Focused On Clients, Committed To Results

Lehman Brothers Securities Litigation

Kessler Topaz is serving as court-appointed co-lead counsel on behalf of a group of institutional investors, including Alameda County Employees' Retirement Association, Government of Guam Retirement Fund, Northern Ireland Local Government Officers' Superannuation Committee, City of Edinburgh Council as Administering Authority of the Lothian Pension Fund, and Operating Engineers Local 3 Trust Fund, (the "Pension Fund Group"), in a securities class action captioned In re Lehman Brothers Equity/Debt Securities Litigation, 08 Civ. 5523 (LAK), pending in the United States District Court for the Southern District of New York. The action arises from misstatements and omissions regarding, among other things, Lehman's financial condition and its use of undisclosed “Repo 105” transactions to artificially reduce its reported net leverage ratio in the period leading up to Lehman's unprecedented bankruptcy filing on September 15, 2008, the largest bankruptcy filing in U.S. history.

On April 23, 2010, the Pension Fund Group, and additional plaintiffs, including Police and Fire Retirement System of the City of Detroit, Brockton Contributory Retirement System, Teamsters Allied Benefit Funds, American European Insurance Company, and Inter-Local Pension Fund Graphics Communications Conference of the International Brotherhood of Teamsters, filed a Third Amended Consolidated Class Action Complaint for Violations of the Federal Securities Laws (“Complaint”).  As defined in the Complaint, the action asserts claims on behalf of all persons and entities who purchased or acquired various securities of Lehman between June 12, 2007 and September 15, 2008. The Complaint asserts claims against several former Lehman officers (including Richard S. Fuld, Jr., the former Chief Executive Officer and Chairman of the Board), several members of Lehman's Board of Directors, Lehman’s outside auditor, Ernst & Young LLP (“E&Y”), and underwriters for various Lehman debt and equity offerings. The Bankruptcy Code prevents Lehman from being a named defendant in this action.
On July 27, 2011, Judge Lewis A. Kaplan denied, in large part, Defendants’ motions to dismiss Lead Plaintiffs’ claims.  Judge Kaplan held, among other things, that Lehman’s “repetitive, temporary, and undisclosed reduction of net leverage at the end of each quarter is sufficient to make out a claim that the Offering Materials and oral statements about net leverage violated the overriding GAAP requirement to present the financial condition of the company accurately.” Judge Kaplan further opined that “the misleading picture that Lehman portrayed played a material part in keeping its stock higher during the class period than it otherwise would have been and, in consequence that some part of the losses the plaintiffs suffered was attributable to the alleged fraud.”

On May 4, 2012, Judge Kaplan granted final approval of a $426.2 million settlement with the over 40 offering underwriters, representing 13% of the $3.3 billion in Lehman securities that these defendants underwrote.  On May 24, 2012, Judge Kaplan approved an additional $90 million settlement with certain of Lehman’s former officers and directors, amounting to the vast majority of the remaining D&O insurance proceeds.  The combined $516.2 million settlement is one of the most significant recoveries to arise out of the recent financial crisis. 

The Pension Fund Group is continuing to pursue its claims against E&Y in the Southern District of New York. For more information on the status of the litigation, and to access to certain information and materials regarding the substantive allegations, including a copy of the Complaint, please visit the Lehman Securities Litigation website at