Another Subprime Lawsuit Settlement

Another Subprime Lawsuit Settlement - 1/5/2009

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News	News 2009
HEADLINES \| SETTLEMENTS AND DISMISSALS \| COURT FILINGS LINKS TO OTHER NEWS \| NEWS ARCHIVE	HEADLINES ARCHIVED SETTLEMENTS AND DISMISSALS ARCHIVED

SETTLEMENT NEWS:

Another Subprime Lawsuit Settlement
Kevin LaCroix

The D & O Diary. January 5, 2009
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EXCERPT: In a development that attracted little notice at the time, on December 10, 2008, the parties to the subprime-related securities lawsuit pending in the Northern District of California against Luminent Mortgage Capital and certain of its directors and officers filed a Stipulation of Settlement, in which the defendants agreed to pay $8 million to settle the case. As far as I am aware, the Luminent settlement is only the second of the subprime-related securities lawsuits in which the parties have reached a settlement. As discussed at greater length here, the plaintiffs had alleged that in certain public statements in July 2007, the defendants has misrepresented Luminent’s liquidity, the quality of its mortgage backed securities (MBS) portfolio, and the safety of its dividend for the second quarter of 2007, payable August 8, 2007. The plaintiffs’ Amended Complaint alleged that the defendants failed to disclose margin calls on the company’s MBS portfolio, a write-down on its portfolio and significant exposure to subprime debt that negatively impacted the company’s liquidity. The company’s share price dropped over 75% after the company announced on August 6, 2007 that it was cancelling payment of the second quarter dividend. As reflected in the Stipulation of Settlement, the parties reached an agreement to settle the case while the defendants’ motion to dismiss was pending. The settlement followed the parties’ agreement to attempt to resolve the case through court-appointed mediation. The settlement is subject to court approval. The settlement also includes defendants’ agreement to pay $100,000 administrative costs. The parties agree that plaintiffs’ counsel may apply for and receive a fee award of up to 25% of the settlement amount.

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