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Employee retirement

$9.7M settlement to aid Kodak retirees hurt in bankruptcy

Brian Sharp
Rochester (N.Y.) Democrat and Chronicle
Eastman Kodak Co., based in Rochester, N.Y., filed for Chapter 11 bankruptcy on Jan. 19, 2012.

ROCHESTER, N.Y. — Eastman Kodak Co. employees and retirees could share in a $9.7 million payout that alleges the company offered Kodak stock in its retirement plans even though the business was in dire straits.

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 that the plans' fiduciaries — an assemblage of Kodak executives — failed to oversee the company's retirement plans. The payout "represents a recovery of between approximately 20% to 50% of the total damages suffered," according to court papers.

Through a spokesman, Kodak said 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, which covered the executives who served as trustees of the retirement plans.

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Lawyers for 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 Jan. 19, 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 trustees of those retirement plans. So employees and retirees sued, arguing those overseeing the plans should be held liable and should have known that Kodak stock was a bad investment at the time.

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 should have known better — spanned Jan. 1, 2010, to March 31, 2012.

Whether a judge or jury would have assigned liability and agreed to that is unknown. Potential damages decline precipitously if the trigger date is moved closer to the bankruptcy filing.

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It is still-evolving case law, and settling was urgent. A couple of the original plaintiffs died during the four years getting to this point, officials said.

Settlement papers describe a highly adversarial litigation process, ultimately leading to an agreement in December 2014 to pursue private mediation. All parties signed a final settlement agreement last week.

Kodak stock was tumbling and the company headed toward bankruptcy, but employees had company stock plans in their 401(k)s.

If all stays on track, final approval of the settlement is possible in the fall. In the meantime, plan members will have an opportunity to file objections.

The total paid out to employees will vary depending on the amount of stock they held in the 401(k), officials said. Lawyers and other fees will be paid first.

No employee likely will see a payout until the end of the year or early next year.

"Class members do not need to do anything in order to receive their portion of the proceeds of the settlement," according to the court papers. "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. "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," Kindall said.

Follow Brian Sharp on Twitter: @SharpRoc

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