JPMorgan Chase & Co. has agreed to pay $44.6 million to settle a 2008 class-action lawsuit in which municipal bond issuers accused the firm of bid-rigging of muni contracts.
On Monday, Judge Victor Marrero of the U.S. District Court of the Southern District of New York in Manhattan preliminarily approved the settlement, which attorneys filed with the court last week.
Marrero scheduled a so-called fairness hearing for Dec. 14 to determine the reasonableness of the proposed settlement and whether it should be approved.
Plaintiffs in the case include Baltimore, the University of Mississippi Medical Center, the University of Southern Mississippi, the University of Mississippi, the Mississippi Department of Transportation, the Central Bucks School District in Doylestown, Pa., and the Bucks County, Pa., Water and Sewer Authority.
Issuers’ attorneys have 30 days to see if other issuers want to participate in the settlement and to provide them with information about how to file a claim.
Claimants can include any municipal bond issuers who purchased — through negotiation, bidding or auction — municipal derivative transactions from JPMorgan, Bear Stearns & Co., which JPMorgan acquired in 2008, or “conspiring firms” between January 1992 and August 2011.
Class members can also be issuers who bought contracts that were brokered by those firms.
Michael Hausfeld, an attorney chairman of Hausfeld LLC in Washington, D.C., which represents Baltimore, said the settlement covers “thousands of transactions” worth “hundreds of millions of dollars.”
Hausfeld called the settlement “another incursion into the excesses of Wall Street institutions.” He said attorneys’ fees will come out of the $44.6 million settlement, but declined to say how much they could be.
Judge Marrero said the court will decide whether to approve attorneys fees during the Dec. 14 hearing. JPMorgan’s payment will be deposited into an escrow account. A court-appointed claims administrator, Rust Consulting Inc., will review issuers’ claims and make recommendations for restitution.
JPMorgan denied wrongdoing under the agreement. “Despite believing that it is not liable for the claims asserted against it in the action … [JPMorgan] has nevertheless agreed to enter into this agreement to avoid further expense, inconvenience and the distraction of burdensome and protracted litigation,” the agreement stated.
JPMorgan’s payment is in addition to money the firm paid in recent years as part of separate settlements with states’ attorneys general, Hausfeld said.
Issuers that recovered money from state settlements are not entitled to additional payments on the same claims, Hausfeld said. However, because the class-action settlement covers a longer period than the states’ settlement, issuers may be entitled to additional payments, he added.
In 2011, JPMorgan agreed to pay $228 million to settle criminal and civil charges with federal and state regulators involving bid-rigging and fraud.
As part of the settlement, the firm agreed to pay $92 million to states’ attorneys general — $65.5 million of which would be deposited into a multi-state restitution fund for issuers and borrowers — $51.2 million to the Securities and Exchange Commission, $50 million to the Internal Revenue Service and $35 million to the Office of the Comptroller of the Currency.
