MetLife Inc. has agreed to pay $50 million to settle two lawsuits stemming from its 2000 demutualization.
Both lawsuits were class actions, one filed with the U.S. District Court for the Eastern District of New York and the other with the New York State Supreme Court.
The actions were brought by former policyholders against MetLife, New York (NYSE:MET).
The plaintiffs alleged that securities fraud took place when the company converted from a mutual to a stock company in April 2000. The demutualization had been approved by the New York state insurance commissioner and by 93% of the 2.8 million MetLife policyholders who voted, MetLife said at the time.
The transaction converted MetLife policies into more than 700 million shares of stock valued at $14.25 per share. MetLife compensated each former policyholder with at least 10 shares of stock.
The class actions claimed that MetLife violated federal securities laws by making significant omissions and misleading statements in materials sent to policyholders to win their support for the conversion.
Under terms of the agreement, attorneys’ costs and fees are to be included in the $50 million. As much as $20 million could be awarded to attorneys for the plaintiffs–Stamell & Schager, New York in the federal action and Lovell, Stewart & Halebian, New York, in the state suit, according to court papers.
The $50 million settlement will also include a $2.5 million donation from MetLife to nonprofit organizations selected with court approval.
The two courts are scheduled to hold a joint hearing on the proposed settlement Dec. 30.
“MetLife is pleased to put these matters behind us, and we believe that the settlement is in the best interest of the company and its policyholders and shareholders,” MetLife says in a statement. “MetLife’s demutualization in 2000 greatly benefited its more than 11 million policyholders and led to the financial strength MetLife enjoys today. We continue to believe that MetLife had strong defenses to the claims, but we settled the matter to end what had been almost a decade of litigation.”