Category Archives: Settlement

May 12, 2005 · 11:35 pm

Interstate Bakeries Settles

Interstate Bakeries Corp. (OTC: IBCIQ.PK), the Kansas City-based manufacturer of Wonder Bread and Twinkies, has obtained preliminary court approval for a settlement of the securities class action pending against the company in the W.D. of Mo. The case was originally filed in 2003 and alleges that the company mislead investors about the market for its goods.

The settlement was agreed to last year, prior to Interstate declaring bankruptcy, and has been on hold waiting for the bankruptcy court to allow it to go forward. The settlement is for $18 million, with $15 million to be paid by insurers.

Addition: In related news, Twinkies have turned 75 years old.

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May 5, 2005 · 8:12 pm

Fee Objectors

Fee objectors are becoming a more common feature in securities class action settlements and, in some cases, are getting results. The Elan securities litigation was settled last year for $75 million. Plaintiffs requested that their counsel be awarded attorneys’ fees of 20% of the settlement or $15 million. There were fifteen objectors to the proposed award, with two of the objectors presenting substantive grounds for their opposition.

In its decision (In re Elan Sec. Litig., 2005 WL 911444 (S.D.N.Y. April 20, 2005)), the court reduced the fee award to 12% of the settlement or $9 million. Notably, the court agreed with the fee objectors that the plaintiffs faced only a modest risk of dismissal at the outset of the case and that the plaintiffs’ attempt to use the hours worked by non-lead counsel to justify the size of the fee award should be rejected.

Quote of note: “Virtually all of Unappointed Counsel’s hours fall into two categories: (1) ‘Investigation, Initial Pleadings, Consolidated Complaint,’ and (2) ‘PSLRA Notice, Lead Plaintiff Motion.’ But Unappointed Counsel failed to segregate the hours devoted to investigation and/or preparation of the Consolidated Complaint and do not establish why they should be compensated for, among other things, seeking but failing to be appointed lead counsel.”

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April 25, 2005 · 8:58 pm

Arthur Andersen Settles WorldCom-Related Claims

Arthur Andersen LLP, the last remaining defendant in the WorldCom securities class action, has agreed to settle the case. The settlement ends the the ongoing trial in the S.D.N.Y. According to a New York Times article, the settlement is for $65 million plus “20 percent of any amount [Arthur Andersen] paid to distribute its remaining capital to its present and former partners.” The settlement also reportedly includes a “most favored nation clause” that guarantees the plaintiffs “the difference between the $65 million and any larger settlement in any other lawsuit [Arthur Andersen] may settle in the future.”

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April 18, 2005 · 3:55 pm

Dynegy Settles

Dynegy, Inc. (NYSE: DYN), a Houston-based energy provider, has announced the preliminary settlement of the securities class action pending against the company in the S.D. of Texas. The case, originally filed in 2002, alleges fraud related to the accounting treatment and disclosures associated with a structured natural gas transaction know as “Project Alpha.”

The settlement is for $468 million (including $150 million from the company’s insurers, a $250 million cash payment, and the issuance of $68 million in common stock). Dynegy also agreed to the election of two new directors to its Board of Directors from a list of candidates supplied by the lead plaintiff in the case.

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April 15, 2005 · 7:45 pm

Westar Energy Settles

Westar Energy, Inc. (NYSE: WR), a Topeka-based electric utility, has announced the preliminary settlement of the securities class action (and a related derivative suit) pending against the company in the D. of Kansas. The case, originally filed in 2002, alleges that Westar misled investors concerning a proposed separation of its electric utility operations from its unregulated businesses. The settlement is for $32.5 million, with all but $1.25 million being paid by insurance.

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March 28, 2005 · 9:24 pm

OM Group Settles

OM Group, Inc. (NYSE: OMG), a Cleveland-based maker of metal-based chemicals, has announced the preliminary settlement of the securities class action pending against the company in the N.D. of Ohio. The suit was originally filed in 2002 following a dissapointing earnings announcement. The company subsequently engaged in a financial restatement. The settlement is for $84.5 million ($76 million in cash and $8.5 million in common stock).

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March 22, 2005 · 6:27 pm

Ex-WorldCom Directors Settle

As of today, all of the former directors sued in the WorldCom securities class action pending in the S.D.N.Y. have agreed to settle the case. The twelve board members will pay $60.75 million ($24.75 million in personal payments and $36 million from their insurers), bringing the total settlements in the case to slightly over $6 billion. The last remaining defendant is Arthur Anderson. The Associated Press has a report.

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March 16, 2005 · 4:32 pm

Make That $6 Billion And Counting

JPMorgan Chase & Co. (NYSE: JPM) has announced the preliminary settlement of the claims brought against it as part of the WorldCom securities class action pending in the S.D.N.Y. JPMorgan is accused of failing to engage in proper due diligence while acting as an underwriter for WorldCom bond offerings and is the last of the defendant banks in the case to settle. The settlement is for $2 billion.

Bloomberg reports that JPMorgan will pay a significant premium (more than 17.5%) over the formula used to establish Citigroup’s related settlement. Taken together, the WorldCom securities class action settlements now total approximately $6 billion.

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March 14, 2005 · 8:54 pm

Amazon Settles ’34 Act Claims

Amazon.com, Inc. (Nasdaq: AMZN), a Seattle-based Internet retailer, has announced the partial settlement of the securities litigation pending against the company in the W.D. of Wash. The plaintiffs brought ’33 Act and ’34 Act claims based on alleged false statements about the company’s financial condition. The settlement is for $27.5 million and only covers the ’34 Act claims. The Seattle Times has a report.

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March 11, 2005 · 7:00 pm

$4 Billion And Counting

Three more banks have agreed to a preliminary settlement of the claims brought against them as part of the WorldCom securities class action pending in the S.D.N.Y. Deutsche Bank AG, WestLB AG, and Caboto Holding SIM Spa will pay a total of $437.5 million based on their roles as underwriters for WorldCom bond offerings.

Bloomberg reports that the premium over the formula used to establish Citigroup’s settlement continues to rise as the case gets closer to trial. The current group of settling banks are paying a 13%-17.5% premium.

Taken together, the WorldCom securities class action settlements now total just under $4 billion.

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