SAC Capital Secures Final Approval for Settlement of Class Action

After more than four years of litigation, U.S. District Judge John G. Koeltl entered final judgment approving the settlement of the last private civil class action alleging that Paul, Weiss clients Steven A. Cohen, SAC Capital Advisors and affiliated entities engaged in insider trading. This settlement resolves the final chapter of a long-running saga, which involved multiple criminal investigations by the U.S. Attorney’s Office in the Southern District of New York, multiple SEC civil enforcement actions and two civil class action suits. All actions have now been resolved without any insider trading findings against Mr. Cohen. 

Shareholders alleged that doctors involved in a 2006–2008 clinical drug trial leaked confidential information to SAC Capital portfolio manager Mathew Martoma, who along with Mr. Cohen earned several hundred million dollars through alleged insider trading. The settlement was negotiated shortly before trial, after the judge initially assigned to the case recused himself and after a series of pretrial victories including removal of two sets of the plaintiffs’ trial counsel as a result of conflicts of interest. The settlement is unusual, as (a) the plaintiffs dismissed all claims against Cohen in an order that was separate from the order settling the class action; (b) class members may only recover actual trading loss, not interest; (c) claimants must provide brokerage records of their trades, and the plaintiffs’ counsel does not have discretion to waive even minor defects in the documents; and (d) there is a charitable reverter clause requiring any monies that remain in the settlement fund after valid claims have been paid be donated to charities chosen by Mr. Cohen. The Paul, Weiss team also successfully objected to the plaintiffs’ counsel’s attempt to secure an $800,000 compensatory award to the lead plaintiff, with the court approving an award of $7,500 and expense reimbursement of $5,000. Finally, the court slashed the plaintiffs’ counsel’s fees by almost $8 million.

The Paul, Weiss team handling the case included partners Daniel Kramer, Audra Soloway, Geoffrey Chepiga, Ted Wells, Mike Gertzman, Chuck Davidow, Marc Falcone and Daniel Leffell and counsel Jennifer Gordon and Jonathan Hurwitz.