The Thursday motion for preliminary approval of the settlement notes that lead counsel for the investor class will ask the court to award attorney fees of up to $4.3 million and informs the court that a fee-sharing agreement with a Czech lawyer linked to the lead plaintiff, also a Czech national, was in place even before the lawsuit was filed.
According to the filing, the agreement between the lead counsel for the investors and the attorney registered with the Czech Bar, Martin Kofro, provides for a 10% cut of any fee award.
"There would be no case and no recovery for the class without Mr. Kofro's involvement," the preliminary approval motion states.
In August 2019, lead plaintiff Jan Martnek filed a lawsuit against AmTrust, its CEO and Chair Barry D. Zyskind, and Directors George Karfunkel and Leah Karfunkel, alleging that the defendants stated on multiple occasions that a planned acquisition of AmTrust's outstanding common stock would not affect the preferred stocks' status as publicly traded securities.
However, after the acquisition was completed, the company announced in January 2019 that it would voluntarily delist and deregister the preferred stock. According to Martnek, this announcement caused a 40% drop in the price of preferred stocks.
According to Thursday's motion for preliminary approval of the settlement, the fee sharing agreement was reached with the approval of lead plaintiff Martnek.
The motion states that Kofro, a former managing attorney at KPMG, assisted Martnek "in understanding potential legal processes and remedies under US law arising from AmTrust's decision to delist the preferred stock," and that the Czech lawyer continued to communicate with Martnek and the lawyers on the case as it was litigated.
In their Thursday filing, lead counsel also stated that they will seek reimbursement of up to $460,000 in costs and expenses for their work litigating the case and negotiating the settlement, as well as a service award payment of up to $15,000 for Martnek, as well as the lead plaintiff's costs and expenses relating to his representation of the class.
The filing states that "Mr. Martnek's work on behalf of the class has been exemplary and has benefited the litigation."
Martnek claims in his complaint that he bought shares of AmTrust stock on the New York Stock Exchange based on statements from the company that he later discovered were false and misleading, artificially inflating the stock's price. Martnek claims he lost $177,800 as a result of the alleged securities law violations.
In 2020, the lawsuit survived a motion to dismiss for failure to state a claim, with the court ruling that "certain but not all of the defendants' alleged misstatements were actionable." Then, in February, a federal judge in New York certified a class consisting of anyone who purchased AmTrust Series A preferred stock or certain depositary shares on the open market on a U.S. stock exchange between January 22, 2018 and January 18, 2019.
Martnek and the lead counsel state in the motion for preliminary approval that the proposed settlement "reflects the inherent risks, costs, and delay associated with this complex class action," and that "the settlement amount is a meaningful recovery that is in the best interests of the class."
According to the motion, there is no guarantee Martnek and the other investors will prevail.
"Though the lead plaintiff and lead counsel believe they could have succeeded in establishing each of their alleged claims," the motion states, "the lead plaintiff would be required to prove all elements of his claims to prevail, whereas defendants would only need to succeed on one defense to potentially defeat the entire action."
AmTrust continues to deny any wrongdoing and that class members suffered the harm outlined in the motion.
According to the preliminary approval motion, the $13 million nonreversionary settlement fund represents approximately 32% of the class's alleged maximum estimated aggregate damages.