NEW YORK (Legal Newsline) - New Jersey Attorney General Paula Dow has a problem with financial services firm Morgan Stanley's proposed settlement in a class action lawsuit that alleges bid-rigging.
Morgan Stanley plans to pay $6.5 million to resolve its role in the case, even though plaintiffs attorneys have not found any evidence that the firm took part in the alleged scheme. The lawsuits allege a conspiracy among brokers and providers in the sale of municipal derivatives.
Joshua Rabinowitz, a deputy attorney general in Dow's office, wrote U.S. District Judge Victor Marrero earlier this month.
"(Dow) respectfully requests that the court declare that the notice (of settlement) is unfair because: (a) it requires a class member to decide whether to remain in the class before it can determine whether it will receive any payment from the settlement fund in exchange for its release to Morgan Stanley; and (b) it burdens a class member's right to exclude itself from the class by requiring it to provide unnecessary information from the class plaintiffs," the letter says.
"The court should further declare that any decision that a class member has made based on the current notice is null and void."
Morgan Stanley plans to create a $4.95 million settlement fund for payments to class members. Many New Jersey-based governmental entities are included in the class, and Dow says a plan of allocation has not yet been disclosed.
In August, she received notice of preliminary approval of the settlement. She says a class member is required to release claims against the company before knowing if it has an eligible claim.
"The notice states that a class member will be 'bound by all of the court's decisions with respect to the settlement,'" the letter says. "The notice is, however, silent about what 'claims are resolved by this settlement,' i.e., the scope of the release. In order to determine the scope of the release, a class member has to review the settlement agreement."
Dow also says the notice fails to convey the risk in staying a class member in order to receive a payment from the settlement fund. The notice says, "It is impossible to determine at this time exactly how much the average payment will be because the settlement will be distributed pro rata based upon class members' eligible claims."
Dow says the court can allow class members having a second opportunity to exclude itself from the settlement after it knows how much money it is getting.
Those opting out of the settlement have to provide too much documentation, she adds, noting that an exclusion request must contain a description of municipal derivatives purchase, the provider, the date of the transaction and the notional amount of the derivatives.
"Because class plaintiffs have no right to require this information as a condition for opting out of the settlement, the provision of this information should be entirely optional," the letter says.
The lawsuits allege an industry-wide price-fixing scheme conducted by more than 30 parties.
From Legal Newsline: Reach John O'Brien by e-mail at email@example.com.