In re Charles Schwab Corp. Securities Litigation

Filing 1121

ORDER POSTPONING APPROVAL OF CLASS COUNSEL'S MOTION AND SETTING HEARING re #1112 MOTION for Disbursement of Funds Class Counsel's Motion for Order Approving (1) Distribution of Remaining Settlement Funds to Class Members; (2) Payment of Reasonable Claims Administration Fees; and (3) Payment of Second Half of Attorneys' filed by YieldPlus Investor Group. Signed by Judge Alsup on December 15, 2011. (whalc2, COURT STAFF) (Filed on 12/15/2011) Modified on 12/16/2011 (wsn, COURT STAFF).

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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IN RE:

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For the Northern District of California

United States District Court

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CHARLES SCHWAB CORPORATION
SECURITIES LITIGATION.

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No. C 08-01510 WHA

This Document Relates
To All Cases.
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ORDER POSTPONING
APPROVAL OF CLASS
COUNSEL’S MOTION AND
SETTING HEARING

Class counsel have moved for approval of redistribution of class funds. This class action

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involves the alleged violation of state and federal law in the management of, disclosures

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concerning, accounting for, and marketing and sales of the Schwab YieldPlus Fund. An order

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dated April 2011 granted final approval of class settlement agreements. That order awarded half

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of the attorney’s fees after the “effective date” as defined by the settlement, but stated that the

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“remaining 50 percent of attorney’s fees may be paid only after counsel certifies that all class

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members have received and cashed their checks, no problems with the distribution have been

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reported for a period of 30 days, and there is nothing left to do” (Dkt. No. 1101).

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In November 2011, class counsel filed a motion entitled “Class Counsel’s Motion for

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Order Approving (1) Distribution of Remaining Settlement Funds to Class Members; (2) Payment

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of Reasonable Claims Administration Fees; and (3) Payment of Second Half of Attorneys’ Fee

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Award” (Dkt. No. 1112). Counsel reported that the “initial distribution of checks to members of

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the Federal and California Classes is complete,” and that over 90% of class members had cashed

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their checks. Counsel proposed reallocating the remaining funds to class members who either
cashed their distribution check or had a check reissued, and requested that $1.8 million be

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awarded to Gilardi & Co., the class administrator. Counsel also requested that the second half of

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the attorney’s fees be awarded.

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Schwab filed a response in which it did not object to class counsel’s requests, but rather

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alerted the Court to a recent distribution problem that arose related to intermediary accounts (Dkt.

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No. 1115). Intermediary accounts are those where class members purchased or held shares in

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YieldPlus in the name of an intermediary broker, rather than in their own name. A complaint by a

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class member alerted Schwab to the fact that Fidelity had not reported that class member’s

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account to Gilardi. That individual class member was issued a check for his share of the

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settlement funds. On November 28, “Fidelity informed [Schwab] that the referenced customer’s
situation is not unique,” and that “there is an unknown number of additional class members whose

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For the Northern District of California

United States District Court

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accounts were not reported to Gilardi and whose shares of the settlement have therefore not yet

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been determined or paid.” Schwab proposed delaying the redistribution until this issue is fully

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understood and resolved.

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Class counsel submitted a supplemental filing requesting that this Court refrain from

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ruling on the motion until the issue could be fully investigated (Dkt. No. 1116). On December 6,

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class counsel submitted a second supplemental filing (Dkt. No. 1117). Counsel reported that data

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submissions from Fidelity in late November 2011 included 190 unique eligible accounts that were

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not included in Fidelity’s previous submissions. The new information affects the calculations of

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approximately 116 claims for class members who have already received checks. Further, class

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counsel reported that the increased payments resulted “in an additional $165,798 owed to Federal

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Class Members and an additional $43,025 owed to the California Class Members.” Class counsel

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argued that these adjustments could be made easily and need not delay residual distribution.

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Schwab filed a response to class counsel’s second supplemental filing, arguing that the 30-

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day waiting period should be respected in order “to achieve relative certainty that all legitimate

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claims have been properly paid” (Dkt. No. 1119). Class counsel submitted a third supplemental

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filing, arguing that redistribution should begin now, lest a rolling 30-day “issue-free” rule

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“preclude the settlement from ever reaching finality” (Dkt. No. 1120).

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Problems have arisen in the course of distributing class funds, and it is clear that class

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counsel has not yet completed all the work there is to be done. In order to ensure that no other

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issues arise before the remaining funds are distributed or class counsel and the administrator are

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paid, consideration of class counsel’s motion will be postponed for 30 DAYS. A status hearing

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will be set for this matter on JANUARY 12, 2012, at 8:00 A.M.

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IT IS SO ORDERED.

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Dated: December 15, 2011.

WILLIAM ALSUP
UNITED STATES DISTRICT JUDGE

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For the Northern District of California

United States District Court

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