Articles from December 2011

Deane v. Fastenal: Nationwide Overtime Collective Action Certified

A Northern District judge has conditionally certified claims brought under the Fair Labor Standards Act (FLSA) against an industrial supply company by two salaried retail store general managers.  See Deane v. Fastenal, No. 3:11-cv-00042 (N.D. Cal. Nov. 14, 2011) (order granting conditional certification) (available here).  The named plaintiffs seek to represent a nationwide class of approximately 2,000 former and current general managers who were allegedly misclassified as exempt employees.  Id.  Judge Susan Illston found that the named plaintiffs’ declarations and their documentary evidence established that they were similarly situated to the proposed class members, and found that the company’s contrary declarations did not sufficiently negate this showing.  Id.  Pursuant to the FLSA’s unique procedures, the court ordered Fastenal to provide the general managers’ contact information to a class action administrator, which will send the putative class members an opt-in notice.  Id.

Wachovia to Pay $148 Million to Settle Bond Market Manipulation Claims

Wachovia Bank (now a part of Wells Fargo Bank) will pay $148 million to federal and state agencies and municipalities after admitting to anticompetitive activity in the municipal bonds market.  State and federal authorities charged the bank with entering into illegal agreements to manipulate the bidding process and rig bids on bond reinvestment transactions from 1997 through 2005.  As part of a non-prosecution agreement with the SEC, Wells Fargo admitted that former employees of Wachovia engaged in this illegal conduct.  The Justice Department has already obtained $525 million in settlements with Bank of America, UBS AG and JP Morgan over allegations of corruption in the municipal bond market.

Maine State Retirement System v. Countrywide: Federal Judge Certifies Countrywide Securities Class Action

A California district court judge granted certification in a class action against Countrywide Financial.  The plaintiffs allege that the home mortgage giant, now owned by Bank of America, engaged in deceptive practices while selling billions of dollars in mortgage-backed securities.  See Maine State Retirement System v. Countrywide Financial Corp., No. 2:10-cv-00302 (C.D. Cal. Nov. 16, 2011) (order granting class certification) (available here).  The class consists of all persons and entities that bought Countrywide’s mortgage-backed securities before January 14, 2010, and includes participants in several public employee pension plans.  Id.

The certified class can now pursue claims that Countrywide and its investment banks made misleading statements and omissions in connection with the issuance of highly risky mortgage-backed securities, which were secured by mortgages virtually certain to result in defaults.  See Second Amended Complaint, Maine State Retirement System v. Countrywide, No. 2:10-cv-00302 (C.D. Cal., filed Dec. 6, 2010), ¶¶ 4-10.  The inevitable mortgage defaults revealed that the properties underlying the mortgages were worth materially less than the loans issued to the borrowers, and that the borrowers were unable to cover the outstanding mortgage balances.   Id. at ¶¶ 10-17. 

The class certification order came after Countrywide stipulated to a proposed class in conformity with the judge’s previous rulings in the case, thereby cutting short protracted legal argument over class certification.  See Maine State Retirement System v. Countrywide Financial Corp., No. 2:10-cv-00302 (C.D. Cal. Nov. 16, 2011) (order granting class certification).

Rubin v. MF Global: $90 Million Class Action Settlement Approved

The Southern District of New York has approved a $90 million cash settlement that confirms the distinctive role of class actions in compensating victims of the recent financial crisis.  See Rubin v. MF Global, No. 1:08-cv-02233 (S.D.N.Y. Nov. 18, 2011) (final order and judgment) (available here).  The settlement resolves claims against defendants, including MF Global, in connection with the company’s initial public offering.  The plaintiffs alleged that defendants erroneously assured investors that MF Global’s system of risk controls would be capable of monitoring risk on a continuous, “real time” basis.  See First Amended Class Action Complaint at ¶ 77, Rubin v. MF Global, No. 1:08-cv-02233 (S.D.N.Y. Nov. 5, 2010).  In fact, MF Global had deactivated trading and margin controls on brokers’ computers to speed up transaction times.  Id. at ¶¶ 14, 93.  When a single trader subsequently lost $141 million speculating in wheat futures in overnight trading, MF Global was forced to absorb those losses, sending MF Global’s stock into a tailspin.  Id. at ¶¶ 13-17. As a result, the company lost $1.1 billion in market capitalization over a two-day period.  Id. at ¶¶ 114-115.

Owing to the unusually large settlement fund of $90 million, class counsel was awarded 18 percent of the settlement fund in fees, rather than the usual 33 percent.  See Rubin v. MF Global, No. 1:08-cv-02233 (S.D.N.Y. Nov. 18, 2011) (order granting plaintiffs’ counsel’s petition for an award of attorneys’ fees).  The settlement follows on the heels of MF Global’s October 31 bankruptcy filing, which was directly tied to an additional scandal in which MF Global failed to segregate its own funds from customer funds as required by the rules of the Chicago Mercantile Exchange and was unable to satisfy customer redemptions.