Seeking to hold a predatory lender accountable, Burkholz and colleagues last October gained final approval of a record-breaking $1.575 billion settlement in the Household International securities class action. The defendant is now known as HSBC Finance Corp. It is the largest recovery following a securities fraud class action trial, the largest securities fraud settlement in the 7th Circuit and the seventh-largest settlement in a securities fraud case filed after the Private Securities Litigation Reform Act of 1995.
And it only took 14 years.
"We got a $2.25 billion jury verdict in May 2009," said Burkholz, who dealt with the loss causation expert witnesses. "They challenged part of it, asking the court of appeal for a complete defense judgment. We felt we should have been affirmed, but instead we got a new trial."
The case was venued in the Northern District of Illinois.
"We moved 20 people to Chicago for the retrial," he said. "At the same time, we were in mediation. As shown by the result, we did pretty well in the mediation. The other side settled on the morning jury selection was to begin."
Burkholz said that the total potential damages came to about $2.1 billion. "So, that's a 75 percent recovery," he said. "Compared to other big cases north of $500 million, there's nothing close to that. Most are in single digits."
Now, he said, "companies facing legitimate securities fraud claims - at least when our firm is representing the plaintiffs - have to face the risks of going to trial. And there was a lot of risk for us, too. We spent $34 million out of pocket on the case, exclusive of attorney fees." Jaffe v. Household Int'l Inc., 1:02-cv-05893 (N.D. Ill., filed Aug. 19, 2002).
In May 2016, Burkholz and his team reached final approval of a $500 million settlement with Bank of America to resolve almost nine years of litigation over claims that Countrywide Financial, along with various Wall Street banks, packaged millions of dollars of mortgage backed securities with defective Countrywide loans, then falsely told investors that the products were investment grade. In approving the settlement, the late U.S. District Judge Mariana R. Pfaelzer of Los Angeles repeatedly complimented Burkholz and the other plaintiffs' attorneys, noting that it was "beyond serious dispute that Class Counsel has vigorously prosecuted the Settlement Actions on both the state and federal level over the last six years." She added that "without a settlement, these cases would continue indefinitely, resulting in significant risks to recovery and continued litigation costs. It is difficult to overstate the risks to recovery if litigation had continued."
Bank of America took the problem over when it acquired Countrywide. "They agreed eventually to pick up the tab," Burkholz said. "It was a great result."
— John Roemer
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