A Piece of JPMorgan...? Gotta Fight for It. 20% Can Be Yours.

Class-Action Lawyers Fight For Piece Of JPMorgan Case

The strange world of class-action securities litigation has entered a new realm in the lawsuit over JPMorgan Chase’s multibillion-dollar trading losses. The New York bank is still trying to calculate how much money its “London whale” lost by betting against, oh, every hedge fund in the universe. Meanwhile class-action lawyers are trashing each other in an effort to grab a bigger piece of the inevitable settlement when JPMorgan figures out what happened.
Alison Frankel at Reuters covered the infighting earlier this week. Two firms at the top of the class-action trade, Grant & Eisenhofer and Robbins Geller, have proposed very different approaches toward representing shareholders who were unlucky enough to buy stock in JPMorgan when the world thought Jamie Dimon was smart and sold after the world discovered he wasn’t so smart. G&E represents a collection of state pension funds that think the swindle began back in February 2010 — which, conveniently enough, would maximize the amount of money G&E’s clients lost trading JPMorgan shares. With clever enough counting, they say they lost $52 million.
Robbins Geller thinks the window should open in 2012. That would put the pension funds at a disadvantage, Robbins Geller says, since during that period they collectively sold 615,000 shares for a $25 million profit. It doesn’t say how far underwater the pensions are on their total JPMorgan holdings, but that’s part of the strangeness of securities class actions: It doesn’t matter. The lawsuit is on behalf of investors who bought shares inflated by a swindle and sold them after the swindle was exposed. The truth is there is a seller for every buyer, so any big pension fund is just as likely to have made money off of a swindle as the other way around. The settlement, therefore, simply shifts dollars from the winners to the losers, with lawyers slicing 20% or so off the top.

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The fun part in this battle is how viciously the law firms are sniping at each other. Robbins Geller accuses G&E of recruiting a “professional plaintiff,” the Louisiana Municipal Police Employees’ Retirement System (“LMPRS” in the trade) to file a lawsuit extending the class period. That would, according to some interpretations of past cases,  give the advantage to the G&E team since some judges have presumed the lawyers with the longest class period represent investors with the biggest losses. The charge against LMPRS has some merit: The pension fund, with about $1.4 billion in assets, is either the unluckiest or most litigious investor in America. It has filed 49 securities lawsuits over the past two years, sometimes at a rate of two or three a week, making a mockery of provisions in the Public Securities Litigation Reform Act that prohibits any entity from serving as a lead plaintiff in more than five cases in a three-year period.

Class-Action Lawyers Fight For Piece Of JPMorgan Case

Robbins Geller doesn’t come to the game with an entirely clean reputation, however. The predecessor to the San Diego firm was founded by Bill Lerach, the convicted felon whose practice of paying plaintiffs kickbacks in securities cases led to the provision above. More recently, a federal judge in Washington disciplined one of the firm’s lawyers for submitting grossly inflated expenses that another Robbins Geller partner failed to correct. Those expenses, including first-class airfare and fancy dinners, would have been paid for by the very shareholders Robbins Geller claims to represent.
And the plaintiff in Robbins Geller’s case, the Operating Engineers union, hasn’t been shy about filing securities suits, either. I count more than 40 since 2003. The fact is, class-action lawyers cozy up to union pension funds — at the very least, their politics seem to be congruent — and install software that alerts them to any losses in their portfolios that might come in useful when it’s time to file a class action. Robbins Geller hit the courthouse with the first complaint on May 14, four days after Dimon disclosed the trading losses. Judge Jed Rakoff called the practice of portfolio monitoring a “shocking conflict of interest” in 2009, but he seems alone in that opinion.
It’s up to U.S. District Judge George Daniels to decide who will be in charge of this litigation. Looking at a JPM chart, the one thing that is certain is anybody who bought and sold the stock over any period in the last two years was just as likely to have made money as to have lost it. The stock plunged 33% from its high of $46 in late march to a low in June. Last year it ranged between $47 and $29. Right now it’s trading at $34 and change — up 15% from June and about where it started the year. Some fraud.