NU Online News Service, Aug. 14, 12:00 p.m. EDT
A federal court of appeals is sending back to district court a $72 million settlement General Reinsurance Corp. had with investors to resolve a securities class-action lawsuit.
The U.S. Court of Appeals for the Second Circuit reversed District Court Judge Deborah Batts' 2010 refusal to certify the settlement class because it could not satisfy a certain “predominance requirement” used to test common versus individual issues in order to determine if the class is cohesive, and whether a class-action is the best way to proceed with a dispute.
In this case, each plaintiff would need to prove that each was aware of and relied on AIG's false financial statements.
But a trio of appeals judges says a failure to satisfy this requirement only presents problems at trial. In this case, the “settlement eliminates the need for trial” so the class does not need to satisfy the requirement.
“With a settlement class, the manageability concerns posed by numerous individual questions of reliance disappear,” says the ruling.
The case was originally filed in 2007, led by several Ohio public pension funds alleging a sham $500 million finite reinsurance transaction between Berkshire Hathaway's Gen Re and American International Group Inc. (AIG) in the early 2000s was intended to inflate AIG's loss reserves.
The judges say their reversal “should not be taken as an endorsement of the fairness of the proposed settlement—and issue we leave to the district court to address” if it certifies the class.
Batts last October also preliminarily approved a separate $725 million settlement agreement to resolve a securities class-action lawsuit AIG and Ohio and Florida public pension plan funds.
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