(Reuters) - The two law firms leading antitrust litigation for over-the-counter investors in financial instruments pegged to the benchmark London Interbank Offered Rate unquestionably deserve hosannas for reaching two proposed class action settlements totaling $250 million. The Libor litigation, which accuses more than a dozen of the biggest banks in the world of colluding to manipulate the benchmark rate, has been as complex as any class action in memory.
The case, which dates back to 2011, was devastated by U.S. District Judge Naomi Reice Buchwald’s dismissal of antitrust claims, then miraculously revived by the 2nd U.S. Circuit Court of Appeals, but only after the U.S. Supreme Court cleared the way (135 S.Ct. 897) for an interlocutory appeal.
Class counsel from Hausfeld and Susman Godfrey reached their first proposed settlement, a $120 million agreement with Barclays, in March 2016. Judge Buchwald granted preliminary approval to the Barclays deal in December 2016. Hausfeld and Susman Godfrey moved for approval of a second settlement, $130 million with Citigroup, last August. The firms have requested a total of $50 million in fees in the two settlements.
Investors in the Libor over-the-counter class have, in the main, been quite satisfied with the settlements. When Judge Buchwald held a hearing on final approval of the Barclays agreement last October, only two objectors raised qualms about the deal – a sign, Hausfeld and Susman Godfrey said, of the “phenomenal result” they achieved. (Judge Buchwald has not yet ruled on the motion for final approval.) The Citi settlement, which is scheduled for a preliminary approval hearing on Jan. 23, has prompted only one objection, from the Virgin Islands Public Finance Authority.
There’s little doubt Judge Buchwald will approve the Barclays and Citi Libor settlements, given the overwhelming acquiescence of the thousands of investors in the class, many of them extremely sophisticated institutions.
That said, it’s notable that both the lone objector to the Citi settlement and one of the two final objectors to the Barclays deal were represented not by typical objectors’ firms nor even by a typical plaintiffs’ firm. The Virgin Islands Public Finance Authority and Barclays objector Maimonides Medical Center are represented by Arent Fox, a Washington, D.C., firm probably best known for regulatory and defense work.
In fact, the Arent Fox partner working on the Virgin Islands and Maimonides objections, Lester Jacobowitz, isn’t a litigator at all – he’s a finance lawyer who got into Libor because of a longstanding client relationship with Maimonides. (Arent Fox counsel Jennifer White, a litigator, is working with Jacobowitz.)
“This is not meant to be a new specialty,” Jacobowitz said. “The objections are specific to this case. We believe the classes are not being adequately compensated.”
The Virgin Islands’ objection, a 13-page letter to Judge Buchwald, explained that theory. (Arent Fox’s objection for Maimonides to the Barclays settlement, by contrast, was a short letter that Hausfeld and Susman Godfrey called “vague and conclusory.”) The objection asserts that class counsel have not disclosed any estimate of the total damages to the class from Libor manipulation, and that based on Arent Fox’s inquiry, it seems no damages estimate exists. Arent Fox said that its analysis shows damages to be at least $23 million. In that context, the Virgin Islands objection said, a $130 million settlement with Citigroup is inadequate.
Class counsel justified the proposed settlement by calling it an ice-breaker and highlighting Citi’s promise to cooperate with the ongoing case against other Libor banks. Arent Fox, in the Virgin Islands objection, said the Barclays Libor settlement already broke the ice. As the second bank to settle, the objection said, Citi should get a big discount.
Hausfeld and Susman Godfrey are due to respond Tuesday to the Virgin Islands objection. They will surely argue, as they did in response to the Maimonides objection to the Barclays settlement, that there are thousands of sophisticated investors in the Libor class and almost none of them have expressed concerns about the settlement.
To that, Jacobowitz said that many public funds and not-for-profits, still reeling from the 2008 financial crisis, aren’t paying attention to the Libor litigation and don’t realize they’re affected by the settlements. According to Arent Fox, class members’ failure to object to the proposed settlements does not necessarily reflect investors’ approval of the deals.
That’s an argument I suspect you wouldn’t hear from lawyers who regularly litigate class actions, in which objections, or a paucity thereof, are widely accepted as a barometer of class members’ attitudes about a proposed settlement. Can Jacobowitz, as a class action outsider, see a truth insiders have become blind to?