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Case Status:    SETTLED
On or around 03/04/2015 (Other)

Filing Date: February 22, 2008

Lehman Brothers Holdings Inc. ("Lehman Brothers" or the Company) (OTC: LEHJQ or LEHMQ) is an American global financial services firm founded in 1847.

The class action against Lehman Brothers was first filed on February 22, 2008 in the U.S. District Court for the Northern District of Illinois. The action titled Claude A. Reese, et al. v. O'Meara, et al., case no. 08-CV-1119, was voluntarily dismissed by the Plaintiff on March 4, 2008. According to the initial Complaint, as a direct result of the market learning of Defendant's misrepresentations and omissions, the price of Lehman Brothers shares declined and Plaintiff and the class suffered a loss on their investments in Lehman Brothers. During the Class Period, Lehman Brothers was an active participant and heavily invested in the mortgage-backed securities markets. By July 17, 2007, news of further deterioration in the mortgage-backed securities market and rumors concerning Lehman Brothers' mortgage related losses reached a critical stage. That day, Bear Stearns, a competing investment bank, announced that its "Structured Enhanced Leverage Fund," due to heavy losses in its mortgage-related investments, would be returning no money to its investors, and that a second failed mortgage securities-based hedge fund would be able to return only a small portion of its clients' funds. This news sent shockwaves through the market, and led investors to suspect that Lehman Brothers was also concealing mortgage related losses on its balance sheet. On July 18, 2007, this speculation forced Lehman Brothers to reassure the market: a Company spokeswoman, Kerrie Cohen, said "[t]he rumors related to subprime [mortgage] exposure are unfounded." Despite the Company's assurances, on July 30, 2007 an article published by Market Watch noted on that day that Standard & Poor's Equity Group downgraded Lehman Brothers, to hold from buy, "citing the brokerage's exposure to leverage in its fixed-income business, widening credit spreads and slower mortgage origination and securitization volume for mortgages." This news shocked the market, causing Lehman Brothers' share price to drop over the next four trading days, to close on August 3, 2007, at $55.78 per share, a 14.56 percent drop from its closing price before the news of the Standard & Poor's downgrade.

On June 18, 2008, a Complaint was filed on behalf of shareholders of Lehman Brothers in the United States District Court for the Southern District of New York. The Complaint, titled Operative Plasterers and Cement Masons International Association Local 262 Annuity Fund, et al. v. Lehman Brothers Holdings Inc., et al., case number 08-CV-05523, seeks damages for violations of federal securities laws on behalf of all investors who purchased Lehman common stock between September 13, 2006 through June 6, 2008, inclusive (the "Class Period"). Throughout the Class Period, Defendants touted the Company's strong liquidity position, superior risk management policies and stable overall financial prospects despite a difficult environment in the financial services industry. As a result of Defendants' statements, the stock traded as high as $86.18 per share during the Class Period. The Complaint extends a prior Class Period to include the Company's most recent earnings disclosure of June 9, 2008. On this date, prior to the opening of trading on the New York Stock Exchange, the Company stunned the market by reporting a $2.8 billion second quarter loss -- nearly ten times the loss analysts had anticipated and the Company's first reported loss since going public in 1994. Lehman Brothers also announced plans to raise $6 billion in additional capital to help it survive its financial crisis. This news shocked investors as management had issued repeated assurances that the Company was financially strong and its liquidity position solid, even going so far as denying speculation that Lehman Brothers would suffer losses such as this. The stock closed at $29.48 that day, a decline of $2.81, on heavy volume of close to 170 million shares.

On July 31, 2008, The Pension Fund Group was appointed lead Plaintiff and and Bernstein Litowitz Berger & Grossman LLP and Schiffrin Barroway Topaz & Kessler, LLP were approved as lead Counsel for the class. On September 26, 2008, a suggestion of bankruptcy was entered for Lehman Brothers. On October 27, 2008, the lead Plaintiff filed an Amended Class Action Complaint.

A class action Complaint titled Fogel Capital Management, et al. v. Fuld, et al. was filed on September 24, 2008, case number 08-CV-08225. This class action lawsuit was filed on behalf of all persons who purchased the Preferred Series "J" stock ("Lehman Preferred J") of Lehman Brothers from the date of the Company's public offering on February 5, 2008 (the "Offering"), and all purchasers traceable thereto (the "Class Period") against certain officers and directors of Lehman and certain Underwriters of the Offering, pursuant to Sections 11 and 15 of the Securities Act of 1933, 15 U.S.C. ss.ss. 77k, 77l and 77o (the "Class"). The Underwriters include Bank of America Securities LLC (NYSE:BAC), Citigroup Global Markets Inc. (NYSE:C), Merrill Lynch, Pierce, Fenner & Smith Inc. (NYSE:MER), Morgan Stanley & Co. Inc. (NYSE:MS), UBS Securities LLC (NYSE:UBS), and Wachovia Capital Markets, LLC (NYSE:WB). Specifically, the Complaint asserts that Lehman's Prospectus contained both material misstatements and omissions, which Plaintiff and the Class relied upon to their detriment. The representations made in the Company's Prospectus were materially false and misleading because at the time of the Offering, Lehman was already suffering from several adverse factors that were not revealed and/or adequately addressed in the document; including the failure to set aside adequate allowances to cover the Company's ever increasing portfolio of underperforming sup-prime related products and to adequately write-down commercial and residential mortgage and real estate assets. These factors were already causing a material adverse affect on Lehman's business and directly led to Lehman's September 15, 2008 announcement that it was seeking protection under the Federal Bankruptcy Code in the largest bankruptcy filing in U.S. history.

The Complaint alleges that Defendants could have - and should have - discovered the material misstatements and omissions in the Company's Prospectus prior to its filing with the SEC and distribution to the investing public. Instead, they failed to do so as a result of a negligent and grossly inadequate due diligence investigation. On September 15, 2008, Lehman filed a voluntary petition to reorganize under Chapter 11 of the Federal Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York in the largest bankruptcy filing in history and largely wiping out the investment interests of the Class. As a result of the dissemination of the false and misleading statements set forth in the Complaint, the market price of Lehman Preferred J was artificially inflated during the Class Period. In ignorance of the false and misleading nature of the statements described in the complaint, Plaintiff and the other members of the Class relied, to their detriment, on the integrity of the market price of Lehman Preferred J. Had Plaintiff and the other members of the Class known the truth, they would not have purchased said securities, or would not have purchased them at the inflated prices that were paid.

A class action Complaint titled Stephen P. Gott, et al. v. UBS Financial Services Inc., et al., was filed on November 6, 2008, case number 08-CV-9578. The lawsuit asserts claims under Sections 11, 12(a)(2) and 15 of the Securities Exchange Act of 1933. The Complaint alleges that Defendants made misstatements and omissions of material fact relating to an investment in Lehman Principal Protection Notes and deceived investors as to the risks of investing in those Notes. The Complaint further alleges that UBS offered and sold Lehman Principal Protection Notes as suitable for investors seeking to protect their entire principal investment. According to the Complaint, holders of Lehman Principal Protection Notes sold by UBS and other broker-dealers learned, following Lehman Brothers’ bankruptcy filing on September 15, 2008, that their Notes are in default and they are now senior unsecured creditors in Lehman’s bankruptcy proceeding, and may stand to lose all or substantially all of their principal investments.

According to Pretrial Order No. 1 issued on January 9, 2009, the following actions are consolidated for all pretrial purposes with 08 Civ. 5523 (LAK): 08 Civ. 5523, 08 Civ. 8225, 08 Civ. 9404, 08 Civ. 9578, 08 Civ. 9793, 08 Civ. 10008 , 08 Civ. 10058, and 08 Civ. 10206. They are referred to collectively as In re Lehman Brothers Equity/Debt Securities Litigation. The following actions are consolidated for all purposes into 08 Civ. 6762 (LAK), and the caption of that action is amended to be In re Lehman Brothers Mortgage-Backed Securities Litigation: 08 Civ. 6762 and 08 Civ. 10686. In re Lehman Brothers Equity/Debt Securities Litigation (08 Civ. 5523 (LAK)), In re Lehman Brothers Mortgage-Backed Securities Litigation (08 Civ. 6762) (LAK) and In re Lehman Brothers ERISA Litigation (08 Civ. 5598 (LAK)) are consolidated for discovery purposes under master docket under 1:21-mc-00104-LAK. The parties and Counsel previously designated as lead Plaintiff(s) and lead Counsel in 08 Civ. 5523 shall serve as lead Plaintiff(s) and lead Counsel in In re Lehman Brothers Equity/Debt Securities Litigation.

According to Pretrial Order No. 3 filed on February 13, 2009, in view of the decision of the Judicial Panel on Multidistrict Litigation transferring a number of actions to this Court, the CLERK SHALL CLOSE docket number 21 MC 0104 (LAK). The master docket number for all Lehman Brothers Securities and ERISA Litigation cases henceforth shall be 09 MD 2017.

On February 23, 2009, the lead Plaintiffs filed a Second Consolidated Class Action Amended Complaint naming additional underwriters as named Defendants. On April 27, 2009, the Defendants filed several motions to dismiss the Second Consolidated Class Action Amended Complaint. Before any ruling on the motions, the Plaintiffs filed a Third Amended Complaint, adding the Company's auditor as a Defendant in the action. On June 4, 2010, the Defendants filed several motions to dismiss the Third Amended Complaint.

According to a news article dated July 27, 2011, District Judge Lewis A. Kaplan sustained, in large part, claims asserted by former Lehman Brothers shareholders in a federal securities action related to the Company's 2008 collapse. In a 106-page opinion, Judge Kaplan of the United States District Court for the Southern District of New York held that Plaintiffs had sufficiently alleged federal securities claims against former officers and directors of Lehman Brothers, Lehman's auditor, Ernst & Young, and fifty-one underwriters that assisted Lehman Brothers in issuing billions of dollars in now-worthless securities to the investing public prior to its bankruptcy. ... Judge Kaplan found that Lehman's use of "Repo 105" transactions, which the Company used to artificially improve its reported capital position by temporarily removing assets from its balance sheet at quarter-end, "paint[ed] a misleading picture of the company's financial position at the end of each quarter." He also found that the Defendants' repeated statements regarding the "strong" and "conservative" nature of Lehman's risk management systems were materially false and misleading "given the allegations of frequent, significant departures from Lehman's internally stated policies."

According to a news article dated December 9, 2011, in a motion made available on Dec. 5, lead Plaintiffs in a securities class action lawsuit against Lehman Brothers Holdings Inc., certain of its formers officers and directors and others asked a federal judge in New York to approve two settlements totaling $507 million to settle claims with a number of the Defendants for alleged federal securities law violations (In re Lehman Brothers Securities and ERISA Litigation, MDL No. 09-2017, [In re Lehman Brothers Equity/Debt Securities Litigation, No. 08-5523], S.D. N.Y.).

Lead Plaintiffs filed their motion for authorization to notify class of proposed settlement in the U.S. District Court for the Southern District of New York, asking Judge Lewis A. Kaplan to approve a $417 million settlement with 42 underwriters of Lehman Brothers stock and a $90 million settlement with former Lehman Brothers CEO Richard S. Fuld Jr., former Chief Financial Officers Christopher M. O'Meara, Erin Callan and Ian Lowitt, former Chief Operating Officer Joseph M. Gregory and nine former members of the Lehman Brothers board of directors. Underwriter Defendants Cabrera Capital Markets LLC, Charles Schwab & Co. Inc., HVB Capital Markets Inc., M.R. Beal & Co., Muriel Siebert & Co. Inc., Siebert Capital Markets, UBS Financial Services Inc., Williams Capital Group L.P. and Incapital LLC are not subject to the proposed settlement agreement; however, according to a footnote in the motion, the lead Plaintiffs contend that "confidential term sheets have been entered into with each of the underwriter Defendants, except for UBS Financial Services, Inc., and lead Counsel expect to consolidate such settlements into the settlement process for the Underwriter Settlement." The lead Plaintiffs aver that they will continue to litigate their claims against the remaining nonsettling underwriter Defendants, as well as Defendant and former Lehman Brothers auditor Ernst & Young LLP (E&Y).

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