a claimant's Recognized Loss is calculated for unvested employee options, nor does it specifically state that unvested employee options are included in the Settlement Class. Section 25 provides more information on the calculation of a Recognized Loss and only provides a Recognized Loss for vested stock units. Plan of Allocation at 11 ("The Settlement Funds . will be distributed according to the Plan of Allocation . members of the Settlement Class . to . who have an out-of-pocket 14 net loss on all Class Period transactions in Bear Stearns equity securities, options, or vested stock uni ts.") (emphasis added) . Thus, when read in context of the overall Plan, Section 5 does not allow the inclusion of unexercised employee stock option as such an interpretation would eviscerate the language of Section 25. The more specific terms of Section 25 regarding how losses are actually calculated is applicable here, and under the Plan of Allocation, employee option grants that were not exercised and sold during the Class Period are not eligible as a Recognized Loss. Disputed Claimant No. 5 notes that the Plan of Allocation describes how to calculate Recognized Loss on options that are not sold and contends that this should apply to unexercised options: " [ f] or the Call Options sold or held after March 14, Recognized Loss is the lesser of 2 0 0 8, the $19.82 per Call Option." Id. at 13. However, this phrase is in the section titled "Publicly Traded Call Options on Bear Stearns Common Stock", apply to unvested employee stock options. and does not Id. To the extent the Objecting Claimants are challenging the Class Period, Settlements or Plan of Allocation, the November 9, 2012 which Opinion had previously certified the narrowed its terms to the Class Period, Settlement and Plan of Allocation to be fair 15 Settlement Class, and found the and adequate. See ---·------- id., 909 F. Supp. 2d at 270-71. Despite the Objecting Claimants' generalized contentions to the contrary, overturn the November 9, the Class Period, there is no reason to 2012 Opinion's holding with respect to Settlements and Plan of Allocation for unexercised options. While the Objecting Claimants have suffered losses in that they will not be compensated for their bargained for unexercised option rights, to the extent that the unexercised options only provided the Objecting Claimants the option to purchase Bear Stearns stock, Objecting Claimants with unexercised options did not experience any monetary losses within the Class Period as they had not tendered any money for acquiring stock. Given such, and as previously held in the November 9, 2012 Opinion, the Settlement and Plan of Allocation are both fair and reasonable, and unexercised employee stock options are not included in the approved Plan of Allocation. 2. Unvested CAP/RSU Plan Units Are Not Entitled To A Recognized Loss Several of the Objecting Claimants, Claimant No. CAP /RSU including Disputed 5, have objected to the exclusion of their unvested Plan Uni ts. CAP /RSU Plan Uni ts are programs offered as compensation by Bear Stearns to certain of its employees. Pursuant to the Plan of Allocation, the Settlement persons who received Bear Stearns 16 Class included [CAP /RSU Plan Uni ts] "all that had fully vested, entitling them to an equivalent number of shares of Bear Stearns common stock upon settlement at the end of a deferral period, during the Class Period, as part of their compensation as an employee with Bear Stearns . ." Plan of Allocation at 5. The Plan of Allocation only covered fully vested CAP/RSU Plan Units during the Class Period. Accordingly, GCG was required to determine if the vesting date for the CAP/RSU Plan Units was within the Class Period in order to calculate a Settlement Class Member's actual recovery from the Net Settlement Funds. CAP/RSU standard schedule Plan Units generally vested according to a (the "Standard Vesting Schedule") . Shares held in the base version of the CAP/RSU Plans vested 50% two years after the grant date and the remaining 50% three years after the grant date with the vesting usually occurring on November 30 of each year. Shares held in the premium version of the CAP /RSU Plans vested 50% three years after the grant date and the remaining 50% four years after the grant date with the vesting usually occurring on November 30 of each year. Cirami Deel. ~ 7. To determine the vesting date for a claimant's CAP/RSU Plan Units, if the documents provided did not show a specific vesting period, GCG Standard Vesting Schedule. Under the Plan of Allocation, used the CAP/RSU Plan Units must have vested during the Class Period, from December 14, 2006 to and through March 14, 2008, and the claimant must have 17 held those vested CAP/RSU Plan Units as of the close of trading on May 30, 2008 in order for those CAP/RSU Plan Units to calculate to a Recognized Loss. Certain claimants were informed that their unvested CAP/RSU Plan Units would automatically vest when JP Morgan acquired Bear Stearns. Cirami Deel. ~ 8. However, the acquisition agreement between JP Morgan and Bear Stearns was not announced until March 16, 2008, after the close of the Class Period. Thus, any CAP/RSU Plan Units eligible for this accelerated vesting would not have vested until after the close of the Class Period, and these CAP/RSU Plan Units do not calculate to a Recognized Loss pursuant to the Plan of Allocation. 3. Id. Vested But Not Exchanged For Common Stock CAP/RSU Plan Units Must Be Offset By Gains During The Class Period With regards to vested CAP /RSU Plan Uni ts, several of the Objecting Claimants realized an overall market gain on their transactions on common stock and vested CAP/RSU Plan Units. The Settlement only applied to members of the Settlement Class "who have an out-of-pocket net loss on all Class Period Transactions in Bear Stearns equity securities, options, or vested stock units." Plan of Allocation at 11. The Plan of Allocation was also explicit 18 in that "[t]o extent a Claimant had an overall out-of-pocket gain from his, her or its overall transactions in Bear Stearns equity securities (or Options or Eligible Vested RSU /CAP Uni ts) during the Class Period, the value of the Recognized Loss will be zero." Id. at 14. Both CAP/RSU Plan Units and common stock transactions were required to be offset by the total gains and losses of the claimant. market Hence, to the extent realization on his, her an Objecting Claimant's or its common overall stock and vested CAP/RSU Plan Units transaction during the Class Period was a gain, that Objecting Claimant did not suffer out-of-pocket losses or a Recognized Loss eligible for compensation under the Plan of Allocation. Publicly Traded Call Options Are Not Entitled To A Recognized Loss 4. Under the Plan of Allocation, that sold Bear Stearns equity "[a]ny person or entity securities 'short' will have no Recognized Loss with respect to such purchases/acquisitions during the Class Period Consequently, these to cover option said short transactions sale." must Id. result at 12. in a Recognized Loss of zero. 5. Disputed Claimant No. 7 Was Properly Classified As An Officer/Director Of Bear Stearns 19 Disputed Claimant No. 7 has objected to his classification as an officer or director which would disqualify him from participation in the Settlements under the Plan. Disputed Claimant No. 7 was the Treasurer of Bear Stearns for a portion of the Class Period, but had resigned as Treasurer on January 14, 2008. In March 2008, his title was "Senior Managing Director" of Bear, Stearns & Co., Inc., a broker-dealer subsidiary of Bear Stearns, and CEO of Bear, Stearns Securities Corp., another brokerdealer subsidiary of Bear Stearns. The Class "the Plan officers of Allocation and excludes directors of from Bear the Settlement Stearns." Plan of Allocation at 5. While Disputed Claimant No. 7 was not an officer of Bear Stearns for the entirety of the Class Period, officer until January 2008, he was an just two months before the close of the Class Period. Given that he was an officer for virtually all of the Class Period, Disputed Claimant No. 7 was properly excluded from the Settlement Group, Inc. (certifying Class. See, e.g., In re Giant Interactive Secs. Litig., 279 F.R.D. 151, 158-159 (S.D.N.Y. 2011) settlement that class excluded officers and directors). 6. Class Counsel And GCG Did Not Act Improperly In Its 20 Handling Of The Distribution, Reserve Distribution And Proposed Order Several Objecting Counsel's and GCG' s Claims, Claimants have complained of Class conduct in explaining denials of Proofs of responding to client requests and dealing with potential conflicts of interest. They have also requested for a reduction in Class Counsel's awarded fees. These Objecting Claimants have noted that Class Counsel's economic interest are at odds with assisting claimants who requested court review as Class Counsel's fee arrangement provides Class Counsel with a fixed fee and any additional effort on advocating the Disputed Claims would result in no additional compensation. In addition, these Objecting Claimants contend that the low number of Disputed Claims submitted to the Court means that it would not have been unduly burdensome for Class Counsel to have offered more attentive legal and individual attention to each Disputed Claimant. Class counsel "owe [s] a duty to the entire class, not merely to the named plaintiffs" or individual claimants. Schick v. Berg, No. 03 Civ. 5513(LBS), 2004 WL 856298, at *8 (Apr. 20, 2004). In class actions there is always "the potential for conflicting 21 interests among the class representatives, absent class members." Maywalt v. Parker 67 F.3d 1072, 1077 (2d Cir. 1995). counsel, and & Parsley Petroleum Co., "Once certified to proceed as a class action, class the action has been it is incumbent on the class representatives to be alert for, and to report to the court, any conflict of interest on the part example, of class counsel, as for counsel's greater concern for receiving a fee than for pursuing the class claims." Id. at 1068. As an initial matter, Class Counsel has previously been held to be adequate representation for the class pursuant to Fed. R. Civ. P. 23 (a) F. Supp. and 23 (b) (3). 2d at 264-65. Further, See November 9, 2012 Opinion, 909 any claims of conflict by Class Counsel here is not substantial. Class Counsel has reaffirmed the claims administrator's determination on the eligibility of the Proofs of Claim according to the Plan of Allocation. There is no evidence, and the Objecting Claimants do not claim as such, that either Class Counsel or GCG has improperly applied the terms of the Plan of Allocation. Mere affirmance of a claims administrator's determination does not constitute inadequate representation by class counsel especially when that determination was proper under the court-approved plan of allocation. Even if Class Counsel is set to receive a fixed fee, impropriety surely cannot follow from the Lead Counsel's proper affirmance of the Plan that has been 22 held to be fair and reasonable. With delayed regards responses shows that to Dispute from Class Claimant Counsel, the No. 5' s claims of documentary evidence the claimant's communications with and questions to Class Counsel and GCG were answered within a reasonable time. See Carbone Deel. ~~ 5-12. The Objecting Claimants contention that Class Counsel and/or GCG provided faulty instructions in its directions to the Objecting Claimants is belied by the 636 Class-in-Process Authorized Claims in this round of distribution who submitted and found to have proper Proofs of Claim and Recognized Losses and only 11 Disputed Claims. Objecting Claimants also have not provided examples of any such faulty or inadequate instructions. Since no impropriety has been shown or found on the part of Class Counsel or GCG, the Objecting Claimants' request for a reduction of the Class Counsel's and GCG's awarded fees is denied. b. Review Of Disputed Claims Court review of the Disputed Claimants Proofs of Claim are as follows: 23 Disputed Claimant No. 1, Claim 1166077 Disputed Claimant No. 1 received approximately 7, 718 CAP/RSU Plan Units which fully vested prior to the start of the Class Period. of Disputed Claimant No. Bear Stearns common 1 also acquired 6,228 shares stock prior to the start of the Class Period. Since participation in the Settlement is open only to those who "purchased or acquired options) during the Class . securities (or sold/wrote put Period," Plan of Allocation at 5, no eligible purchases were made as all securities were acquired prior to the start of the Class Period. The Proof of Claim of Disputed Claimant No. 1 is rejected. Disputed Claimant No. 2, Claim 1000201 Disputed approximately 2, 090 Claimant No. CAP/RSU Plan 2 Units received in 2006 a total of and 2007. The supporting documentation shows a vesting date of May 1, 2008 for 206 CAP/RSU Plan Units and a vesting date of May 1, additional 206 CAP/RSU Plan Units, close of the Class Period. 2009 for an both of which are after the Claimant did not provide supporting documentation for the remaining approximately 1,678 CAP/RSU Plan Uni ts. Application of the Standard Vesting Schedule 24 results in vesting dates after the close of the Class Period. Given such, no eligible purchases were made during the Class Period. The Proof of Claim of Disputed Claimant No. 2 is rejected. Disputed Claimant No. 3, Claim 1163922 Disputed Claimant No. 3 acquired 700 shares of common stock on March 24, 2008, after the close of the Class Period. No eligible purchases were made during the Class Period because the acquisition of common stock occurred after the close of the period. Hence, the Proof of Claim of Disputed Claimant No. 3 is rejected. Disputed Claimant No. 4, Claim 1000145 Disputed Claimant No. Units pursuant to the base 4 received 1,724.68 CAP/RSU Plan plan in 2007. No supporting documentation was provided regarding the vesting date. Application of the Standard Vesting Schedule results in vesting dates after the close of the Class Period. Thus, no eligible purchases were made during the Class Period because all CAP/RSU Plan Units vested after the close of the period. The Proof of Claim of Disputed Claimant No. 4 is rejected. Disputed Claimant No. 5, Claim 1001814 25 Disputed Clamant No. stock and publicly traded 5 has CAP/RSU Plan Units, call options that factor common into his Recognized Loss. CAP/RSU Plan Shares - Disputed Claimant No. 5 received approximately 30,205 CAP/RSU Plan Units which were fully vested prior to the beginning of the Class Period. assigned to these shares is zero. The Recognized Loss Disputed Claimant No. 5 also received approximately 2,625 CAP/RSU Plan Units which fully vested during the Class Period and were held after May 30, market these loss for approximately calculates to $257, 705. 74. 2, 625 Pursuant to the CAP/RSU 2008. Plan The Units Plan of Allocation, these CAP/RSU Plan Units were assigned a value of $46.595 per share for a Recognized Loss of approximately $122,298. Common Stock - Prior to the start of the Class Period, Disputed Claimant No. 5 held 144,000 shares of Bear Stearns common stock. On December approximately 18, 19,231 2006, shares Disputed Claimant No. of common stock 5 acquired (converted from CAP/RSU Plan Units granted in 2001) which were assigned a value of $56. 88 per share for a total purchase price of approximately $1,093,859. On March 22, 2007, Disputed Claimant No. 5 acquired an additional 1, 2 92 shares of common stock 26 (converted from CAP /RSU -----------· - Plan Units granted in 2001) which were assigned a value of $56.88 per share for a total purchase price of approximately $73,488. On April 13, 2007, Disputed Claimant No. 5 purchased an additional 10 shares of common stock for $148.40 per share for a total purchase price of approximately $1, 484. On December 21, 2007, Disputed Claimant No. 5 acquired an additional 4,566 shares of common stock (converted from CAP /RSU Plan Uni ts granted in 2 0 02) which were assigned a value of $64 per share for a total purchase price of approximately $292, 224. In the aggregate, the total amount paid for the 25,099 shares of common stock acquired during the Class Period calculates to approximately $1,461,056. Disputed Claimant No. 5 sold 25,099 shares of common stock on December 26, 2007 for $88.4439 per $2,219,853, share, for a total sale price of approximately resulting in an overall market gain of approximately $758,797. Publicly Traded Call Options - at the beginning of the Class Period, Disputed Claimant No. 5 had an opening short position of Bear Stearns call options. 5 engaged in During the Class Period, several other transactions Disputed Claimant No. in call options, all sold short with eventual purchases to cover those sales. As discussed above and pursuant to the Plan of Allocation, any person or entity that "short" will have no sold Bear Recognized 27 Stearns Loss with equity securities respect to such purchases/acquisitions during the Class Period to cover said short sale. Disputed Clamant No. S's CAP/RSU Plan Units calculate to a Recognized Loss. However, the Claimant's losses are completely offset by the net market gain received as a result of his common stock transactions. The common stock market gain of $758,797 is greater than his CAP/RSU Plan Units market loss of $257,705, the claim results in an overall net market gain of Therefore, the Recognized Loss for Disputed Claim No. and $501, 092. 5 is zero, and his Proof of Claim is rejected. Disputed Claimant No. 6, Claim 1000435 Disputed Claimant No. 6 has CAP/RSU Plan Units and common stock transactions that factor into his Recognized Losses. CAP/RSU Plan Units - Disputed Claimant No. 6 received approximately 6,842 vested CAP/RSU Plan Units prior to the start of the Class Period. The Recognized Loss assigned to these shares is zero. Disputed Claimant No. 6 was also granted approximately 657 additional CAP/RSU Plan Units in 2005 which vested during the Class Period, were held after May 30, grant price of $116.50. 2008 and were assigned a Disputed Claimant No. 28 6 was also granted approximately 961 CAP/RSU Plan Units in 2004 which vested during the Class Period, were held after May 30, 2008 and were assigned a grant price of $102.65. These 1,618 CAP/RSU Plan Units that were fully vested during the Class Period calculate to a market loss of $159,044, and, pursuant to the Plan of Allocation, these CAP/RSU Plan Units have a value of $46.59 per share for a Recognized Loss of approximately $75,382. Common Stock - On December 18, 2006, No. 6 acquired approximately 2,871 shares Disputed Claimant of common (converted from CAP /RSU Plan Uni ts granted in 2002) stock which were assigned a value of $64 per share for a total purchase price of approximately $183, 744. On December 21, 2007, Disputed Claimant No. 6 acquired 2,626 shares of common stock (converted from CAP/RSU Plan Units granted in 2003) which were assigned a value of $73.75 per share for a total purchase price of approximately $193,667. In the aggregate, the total amount paid for the 5,497 shares of common stock acquired during the Class Period totals approximately $377,411. On December 18, 2006, Disputed Claimant No. 6 sold 1,060 shares of common stock at approximately $164.68 per share for total proceeds of approximately $174,559. On December 21, 2006, Disputed Claimant No. 6 sold 1,811 shares of common stock at approximately $164.95 per share for total proceeds of approximately $298,724. On December 21, 2007, Claimant No. 6 sold 2,626 shares of common stock 29 at approximately $89.0327 approximately $233, 800. per share for In the aggregate, total proceeds of the proceeds received from the sale of 5,497 shares of common stock totals approximately $707,083, resulting in a net common stock market gain of $329,672. The CAP/RSU Plan Units market loss of $159,044 is offset by the common stock market gain of $329,672, and results in a claim of an overall net market gain of $170,628. The Recognized Loss for Disputed Claim No. 6 is therefore zero. The Proof of Claim of Disputed Claimant No. 6 is rejected Disputed Claimant No. 7, Claim 1000810 As discussed above, Stearns officer and Disputed Claimant No. excluded by participation in the Settlements. the Plan of 7 was a Bear Allocation from His Proof of Claim is further discussed as follows: CAP/RSU Plan Shares - Disputed Claimant No. approximately 46, 496 shares of prior of to the start the 7 received fully vested CAP/RSU Plan Units Class Period. The Recognized Loss assigned to these shares is zero. Disputed Claimant No. 7 received approximately 14,652 additional fully vested CAP/RSU Plan Units during the Class Period that were held after May 30, 30 2008. The total market loss for these CAP/RSU Plan Units is approximately $1,434,431. Under the Plan of Allocation, these shares were assigned a value of $46.59 per share for a total Recognized Loss of approximately $682,649. Common Stock - On December 18, 2006, No. 7 acquired approximately 19,274 Disputed Claimant shares of common (converted from CAP/RSU Plan Units granted in 2001) stock which were assigned a value of $56.88 per share for a total purchase price of approximately $1,096,305. On March 22, 2007, Disputed Claimant No. 7 acquired 1,295 shares of common stock Plan Units granted in 2001) $56. 88 per share for a (converted from CAP/RSU which were also assigned a value of total purchase price of approximately $73,659. On December 21, 2007, Disputed Claimant No. 7 acquired an additional 25,927 shares of common stock as the result of CAP/RSU Plan Units granted in 2002 which were assigned a value of $64 per share for a total purchase price of approximately $1,659,328. The total amount paid for the 46,496 shares of common stock acquired is approximately $2,829,293. On December 18, 2006, Disputed Claimant No. 7 sold 19,274 shares of common stock at approximately $164.76 per share for total proceeds of approximately $3,175,700. On March 22, 2007, Disputed Claimant No. 7 sold 1,295 shares of common stock at approximately $151.27 per share for total proceeds of approximately $195,903. On December 21, 2007, Disputed Claimant 31 No. 7 sold 25,927 shares of common stock at approximately $89.03 per share for total proceeds of approximately $2,308,350. aggregate, In the the proceeds received for the 46,496 shares of common stock total approximately $5, 679, 953, resulting in a net common stock market gain of $2,850,660. When $2, 850, 660 is the common stock offset by the market CAP/RSU gain of approximately Plan Units market loss of $1,434,431, the claim results in a net market gain of $1,416,229. The Recognized Loss for Disputed Claimant No. 7 is zero. The Proof of Claim for Disputed Claimant No. 7 is thus rejected. Disputed Claimant No. 8, Claim 1124212 Disputed Claimant No. 8 purchased 127 shares of common stock on March 13, 2008 for $55 per share. The claimant sold them on March 14, per share 2008 for $58 per share for a net market gain of $3 and an overall transactions is zero. gain. The Recognized Disputed Claimant No. shares of common stock at varying prices, Loss for these 8 also purchased 760 all on March 14, 2008 and sold them on the same day. Pursuant to the Plan of Allocation, "in and out" transactions have a recognized loss of zero. See Plan of Allocation at 13 ("For Bear Stearns common stock purchased or acquired on March 14, 2008 and . sold on March 14, 2008, the 32 Recognized Loss is zero"). The Proof of Claim for Disputed Claimant No. 8 is rejected. Disputed Claimant No. 9, Claim 1208621 Disputed Claimant No. 9 sold short 2,500 shares prior to the start of the Class Period. 1,200 shares were purchased on March 14, 2008 and 1,300 shares were purchased after the Class Period ended. These purchases were made to cover pre-Class Period short sales and therefore have no Recognized Loss. Disputed Claimant No. 9 also purchased 15,000 shares after the end of the Class Period that remained unsold as of May 30, 2008. The shares were purchased after the Class Period ended; they do not calculate to a Recognized Loss. Thus, the Proof of Claim for Disputed Claimant No. 9 is rejected. Disputed Claim No. 10, Claim No. 1148039 Disputed Claimant No. Stearns common stock prior 10 purchased 300 shares of Bear to the start of the Class Period. Disputed Claimant No. 10 acquired less than one share of common stock on 2007 January 29, at approximately $169 per acquired less than one share on April 30, $160 per share, all of which 33 was sold share and 2007 at approximately on May 1, 2008 at approximately $6.47 and $6.74, respectively. Pursuant to the Plan of Allocation, these shares are assigned a value of the lesser of $46.59 per share or the purchase price paid per share less the greater of (i) the sales proceeds received per share, or (ii) the average closing price per share applicable to the date of sales as listed in the Plan of Allocation. Here, the lesser value is $46.59 per share. Given such, the total Recognized Loss is approximately $54.95, and payment will be made for that amount. Disputed Claimant determination that Period do equity not the calculate securities, distribution 300 of the No. 10 has Accordingly, to a Recognized Loss. Plan Settlement purchased prior the to 300 the the shares purchased prior to the Class of Allocation proceeds for acquired and sold during the Class Period. 11. challenged shares Class of only stock regards to provides for purchased or Plan of Allocation at Disputed Period With Claimant cannot calculate No. to 10 a Recognized Loss. Disputed Claimant No. 11, Claim 1001516 Disputed Claimant No. 11 has requested judicial review of the determination that employee options that were not exercised to purchase common stock are not 34 eligible securities in the Settlements. As noted above, such securities are not eligible under the Plan of Allocation. unexercised employee Accordingly, options are Disputed Claimant No. not eligible for ll's distribution under the Settlements. c. The Claims-in-Process Authorized Claimants Is Approved Having reviewed the documentation for the Claims-in- Process Authorized Claimants, GCG's recommendation for payment to the 636 Claims-in-Process Authorized Claimants found to be eligible for funds under the Plan of Allocation is approved. After applying the pro-rations from the Distribution, the award amount from the Reserve Distribution to these claims will be approximately $11,098,764. d. Participation In The Reserve Distribution For The Revised Authorized Claimants Is Approved The revised by claims. GCG' s Revised GCG is an Authorized appropriate Claimants' revision Recognized for these Losses eligible recommendation for the "catch-up" award amount of $87,541 to be paid to the Revised Authorized Claimants is approved. e. Participation In The Reserve Distribution For The New Claims Is Approved 35 GCG was instructed by Class Counsel to approve the New Claims based on the Modification Order. Given such, the Proofs of Claim for the New Claims is approved. f. Affirmation Of GCG's Rejection Determinations Of The Rejected Claims GCG recommends for rejection 623 Proofs of Claim. According to GCG, all claimants who timely filed claims or claims after June 15, 2013 received notification outlining any ineligible conditions and how to cure their claim, if possible. Cirami Deel. ~ 21. The general reasons for rejection of the Proofs of Claim recommended for rejection are as follows: Reason for Rejection Proof of Claim Description Duplicate Proof of Deficient Proof of Proof of Claim Did Loss TOTAL Id. ~ Did Not Fit Number of Claims the Class 183 Claim Claim Never Cured Not Result in a Recognized 36 150 254 623 22. Other than the 11 Disputed Claimants, none of the other Rejected Claimants have disputed the rejection of their Proof of Claim. Having reviewed the GCG's recommendations, 36 the Proofs of Claim for the 623 Rejected Claims is rejected. g. GCG's Fees And Disbursements Is Approved GCG was responsible for directing the first distribution to Authorized Claimants, reviewing additional claims containing CAP and/or RSU shares and issues, assessing the Claims in Process, mailing and distributing all payments and communications to Authorized Claimants, and other tasks related to the Distribution and administration of the Proofs of Claim. GCG billed Class Counsel on a regular basis and provided regular reports of all of the work GCG performed Settlements. all work with respect Cirami Deel. performed ':ll 23, therein. to Ex. GCG the F. has administration of the Class Counsel authorized filed an invoice for $421,261.49 that reflects GCG's outstanding fees and expenses that have been incurred in in connection with its work related to the Claims-In-Process, Disputed Claims and New and Revised Claims, as well as GCG's estimate of fees and expenses to conduct the Reserve and Supplemental Distributions in accordance with the Distribution Plan. Id., Ex. F. Having reviewed the Declaration of Stephen J. Cirami and the accompanying invoices which detail the work done by GCG, GCG's services and charges were appropriate and in accord with the types 37 of services and charges necessary for administering the Proofs of Claim, Distribution Life Ins. Co. v. and Reserve Miliken, (S.D.N.Y. Nov. 2 0, included, among other assisting in No. 1997) Distribution. 92-CV-1151, (claims things, administering Presidential 1997 WL 727497, administrator's processing the See fund, and proofs *5-6 services of claims, calculating taxes); Genden v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 741 F. Supp. 84, 88 (S.D.N.Y. settlement administrator settlement fund); WL 1310503, 1990) at Blank v. *5 (approving for total services Jacobs, (E.D.N.Y a Mar. No. 27, in of $507, 684. 45 administering to the 03-CV-2111 (JS) (WDW), 2013 2013) (approving claims administrator's fees and expenses for processing and distribution of settlement fund). Accordingly, GCG is entitled to the requested amount of $421,261.49 for its fees and expenses. 38 IV. Conclusion Based on the conclusions set forth above, the motion for a distribution order approving administrative determinations and directing distribution of reserved settlement funds made by Lead Plaintiff is granted. It is so ordered. New York, NY July ;j" , 2014 ROBERT W. SWEET U.S.D.J. 39
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