Fleet and Individual Defendants Settle Major Securities Class Action
November 29, 2011
Cleary Gottlieb successfully settled a class action brought under the Securities Act of 1933 on behalf of its clients Fleet Boston Financial Corporation (now Bank of America, N.A.) and individual defendants that arose out of the Argentine economic crisis of 2001. Plaintiffs argued that Fleet’s loan loss reserves were too low because it should have seen in March 2001, when it acquired Summit Bancorp in a $7 billion stock-for-stock merger, that Argentina would suffer an economic upheaval nearly a year later. As a result, the plaintiffs (former Summit shareholders who exchanged their shares for Fleet shares in the merger) contended that Fleet paid too little in the merger, and asserted claims under Section 11 seeking more than a billion dollars in damages. Extensive motion practice spanning several years narrowed the case substantially. After significant discovery, including over two dozen depositions in the United States and Argentina, confirmed that Fleet had no more insight into the future of Argentina’s economy than anyone else and that plaintiffs’ claims had no factual basis, Fleet was prepared to move for summary judgment.
Throughout the years, plaintiffs struggled to identify and maintain adequate class representatives, with the Court eventually demoting the class to “conditionally certified.” Plaintiffs moved to appoint five new class representatives, which motion was sub judice from June 2009 until the parties agreed to mediation. On March 3, 2011, the parties settled the case with the help of mediator Judge Nicholas Politan (ret.) for $5.5 million. On November 29, 2011, Chief Judge Brown of the U.S. District Court for the District of New Jersey finally approved the settlement, plan of allocation, certification of the settlement class, award of attorneys’ fees, and reimbursement of a class representative’s expenses.