Jun. 16, 2016
David R. Stickney
See more on David R. StickneyBernstein Litowitz Berger & Grossmann LLP
Stickney has won nearly $2 billion in recoveries for investors from Wall Street banks in subprime-related litigation. His targets included Lehman Brothers Holdings Inc., Merrill Lynch & Co. Inc., JPMorgan Chase & Co., Wells Fargo & Co. and Morgan Stanley.
"It all arose from the financial crisis," Stickney said, referring to the packaging and sale of mortgage-backed securities by major financial institutions. Problem was, at the outset, there was little established precedent to recover fraud-related losses on behalf of investors under federal securities law. "Today, we know about corruption in the housing market, the corners cut. But all we knew in 2008 was that our clients had suffered significant losses. The underlying facts did not come out all at once."
No court had sustained claims under federal securities law for purchasers of residential mortgage-backed securities. And no court had certified a class of these purchasers or accepted plaintiffs' damages theories arising from such claims. Stickney and colleagues dissected the complex securities business, developed theories and strategies to maximize recoveries, distilled and presented intricate issues to the courts, and established new legal precedent by winning the first ever certification of this class of investors.
"We got some information from congressional investigations, some after we filed our first suits," he said. "When the facts began to flow, it was almost like trying to drink from a fire hose." The challenge was proving claims involving tens of thousands of individual loans. "It was a pragmatic issue for courts and judges," he said. "The system would be overwhelmed if we fought loan by loan."
His strategy was to prove his cases "on the platform level," as he put it, by focusing on the way Wall Street banks were making money. "We obtained internal documents, emails, bankers' unguarded communications. We obtained testimony from those people. We developed compelling evidence so that when we sat down with them we could convince them they had issues." A key breakthrough that unlocked many doors was persuading courts to consider statistical sampling of loan data to demonstrate that a large percentage was defective.
In a current case, Stickney is awaiting final court approval of a $219 million class settlement on behalf of client Fresno County Employees' Retirement Association with long-term care insurer Genworth Financial Inc. over allegations it made a billion dollar understatement of its insurance reserves, causing its stock to plunge when the company had to write down $500 million in losses. It is to be the largest recovery ever obtained in a securities class action in Virginia. In re Genworth Financial Inc. Securities Litigation, 3:14cv00682 (E.D. Va., filed Oct. 6, 2014)
"This is an excellent result," Stickney said. "These issues can be technical and difficult to grasp, but everyone understands greed and recklessness."
- John Roemer
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