A Chicago federal judge has signed off on a $4.25 million settlement to end years of litigation between financial investment firm Northern Trust Co. and a host of public worker retirement plans in Chicago and elsewhere in the U.S. over claims Northern Trust’s allegedly risky investment decisions had led to hundreds of millions of dollars in losses for the retirement programs when markets crashed at the onset of the Great Recession.
The judge, however, has not yet ruled on the plaintiffs’ attorneys’ claim for nearly $1.1 million of that amount for fees and litigation costs, saying he was taking that request “under advisement” for now.
The settlement would draw to a close a class action lawsuit brought against Chicago-based Northern Trust on behalf of retirement plans across the country who participated in a so-called “securities lending program” administered by Northern Trust. The class action suit, originally filed in 2009 and amended in 2010 and 2014, listed as named plaintiffs the Louisiana Firefighters’ Retirement System, the City of Pontiac’s public workers’ retirement systems and the Chicago Public School Teachers’ Pension & Retirement Fund.
The lawsuit alleged Northern Trust’s SLP had invested the pension funds’ billions of dollars in high-risk ventures, exposed to the real estate market, in a “classic ‘heads we win, tails you lose’ scenario,’” in which Northern Trust would profit no matter how much invested money might be lost. And the lawsuit alleged the retirement agencies lost big, as Northern Trust allegedly refused to take the steps necessary to mitigate damage from the financial collapse at the onset of the Great Recession, allegedly costing the retirement funds hundreds of millions of dollars.
However, after years of proceedings in federal court, the two sides agreed to settle for $4.25 million. In a memorandum accompanying the motion for settlement, plaintiffs said the settlement marked an “excellent” outcome for the three named plaintiff retirement organizations, as well as others who signed on to participate as members of the plaintiff class.
The plaintiffs’ memo said the settlement would guarantee the retirement funds would receive some cash payments, whereas they might not if the case went to trial. According to court documents, Northern Trust was prepared to argue the financial market crash of 2008 was almost entirely to blame for the retirement funds’ losses, and not the “imprudence” alleged by the retirement fund plaintiffs.
The memo noted no class members had objected to the settlement terms. The deadline for those objections had been Dec. 21.
U.S. District Judge Jorge Alonso granted preliminary approval of the settlement approved the settlement after a hearing on Jan. 11.
During that hearing, the judge also directed plaintiffs’ lawyers to supplement their motion for expenses and fees. The lawyers had requested 18 percent of the total settlement in fees - a sum they pegged at $765,000 – as well as an additional $330,612 in litigation expenses. The judge is expected to rule on those fee requests later. No date was specified for that ruling, however, and the court has not set another hearing date in the case.
Northern Trust was represented in the case by attorneys with the firms of Jenner & Block and Winston & Strawn, each of Chicago.
The Pontiac retirement funds and the class were represented by attorneys with the firms of Bernstein, Litowitz, Berger & Grossman, of Chicago and New York; Schneider Wallace Cottrell Konecky Wotkyns, of Emeryville, Calif., and Scottsdale, Ariz.; and Keller Rohrback LLP, of Seattle.