In the latest subprime-related securities lawsuit to be settled, on July 15, 2009, the parties to the Accredited Home Lenders Holding Company securities fraud lawsuit filed a motion for preliminary approval of their proposed $22 million settlement of the case. A copy of the parties’ stipulation of settlement can be found here. Background regarding the case can be found here.
The Accredited Home Lenders case was one of the earliest subprime-related securities lawsuits to be filed – the first filed complaint in the case was filed in March 2007. And as reflected here, it was also one of the early subprime-related cases to survive a motion to dismiss.
In her January 4, 2008 order denying the motion to dismiss, Central District of California Judge Marilyn Huff found that the plaintiffs’ complaint adequately pled that the alleged misrepresentations were false and misleading. In making this finding Judge Huff relied on the "group pleading doctrine" which she found properly applied to the officer defendants because they had "direct involvement with the company’s day to day affairs and financial statements." She also found that the complaint adequately pled scienter, based on confidential witness information that the defendants directed "deviations" from company policy.
Accredited itself filed for bankruptcy protection in May 2009. According to the settlement stipulation, the settlement is conditioned upon receiving bankruptcy court approval for the company’s participation in the settlement.
According to the stipulation, the settlement was the result of "extensive settlement discussions" in April 2009, following mediation.
The $22 million settlement apparently is to be entirely funded by a transfer of funds from the company’s directors’ and officers’ liability insurers, who are identified in the definitions section of the stipulation. The stipulation recites that settlement is also conditional on bankruptcy court approval of the use of the insurance proceeds to fund the settlement.
The Accredited settlement joins the recent $30.5 million settlement announced in the subprime-related securities lawsuit involving Beazer Homes (about which refer here). Because the Accredited case was one of the first subprime lawsuits to be filed and because it had already progressed past the motion to dismiss, it may or may not immediately prefigure coming events in other subprime cases, as so many of the cases are still just in their earliest stages. Nevertheless, as settlements like those in the Beazer and Accredited cases accumulate, a better sense of the range of possible settlements may begin to emerge.
I have in any event added the Accredited settlement to my register of subprime and credit crisis-related lawsuits settlements and case resolutions, which can be accessed here.
ABA TIPS Panel: "The Financial Collapse — What Caused It and How Will It Continue To Impact Corporations and Their Boards?": The American Bar Association Tort Trial & Insurance Practice Section (TIPS) Task Force on Corporate Governance will hold this meeting at the ABA Building in Chicago on July 30, 2009 as part of the ABA Annual Meeting, to discuss the 2008 financial collapse and how corporations can manage risk throughout the remainder of the ongoing crisis.
I will be participating in this free session, which will be chaired by my good friend Kim Hogrefe from Chubb. The panel will also include Fiona Phillip of Howrey LLP and Dr. Faten Sabry of NERA Economic Consulting. The event will be followed by a reception. More information about the event, including event registration can be found here.