Jaffe v. Household Int’l, Inc.
Largest Securities Class Action Recovery Following a Trial
On October 20, 2016, after 14 years of tireless litigation, Robbins Geller obtained final approval of a record-breaking $1.575 billion recovery in the Household International (now HSBC Finance Corporation) securities class action. The $1.575 billion recovery is a record; it is the largest ever following a securities fraud class action trial, the largest securities fraud settlement in the Seventh Circuit and the seventh-largest settlement ever in a post-PSLRA securities fraud case.
The case was filed on August 19, 2002. On May 7, 2009, a jury returned a verdict in favor of the plaintiff class following a six-week trial before the Honorable Ronald A. Guzman in the United States District Court for the Northern District of Illinois. The jury found that Household International, Inc. and the individual defendants, William Aldinger, David Schoenholz and Gary Gilmer, collectively made 17 false and misleading statements concerning the Illinois lender’s financial results and operations in violation of §10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5. During the relevant period, William Aldinger was the Company’s Chief Executive Officer, David Schoenholz was its Chief Financial Officer and Gary Gilmer headed Household’s Consumer Lending Group, at which the majority of the predatory lending practices asserted by plaintiffs took place. Plaintiffs’ counsel, Robbins Geller, fought the defendants’ repeated attempts to derail the litigation after the verdict, which included several post-trial motions to invalidate the verdict, objections to tens of thousands of claims by injured class members, and an appeal to the Seventh Circuit Court of Appeals.
On May 21, 2015, the Seventh Circuit upheld the jury’s verdict that defendants made false or misleading statements of material fact about the company’s predatory lending practices, the quality of its loan portfolio and the company’s financial results between March 23, 2001 and October 11, 2002, but remanded the case for a retrial limited to whether the individual defendants “made” certain false statements, whether those statements caused plaintiffs’ losses, and the amount of damages.
In approving the settlement, the Honorable Jorge L. Alonso noted the team’s “skill and determination” while recognizing that “Lead Counsel prosecuted the case vigorously and skillfully over 14 years against nine of the country’s most prominent law firms” and “achieved an exceptionally significant recovery for the class.” The court added that the team faced “significant hurdles” and “uphill battles” throughout the case and recognized that “[c]lass counsel performed a very high-quality legal work in the context of a thorny case in which the state of the law has been and is in flux.” The court succinctly concluded that the settlement was “a spectacular result for the class.”
The Household case was litigated by Robbins Geller on behalf of court-appointed lead plaintiffs the International Union of Operating Engineers, Local 132 Pension Plan, PACE Industry Union-Management Pension Fund and Glickenhaus & Company. Robbins Geller’s team of attorneys, forensic accountants and support staff was led by partners Michael J. Dowd, Spencer A. Burkholz, Daniel S. Drosman, Luke O. Brooks and Maureen E. Mueller.
Since the enactment of the PSLRA, trials in securities fraud cases have been rare. According to published reports, the case was just the seventh securities fraud case tried to a verdict since the passage of the PSLRA. Robbins Geller is well equipped to handle such trials. The Firm boasts over 20 former federal and state prosecutors among its partners and associates, as well as a number of other experienced trial lawyers, making Robbins Geller unique among firms that specialize in plaintiffs’ class action litigation in its ability to successfully bring such cases to trial, appeal, and ultimately a successful resolution. The case highlights the Firm’s willingness to shoulder the burden of sustained litigation. Robbins Geller was ready to try the case to verdict a second time, moving more than a dozen attorneys, other professionals and support staff to Chicago for the trial in 2009 and again for the retrial.
Jaffe v. Household Int’l, Inc., No. 02-C-05893 (N.D. Ill.).
- © 2016 Reuters
- © 2016 Financial Times
- © 2016 Financial Times