The parties to the consolidated class action litigation arising out of the collapse of Washington Mutual - the largest bank failure in U.S. history -- have agreed to settle the suit for a combined $208.5 million. The settlement, which has a number of interesting features, actually consists of three separate agreements: one agreement to pay $105 on behalf of the individual defendants; another to pay $85 million on behalf of the underwriter defendants; and a third to pay $18.5 million on behalf of the company's auditor, Deloitte & Touche. The settlement is subject to court approvals.
As reflected here, the first of the consolidated lawsuits was first filed in November 2007. Additional suits followed as the subprime meltdown continued to unfold during 2007 and 2008. Further suits followed WaMu's September 2008 collapse (about which refer here).
The cases were consolidated in the Western District of Washington before Judge Marsh Pechman. The plaintiffs' sprawling complaint asserted numerous allegations, but the gist is that the defendants: "(1) deliberately and secretly decreased the efficacy of WaMu's risk management policies; (2) corrupted WaMu's appraisal process; (3) abandoned appropriate underwriting standards; and (4) misrepresented both WaMus' financial results and internal controls." Judge Pechman initially granted the defendants' motions to dismiss (refer here), but she denied the defendants' renewed motion to dismiss the plaintiffs' amended consolidated complaints (refer here).
Following class certification as well as additional procedural wrangling well-detailed in Alison Frankel's July 1, 2011 Thompson Reuters News & Insight article about the settlement (here) , the parties entered mediation, which ultimately resulted in the settlement
The settlement stipulation entered on behalf of the individual director and officer defendants (the "D&O settlement agreement") can be found here; the underwriters' settlement stipulation can be found here; and the Deloitte & Touche settlement stipulation can be found here.
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Read other items of interest from the world of directors & officers liability, with occasional commentary, at the D&O Diary, a blog by Kevin LaCroix.
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