U.S. District Judge Robert W. Sweet of the U.S. District Court for the Southern District of New York said in his opinion that 22 securities class action cases are pending before the court, some alleging violations of the Securities Exchange Act and some alleging fiduciary breaches of the Employee Retirement Income Security Act (ERISA), and one derivatives class action. Sweet consolidated the securities actions, naming the State of Michigan Retirement Systems as lead plaintiff, and consolidated the ERISA actions, with Aaron Howard and Shelden Greenberg as interim co-lead plaintiffs.
The derivatives class action was left as a separate case.
Sweet said that consolidating all 22 cases into one action was not appropriate because the “securities and ERISA Actions involve different parties, claims, burdens, pleading standards, losses, and insurance issues.”
The court reserved the ability to alter this structure at any time and for any reason, and warned that it “will do so if it finds that the progress of the litigation is being delayed, that expenses are being unnecessarily enlarged, or if the structure established proves detrimental, in any way, to the best interests of the proposed class.”
According to the opinion, all claims relate to events that happened in March that led to the eventual sale of Bear Stearns to JPMorgan Chase. Plaintiffs allege that on March 10, information about Bear Stearns liquidity problems began leaking into the market causing its stock price to drop. When it was announced that JPMorgan agreed to purchase Bear Stearns, the stock price fell to $4.30 per share from a 15-month high of approximately $160.
The securities cases allege that the defendants issued materially false and misleading statements regarding the Bear Stearns’ business and financial results, resulting in the trading of the firm’s stock at artificially inflated prices during the relevant time period. In the ERISA cases, it is alleged that the defendants breached their fiduciary duties by continuing to offer Bear Stearns stock as an investment option in the Bear Stearns Employee Stock Ownership Plan, despite the fact that they knew Bear Stearns stock to be an imprudent investment.
The case is In re Bear Stearns Cos. Securities, Derivative, and Employee Retirement Income Security Act Litigation, S.D.N.Y., No. 08 M.D.L. 1963 (RWS), 1/5/09.