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Member, Beacon International Group, Ltd.
The 2nd U.S. Circuit Court of Appeals last week ordered a lower court to reconsider class certification in a $72 million settlement involving General Reinsurance Co. and several pension funds.
The three-judge panel vacated a 2009 ruling by a district court judge denying class certification to the plaintiffs that was necessary to move the settlement forward. The plaintiffs had alleged that Gen Re was involved in a sham reinsurance deal that was aimed at boosting the balance sheet of American International Group Inc.
The public pension fund plaintiffs—the Ohio Public Employees Retirement System, the State Teachers Retirement System of Ohio and the Ohio Police and Fire Pension Fund—alleged that the transactions that took place in late 2000 and early 2001 enabled AIG to book $500 million in reinsurance transactions purely for AIG's accounting purposes. As holder of AIG shares, the plaintiffs alleged they suffered materially when AIG was forced to restate its earnings in May 2005.
While the lower court denied class certification to the pension funds, the three-judge appeals court panel last week ordered the lower court to reconsider whether the class certification is appropriate and whether the proposed settlement is fair.