The Federal Court has approved the settlement of the Lehman Brothers Australia class action. The court heard an application from representatives of the class action and the LBA liquidator last week, and yesterday gave its approval.Under the terms of the settlement, the class action will cease and claims will be assessed under a non-adversarial resolution process.Sixty-nine local councils, church groups and charities brought a class action against LBA over the sale of credit derivatives up to the year 2007. The derivatives became illiquid during the financial crisis.In September last year, the Federal Court made a finding that LBA had engaged in misleading and deceptive conduct, was negligent and was in breach of its fiduciary duties when it sold collateralised debt obligations to its clients.Part of the settlement is that an appeal against that ruling will cease.The settlement follows an agreement with LBA's insurers in October. LBA's creditors approved a scheme of arrangement resulting in the recovery of more than US$445 million from insurance policies.The claimants are still going after McGraw-Hill Companies Inc, which owns Standard & Poor's. S&P rated the CDOs that LBA sold, and the claim is for the balance of any loss not covered by the LBA settlement.