Some 1,200 US investors who lost money in the Allfirst scandal are to share about $1.5 million (€1.2 million) in a class action suit.

They are just a small fraction of the 49,000 investors who received notices of the lawsuit.

In the federal district court in southern Manhattan late on Monday, Judge Deborah Batts agreed to a class action settlement of $2.5 million plus $13,000 in interest.

However, the judge agreed to subtract lawyers' fees of $754,179 and lawyers' expenses of $79,530 from the $2.5 million, as well as just over $113,000 in printing and postage costs for distributing circulars to potential claimants.

She also agreed to a request by plaintiffs' lead counsel, Donald J Enright, to return to the court with additional expenses that will arise from the claims administrator's distribution of the settlement money to claimants.

The case arose from the $691 million losses incurred by disgraced trader, John Rusnak.

After Judge Batts ruled the class action was "fair and adequate", Mr Enright said he wanted to clarify to the court that his firm had not obtained privileged documents from Eugene Ludwig, the former comptroller of US currency who was hired by AIB to investigate the Allfirst scandal.

He said that AIB was involved in litigation in other Allfirst cases and it was important to point out that AIB had not given any privileged documents to the plaintiffs.

Judge Batts said she accepted the "bottom line" that neither Mr Enright nor his firm had seen any privileged documents.

The class action was taken against AIB, Allfirst and seven former Allfirst directors and officers, including John Rusnak.

One legal expert close to the case said the settlement amount was so low because AIB shares shot up in value soon after the scandal was discovered, based on rumours of a possible take over of AIB by Royal Bank of Scotland.

The settlement only applies to US holders of American Depository Shares (ADSs), which are securities offered by non-US companies that are not listed on an American exchange. Each AIB ADS can be converted to the company's regular shares.

Investors wishing to claim on the fund must have held AIB ADSs between February 6th, 1999 and February 6th, 2002, inclusive, and the claims must be entered by August 17th next. It's unlikely any significant number of new claimants will wish to be added to the 1,200 who have already availed of the class action suit.

The plaintiff firm, Finkelstein, Thompson & Loughran, estimates that the average recovery per AIB share is just $0.38, even before deduction of attorneys' fees and expenses.

According to the office notice of the claim, AIB and the other defendants denied all wrongdoing but agreed to settle to "eliminate the expense, risks and uncertain outcome of litigation". This is the second US case taken on behalf of AIB security deposit holders who lost money on the Rusnak scandal.

Last December, the Maryland Appeals Court threw out a derivative action taken on behalf holders of AIB American Depository Receipts (ADRs), which are a similar form of security to ADS.

The court ruled by a six-to-one majority that only Irish law should decide the case and that the ADRs did not give the plaintiff company, Tomran, the right to sue in the US.