Kodak retirees reach $9.7 million settlement
Eastman Kodak Co. employees and retirees could share in a $9.7 million payout under a proposed settlement involving an alleged failure in oversight of the company's retirement plans.
U.S. District Judge David Larimer granted preliminary approval to the settlement in an order dated Wednesday. More than 21,000 current and former employees could benefit. The litigation dates from 2012, and claims the plans' fiduciaries — an assemblage of Kodak executives — continued offering company stock despite the company being in dire straits.
The payout "represents a recovery of between approximately 20 (percent) to 50 percent of the total damages suffered," according to court papers.
Kodak, through a spokesman, said that as a company it is not a party to the lawsuit and is not obligated to make any payment under the settlement. That bill instead falls to the insurance companies.
Lawyers for the employees claimed victory.
"In light of the risks involved in the case and the total damages that are involved, this is an exceptionally good settlement for the members of the class," said co-lead counsel Mark P. Kindall of the Izard Nobel law firm based in Connecticut. "And (it) ensures that they will obtain a real and valuable recovery within a reasonable time frame."
The case is one of the first to address fiduciary responsibility for a company stock fund in a 401(k) plan, when information about the business is publicly available and accurate.
Kodak filed for bankruptcy in early 2012. That shielded the company from litigation, but not the Eastman Kodak Employees’ Savings and Investment and the Kodak Employee Stock Ownership plans it had sponsored. More to the point, Chapter 11 did not shield the individuals or entities serving as fiduciaries of those retirement plans. Each is insured for actions taken in those roles. Kodak as a company did not take such a role.
So employees and retirees sued, arguing those overseeing the plans should be held liable and should have known that Kodak stock was, at the time, a bad investment. Shares were going for roughly $25 in mid-February 2007. By mid-February 2010, they were at $6, slumping further to $3.60 in 2011, and just 38 cents in mid-February 2012.
Employees alleged the period of damages — when the plans' overseers displayed "imprudence" or should have known better — spanned Jan. 1, 2010, through March 31, 2012.
Whether a judge or jury would have assigned liability and agreed to that period is unknown. And potential damages decline precipitously if the trigger date is moved closer to the bankruptcy filing. Add to that the still-evolving case law and the urgency of settlement — a couple of the original plaintiffs died during the four years getting to this point, officials said.
Settlement papers describe an extended and "highly adversarial" litigation process, ultimately leading to an agreement in December 2014 to pursue private mediation. A final settlement agreement was signed by all parties last week.
If all stays on track, final approval of the settlement is possible this fall. In the meantime, plan members will have an opportunity to file objections. The total paid out to employees will vary, with many payouts involving very small accounts, officials said. Attorneys and other fees will be paid first. It is unlikely that any employee will see a payout until the end of the year or early next year.
"This is an all-in settlement," court papers read, "with a portion of the $9.7 million fund intended to cover the costs of notice and settlement administration, any court-approved service payments to the class representatives; and court-approved attorneys’ fees and costs. In general terms, net of these costs, the balance of the fund will be allocated to settlement class members based upon the losses attributable to their holdings of Kodak stock."
The agreement continues: "Class members do not need to do anything in order to receive their portion of the proceeds of the settlement. Rather, their portion of the settlement will be based on individual transactional data provided by the plans."
Asked about what other businesses can take from the decision, Kindall spoke in general terms about the marketplace.
"You have to treat other people's money like you would treat your own money," he said, explaining later: "You shouldn’t be thinking about whether this (retirement plan decision) is going to affect the investment perception of your company in the world at large. You should be thinking about your recipients, because you are their fiduciary.
"They are counting on you."