A federal judge on Tuesday allowed MF Global Holdings Ltd.'s
commodity customers to move forward with a class-action lawsuit
against former Chief Executive Jon Corzine and other officials,
although the judge narrowed the scope of the suit.
While U.S. District Judge Victor Marrero declined the request of
Mr. Corzine and others to completely dismiss a lawsuit over MF
Global's 2011 collapse, he did dismiss some claims against Mr.
Corzine and others and also dismissed all of the customers' claims
against PricewaterhouseCoopers LLP, MF Global's former auditor.
Judge Marrero, who has previously compared MF Global's collapse
and the wave of litigation it spawned to a "massive train wreck,"
wrote in his ruling that he had hoped those involved in litigation
could resolve the matter "in a just and efficient way."
Instead, the judge wrote, "wasteful and rancorous litigation"
will continue to unfold as customers await compensation.
Last month, Judge Marrero denied Mr. Corzine's request to
dismiss a similar lawsuit against him brought by the Commodity
Futures Trading Commission.
A spokesman for Mr. Corzine couldn't immediately be reached for
comment Tuesday afternoon.
MF Global filed for bankruptcy protection in October 2011,
exposing a $1.6 billion shortfall in its brokerage customer
accounts. According to the CFTC's lawsuit, that violated federal
laws requiring commodity futures brokers to keep customer funds
separate and barring them from deploying the funds elsewhere.
In the class action lawsuit, MF Global's former commodity
customers blamed the shortfall on the allegedly "unlawful conduct"
by Mr. Corzine and others. They say the firm's liquidity crisis was
brought on by an "ill-conceived business model" devised by Mr.
Corzine, the former governor of New Jersey.
Judge Marrero dismissed such claims against Mr. Corzine as
breach of fiduciary duty, mismanagement and violation of
commodities laws. The claims the judge allowed the customers to
move forward with include aiding and abetting violations of
commodities laws, aiding and abetting breach of fiduciary duty and
one of two counts of negligence.
The customers had accused auditor PwC of professional negligence
and breach of fiduciary duty for its alleged failures to
investigate and report MF Global accounting issues. PwC asked the
Judge Marrero dismiss the claims, which he did.
MF Global's brokerage last year won bankruptcy-court approval
for a plan to repay all of the money owed to its U.S. and overseas
commodity customers, some $305 million. MF Global Holdings, the
brokerage's parent, had previously won bankruptcy-court approval of
its own payment plan, which offered a 12% to 42% recovery to
unsecured bondholders owed about $1 billion.
Write to Jacqueline Palank at jacqueline.palank@wsj.com
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