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In re Bank of America Corp. Securities Litigation

United States District Court, E.D. Missouri, Eastern Division

February 26, 2018

IN RE BANK OF AMERICA CORP. SECURITIES LITIGATION,

          MEMORANDUM AND ORDER

          CATHERINE D. PERRY UNITED STATES DISTRICT JUDGE.

         This case is before the Court on the motion of Abbey Spanier, LLP, as Lead Counsel for the BankAmerica Classes, to distribute surplus settlement funds in the approximate amount of $9, 590 under the doctrine of cy pres, to terminate this class action with respect to the BankAmerica Classes, and to relieve both the Claims Administrator and Lead Counsel for the BankAmerica Classes of further duties and responsibilities. No. objections to the motion have been filed. For the reasons stated below, I will grant this motion.

         Background

         This litigation began as a class action under the Private Securities Litigation Reform Act of 1995 (PSLRA), 15 U.S.C. § 78u-4. Plaintiffs alleged losses from misrepresentations in the prospectus and proxy materials provided to shareholders during the 1998 merger of NationsBank and BankAmerica. The cases were transferred by the Judicial Panel on Multidistrict Litigation to the Eastern District of Missouri. Four plaintiff classes were certified: two classes of NationsBank shareholders and two classes of BankAmerica shareholders. The cases were resolved with a global settlement agreement for $490 million which was approved by the district court in 2002 and affirmed by the court of appeals in 2003. ECF Nos. 571, 602. Two settlement funds were established - one for each of the two sets of classes - with the BankAmerica Classes receiving approximately $156.8 million (“Settlement Fund”). As part of the settlement, Bank of America disclaimed any interest in the Settlement Fund such that any remaining money after distribution to class members would not revert back to it.

         In May 2015, after three rounds of distribution of money from the Settlement Fund, the Court issued an order for a final distribution to eligible class members of the $1, 027, 814 remaining. ECF No. 841. The May 2015 Order required the payment of certain attorneys' fees and expenses of Lead Counsel, and the reservation of $30, 000 for fees and expenses payable to the Claims Administrator, Heffler Claims Group LLC, a division of Heffler, Radetich & Saitta, LLP. After those payments, the remainder of the $1, 027, 814 in the Settlement Fund would be distributed in one or two final payments to those BankAmerica class members who had cashed checks from the prior distribution in 2009. The Court also retained jurisdiction over the action to consider other matters that might arise, including the cy pres distribution of any money remaining in the Fund after the final distributions were complete.

         Pursuant to the May 2015 Order, Claims Administrator Heffler made two more distributions to BankAmerica class members and the Fund now contains approximately $9, 590.52 from uncashed and refunded checks. Lead Counsel seeks a cy pres distribution of the remaining amount in the Fund.

         The Eighth Circuit on Cy Pres Distributions

         The Eighth Circuit Court of Appeals clarified the legal principles concerning cy pres distributions in a 2015 ruling that involved the NationsBank Classes in this case. In re BankAmerica Corp. Sec. Litig., 775 F.3d 1060 (8th Cir. 2015). In vacating a cy pres distribution of approximately $2.4 million in residual settlement funds from the NationsBank Fund, the appellate court discussed with approval the American Law Institute's Cy Pres criteria:

A court may approve a settlement that proposes a cy pres remedy …. The court must apply the following criteria in determining whether a cy pres award is appropriate:
(a) If individual class members can be identified through reasonable effort, and the distributions are sufficiently large to make individual distributions economically viable, settlement proceeds should be distributed directly to individual class members.
(b) If the settlement involves individual distributions to class members and funds remain after distributions (because some class members could not be identified or chose not to participate), the settlement should presumptively provide for further distributions to participating class members unless the amounts involved are too small to make individual distributions economically viable or other specific reasons exist that would make such further distributions impossible or unfair.
(c) If the court finds that individual distributions are not viable based upon the criteria set forth in subsections (a) and (b), the settlement may utilize a cy pres approach. The court, when feasible, should require the parties to identify a recipient whose interests reasonably approximate those being pursued by the class. If, and only if, no recipient whose interest reasonably approximate those being pursued by the class can be identified after thorough investigation and analysis, a court may approve a recipient that does not reasonably approximate the interests pursued by the class.

Id. at 1063-64 (quoting Principles of the Law of Aggregate Litigation § 3.07 (2010)).

         Based on the ALI criteria and court precedent, the Eighth Circuit established the following principles for application in cy pres cases: (1) a cy pres distribution to a third party is only permissible when it is not feasible to make further distributions to class members based on the administrative costs of such a distribution; (2) it is not sufficient to declare all class members “satisfied in full” or “fully compensated” in order to authorize a cy pres distribution; (3) language in a settlement agreement ordering that a cy pres distribution be made in the district court's “sole discretion”[1] is void and cannot be the basis for awarding such a distribution; (4) when the amount of funds to de distributed cy pres is not deminimis, the district court should make a cy pres proposal publicly available and allow class member input; and (5) if a district court applies the cy pres standards and concludes that a distribution is appropriate, the ...


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