Berkshire Hathaway 2010 Annual Report Download - page 63

Notes to Consolidated Financial Statements (Continued)
(20) Contingencies and Commitments (Continued)
asserted on behalf of investors who purchased publicly-traded securities of AIG between October 1999 and March 2005. The
complaint, originally filed in April 2005, asserts various claims against AIG and certain of its officers, directors, investment
banks and other parties, including former employees of General Reinsurance (whom the Complaint defines, together with
General Reinsurance, as the “General Re Defendants”). The Complaint alleges that the General Re Defendants violated
Section 10(b) of the Securities Exchange Act and Rule 10b-5 in connection with General Reinsurance’s transaction with AIG
initially effected in 2000 (“the AIG Transaction”). The Complaint seeks damages and other relief in unspecified amounts.
General Reinsurance has answered the Complaint, denying liability and asserting various affirmative defenses. Lead plaintiffs
filed a motion for class certification on February 20, 2008. Various defendants, including General Reinsurance, have filed
oppositions to class certification. The lead plaintiffs and General Reinsurance previously reached agreement concerning the
terms of a settlement that would resolve all claims against the General Re Defendants in exchange for a payment by General
Reinsurance of $72 million, out of which the court may award plaintiffs’ counsel no more than $11.5 million in fees and
reimbursement of costs, with the remaining amount of at least $60.5 million to be distributed to purchasers of AIG securities.
There was no court decision specifically approving or disapproving this settlement but rather, on February 22, 2010, the court
granted class certification with respect to claims against AIG, and denied class certification with respect to claims against
General Reinsurance. On September 23, 2010, the court entered a final judgment dismissing the General Re Defendants from
the case. On October 21, 2010, the lead plaintiffs, on behalf of themselves and the putative class, filed a notice of appeal of that
final judgment, and also appealed from the court’s February 22, 2010 order (granting in part and denying in part the lead
plaintiffs’ motion to certify the class, but only to the extent the order denied class certification as against the General Re
Defendants), and the court’s March 4, 2010 order denying as moot the lead plaintiffs’ motion for preliminary court approval of
the class action settlement with General Re.
A member of the putative class in the litigation described in the preceding paragraph has asserted similar claims against
General Reinsurance and a former officer of General Reinsurance in a separate complaint, Florida State Board of
Administration v. General Re Corporation, et al., Case No. 06-CV-3967, United States District Court, Southern District of New
York. The parties have settled this matter, the terms of which will require dismissal of this action with prejudice.
On July 27, 2005, General Reinsurance received a Summons and a Verified and Amended Shareholder Derivative
Complaint in In re American International Group, Inc. Derivative Litigation, Case No. 04-CV-08406, United States District
Court, Southern District of New York. The complaint, brought by several alleged shareholders of AIG, seeks damages,
injunctive and declaratory relief against various officers and directors of AIG as well as a variety of individuals and entities with
whom AIG did business, relating to a wide variety of allegedly wrongful practices by AIG. Plaintiffs have petitioned the court
to dismiss the action with prejudice as to all defendants.
In August 2005, General Reinsurance received a Summons and First Amended Consolidated Shareholders’ Derivative
Complaint in In re American International Group, Inc. Consolidated Derivative Litigation, Case No. 769-N, Delaware Chancery
Court. On September 28, 2007, AIG and the shareholder plaintiffs filed a Second Combined Amended Complaint, in which AIG
asserted claims against certain of its former officers and the shareholder plaintiffs asserted claims against a number of other
defendants, including General Reinsurance. On July 13, 2009, the Delaware Chancery Court entered judgment dismissing with
prejudice the claims asserted against General Reinsurance and certain other defendants in the matter. By Order dated
December 29, 2010, the Delaware Supreme Court unanimously affirmed the Chancery Court dismissal of the claims against
General Reinsurance and certain other defendants.
FAI/HIH Matter
In December 2003, the Liquidators of both FAI Insurance Limited (“FAI”) and HIH Insurance Limited (“HIH”) advised
indirect wholly-owned subsidiaries of Berkshire (General Reinsurance Australia Limited (“GRA”) and Kölnische
Rückversicherungs-Gesellschaft AG (“Cologne Re”)) that they intended to assert claims arising from insurance transactions
GRA entered into with FAI in May and June 1998. In August 2004, the Liquidators filed claims in the Supreme Court of New
South Wales in order to avoid the expiration of a statute of limitations for certain plaintiffs. The focus of the Liquidators’
allegations against GRA and Cologne Re are the 1998 transactions GRA entered into with FAI (which was acquired by HIH in
1999). The Liquidators contend, among other things, that GRA and Cologne Re engaged in deceptive conduct that assisted FAI
in improperly accounting for such transactions as reinsurance, and that such deception led to HIH’s acquisition of FAI and
caused various losses to FAI and HIH. The Liquidator of HIH served its Complaint on GRA and Cologne Re in June 2006 and
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