A California federal judge suggested on Wednesday that he is unlikely to reduce the legal fees related to Morgan Stanley’s $10 million settlement with financial advisers, despite the discovery of a previously undisclosed “side deal” between the firm and lead plaintiff Brandon Harvey. The judge stated that although the existence of this provision should have been disclosed, it did not affect the fairness of the settlement.
During a virtual hearing, U.S. District Judge William H. Orrick expressed that, while the “walkaway” provision tied to Morgan Stanley’s claims with the Financial Industry Regulatory Authority (FINRA) against Harvey had been abandoned, the overall fairness of the settlement remained intact. “The walkaway agreement should have been disclosed,” Judge Orrick said, noting that it constituted a “covered side deal” under Rule 23 of the Federal Rules of Civil Procedure.
Despite the provision being dropped, Harvey had initially claimed no such side agreement existed. However, Judge Orrick contradicted this statement, suggesting that Harvey’s earlier assertion to the Ninth Circuit might not have been entirely accurate. Both Morgan Stanley and Harvey had earlier confirmed that the walkaway deal was not part of the formal settlement submitted for court approval.
