Category Archives: Settlement

As reported in The 10b-5 Daily back in November 2003, Telxon agreed to settle the securities class action pending against it in the N.D. of Ohio for $37 million. The company had also brought a separate, but related, suit against PricewaterhouseCoopers (its former auditors) alleging that it had been improperly audited. Telxon had agreed to pay to the shareholder class, under certain circumstances, up to $3 million of the proceeds of that suit.

The other shoe has finally fallen. Telxon announced yesterday that PwC will pay $18 million to settle the separate suit. As promised, $3 million of the proceeds will go to the shareholder class.

The Economist (August 11 edition) has an article discussing the rise in the value of securities class action settlements.

Quote of note: “America’s new Class Action Fairness Act seeks to curb frivolous class-action lawsuits against companies in areas such as product liability and labour law, mainly by redirecting more of them to federal courts and so denying lawyers scope to “forum-shop” among biddable state courts. But before companies declare victory, they should reflect that the law of unintended consequences can sometimes be stronger than the law itself. The Private Securities Litigation Reform Act of 1995 was meant to curb frivolous class-action suits within the field of securities law. But in forcing class-action lawyers to raise their game, it has contributed to a new era of big lawsuits and even bigger settlements.”

Time Warner Inc. (NYSE: TWX), the world’s largest media company, has announced the preliminary settlement of the securities class action pending against the company in the S.D.N.Y. The suit alleges that AOL inflated its revenue between January 1999 and August 2002 as part of a scheme to gain approval for its merger with Time Warner. Reuters reports that the settlement is for $2.4 billion.

Addition: Co-defendant Ernst & Young has agreed to settle the claims against it for $100 million.

Reliant Energy, Inc. (NYSE: RRI), a Houston-based energy provider, has announced the preliminary settlement of the securities class action pending against the company in the S.D. of Tex. The case alleges that from 1999 to 2001 the company engaged in “round trip” energy deals to inflate its revenues and trading volume. The settlement is for $68 million, of which $61.5 million will be paid for by Reliant’s insurance carriers. In addition, co-defendant Deloitte & Touche will make a settlement payment of $7 million.

Broadcom Corp. (Nasdaq: BRCM), a California-based fabless semiconductor company, has announced the preliminary settlement of the securities class action pending against the company in the C.D. of Cal. The case was originally filed in 2001 and alleges that Broadcom improperly accounted for warrants given to customers who bought certain amounts of the company’s products. The settlement is for $150 million. Broadcom “expects that approximately $40 million of that amount will be paid by its insurance carriers.”

In the wake of the billion dollar settlements in the Enron and WorldCom cases, it is easy to forget that a hundred million dollar settlement used to be considered very significant. CVS Corp. (NYSE: CVS), the country’s largest pharmacy chain, recently announced the preliminary settlement of the securities class action pending against the company in the D. of Mass. The case, originally filed in 2001, was scheduled to go to trial last month. The plaintiffs alleged that CVS failed to properly account for marked down items.

The settlement is for $110 million and will be paid “primarily” by the company’s insurance carriers. The Boston Globe had this report.