## Facts

- JPMorgan Chase & Co. and Bank One Corporation merged in 2004.
- A class of JPMorgan shareholders sued JPMorgan in connection with disclosures made when JPMorgan sought shareholder approval of the merger.
- Shareholders alleged JPMorgan failed to disclose a pre-merger arrangement between the CEOs of JPMorgan and Bank One concerning post-merger leadership.
- The shareholders contended that the alleged arrangement and the lack of disclosure harmed JPMorgan shareholders.
- The allegations relied heavily on reports in the New York Times and other newspapers.
- During the litigation, the shareholders were unable to independently corroborate the reported arrangement.
- The parties negotiated a proposed class settlement that provided no monetary recovery to the shareholder class.
- Instead, JPMorgan agreed to implement a series of corporate-governance reforms directed at more truthful and transparent communications with shareholders.
- Under the settlement terms, JPMorgan’s board of directors retained authority to alter or terminate the reforms without seeking shareholder approval.
- Declarations submitted in support of the settlement stated that the reforms could provide value by improving corporate management and, in turn, shareholder value.
- A class member objected, arguing that the reforms’ value was unknown and might be nonexistent because the board could later change or end them.
- The shareholder plaintiffs moved for court approval of the proposed settlement.

## Issues

1. Whether the proposed class settlement—providing only corporate-governance reforms and no monetary damages—was fair, reasonable, and adequate under Federal Rule of Civil Procedure 23(e).
2. Whether governance reforms are too speculative or “illusory” to support settlement approval when the company’s board may later modify or terminate them.
3. How the court should weigh evidentiary weaknesses and litigation risk (including the inability to corroborate key allegations) when assessing the adequacy of non-monetary relief.

## Decision

- The court granted the motion for approval of the proposed class settlement.
- The court held the settlement was fair, reasonable, and adequate under Rule 23(e) even though it provided no cash payment to the class.
- The court rejected the objector’s argument that the settlement’s governance reforms were valueless solely because the board retained authority to change or terminate them.

## Legal Principles

- Rule 23(e) requires court approval of any class-action settlement and permits approval only if the settlement is fair, reasonable, and adequate to absent class members.
- In evaluating settlement fairness, courts consider factors such as the strength of the plaintiffs’ case, the risk and likely expense and delay of further litigation, the stage of proceedings, and the nature of the relief obtained compared to what might be achieved through continued litigation.
- A class settlement may provide non-monetary relief (including corporate-governance measures) rather than damages, and such relief can be sufficient consideration where it addresses the alleged misconduct and provides a real benefit to the class.
- When plaintiffs face meaningful litigation risk—such as difficulty proving core allegations beyond media reports—courts may find it reasonable to approve a settlement that trades uncertain merits outcomes for structural relief.
- The possibility that a board could later revise internal policies does not, by itself, make governance relief illusory; courts may credit the immediate adoption of the measures and the practical value of formalized procedures and disclosure controls at the time of settlement approval.

## Conclusion

The court approved a Rule 23(e) class settlement arising from alleged nondisclosure of a purported pre-merger CEO arrangement in the JPMorgan–Bank One merger, finding that governance reforms (without any monetary damages) provided sufficient present value to the class given the plaintiffs’ inability to corroborate key allegations and the significant risk that continued litigation could yield no recovery.


In re JPMorgan Chase & Co. Securities Litigation, 2009 WL 537062 (2009)