Bank of New York Mellon Corp. (BK:US) reached a $114 million settlement with Medical Capital Holdings Inc. investors who alleged the bank breached its duty as trustee for notes issued by the company.
Lawyers for the noteholders filed a request for preliminary approval of the class-action settlement Feb. 21 in federal court in Santa Ana, California.
The “principal reason for entering into the settlement is the very substantial cash benefit provided for the class considered against the significant risk that a smaller recovery - or, indeed, no recovery - might be achieved after a trial,” according to the request.
Medical Capital, based in Tustin, California, bought accounts receivable from health-care providers and raised money by issuing notes through related entities to investors. The U.S. Securities and Exchange Commission sued the company and its top executives in 2009, saying they defrauded investors and misappropriated funds.
The noteholders accused BNY Mellon of disregarding its own policies and the provisions of the note issuance and securities agreements that were designed to protect the investors’ interests.
“We are pleased to be putting the matter behind us,” Kevin Heine, a BNY Mellon spokesman, said in an e-mailed statement.
The case is In re Medical Capital Securities Litigation, 10-ML-02145, U.S. District Court, Central District of California (Santa Ana).
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