Wednesday, June 24, 2020

No. 378: MetLife Agrees to Settle an Eight-Year-Old Federal Securities Lawsuit

On January 12, 2012, the City of Westland Police and Fire Retirement System filed a class action lawsuit against MetLife, Inc. (NYSE:MET) and several MetLife senior officers and directors. The classes of plaintiffs consist of MetLife shareholders who allegedly suffered losses as the result of defendants' violations of federal securities laws. The original complaint has three counts of such violations. On May 14, 2012, the plaintiffs filed an amended complaint containing five counts. (See City of Westland v. MetLife, U.S. District Court, Southern District of New York, Case No 1-12-cv-256.)

MetLife's Descriptions of the Case
After the original complaint was filed, MetLife included a one-paragraph description of the case in the company's 10-K report for the year ended December 31, 2011, which was filed with the Securities and Exchange Commission on February 28, 2012. The most recent description is in the company's 10-Q report for the quarter ended March 31, 2020, filed May 8, 2020. Those two short descriptions are in the complimentary package offered at the end of this post.

Recently I learned through news reports that the parties are settling the case. I asked a media relations person at MetLife whether the company has issued a statement about the settlement. The person referred me to another person, from whom I heard nothing. I followed up with the person who had made the referral. MetLife apparently has not issued a statement recently on the case (other than the short statement in the latest 10-Q report, which does not mention the settlement). The person provided the following statement, which apparently was prepared especially for me:
MetLife denies the claims brought forward in the lawsuit and strongly believes its conduct was at all times proper and in compliance with all applicable laws and regulations. The company is entering into this settlement to eliminate the burden and expense of further litigation.
On page 80 in the 10-Q report for the quarter ended March 31, 2020, MetLife said its board received six letters dated from March 2018 to April 2020 on behalf of individual shareholders. I asked the media relations person for copies of the letters. In response, another person said: "The 10-Q you reference is the public notification of those letters. The letters themselves are not public."

The Original Complaint
The court filings in the City of Westland case have been extensive throughout the eight years since the case began. Here is part of the "Summary of Action" in the original 22-page complaint (the full complaint is in the complimentary package offered at the end of this post):
This is a securities fraud class action alleging violations of the anti-fraud provisions of the federal securities laws on behalf of all purchasers of the common stock of MetLife, Inc. between February 2, 2010 and October 6, 2011, inclusive. The claims asserted herein are brought against MetLife and certain of its current and former officers and directors...
During the class period, the defendants engaged in a fraudulent scheme and multiple violations of the Securities Exchange Act of 1934 ... by making false and misleading statements concerning the Company's current and future financial condition in quarterly and year-end financial statements.
The Amended Complaint
The amended complaint is more elaborate than the original complaint. The first 13 pages of the 182-page document include a "Table of Contents" and an "Introduction and Review." The latter section, for example, alleges that MetLife used the Social Security Administration's Death Master File (DMF) to stop payments to supposedly deceased life annuitants, and did not use the DMF to identify and locate life insurance beneficiaries to whom death benefits may have been owed. In other words, the amended complaint alleges that the company did not adjust its reserves to reflect that it had unclaimed property subject to escheatment pursuant to state unclaimed property laws. The first 13 pages of the amended complaint are in the complimentary package offered at the end of this post.

The Class Notice
On June 17, 2020, as part of the filing of a request to the judge for preliminary approval of the proposed settlement, the plaintiff submitted as an exhibit a proposed notice to be sent to the members of the various classes. The notice has not yet been sent out, because the judge has not yet approved the form of the class notice. Nonetheless, the proposed notice is helpful because of its description of the case. Part of the beginning of the "Statement of Class Recovery" in the proposed notice reads:
Pursuant to the Settlement described herein, an $84,000,000.00 settlement fund has been established (the "Settlement Amount"). The Settlement Amount together with any interest earned thereon is the "Settlement Fund." The Settlement Fund, less (a) any taxes, (b) any Notice and Administration Expenses, and (c) any attorneys' fees and litigation costs, charges and expenses (including any award to Lead Plaintiff of its costs and expenses in representing the Classes) awarded by the Court, will be distributed to Members of the Classes in accordance with a plan of allocation that is approved by the Court. The proposed plan of allocation (the "Plan of Allocation") is set forth on pages ___ below. Based on the Lead Plaintiff's estimate of the number of shares of MetLife common stock eligible to recover, the average distribution under the Plan of Allocation is roughly $0.26 per common share, before deduction of any taxes on the income earned on the Settlement Fund, Notice and Administration Expenses, and allowable attorneys' fees and expenses (including any award to Lead Plaintiff) as determined by the Court. Members of the Classes should note, however, that these are only estimates [emphasis in original].
The proposed class notice consists of 22 pages. It is included in full in the complimentary package offered at the end of this post.

General Observations
The lengthy court docket in this case reveals that the parties fought the case intensely during the entire eight years since it was filed. During that time, they met three times with a retired judge in unsuccessful efforts to mediate the dispute. Now that the matters prompting the lawsuit are ancient history, the parties are settling the case as quietly as possible. Among those matters, for example, are investigations by state insurance regulators into the failure of companies to pay certain life annuity benefits and life insurance death benefits, and investigations by state unclaimed property officials into the failure of companies to escheat unclaimed property to the states. I think the case provides an important history lesson for persons keenly interested in the life insurance business.

Available Material
I am offering a complimentary 58-page PDF consisting of MetLife's short descriptions of the case (1 page), the original complaint (22 pages), the beginning of the amended complaint (13 pages), and the proposed class notice (22 pages). Email and ask for the June 2020 package about the case of City of Westland v. MetLife.