MF Global Litigation
On May 21, 2012, Berger Montague was named co-lead counsel in this litigation. A copy of the judge’s order is available for download here.
On January 10, 2012, Berger Montague filed a class action complaint on behalf of tens of thousands of commodities account holders who fell victim to the alleged massive theft and misappropriation of client funds at MF Global Inc.
Berger Montague filed a Consolidated Amended Class Action Complaint on November 5, 2012, in which it alleged that individuals and entities associated with the MF Global debacle — including PricewaterhouseCoopers LLP, CME Group, Inc., and former Senator Jon Corzine — violated numerous laws, including the Commodity Exchange Act, when more than $1 billion disappeared from MF Global’s customers’ accounts.
On March 19, 2013, Berger Montague, as Co-Lead Counsel for the Class of MF Global Inc. (“MFGI”) customers and James W. Giddens, the trustee (“Trustee”) for the liquidation of MFGI, have announced a settlement (“Settlement”) of all potential claims against JPMorgan Chase Bank, NA and its parents, subsidiaries and affiliates (“JPMorgan”). On March 19, 2013, the proposed Settlement was contemporaneously presented by motions for approval to both District Court Judge Victor Marreo and to Bankruptcy Court Judge Martin Glenn.
On March 28, 2013, District Court Judge Victor Marreo entered an Order preliminarily approving the Settlement and scheduled a hearing to be held on July 3, 2013, at which the Court will consider whether to grant final approval of the settlement. The Bankruptcy Court Judge Martin Glenn has scheduled a hearing to be held on April 10, 2013, at which that Court will consider the Trustee’s motion for approval of the Settlement. The notice of class action settlement is available for download here.
The proposed Settlement, which will resolve all of the Customer Representatives’ and Trustee’s potential claims against JPMorgan arising both from transfers of Customer Property during the days preceding MFGI’s collapse and from JPMorgan’s conduct as one of MFGI’s primary banks and repositories of Customer Property, provides a sizable benefit to the Settlement Class of former customers of MFGI. Subject to Court approval, the Settlement provides for a $100 million cash payment from JPMorgan for distribution to MFGI’s former customers.
In addition to the $100 million cash payment, the Settlement also provides for the return of approximately $29 million in proprietary MFGI funds held by JPMorgan to secure potential obligations under a certain revolving credit facility agreement and JPMorgan’s clearance and other agreements with MFGI, as well the release of JPMorgan’s retained liens and set off rights in approximately $417 million of proprietary MFGI funds it previously remitted to the Trustee, permitting these funds to be made available to MFGI’s customers and creditors.
Upon approval, the Settlement will enable the Trustee to immediately seek to allocate $250 million to the 4d Customer Estate for the benefit of MFGI customers who engaged in commodity transactions on domestic exchanges (“4d Customers”) and $50 million to the 30.7 Customer Estate for the benefit of customers who transacted on foreign exchanges (“30.7 Customers”).
Moreover, the Settlement with JPMorgan will satisfy an important condition to the effectiveness of the settlement between the Trustee and the Joint Special Administrators of MF Global UK Limited (“MFGUK”), approved by the Bankruptcy Court on January 31, 2013, which will facilitate the recovery from MFGUK of approximately $500-$600 million (over time) for additional distribution to customers and general creditors. All told, the Settlement will ultimately enable the Trustee to distribute to customers an amount approaching $1 billion.
The Class is continuing to pursue its claims against the former directors and officers of MFGI, including Jon Corzine, and against MFGI’s former auditor, PricewaterhouseCoopers and MFGI’s primary regulator, the CME Group.
Co-Lead Counsel for the customers, Merrill Davidoff of Berger Montague, and Andrew Entwistle of Entwistle & Cappucci LLP, were especially pleased with the Settlement. This Settlement reflects the cooperative efforts of our team and the Trustee over many months of investigation and negotiations with JPMorgan; represents a favorable and economically sound resolution to what would otherwise have been a costly and protracted legal battle; and is a key recovery for the Customers both in its own right and as the lynchpin to the UK settlement recently approved by Judge Glenn.
Attorney Davidoff observed that: “We are pleased JPMorgan elected to resolve these claims early enough to enable the Trustee to return significant sums to customers, and especially that the contemporaneous release of liens asserted by JPMorgan will free up hundreds of millions of dollars that can be distributed once the Settlement becomes final.” While a substantial shortfall will still remain for 4d and 30.7 Customers, the $800m-900m that this Settlement will cause to be paid to customers over time is a tremendous step forward in this process. Davidoff further stated, however, that: “Nearly a year and a half has passed since the management of MFGI improperly transferred hundreds of millions of dollars in segregated customer property for use by the firm, while PwC and CME Group enabled their reckless behavior. It is time that the remaining parties pay for their improper behavior and make MFGI’s former customers whole.”
The following documents are available for review:
- Notice of Plaintiffs’ Motion for Final Approval of Settlement;
- Plaintiffs’ Memorandum of Law in Support of Final Approval of Settlement;
- Joint Declaration in Support of Final Approval of Settlement;
- Notice of Plaintiffs’ Motion for an Award of Attorneys’ Fees and Litigation Expenses;
- Plaintiffs’ Memorandum of Law in Support of an Award of Attorneys’ Fees and Litigation Expenses; and
- Joint Declaration in Support of an Award of Attorneys’ Fees and Litigation Expenses.