Rate-Rigging Suits Against Big Banks Proceed
U.S. District Judge Jesse Furman has ruled that Philadelphia and Baltimore can proceed with consolidated class action litigation accusing major banks of artificially inflating interest rates on securities known as variable rate demand obligation (VRDO) bonds. Some of the cities’ state-law claims were dismissed. Judge Furman ruled that an antitrust conspiracy had been plausibly alleged by the cities.
Judge Furman declined to dismiss the cities’ federal antitrust claims against Bank of America, Citigroup and other financial institutions named in the putative class action case. The cities alleges a multiyear conspiracy among VRDO “remarketing agents” to manipulate the interest rates set for the tax-exempt bonds often used in financing major municipal projects. Judge Furman wrote:
To be sure, Defendants offer plausible non-collusive explanations for many of the facts alleged in the complaint. But the choice between two plausible inferences that may be drawn from factual allegations is not a choice to be made by the court on a Rule 12(b)(6) motion. Instead, the sole question for the court is whether Plaintiffs put forward enough facts to raise a reasonable expectation that discovery will reveal evidence of illegal agreement. Taking all of Plaintiffs’ allegations together and drawing all reasonable inferences in their favor, as the court must … the court concludes that Plaintiffs meet that burden on their federal antitrust claims.
Philadelphia and Baltimore, which filed the case last year on behalf of themselves and a proposed class of other VRDO issuers, have also asserted state-law claims for breach of contract and fiduciary duty as well as unjust enrichment against the Defendants. Included as Defendants are certain parents, subsidiaries and affiliates from eight large banking institutions.
But Judge Furman found that the cities had not alleged a contractual or fiduciary relationship with a subset of these Defendants, known as the non-counterparty Defendants, and therefore could not proceed with the corresponding contract and fiduciary duty claims against those Defendants.
By contrast, Judge Furman upheld contract claims against those bank units alleged to have served as remarketing agents for Philadelphia and Baltimore VRDO issuances, but he dismissed Philadelphia’s breach of fiduciary claims against these same so-called counterparty Defendants as largely duplicative of the contract claims. Judge Furman wrote:
Beyond the conclusory assertion that counterparty Defendants acted as its ‘municipal advisors’ … Philadelphia does not allege any facts to show that it had a special relationship of trust with the banks that would give rise to a fiduciary duty.
Judge Furman additionally rejected the cities’ unjust enrichment claims, citing in part what he said was an unfulfilled requirement under Pennsylvania and Maryland state law for the validity of the banks’ remarking agreements themselves to be in dispute.
The interest rates on VRDOs are regularly reset to keep them as low as possible, and VRDO issuers like Philadelphia and Baltimore hire banks as remarketing agents to perform these resets and remarket the bonds that investors decide to sell back at par value.
In their lawsuit, however, the two cities have alleged that remarketing agents inflated the interest rates on VRDOs between 2008 and 2016 in order to reduce the likelihood that investors would sell their bonds back, thus minimizing the banks’ need to hold and remarket the bonds. Inflated rates, according to the suit, also benefited money market funds that invested in VRDOs and were managed by some of these banks.
Classwide damages are established at potentially billions of dollars. The case was consolidated in May 2019. The suits initially were brought separately by Philadelphia and Baltimore. Similar claims of VRDO rate manipulation by major financial institutions have also featured in several state court whistleblower suits, though some of these cases have since been dismissed or reduced in scope.
The cities are represented by Quinn Emanuel Urquhart & Sullivan LLP, Wollmuth Maher & Deutsch LLP and Susman Godfrey LLP, with additional representation for Philadelphia from its own City of Philadelphia Law Department.
The case is City of Philadelphia et al. v. Bank of America Corp. et al. (case number 1:19-cv-01608) in the U.S. District Court for the Southern District of New York.
Recently Settled Class Action Cases
There have been several significant settlements in class action litigation over the past several weeks. This area of litigation is still extremely active and that activity is expected to continue and even increase in 2021. The following are some of the settlements.
Travel Companies Agree To $26 Million Settlement To End Trip Insurance Suit
A proposed class of travelers has asked a Florida federal court to approve a $26 million settlement to resolve claims that Delta Air Lines Inc., JetBlue Airways Corp. and other travel companies hid that they were getting paid when consumers bought travel insurance.
In a motion filed on Nov. 3, the class, led by named Plaintiff Bonnie Foshee, said the fund would go toward reimbursing class members for up to 15% of their trip insurance payments and that the settlement includes an injunction making the travel companies disclose they receive compensation when customers buy travel insurance.
The fund is nonreversionary and will also cover attorney fees, incentive awards and other administrative costs. Leftover funds will go first toward class members, who could receive up to 100% of their trip insurance payments, and any left over after that will go cy pres to the Make-A-Wish Foundation.
The proposed class filed a consolidated complaint in October, bringing together under Foshee’s suit claims in nine separate separate suits against Delta, JetBlue, American Airlines Inc., United Airlines Inc., Alaska Airlines Inc. and Amtrak. All of these Defendants will be dismissed as part of the settlement and the release of claims.
It was alleged that each of the companies induced customers to buy travel insurance through AGA Service Co. without disclosing that the airlines and Amtrak receive compensation as part of the deal. Some of the suits also allege that the travel companies illegally sold their data to AGA. It should be noted that AGA is not named in the consolidated complaint and is not party to the settlement.
The settlement comes after years of litigation starting in 2016, the class told the court, saying it is a good result for class members, considering the companies were granted motions for dismissal and summary judgment in some of the nine suits.
The travel companies announced that they had worked out a framework for the settlement in March. While a 10th suit is affected, it’s not a part of the settlement. That suit includes claims involving a separate travel insurance carrier.
The travelers asked the court to approve a settlement class consisting of all U.S. residents who bought a travel policy from AGA as part of its business arrangement with the Defendants, with class notice going out through the same email addresses AGA received from class members when they bought their policies.
Class representatives will ask for incentive awards based on their participation in the case, with Plaintiffs who sat for deposition asking for $7,500 each; Plaintiffs who did not sit asking for $5,000; and those Plaintiffs first named in the consolidated complaint asking for $1,000.
The proposed class is represented by lawyers from Robbins Geller Rudman & Dowd LLP; Leon Cosgrove LLP; Levi & Korsinsky LLP; Taus Cebulash & Landau LLP; Kantrowitz Goldhamer & Graifman PC; The Moskowitz Law Firm; Korein Tillery LLP; Bonnet Fairbourn Friedman & Balint PC; Wites Law Firm; Glancy Prongay & Murray LLP; and Gustafson Gluek PLLC.
The case is Foshee et al. v. Delta Air Lines Inc. et al. (case number 4:19-cv-00612) in the U.S. District Court for the Northern District of Florida.
Birdsong To Pay $50 Million To Settle Peanut Price-Fixing Suit
Farmers who claim that three of the biggest names in peanut shelling have been conspiring to flatten the price of their crops asked a Virginia federal judge Monday to bless a $50 million settlement they reached with Birdsong Corp. in their proposed class action.
The peanut farmers asked U.S. District Judge Raymond A. Jackson for preliminary approval of the deal, which was announced on the docket last week and will see peanut-shelling giant Birdsong pay $50 million to the settlement class, according to the motion.
Birdsong has also agreed to cooperate with the farmers in their continued litigation against Golden Peanut Co. in exchange for the release of claims that were brought or could have been brought against Birdsong and its affiliates, according to the motion. “This cooperation here is even more valuable in light of the applicability of joint and several liability to Plaintiffs’ claims – which at the point of the litigation means that Golden Peanut is jointly and severally liable for the full treble damages that Plaintiff establishes at trial,” the farmers said.
Golden Peanut remains the only Defendant left in the case after the farmers reached a preliminary $7.75 million settlement with Olam Peanut Shelling Co. last month, according to court records. The suit, which was filed in September 2019, accuses the three companies of working together to depress the price they shell out for the farmers’ crops.
According to the farmers, their case is about “how three large corporations conspired with one another for the past six years to drive down the prices they paid America’s peanut farmers for their hard work.” The trio buy raw and harvested peanuts from farmers, shell them and then sell them in bulk to entities around the country, such as candy companies. Together they make up around 80% of the peanut-shelling industry in the United States, according to the suit.
Specifically, the suit’s allegations center on runner peanuts, the most popular type in the United States. They’re the type used to make peanut butter and other snacks and aren’t normally packaged to be eaten on their own.
In September, the farmers launched a bid for class certification, arguing that presenting the same evidence at “potentially hundreds of separate trials” would be “highly inefficient and wasteful.”
In their motion for preliminary approval of the settlement with Birdsong, the farmers defined the settlement class as anyone in the U.S. who sold raw, harvested runner peanuts to any of the three Defendant companies, their subsidiaries or joint ventures from Jan. 1, 2014, through Dec. 31, 2019.
The farmers estimate that the class contains thousands of people or entities, according to the motion. A trial is currently slated to begin in January. There have been some delays caused by the coronavirus pandemic. But Judge Jackson said another delay wouldn’t be possible, since he’d already agreed to “kick the can along” once.
Birdsong and Golden Peanut had attempted to get the claims dismissed before the trial. Judge Jackson refused to let them out of the suit in May, rejecting arguments that the farmers based their claims on flawed U.S. Department of Agriculture data.
The farmers are represented by Wyatt B. Durrette Jr. and Kevin J. Funk of Durrette Arkema Gerson & Gill PC; W. Joseph Bruckner, Brian D. Clark, Simeon A. Morbey and Stephanie A. Chen of Lockridge Grindal Nauen PLLP; Kimberly A. Justice, Jonathan M. Jagher, Douglas A. Millen, Michael E. Moskovitz, Robert J. Wozniak and Brian M. Hogan of Freed Kanner London & Millen LLC; and Jeffrey J. Corrigan of Spector Roseman & Kodroff PC.
The case is In re: Peanut Farmers Antitrust Litigation (case number 2:19-cv-00463) in the U.S. District Court for the Eastern District of Virginia.
University Of California Reaches $73 Million Settlement To End Sex Abuse Claims
The University of California has agreed to pay out $73 million to settle claims its Los Angeles campus failed to protect scores of women who were sexually abused by a former gynecologist. The seven former patients of Dr. James Heaps alleged in their putative class action that the University of California, Los Angeles missed multiple opportunities to stop the doctor from sexually exploiting his patients. Heaps was arrested and charged with sexual battery in June 2019, according to the suit, which was filed in Oct., 2020. The Plaintiffs aren’t named in the suit.
The proposed settlement class consists of an estimated 6,600 women who were seen by Heaps at the Ronald Reagan UCLA Medical Center between 1986 and June 2018, at UCLA’s student health center from 1983 to June 2019, and at his medical offices at the UCLA Medical Plaza from February 2014 to June 2018.
Under the proposed deal, UCLA must make institutional reforms and compensate members of the settlement class, the patients said in this motion for approval filed on Nov. 16. Class members will receive an amount from $2,500 to $250,000 apiece, although some could get even more.
UCLA will also cover the Plaintiffs’ attorneys’ fees, an amount that won’t exceed $8.8 million, according to the filing. Additionally, the Plaintiffs could each come away with up to $15,000 in service awards.
Class members who still want to pursue individual litigation are free to do so. But the proposed settlement was said to offer “a better alternative for thousands of women who were impacted by Heaps’ predatory behavior and would otherwise receive nothing.”
According to the July 2019 suit, over the years Heaps made inappropriate and sexually suggestive comments about patients’ appearance, anatomy or sexual activity, removed patients’ clothing without consent and recommended unnecessary procedures and overly frequent examinations so he would have additional opportunities for abuse. The OB-GYN also sexually assaulted patients in a variety of ways, the victims alleged.
The patients are represented by Daniel C. Girard, Jordan Elias, Trevor T. Tan and Makenna Cox of Girard Sharp LLP, Elizabeth A. Kramer of Erickson Kramer Osborne LLP and Eric H. Gibbs, Amy M. Zeman and Amanda M. Karl of Gibbs Law Group LLP. The case is A.B. et al. v. The Regents of the University of California et al., case number 2:20-cv-09555, in the U.S. District Court for the Central District of California.
Judge Will Approve $23.6 Million Forex-Rigging Settlement
A New York federal judge has indicated she will approve a $23.6 million class-action settlement with more than a dozen big banks accused of rigging the foreign exchange market.
U.S. District Judge Lorna G. Schofield indicated her approval of the wide-ranging agreement during a telephone hearing, commending the investors’ counsel on what she said was an agreement so well received by an estimated 100,000 class members that not a single one had objected or opted out.
The settlement will benefit eight statewide classes of investors in Arizona, California, Florida, Illinois, Massachusetts, Minnesota, New York and North Carolina who indirectly purchased forex instruments from the banks.
The investors filed their claims in April 2017, alleging traders at Bank of America NA, Citigroup Inc., Deutsche Bank AG and other big banks worked together to manipulate the forex market and swap confidential customer information between 2007 and 2013.
According to the complaint, high-level traders held secret meetings using code words and used online chat rooms to coordinate the timing and volume of trades and move exchange rates in directions that favored the banks.
The investors also accused the banks of failing to maintain safeguards that could have prevented the manipulation and turning a blind eye to the collusion.
Judge Schofield has given preliminary approval of the five-part settlement in July. The investors are represented by Berger Montague, Schneider Wallace Cottrell Konecky Wotkyns LLP, Peiffer Wolf Carr Kane & Conway APLC and McCulley McCluer PLLC.
The case is Contant et al. v. Bank of America Corp. et al., case number 1:17-cv-03139, in the U.S. District Court for the Southern District of New York.
Navy Federal To Pay $16 Million To Settle Insufficient Funds Fee Suit
A Navy Federal Credit Union member accusing the nation’s largest credit union of unfairly charging insufficient funds fees has asked a Virginia federal judge to preliminarily approve a $16 million proposed class settlement.
According to the motion for preliminary approval, the proposed settlement would establish a $16 million common fund for the settlement class and require Navy Federal to revise its account agreement policy to clarify how it assesses insufficient funds fees. Navy Federal did not oppose certifying the class.
Lambert sued the credit union in January 2019, alleging that its fee-assessment practices for insufficient funds violated her agreement with the credit union. In her complaint, Lambert says that Navy Federal charged multiple $29 insufficient funds fees per transaction, and contends that her contract only allowed the credit union to charge one fee per transaction.
After her suit was dismissed with prejudice for failing to state a claim in August 2019, Lambert appealed to the Fourth Circuit, but the appellate court stayed further proceedings to allow the parties to mediate an agreement.
Lambert said in her motion that one of the hallmarks of the agreement is that settlement class members are not required to file claims to receive compensation. The settlement fund will be allocated to members of the settlement class under a distribution plan in the agreement.
“The precise calculation and implementation of allocations of the settlement fund will be done by class counsel and plaintiff’s expert using data provided by Navy Federal,” the motion said.
In October 2018, Navy Federal agreed to pay out $24.5 million to end proposed class claims in a similar suit alleging the credit union unfairly charged overdraft fees. Lambert and the proposed class are represented by Kristi C. Kelly and Andrew J. Guzzo of Kelly Guzzo PLC.
The case is Rudy Lambert et al. v. Navy Federal Credit Union (case number 1:19-cv-00103) in the U.S. District Court for the Eastern District of Virginia.