Iron Workers Local No. 25 Pension Fund v. Credit-Based Asset Servicing & Securitization, LLC

A series of class actions were brought by multiple investors, including Iron Workers Local No. 25 Pension Fund (the pension fund) and the Public Employees’ Retirement System of Mississippi (MissPERS) (plaintiffs), who argued that Credit-Based Asset Servicing & Securitization, LLC; Merrill Lynch & Co., Inc.; and others (defendants) had failed to disclose the risks of investing in subprime mortgages. Two of the plaintiffs—the pension fund and MissPERS—each sought to be named the lead plaintiff in the consolidated suit pursuant to the Private Securities Litigation Reform Act of 1995 (PSLRA). Additionally, the pension fund and MissPERS each sought the appointment of its own respective attorneys be named lead counsel for the proceedings. During evidentiary hearings, the compensation arrangements between the attorneys for the pension fund and MissPERS and their respective clients were identified and discussed. The pension fund and its law firm, Coughlin Stoia Gelle Rudman & Robbins, LLP (Coughlin Stoia), had agreed that Coughlin Stoia would provide free monitoring of the pension fund’s investments and recommend litigation when appropriate. In return, the pension fund would retain Coughlin Stoia on a contingent-fee basis to handle the litigation that Coughlin Stoia itself had recommended. MissPERS was represented by approximately a dozen law firms that also monitored its investments for free. MissPERS also employed its own securities experts to direct litigation decisions. However, there was no contractual guarantee that the law firm that recommended litigation would represent MissPERS in the litigation. The United States District Court for the Southern District of New York ordered that MissPERS would serve as lead plaintiff and one of its law firms, Bernstein Litowitz Berger & Grossman LLP (Bernstein Litowitz) would serve as lead counsel. The court explained its decision.