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April 25 — Fiduciaries of the Eastman Kodak Co. employee stock ownership plan and savings investment plan agreed to pay $9.7 million to settle a lawsuit accusing them of breaching their ERISA fiduciary duties by offering imprudent investment options.
The proposed settlement would end a “highly adversarial litigation” and provide relief for 21,000 class members. Their complaint alleged that the fiduciaries violated the Employee Retirement Income Security Act by allowing the plans to offer Kodak stock as an investment option after objective information revealed the company was in extreme financial distress and its stock was an extremely risky investment.
An early ruling in this case denying the fiduciaries' motion to dismiss was one of the first substantive rulings in a case challenging an offer of declining employer stock as an investment option since the U.S. Supreme Court altered the standards applicable to stock-drop lawsuits in Fifth Third Bancorp v. Dudenhoeffer, 134 S.Ct. 2459 (U.S. 2014) (243 PBD, 12/19/14).
At the time, the court held that the participants alleged sufficiently dire circumstances to overcome the fiduciaries' motion to dismiss. Earlier this year, the parties engaged in mediation procedures and after “extensive arms' length negotiations,” they agreed to settle the case, court documents said.
The settlement represents a recovery of between approximately 20 percent to 50 percent of the total damages allegedly suffered by the participants, according to court filings.
In addition, class's counsel would move for an amount not to exceed one-third of the settlement fund as attorneys' fees plus reimbursement of the out-of-pocket costs. This could add up to well more than $3 million.
The proposed settlement was filed April 22 in the U.S. District Court for the Western District of New York.
Kessler Topaz & Check LLP, Izard Nobel LLP, Faruqi & Faruqi LLP, Connolly Wells & Gray LLP, Blitman & King, Berger & Montague PC, Gregory M. Egleston, Gainey McKenna & Egleston, Wolf Haldenstein Adler Freeman & Herz LLP, Peiffer Rosca Wolf Abdullah Carr & Kane LLC and Schneider Wallace Cottrell Brayton Konecky LLP represented the class. Phillips Lytle LLP and Gibson, Dunn & Crutcher LLP represented the plan.
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Text of a memorandum in support of the motion for settlement approval is at http://www.bloomberglaw.com/public/document/Gedek_v_Perez_et_al_Docket_No_612cv06051_WDNY_Jan_27_2012_Court_D/1.
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