Home -> Law Blog Directory -> Class Action Blogs -> CAFA Law Blog - Information, cases and insights regarding the Class Action Fairness Act of 2005

Class Action

: CAFA Law Blog - Information, cases and insights regarding the Class Action Fairness Act of 2005

New York Court Accepts Class Settlement, "Making It Rain" for Class Members.

Silberblatt v. Morgan Stanley, No. 05-7569, 2007 WL 4145403 (S.D.N.Y. November 19, 2007).

In a case that reminds us Goldfinger’s car, this class settlement involves bars of precious metals.  This action began in late 2005 when Silberblatt alleged that he and others had been misled by Morgan Stanley into believing that specific bars/units of precious metals were allocated to them and therefore not subject to claims of  Morgan Stanley’s creditors. In addition, they alleged that Morgan Stanley didn’t disclose the true nature of their purchase and storage practices, which resulted in the payment of excessive storage fees.

The class was certified a little more than 1 year later, and consisted of all persons who entered into contracts to purchase precious metals from and through Morgan Stanley DW, Inc. from February 1986 through the date the action began.

In April 2007, the parties, through private mediation, entered into a Memorandum of Understanding outlining the terms of a proposed settlement. The court was then called on to determine if the settlement was fair, reasonable and adequate. 

The terms of the settlement provided for $1.5 million in cash, which the court found to be fair, reasonable, and adequate to the members of the class and therefore approved the amount. However, relying on New York’s statute of limitations for contract actions, the court decided to bifurcate the cash portion of the settlement, with 20% going to those incurring storage fees before January 1, 2000, and 80% going to those incurring fees after January 1, 2000. 

The terms of the settlement also provided for approximately $2.85 million in remedial consideration for those members of the class with open accounts as of the last day of the class period (your account closed as of that date – no remedial consideration for you!). 

We know your asking, what was this remedial consideration? Well, it consisted of: (1) modifications to customer disclosure statements, (2) revisions to certain agreements to provide customers with better protection, (3) the liquidation of precious metal holdings in London, replacing it with storage in Delaware, (4) an agreement to move precious metals or take steps to better protect customers should any storage facility assign its assets for a creditor’s benefit or in bankruptcy proceedings, and (5) the adoption of quarterly billing and the reduction of one-year storage fee caps. Because the value of these considerations could not be proven, the court decided they would not be included in the overall valuation of the class settlement. Why does this matter? For purposes of attorneys fees, of course!

Plaintiff’s counsel sought a fee award of $783,900 (Too much you say? Well the attorney alleged that under the lodestar method, the 2,800+ hours he spent warranted $1.3 million in fees). However, to counsel’s dismay, the court only approved an award of 20% of the cash consideration, or $300,000 in attorneys fees.                

Finally, Silberblatt sought a $9,600 “award” (for 240 man hours spent working on the case at $40 an hour) plus reimbursement for out-of-pocket expenses from the class fund. While the court didn’t exactly agree, it did find that 48 of those hours spent in New York working on the case did present a substantial inconvenience to him, which justified compensation. Therefore, he was awarded $1,920 for those hours, plus his out-of-pocket expenses.       (H. LaSalle)

Full post as published by CAFA Law Blog - Information, cases and insights regarding the Class Action Fairness Act of 2005 on January 30, 2008 (boomark / email).