In re Am. Int'l Grp., Inc. Sec. Litig.

• Citation: 916 F.Supp.2d 454
• Decision Date: 07 January 2013
• Docket Number: No. 04 Civ. 8141(DAB).,04 Civ. 8141(DAB).
• Parties: In re AMERICAN INTERNATIONAL GROUP, INC. SECURITIES LITIGATION. This Document Relates to: All Actions.
• Court: U.S. District Court — Southern District of New York

916 F.Supp.2d 454

In re AMERICAN INTERNATIONAL GROUP, INC. SECURITIES LITIGATION. This Document Relates to: All Actions.

No. 04 Civ. 8141(DAB).

United States District Court, S.D. New York.

Jan. 7, 2013.

David John Michalski, Hahn Loeser & Parks LLP, Cleveland, OH, Edward Labaton, Louis Gottlieb, Thomas A. Dubbs, Zachary Myles Ratzman, Labaton Sucharow, LLP, New York, NY, for Plaintiffs, Ohio Public Employees Retirement System, Public Employees Retirement Association of New Mexico, State Teachers Retirement System of Ohio, Ohio Police and Fire Pension Fund, Michael Feder, and Public Employees' Retirement System of Mississippi.

Samuel Howard Rudman, Robbins Geller Rudman & Dowd LLP, Melville, NY, Robert Andrew Skirnick, Meredith Cohen Greenfogel & Skirnick, New York, NY, for Plaintiffs, Public Employees Retirement Association of New Mexico, State Teachers Retirement System of Ohio, Ohio Police and Fire Pension Fund, Michael Feder, and Public Employees' Retirement System of Mississippi.

Gerald H. Silk, Bernstein Litowitz Berger & Grossmann LLP, New York, NY, for Public Employees' Retirement System of Mississippi.

Deborah G. Solmor, Gregory S. Bailey, Ryan Stoll, Thoufiq Kutty, Andrew J. Jarzyna, Skadden, Arps, Slate, Meagher & Flom, LLP, Chicago, IL, Nicholas A. Gravante, Jr., Amy Lynn Neuhardt, Robert Jeffrey Dwyer, Steven Ian Froot, Boies, Schiller & Flexner, LLP, Cyrus Amir–Mokri, Douglas M. Kraus, George Abraham Zimmerman, Skadden, Arps, Slate, Meagher & Flom LLP, New York, NY, David Scott Bassinson, Boies, Schiller & Flexner LLP, Albany, NY, for Defendants.

MEMORANDUM AND ORDER

DEBORAH A. BATTS, District Judge.

In 2004, Michael Feder filed a Complaint “on behalf of himself and all others similarly situated” against American International Group, Inc. (“AIG”), Maurice Greenberg, Howard Smith, and Thomas Tizzio, which alleged violations of the Securities and Exchange Act of 1934. (Original Complaint, ECF No. 1). On February 4, 2004, the Court held a hearing on the consolidation of cases related to the Complaint and the determination of a lead plaintiff to represent that class in the matter. On February 8, 2004, the Court issued two Orders, which consolidated the cases and named the Ohio Public Employees Retirement System, the State Teachers Retirement System of Ohio, and the Ohio Police & Fire Pension (collectively “Lead Plaintiff”) representatives of the class. (Orders Appointing Lead Plaintiff, Approving the Selection of Lead Plaintiff's Counsel, and Consolidating. Cases, ECF No, 51, 52) The pending settlement in the suit against Maurice Greenberg, Howard Smith, Christian Milton, and Michael Castelli, and C.V. Starr & Co., Inc., Starr International Company, Inc. (collectively “Starr Defendants”) is the final matter before the Court in this complex action, as the Court has already approved the settlements against co-defendants, PriceWaterhouseCoopers LLP (Final Judgment and Orders Approving Proposed Settlement, Attorneys Fees, Expenses, and Plan of Allocation, ECF No. 568–573) and AIG (Final Judgment and Orders Approving Proposed Settlement, Attorneys Fees, Expenses, and Plan of Allocation, ECF No. 619–622). In advance of the Court holding a Fairness Hearing and giving final approval to the Settlement in the instant action (“Settlement”), the State of New York Office of the Attorney General (“NYAG”) filed an objection. The NYAG asserted that the Settlement was unfair and inadequate because it does not take into account an alleged fraudulent transaction involving the General Reinsurance Corp. (“Gen Re”), the occurrence of which is, in large part, the basis of a suit that the NYAG is prosecuting in state court. The issue before the Court is whether the NYAG has standing to object to the Settlement in this matter. The NYAG requests that, in the event that the Court find it lacks standing, the Court grant it leave to move to intervene, specifically to raise an objection to the Settlement. For the reasons stated infra, the Court finds that the NYAG lacks standing to object, and the NYAG's Request for Intervention is DENIED.

BACKGROUND

The Parties' familiarity with the facts of this case is assumed, and the Court reiterates only those relevant for the resolution of the narrow matter before it. In October 2004, the instant securities class action suit was filed in this Court. (Original Complaint, ECF No. 1) In February 2005, Congress passed, and the President signed, the Class Action Fairness Act of 2005 (“CAFA” or “the Act”). Lead Plaintiff filed an Amended Complaint in April 2005. (Consolidated Amended Class Complaint, ECF No. 61) In January 2011, Lead Plaintiff and Starr Defendants sought preliminary approval of the Settlement. (Lead Plaintiff's Motion for Preliminary Approval of Class Settlement, ECF No. 574) Also as early as January 2011, the NYAG began submitting letters to the Court, making known its belief that the Settlement should be delayed. While there is some disagreement among the Parties and the NYAG, the Court believes that between January 2011 and now, there were a series of requests from the NYAG to the Parties for documents, meetings, and cooperation related to the Settlement. ( See; e.g., NYAG Bit. at 2, n. 2; Lead Pl's Br. at 3–5) Also during this time, the NYAG made clear to Lead Plaintiff and Starr Defendants its intention to object to approval of the Settlement.

This Court preliminarily approved the Settlement in an Order issued on February 3, 2012, which defined the Settlement Class as:

all persons and entities who purchased or otherwise acquired AIG Securities during the period of time from October 28, 1999 through April 1, 2005, inclusive (the “Class Period”), as well as all persons and entities who held the common stock of HSB Group, Inc. (“HSB”) at the time HSB was acquired by American International Group, Inc. (“AIG”) in a stock for stock transaction, and all persons and entities who held the common stock of American General Corporation (“AGC”) at the time AGC was acquired by AIG in a stock for stock transaction, and were damaged thereby.

(Preliminary Approval Order, ECF No. 623) The February 3, 2012 Order also included a Notice of Proposed Settlement, which provided members of the Settlement Class the option to exclude themselves from the Settlement while preserving their rights pursue their individual claims against the Starr Defendants. ( Id.) The period to object closed, and there are no outstanding objections by members of the class.

The NYAG, which is pursuing its own suit against the Starr Defendants in state court, submitted its objection to the Court on August 17, 2012. The NYAG's objection is based primarily on an expert's error made during the loss causation calculations, arguing that a certain transaction between AIG and Gen Re had a negative effect on value of the shareholders' equity on specific dates. (NYAG Objection at 8–10) In People v. Greenberg, et al., Index No. 401720/05 (N.Y.Sup.Ct.), the State Action against the Starr Defendants based on the Martin Act and New York Executive Law (“State Action”), the NYAG alleges that there was a market fallout from the AIG–Gen Re transaction, and claims over $6 billion in damages.¹ (NYAG's Br. at 1–2, 9) The NYAG believes that the Settlement, then, is inadequate, and does not take into account the decline in AIG stock value resulting from three alleged “Corrective Dates”—days on which the market would have absorbed fully, and reacted to, the negative information surrounding the transaction.

Lead Plaintiff filed a reply to the NYAG objection on September 19, 2012, and the Starr Defendants, on September 20, 2012. Lead Plaintiff does not deny the error, but asserts that it would not have affected the settlement.

The NYAG is neither a member of the Settlement Class nor a representative of any member, but insists that it has standing to protect the marketplace, as well as the interests of the state residents who have been affected.

DISCUSSION

The NYAG argues that it “clearly has standing to object to the Starr Settlement under both [CAFA] and traditional standing principles.” (NYAG Br. at 2) In support, the NYAG declares that (1) CAFA established standing for State Attorneys General to object to class action settlements, and the Act applies to suits filed prior to its enactment, (2) it has independent standing under other legal principles, and, in the alternative, (3) it meets the criteria to intervene in this matter. The Court discusses the NYAG's arguments in turn, but finds them to be unpersuasive.

I. Objecting to a Settlement Pursuant to Rule 23

Rule 23 provides that [a]ny class member may object to the propos[ed settlement, voluntary dismissal, or compromise] if it requires court approval....” Fed. R. Civ. P. 23(e)(5)(emphasis added). From the unambiguous description of the Settlement Class set out in the February 3, 2012 Order, it is clear that the NYAG is not a member of the class. Nor does the NYAG claim to be counsel of record for any members of the Settlement Class. “Because [the NYAG] is not a class member, it does not have an affected interest in the class Plaintiffs' claims against [the Starr Defendants] to be able to assert its objections....” Central States S.E. & S.W. Areas Health & Welfare Fund v. Merck–Medco Managed Care, L.L.C., 504 F.3d 229, 244 (2d Cir.2007). It is therefore uncontested that the NYAG does not have standing under Rule 23 to object to the Settlement. ( See alsoAlba Conte & Herbert B. Newberg, Newberg on Class Actions § 13:69 (4th ed. 2002)(“Nonparties to a settlement generally do not have standing to object to a settlement of a class action.”))

II. The Class Action Fairness Act of 2005

congress passed the Class Action Fairness Act or 2005 (“CAFA” or “the Act”) in February 2005 to, inter alia, “amend the procedures that apply to consideration of interstate class actions to assure fairer outcomes for class members and defendants....” Class Action Fairness Act of 1995, Pub.L. No. 109–2,...