Breach of Fiduciary Duty Class Action Settles for $7.999 Million; Case Forces Detroit Pension Funds to Implement Major Reforms - NBC Right Now/KNDO/KNDU Tri-Cities, Yakima, WA |

Breach of Fiduciary Duty Class Action Settles for $7.999 Million; Case Forces Detroit Pension Funds to Implement Major Reforms

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SOURCE Mantese, Honigman, Rossman & Williamson, P.C.

DETROIT, Feb. 27, 2014 /PRNewswire/ -- Participants in Detroit's two public employee retirement systems brought class action lawsuits in 2009 against the retirement systems' trustees and their investment advisor, claiming breach of fiduciary duty and gross negligence arising from several failed investments.  After the plaintiffs' attorneys obtained a significant summary disposition ruling, the cases settled for $7.999 million.

The plaintiffs alleged that the trustees breached their fiduciary duties by approving high risk investments of fund money without adequate due diligence.  Shortly after filing the complaint, Plaintiffs obtained a temporary restraining order, which enjoined the trustees from destroying documents.

On May 6, 2009, the plaintiffs moved for certification of a class action.  On July 17, 2009, the defendants opposed class certification and also moved for summary disposition, arguing that the defendants had immunity under the Government Tort Liability Act.  The defendants also argued that the plaintiffs did not have standing to sue derivatively on behalf of the retirement system for the losses it incurred.  After extensive briefing and argument, the court granted class certification to the plaintiffs and denied the defendants' motions for summary disposition, whereupon the defendants appealed.  On November 15, 2012, the Court of Appeals affirmed the trial court's decisions on certification and summary disposition.  

During the subsequent discovery period, plaintiffs' counsel conducted over 30 depositions and reviewed tens of thousands of documents.  In August 2013, the plaintiffs moved for summary disposition in both cases on the issue of gross negligence.  Ultimately, the trial court granted summary disposition in the plaintiffs' favor as to one of the principal investments, holding that it was grossly negligent as a matter of law.

Thereafter, the parties participated in mediation which resulted in a settlement requiring the defendants to pay $7.999 million as compensation to the two retirement systems.  In addition to this payment, the defendants were forced to overhaul the funds' governing policies and procedures and implement a set of binding reforms and safeguards to protect against future misconduct.

On February 27, 2014, the court granted final approval of the settlement in Estes v. Clark, Wayne County Circuit Court no. 09-010080-NZ and Foy v. Bandemer , Wayne County Circuit Court no. 09-024103-NZ.  The plaintiffs in these cases were represented by:

Gerard Mantese
Mantese, Honigman, Rossman & Williamson, P.C.
1361 E. Big Beaver Rd.
Troy, MI 48083
(248) 457-9200 (office)
(248) 515-6419 (cell)
gmantese@manteselaw.com

and

John J. Conway
John J. Conway, P.C.
26622 Woodward Ave Ste 225
Royal Oak, MI  48067
(313) 961-6525
john@johnjconway.com

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