Update on Class Action Suit and Settlement

It has been a rather quiet few weeks and we’ve received several inquiries as to the status of the Class Action suit and the proposed settlement. In addition, you may have noticed several news items this week which mention negotiations with the junior shareholders.

Here is what we can report after checking in with Blum Collins and reviewing the recent articles:

  • Back in November, at the initial hearing for the Court to consider the Class settlement and approve the Notice to the Class, Judge Montali asked that the Notice be reviewed by the parties and edited for completeness and clarity, based on comments that were made at the hearing. At that time the parties anticipated that it would take only a few days to submit a revised Notice.
  • In the meantime, the Heller Ehrman estate has been in negotiations with the shareholders to settle the estate’s claims against shareholders. Shortly after the November hearing, Judge Newsome, who is handling the mediation with the shareholders, asked Judge Montali to delay any decision on the proposed Plan of Reorganization and Disclosure Statement while settlement discussions continued. Judge Montali agreed and postponed indefinitely any further action on the Plan. Because adoption of the Plan was an integral part of the Class settlement, that made it necessary to address the delay in the Plan in the context of timing of approval of the settlement and payments to be made under the settlement.
  • It appears that a settlement has been reached with a large group of junior shareholders, while negotiations continue with the higher income Heller Ehrman shareholders.
  • While we had hoped we would see a partial payment of the settlement amounts by early January, the process is delayed because funding of those payments comes in part from the settlement with the shareholders. The Blum Collins lawyers have asked for a deadline for payment of priority claims, and the response has been encouraging but the Heller Ehrman estate is waiting for more definitive progress in the negotiations with the shareholders before agreeing.
  • The review process and the changes in the proposed settlement to accommodate the delay in approval of a Plan are not expected to result in any substantive changes in the terms of the settlement reached on behalf of the class members by Blum Collins. Put another way, the benefits the class members will receive will not change but the procedures for and timing of payment has been modified because Plan approval has been delayed. The delay results from the decisions of Judge Newsome and Judge Montali to try to get a better Plan in place and the fact that funding of the settlement depends on funding of a Plan.
  • The next step is to go back to Judge Montali to gain preliminary approval of the settlement and approval of Notice to the Class. The only thing that is delaying that process now is hearing from the estate regarding a deadline for funding the settlement. Judge Montali’s approval of the Notice to the class will start the process for class members to review the terms of the final settlement and decide whether accept the settlement or to opt out and pursue their claims individually. Based on the report from Blum Collins lawyers, we continue to believe that the terms of the settlement, while not perfect, are much better than we could have done without the extra clout of having filed a class action.
  • Several of you have asked on the blog whether or not employees other than Blum Collins clients will get the benefit of the settlement. The answer is that all employees, even those who did not file an individual proof of claim, will be entitled to participate in the settlement. The Notice to the class, once approved by Judge Montali, will spell out these and other details.

That’s all we can report right now. If there is any breaking news, be sure that Heller Highwater will report it.

We may not have word on any activities until after the first of the year. Until then have a happy holiday!

© 2009, copyright Thomas MacEntee


10 Responses to “Update on Class Action Suit and Settlement”

  1. 1 Observer 11 December 2009 at 5:25 pm

    The Recorder reports a settlement with 90 junior partners at an average of $12,000 per person. Total of $1.7 MM.

    That sounds like a low recovery from these people. On the other hand, they were not the ones driving the ship into the iceberg, so their liability exposure may also be relatively slight.

    Need to see the motion to approve settlement papers, I suppose.

  2. 2 Former Associate 12 December 2009 at 10:54 am

    The initial filing suggests that much of the settlement papers will be filed under seal, so we may not be able to glean much from them once they’re filed next Friday.

    It’s going to be very hard to know how fair the settlements are. Maybe a $12,500 settlement from a very junior shareholder is fair. There were six more senior shareholders who paid about $150,000 each. I don’t know if we’ll ever know how much those SHs earned during the final year. Hopefully the bulk of remaining SHs to settle with are the higher income ones, and hopefully they pay more than $150k each–with a profits-per-partner of $1M, it seems that SHs should contribute more.

    I guess this is better than nothing, but I suspect it will fall far short of the $150 million the Committee is seeking from SHs.

  3. 3 anon 13 December 2009 at 2:05 am

    Junior partners at Heller were basically glorified associates. It’s ridiculous that they have to pay anything since they absolutely had no say in anything and were more like employees than owners. People should go after the shareholders in charge of running the firm.

  4. 4 anony 15 December 2009 at 1:46 am

    Follow up on Dale Bratton’s point: what percentage of the employees’ money will go to Blum Collins? And what would we have gotten without Blum Collins’ involvement?

  5. 5 Paladin 15 December 2009 at 1:02 pm

    Yes, Anony. The settlement doesn’t really get anything above and beyond what employees would have gotten anyway. So, sadly, the million dollars going to Blum Collins is a million dollars not available to be doled out to employees. Not to mention what the Estate paid attorneys to defend against the suit.

    All I can say is I hope those who prosecuted the suit feel they got $1,000,000+ worth of emotional catharsis.

  6. 6 Sleeping in Seattle 15 December 2009 at 11:28 pm

    Some of us on the lower end of the pay scale will be seeing a great deal more under the settlement Blum Collins negotiated than what we would have gotten otherwise, because of the addition of WARN act pay. If you’re not, I’d guess that’s because your salary’s high enough that vacation pay alone exceeds the priority claim limit under federal bankruptcy law. That’s not the fault of the class plaintiffs though.

  7. 7 Former SF Employee 19 December 2009 at 8:22 pm

    Once again, thank you Thomas for taking the time and keeping us so well informed.

    Happy Holidays!

  8. 8 Pumasbud 21 December 2009 at 3:10 pm

    I just received “Notice of Filing Amendment to Schedule E and Amended Summary of Schedules” Dated 12/15/2009, my due amount dropped from 5k+ TO 1K+ and all from vacation, I noticed that all the other employees were noted as Vacation and a few from Sabbatical Pay, but none from warn act, does this mean that the delusional Committee (Peter Benvenutti signed the document) still does not believe it owes us any Warn Act Monies? Does any body have a differant take on the filing, I have a call into Blum/Collins but as of yet have not had a callback.

  9. 9 Observer 21 December 2009 at 6:35 pm

    It’s true that the amended schedules still do not show any WARN amounts. That means, basically, that the debtor is still reserving that issue, pending possible class action settlement. Until then, they are still relying on their contention that some of the exceptions to WARN Act coverage apply to relieve the debtor of that obligation. If they gave up on that contention in the amended schedules, it would prejudice them in the (apparently) ongoing settlement discussions so they are not going to do that.

  10. 10 EyeinLA 22 December 2009 at 11:55 pm

    Just a note of interest while we are tallying what we will or what we won’t get…. I specifically asked about the firm’s 401k contribution being included, on a pro rata basis, and was told from Carol Budinger – directly – that the firm in its bankruptcy would not be liable for any 401k employer contributions in whole or in part. If you look at the Schedule and note the upper management administrator positions have put in a claim for “Supplemental Profit Sharing Contributions, Contribution to Employee Benefit Plan and Vacation Pay.” Were we given misleading information from the firm’s administrators? If the dissolution date is December, wouldn’t that entitle us all to our 401k Plan contribution for 2008? My 401k contribution from the firm would have been for about $5,000. Has Blum Collins been asked about including that category of benefit in our settlement? If not, maybe that should be a topic to inquire about since others have made claim for their unpaid benefits which include 401k and “profit sharing” payments.
    I would be really interested in hearing what Blum Collins has to say. Thanks! ohh and I hope that each and every one of you a Very Merry Christmas!!! and a Blessed New Year

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