Citigroup Inc. and its lawyers at Paul, Weiss, Rifkind, Wharton & Garrison have secured final court approval for a $730 million settlement with bondholders who claimed the bank misled them about its condition during the financial crisis. The ruling doesn't address the lingering question of whether plaintiffs counsel at Bernstein Litowitz Berger & Grossmann will get the $146 million they've requested in attorneys fees.
U.S. District Judge Sidney Stein signed off on the settlement in a 13-page decision issued on Tuesday. The development comes just a few weeks after Stein approved a $590 million deal Citi inked with shareholders over parallel claims.
The judge called the settlement fair and reasonable, even as he noted that Bernstein Litowitz's own expert witness had pegged damages at roughly $3 billion. Plaintiffs counsel would have faced several obstacles at trial, Stein wrote, like establishing liability under Fait v. Regions Financial Corp., a 2011 decision by the U.S. Court of Appeals for the Second Circuit that made it extremely difficult to build a securities class action based on a bank's statements about its goodwill and loan loss reserves (see here and here).
As we noted when the settlement was first announced in March, Bernstein Litowitz's total recovery in post-financial crisis investor class actions is now hovering above the $5 billion mark.
Stein has not yet ruled on the firm's $146 million attorneys fee request, which it filed in June. The firm plans to give part of the money to co-counsel at Kessler Topaz Meltzer & Check and Pomerantz Grossman Hufford Dahlstrom & Gross. By way of comparison, Bernstein Litowitz and its co-counsel asked for $150 million when they negotiated a historic $2.4 billion class action settlement with Bank of America Corp. last September.
Class action crusader Theodore Frank criticized Bernstein Litowitz in a blog post for demanding 20 percent of the recovery in the Citi case, but a scan of the court docket doesn't reveal much in the way of formal objections. Frank's Center for Class Action Fairness recently succeeded in slicing a $100 million attorneys fee request lodged by Kirby McInerney for negotiating the $590 million Citi shareholder deal.
"We and our clients are extremely pleased that the Court approved the settlement, which we believe is an outstanding result for investors," Bernstein Litowitz partner John Browne said in a statement.
Lawyers at Skadden, Arps, Slate, Meagher & Flom represented underwriter defendants in the case.
