By the Final Order and Judgment signed by U.S. District Judge U. W. Clemon on December 14, 2005, the settlement with the remaining defendant, Banc of America Securities LLC f/k/a Nationsbanc Montgomery Securities LLC, was approved and the bondholder action was dismissed with prejudice.
According to the Notice of Proposed Settlement of Class Action, a settlement fund in the amount of $17,750,000 was established to settle claims with the remaining defendant Banc of America Securities LLC f/k/a Nationsbanc Montgomery Securities LLC.
As summarized by the same Notice, by order dated August 11, 2005, the Court granted Lead Plaintiffs’ motion, certifying a Plaintiff Class for claims against BAS under Section 10(b) and Rule 10b-5, and a Plaintiff Sub-Class, limited to purchasers in the initial JFF Bond offering, for claims under Section 12(a)(2), 1 and appointing Lead Plaintiffs’ counsel as counsel for the Class (“Plaintiffs’ Counsel”). Almost immediately thereafter, BAS filed a petition with the Eleventh Circuit Court of Appeals, asking for permission to appeal from the Court’s order certifying a Plaintiff Class and Sub-Class. Plaintiffs’ Counsel filed an opposition to the petition. The petition is still pending before the Court of Appeals. While working to resolve the appeals regarding the JFF Individuals Settlement and Deloitte Settlement, and conducting discovery against BAS, Plaintiffs’ Counsel also began arm’s length negotiations to achieve a settlement with BAS. On November 11, 2003, Plaintiffs’ Counsel conducted arm’s length negotiations with counsel for BAS through an experienced mediator, the Honorable Edward A. Infante, retired Chief Magistrate Judge for the United States District Court, Northern District of California, with respect to a settlement of the Bondholder Action against BAS, and with a view by Plaintiffs’ Counsel to achieving the best relief possible consistent with the interests of Lead Plaintiffs and the Class. On September 26, 2005, mediation recommenced, with Plaintiffs’ Counsel conducting arm’s length negotiations with counsel for BAS through another experienced mediator, Eric D. Green, a Professor at the Boston University School of Law. On October 11, 2005, mediation again recommenced, with counsel for Lead Plaintiffs and the Class conducting arm’s length negotiations with counsel for BAS, again through Professor Eric D. Green, and, this time, the negotiations reached a successful conclusion.
The original complaint was filed on May 24, 2000, and named four defendants, including three individuals, Harold Ruttenberg, Randall Haines, and a third individual, all of whom are former officers and/or directors of JFF, and BAS, the lead underwriter of the JFF Bonds, on behalf of itself and a class of underwriters. Claims alleged against one or more of the defendants included violations of Sections 12(2) and 15 of the Securities Act of 1933, violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, as well as state law claims for common law and statutory fraud. By order, dated August 25, 2000, Thrivent Partner High Yield Bond fund f/k/a AAL High Yield Bond Fund and Delaware Delchester Fund were appointed Lead Plaintiffs by the Court. Each of the defendants moved to dismiss the original complaint. By order dated October 1, 2001, the motions of Harold J. Ruttenberg and BAS were denied in their entirety, and the motion of Randall L. Haines was granted, but with leave to Plaintiffs to amend their complaint to plead fraud against Haines with the particularity required by Fed. R. Civ. P. 9(b) and the Private Securities Litigation Reform Act. The motion of the other former officer of JFF was granted with prejudice. On November 14, 2001, Lead Plaintiffs filed an Amended Class Action Complaint and Individual Claim (the “Complaint”). The Complaint restated the same claims as in the original complaint against Ruttenberg, Haines and BAS and added a claim for violation of Section 12(1) of the Securities Act of 1933. The Complaint also added Deloitte as a defendant, and alleged claims against Deloitte under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, as well as state law claims for common law and statutory fraud. In 2002, all the remaining defendants except BAS settled with Plaintiffs. On October 4, 2002, the Court approved two settlements: one between Plaintiffs and the former JFF officers and/or directors, Ruttenberg and Haines (the “JFF Individuals”), and the other between Plaintiffs and Deloitte. Also on October 4, 2002, the Court certified a plaintiff class solely for the purpose of the settlements involving the JFF Individuals and Deloitte. The aggregate settlement consideration contributed by the JFF Individuals, their insurers and Deloitte totaled $7.75 million. A dispute among the defendants led to successive appeals, which are still ongoing, regarding the Court’s orders approving the settlements with the JFF Individuals and Deloitte. Although the appeals do not directly involve any issue between any defendant and Plaintiffs, distribution to the plaintiff class of the settlement consideration from these previous settlements has been delayed, pending resolution of the appeals. While working to timely resolve the appeals regarding the settlements achieved in 2002, Lead Plaintiffs began taking discovery against the sole remaining defendant, BAS. Lead Plaintiffs and their counsel also moved for an order certifying a plaintiff class regarding the claims against BAS.
The complaint asserts claims on behalf of the Class for alleged violations of the federal securities laws and, on behalf of Lead Plaintiffs, under Alabama law, for statutory and common law fraud. The Plaintiffs allege, among other things, that BAS and the other defendants disseminated false and misleading information during the Class Period regarding, among other things, JFF’s financial condition and prospects, which had the result of artificially creating a market for and inflating the market price of the JFF Bonds, causing those who purchased JFF Bonds during the Class Period to make such purchases and/or to make them at inflated prices. The complaint seeks damages for persons who still hold their JFF Bonds purchased during the Class Period, or who sustained a loss upon their sale of JFF Bonds purchased during the Class Period.