- Class action trial loomed in September
- Suit alleged falling values not disclosed
- Case was dismissed, then reinstated
The proposed deal follows more than five years of litigation between investors and Blackstone and helps the world’s largest private equity firm avert a rare securities class action trial that was due to begin Sept. 16. The settlement, disclosed in court papers filed Aug. 28 in U.S. District Court in Manhattan, also covers claims against individuals including Stephen Schwarzman, Blackstone’s chief executive.
Blackstone spokesman Peter Rose declined to comment. The company continues to deny wrongdoing as part of the settlement, court papers state.
Lawyers for the plaintiffs said in court papers the settlement represents about 12 percent of the $691.5 million claim they believed was achievable at trial.
Investors contended Blackstone did not properly disclose at the time of offering that its investments in a bond insurer, a semiconductor company and real estate were declining in value. As a result, investors alleged that there was an increased risk Blackstone’s potential performance fees would be “clawed back” by limited partners.
Blackstone offered up 153 million common units at $31 a piece at the time of its June 2007 IPO. By the time plaintiffs filed an amended complaint in October 2008, they were trading at about $7.75 a unit.
U.S. District Judge Harold Baer, who must approve the settlement, initially dismissed the case in September 2009. But in February 2011, the Second U.S. Circuit Court of Appeals in New York revived the case. The U.S. Supreme Court rejected Blackstone’s further appeal in October 2011.
At the time of the settlement, the parties had been awaiting a decision by Baer on whether to again dismiss the case, this time following depositions and document discovery.
David Brower, a lawyer for the lead plaintiffs Martin Litwin and Francis Brady at the law firm Brower Piven, in an email said he was “very pleased with the result.”
Nate Raymond is a correspondent for Reuters in New York. Additional reporting by Gregory Roumeliotis.