Alaska Electrical Pension Fund v. Bank Of America Corporation

Background

Institutional investors alleged that major banks illegally manipulated the U.S. Dollar ISDAfix, a benchmark interest rate used in many financial derivatives. The plaintiffs reached settlements with each defendant, and the court previously approved those settlements and proposed distribution plans. Class Counsel later moved for approval to distribute the net settlement funds to claimants with valid claims.

The claims administrator, Epiq Systems, Inc., sent more than 59,000 notice packets and received more than 31,000 claims. Epiq rejected 2,369 claims and found 28,750 eligible for payment. Class Counsel proposed several distribution steps: claimants whose valid claims were worth $100 or less would receive an alternative minimum payment of $100; other valid claimants would initially receive proportional distributions of 92% of the remaining settlement funds; and 8% would be held in reserve for later costs or contingencies. Any remaining funds generally would be distributed to valid claimants, unless another distribution was not cost-effective and the court later approved a payment to a nonprofit organization.

Fortinbras’s objection

Fortinbras Asset Management GmbH, formerly known as Prospero Beteiligungsverwaltung GmbH, was the only claimant to object. It argued that Epiq improperly rejected claims concerning alleged interest-rate-swap trades with Credit Suisse between June 24, 2008, and January 31, 2014. Fortinbras asserted that documents—including an expert report, index rules, a product termsheet, confirmation emails, and a spreadsheet—showed that the trades occurred and had a total stated notional value of more than $3.3 trillion.

Class Counsel supported Epiq’s rejection of the disputed claims after a year-long audit, arguing that Fortinbras had not provided enough evidence that the trades actually occurred. The court agreed. It found that the expert report described a trading strategy and calculated values from data supplied by Fortinbras but did not independently verify actual transactions. The index rules explained how an index was calculated, the termsheet identified Fortinbras as an index adviser, and the confirmation emails showed that Fortinbras sent daily positions used in calculating the index. None established that Fortinbras purchased the relevant financial products or entered the alleged swaps. Fortinbras also acknowledged that the transactions described in the spreadsheet were not the swaps claimed by its fund.

The court noted that Fortinbras did not provide expected records such as individual trade confirmations, bank or brokerage statements, trading-venue reports, or custodian records. Credit Suisse also searched its records and could not identify transactions with Fortinbras during the relevant period. The court therefore concluded that Fortinbras failed to prove that it engaged in the claimed real transactions.

Ruling

Judge Jesse M. Furman found that the proposed distribution framework was fair and reasonable and in the best interests of the settlement class. The court granted Class Counsel’s motion to approve distribution of the net settlement funds and overruled Fortinbras’s objection. The court held that Epiq and Class Counsel properly treated the disputed claims as invalid and excluded them from distribution. The clerk was directed to terminate the motion docket entry.