Summary
This 8-K filing from The Charles Schwab Corporation (SCHW) details the company's decision to terminate settlement agreements related to consolidated class action litigation concerning the Schwab YieldPlus Fund. The litigation, filed in 2008, initially involved proposed settlements totaling $235 million ($200 million for federal claims and $35 million for state claims), which were preliminarily approved in May 2010. However, a court opinion in October 2010 interpreted the settlement terms to allow federal securities law class members residing outside of California to pursue further claims under California law, which led Schwab to invoke termination provisions for the agreements.
Key Highlights
- 1Schwab is terminating previously agreed-upon settlement agreements for class action litigation concerning the Schwab YieldPlus Fund.
- 2The litigation originated in 2008 and involved claims related to the ultra-short bond fund.
- 3Initial settlement agreements totaled $235 million, consisting of $200 million for federal claims and $35 million for state claims.
- 4Preliminary court approval for these settlements was granted on May 26, 2010.
- 5Schwab invoked termination provisions on November 8, 2010, following a court interpretation that allowed certain class members to pursue additional claims.
- 6The company is withdrawing joint motions filed with plaintiffs for final settlement approval.
- 7Plaintiffs reportedly continue to support the motions for final approval, leaving the situation pending further court proceedings.
Frequently Asked Questions
Schwab is terminating the settlement agreements because a court's interpretation of the settlement terms, issued on October 14, 2010, would not preclude federal securities law class members residing outside of California from bringing further claims under California law. This outcome was not as intended by the settlement, leading Schwab to exercise its right to terminate.
The total proposed settlement amount was $235 million. This was comprised of $200 million to resolve plaintiffs' federal law claims and $35 million to resolve plaintiffs' state law claim.
Schwab has notified plaintiffs and filed a notice to withdraw from the motions for final approval of the settlements. The plaintiffs, however, continue to support these motions, which remain pending before the court for further proceedings.
Not necessarily. While Schwab is terminating the current settlement agreements, the plaintiffs reportedly still support the motions for final approval. The situation is subject to further court proceedings, and the ultimate resolution of the litigation remains to be seen.