In re Prudential Securities Incorporated Limited Partnerships Litigation

Settled: November 20, 1995
Firm Chairman Lawrence Sucharow and Partner Joel Bernstein were among class counsel in In re Prudential Securities Incorporated Limited Partnerships Litigation, MDL Docket No. 1005, a major class action involving the sale of risky limited partnerships where the $110 million settlement was approved by the Court on November 20, 1995.

The $110 million settlement resolved a large portion of the litigation arising out of Prudential Securities Incorporated's ("PSI") marketing and sale of high-risk limited partnership interests to the investing public. The settlement provided a recovery for a class of 80,000 - 100,000 investors who had not previously resolved their claims against the PSI settling defendants pursuant to an earlier settlement with the SEC. Judge Milton Pollack described the proposed settlement as follows: "The $110 million settlement represents an outstanding achievement for the benefit of the class."

On April 14, 1994, the Judicial Panel on Multidistrict Litigation transferred to the Southern District of New York several class action cases arising out of PSI's marketing and sale of limited partnership units during the 1980s.

On June 8, 1994, plaintiffs served a detailed, three volume, Consolidated Complaint, which asserted claims under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), the securities laws and other claims. As alleged in the Consolidated Complaint, approximately 700 limited partnerships were organized, marketed and sold as part of a massive plan designed to persuade investors to buy "risk free" partnership units. Moreover, PSI allegedly represented that class members' investment principal remained safe and secure when, in fact, it was eroded by fees, charges and distributions. Plaintiffs further alleged that PSI used a standardized sales approach that allegedly misrepresented the nature of the highly speculative partnerships and the large risks associated with investing in them. Plaintiffs also alleged that while investors incurred substantial losses from the moment they purchased these partnership interests, the defendants obtained large commissions, management fees and profits.

In describing the work that class counsel did which led to the settlement, Judge Pollack found that plaintiffs' counsel conducted "an intensive and multifaceted investigation...which included: analysis of enormous quantities of documents produced by the defendants; interviews and the procurement of affidavits from former employees of several defendants; and significant depositions of personnel of one of the largest sponsor-defendants." In addition, plaintiffs' counsel had access to relevant discovery, including important deposition and trial testimony, obtained in several related actions and arbitrations against the PSI settling defendants and some of the sponsoring defendants.

In describing the settlement itself, Judge Pollack found that after more than three years of litigation in state and federal courts, and after months of intense negotiations, "the plaintiffs' class counsel in this Multidistrict class action have reached an outstanding partial settlement resulting in a $110,000,000. recovery from the settling defendants." (The settlement was "partial" since not all of the named defendants were included in the settlement. A $22.5 million settlement was later reached with one of the non-settling defendants.) "Against increasing odds, plaintiffs succeeded in reaching an important and excellent additional settlement with the PSI settling defendants."

Finally, it should be noted that in addition to providing for the $110 million cash payment, the settlement agreement required the PSI settling defendants to cooperate with plaintiffs' counsel in continuing discovery as it related to the non-settling defendants.