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Illinois Funeral Directors Association Litigation

Wexler Wallace represented funeral directors around the State of Illinois and was appointed Lead Settlement Class Counsel in a class action seeking to recover damages on behalf of funeral homes, trustees, pre-need contract purchasers and trust accounts affected by the collapse of the Illinois Funeral Directors Association (IFDA) Pre-Need Trust. Money intended as prepayment for funeral services was deposited in the Trust and was supposed to be invested conservatively in order to preserve capital and earn a small rate of return to cover the cost of inflation. Plaintiffs in the class action alleged the money was not prudently invested, however, but was used to buy single premium life insurance policies, resulting in a financial catastrophe for the Trust that has directly damaged funeral directors, who are forced to pay the difference between what funerals actually cost and the inadequate amounts available from the Trust that were supposed to pay for those services.

The Clancy Action:
Clancy-Gernon Funeral Homes, Inc., et al v.
Merrill Lynch, Pierce, Fenner & Smith, Inc., et al.,
Consolidated Case No.: 09-cv-390 (S.D. Ill.)

This class action case was filed in June 2009 by a group of funeral directors seeking to represent all IFDA members that deposited pre-need funds with the IFDA Tax-Exempt Trust against the legal and financial advisors that advised and assisted the IFDA in purchasing allegedly inappropriate and illegal insurance policies with Tax-Exempt Trust funds. Originally filed in state court, this case was removed to federal court and transferred to the Southern District of Illinois, where it was consolidated with a class action brought by purchasers of pre-need contracts. For a copy of the Fourth Amended Class Action Complaint, click here.

On February 14, 2012, the Illinois Securities Division (ISD) issued a Consent Order resolving its investigation into into Merrill Lynch, Pierce, Fenner & Smith, Incorporated (“MLPF&S”)’s involvement with the Trust and calling for Merrill Lynch to pay $25 million (the “ISD Fund”).  On June 12, 2012, the Court also approved a settlement in the consolidated class actions.  As a pre-condition to the class action settlement, the $25 million ISD Fund will be distributed to class members, along with additional funds totaling over $41 million.  This is in addition to $18 million distributed by the Illinois Department of Insurance in January 2011 to resolve its investigation into Merrill Lynch Life Agency.  As approved on June 12, 2012, the settlement brought the total benefits received by class members to over $59 million.

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The Kurrus Action:
Charles G. Kurrus, III, P.C., d/b/a Kurrus Funeral Homes v.
Merrill Lynch, Pierce, Fenner & Smith, Inc., et al.,
Case No.: 10-L-391 (St. Clair County, Ill.)

This case was filed on July 28, 2010, on behalf of Kurrus Funeral Homes against the financial advisors, insurance agents and lawyers that advised IFDA and was resolved as part of the class action settlement in the Clancy case, described above and at www.IFDATrustSettlement.com.

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The Dames Action:
Fred C. Dames Funeral Homes, Inc., et al. v. Daniel W. Hynes, et al.,
Case No.: 09-CH-21989 (Cook County, Ill.)

On May 18, 2009, the Illinois Department of Insurance (“DOI”) settled claims it had brought against Merrill Lynch Life Agency, Inc. for its involvement in the collapse of the IFDA Pre-Need Trust in exchange for $18 million. While plaintiffs welcomed the $18 million as a first step to recovering funds lost from the Trust, the DOI’s Stipulation and Consent Order provided that no funeral director could access the funds recovered for the Trust without first meeting a variety of conditions and restrictions.  These conditions included the signing of a release designed to exculpate all Merrill Lynch entities from wrongdoing.Funeral directors filed a Class Action Complaint for Declaratory Judgment in Cook County Circuit Court, asking the Court to declare that, by administering the regulatory settlement in a way that affected the rights of third parties, the DOI and the Illinois Office of the Comptroller (“IOC”) had acted outside of their statutory and constitutional authority.

On February 24, 2010, the Hon. Mary Anne Mason issued a Memorandum Opinion and Order granting the Plaintiffs’ motion for partial summary judgment and denying motions for summary judgment filed by the DOI, the IOC, and Merrill Lynch Life Insurance Company. Judge Mason ruled, among other things, that the DOI did not have the legal authority to enter into or participate in the administration of the Consent Order and, similarly, the IOC did not have the legal authority to require funeral directors to commit to alter the provisions of their non-guaranteed pre-need contracts as a condition for participating in the settlement. In response, the DOI issued an Amended Consent Order which allowed for the distribution the $18 million without the onerous requirements on participating funeral directors.

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The Calvert Action:
Calvert Funeral Homes, et al. v. Robert W. Ninker, et al.,
Case No.: 09-CH-03624 (Cook County, Ill.)

In this derivative action, funeral directors sued the directors and officers of the IFDA and its legal and financial advisors. Plaintiffs alleged, among other things, that the director and officer defendants breached their fiduciary duties and acted negligently in approving, participating in and carrying out a scheme by which the great majority of pre-need trust funds entrusted to it by its members were inappropriately invested in speculative life insurance policies.  After a motion to dismiss filed by the IFDA’s former legal counsel was defeated they asked to be realigned as the plaintiff in the case. That motion was granted on January 12, 2011.

This case was resolved as part of the class action settlement in the Clancy case, described above and at www.IFDATrustSettlement.com.