Richmond, Virginia. Below is an update regarding the status of the various settlements in the LandAmerica case:
Settlements with Directors and Officers and Their Insurance Carriers
On July 9, 2012, the Bankruptcy Court for the Eastern District of Virginia approved the settlement with certain former officers and directors of LandAmerica Financial Group, Inc. (“LFG”) and LandAmerica 1031 Exchange Services, Inc. (“LES”), who have been sued by the LFG Trustee on behalf of the LFG Trust and the LES Trust (“D&O Settlement”).
The Settlement Agreement with the Trusts provides for certain insurance carriers to pay the Trusts $36 million. The LES Trustee believes that this will yield a distribution of approximately 7-8% to eligible Exchangers.
Settlement between Class Action Exchangers and Directors and Officers and Their Insurance Carriers
In addition, counsel for a putative class of exchangers of LES has also settled with the same former directors and officers (“Class D&O Agreement”) and is filing a motion for preliminary approval of that Class D&O Agreement in the United States District Court for the District of South Carolina. The Class D&O Agreement provides for a $4 million payment to the Class. Approval of the Settlement Agreement with the Trusts is not contingent on approval of the Class D&O Agreement. The Class counsel will apply for fees and costs, member of the Class will have an opportunity to respond, and then the District Court will decide what to award.
Prior E&O Settlement Update
As you will recall, in April, 2012, the Bankruptcy Court approved the settlement that the LES Trustee negotiated with Lloyd’s of London (“Underwriters”), the E&O insurer, for $37,855,029.06, of which the gross recovery to the LES Trust is $36,855,029.06 (the “E&O Settlement”). That E&O Settlement also involved an $11 million settlement between certain Title companies and a purported class of exchangers of LES, where class counsel has also agreed to cap its fee request at 25% of $9 million (“Class Title Company Agreement”).
Bankruptcy Court approval of the E&O Settlement is final, but will only be effective and the money will only be available for distribution when a separate federal court approves that Class Title Company Agreement, and such order is final.
On July 5, 2012, United States District Court in the Northern District of California preliminarily approved the Class Title Company Agreement. A final hearing regarding this settlement is set for November 2, 2012. This means that a distribution of the E&O insurance settlement funds cannot occur until the end of this year. The LES Trustee believes that this will yield a distribution of approximately 18% to eligible Exchangers.
Prior to the above described settlements, the LES Trustee had distributed approximately 70.7% to eligible Exchangers on their lost principal (having already paid segregated and note exchangers in full).
Once final, the E&O Settlement will bring an additional distribution to eligible Exchangers of approximately 18%.
Once final, the D&O Settlement will bring an additional distribution to eligible Exchangers of approximately 7-8%.
The Class Title Company Agreement will bring an additional distribution to eligible Exchangers of approximately 4.5%.
The Class D&O Agreement could bring an additional distribution to eligible Exchangers of approximately 2%.
This would bring the recoveries at or above 100%, depending how the class recoveries are treated, at which point the LES Trust will proceed to consider how best to deal with damage claims.
In addition, the LES Trust is maintaining a reserve of approximately $9 million in cash for the continued operations and investigations of the Trust and for damage claims.