AIG shareholders win class-action status in lawsuit versus U.S.

Mon Mar 11, 2013 6:31pm EDT

A new sign is displayed over the entrance to the AIG headquarters offices in New York's financial district, January 9, 2013. REUTERS/Brendan McDermid

A new sign is displayed over the entrance to the AIG headquarters offices in New York's financial district, January 9, 2013.

Credit: Reuters/Brendan McDermid

(Reuters) - Two groups of American International Group Inc (AIG.N) shareholders won class-action status from a federal judge on Monday in a $25 billion lawsuit by former Chief Executive Maurice "Hank" Greenberg over alleged losses caused by the U.S. government's bailout of the insurer.

U.S. Court of Federal Claims Judge Thomas Wheeler also appointed Greenberg's lawyer, David Boies, of Boies, Schiller & Flexner LLP, as lead counsel for the classes.

Greenberg's Starr International Co, once AIG's largest shareholder with a 12 percent stake, sued the United States in 2011 over what eventually became a $182.3 billion bailout for the New York-based insurer.

It said that by taking a 79.9 percent AIG stake and then conducting a reverse stock split without letting existing shareholders vote, the government conducted an illegal taking that violated the 5th Amendment of the U.S. Constitution.

Citing Boies' estimate that "tens of thousands" of shareholders might be affected, Wheeler said "class certification is by far the most efficient method of adjudicating these claims."

He distinguished the case from the U.S. Supreme Court's 2011 rejection of class status for more than 1 million Wal-Mart Stores Inc (WMT.N) workers alleging gender bias, saying the AIG claims are "based on the same exact government action" rather than "literally millions" of separate actions.

One class includes AIG shareholders as of September 22, 2008, when a credit agreement awarding the 79.9 percent stake took effect. The other class includes shareholders as of June 30, 2009 who were denied a chance to vote on the reverse split.

U.S. Department of Justice spokesman Charles Miller declined to comment.

AIG decided on January 9 not to join Greenberg's lawsuit, amid anger from Congress and voters at the prospect that it might sue the same entity that rescued it from collapse.

Greenberg is separately appealing the November 19, 2012 dismissal of a related lawsuit in Manhattan federal court against the Federal Reserve Bank of New York.

On March 1, AIG bought back warrants from the Treasury Department, eliminating the government's last financial interest in the insurer.

The case is Starr International Co. v. U.S., U.S. Court of Federal Claims, No. 11-00779.

(Reporting by Jonathan Stempel in New York; Editing by Dan Grebler)

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see
Comments (3)
tatman wrote:
i’d counter their suit with criminal charges for AIG’s part in the fleecing of millions of Americans in their part of the abuses that lead to the worst financial crisis our country has seen since the great depression — and AIG was 100% culpable. See how these greedy shareholders like that one (they sure weren’t complaining when the money from AIGs manipulations were filling their pockets in the last decade…)

Mar 11, 2013 7:25pm EDT  --  Report as abuse
Animated wrote:
I agree tatman…and they should all face jailtime

Mar 11, 2013 7:50pm EDT  --  Report as abuse
xyz2055 wrote:
We should never have bailed AIG out. This is an international company founded in China who moved their home offices to New York. The shareholders would have nothing had that happened. This greed at it’s purest.

Mar 11, 2013 7:51pm EDT  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.