Category Archives: Settlement

SymbolTechnologies(NYSE: SBL) has announced that its wholly-owned subsidiary, Telxon Corp., has entered into a preliminary settlement of the securities class action pending against the company in the N.D. of Ohio. The case was originally filed in 1998, prior to Symbol’s acquisition of Telxon, and alleges that the company and certain former officers engaged in improper revenue recognition practices and hid adverse business and financial conditions. Telxon’s motion to dismiss was denied in September 2000.
The settlement, which is subject to court approval, is for $37 million. Telxon’s insurers are expected to pay $12 million of this sum. The company has brought a separate, but related, suit against its former auditors and has “agreed to pay to the class, under certain circumstances, up to $3 million of the proceeds of that lawsuit.”

The court has approved the proposed $7 million settlement in the securities class action against Corel Corp., the Candian company that manufactures WordPerfect.
As posted in The 10b-5 Daily last August, plaintiffs offered a number of justifications to the court for the relatively low settlement amount (about 15% of the alleged damages), including Corel’s poor financial position and the defendants’ threat to seek refuge in Canadian bankruptcy court in the event of a judgment against them. Judge Brody of the E.D. of Pa. appears to have accepted these arguments.

Quote of note: “‘Throughout this litigation, defendants have maintained that if judgment is entered against them, they will seek the protection of the Canadian bankruptcy court. If this were to occur, there would be a significant question regarding whether or not Corel’s insurance policies would still be available to fund a judgment for plaintiffs,’ Brody wrote.”

The October 2003 edition of ISS’s Securities Class Actions Services Alert, contains a useful summary of the recent settlements containing corporate governance reforms. The 10b-5 Daily has previously posted about this developing trend.

Enterasys Networks, Inc. (NYSE: ETS), a Massachusetts-based business network service provider, has announced a settlement in the securities class action against the company pending in the D. of N.H. The proposed settlement is for $50.4 million ($17.4 million in cash and $33 million in shares) and is subject to approval by the court. The settlement also covers related derivative actions against the company that have been brought in New Hampshire and Delaware state court.

Enterasys has been the subject of two securities class actions in the past five years. The current settlement is for the case brought in 2002, following a financial restatement, alleging that the company improperly recognized revenue in violation of GAAP. An earlier securities class action against the company filed in the D. of N.H. in 1998 was dismissed with prejudice by the district court, but the decision was reversed by the U.S. Court of Appeals for the First Circuit in this opinion. According to Enterasys’ most recent quarterly SEC filing, the 1998 case is still pending.

THQ, Inc. (Nasdaq: THQI) has announced the settlement of its arbitration dispute with National Union, the company’s directors’ and officers’ insurance carrier, over the coverage due for the settlement of a class action lawsuit filed against THQ in February 2000. According to the press release, “National Union had previously contributed $5.0 million to the class action settlement, but had disputed its obligation to pay the balance of $5.0 million under THQ’s total of $10.0 million in directors’ and officers’ insurance coverage.” As part of the settlement, THQ will receive a $4 million payment and “additional considerations” from National Union.

Paradyne Networks, Inc. (Nasdaq: PDYN), a Florida-based provider of high-speed network access solutions for broadband voice, data and video, has announced the settlement of the securities class action pending against the company in the M.D. of Fla. The proposed settlement is for $3 million, to be funded by Paradyne’s insurance, and is subject to approval by the court.

The plaintiffs have alleged that Paradyne and certain of its officers and directors fraudulently inflated the price of the company’s stock from September 1999 to September 2000 by making false and misleading representations about the company’s practice of managing and reporting its inventory. The court denied the defendants’ motion to dismiss in April 2002.

Reuters reports that Judge Farnan of the D. of Del. has granted preliminary approval for the proposed $300 million settlement of the securities class action against DaimlerChrysler AG. The suit alleges that Daimler-Benz AG misrepresented the acquisition of Chrysler as a “merger of equals” to avoid paying Chrysler shareholders a takeover premium for their shares. (The 10b-5 Daily originally posted about the settlement in August.)

Network Associates, Inc. (NYSE: NET), a California-based provider of computer security software and services, has announced the settlement of the securities class action filed in the N.D. of Cal. against the company and certain of its former executives. The settlement is for $70 million and is subject to court approval.

According to a Reuters article, the suit was originally brought in 2000 and 2001 and alleges Network Associates “misled investors by recognizing software revenue when it was shipped to distributors rather than when end-user paid for its products, a practice called ‘channel stuffing.'” The company still faces Justice Department and SEC probes over its revenue recognition practices.

According to a Reuters report, the proposed settlement of the securities class action and related suits against Lucent Technologies, Inc. (NYSE: LU.N), a New Jersey-based telecommunications equipment maker, has received preliminary court approval. The $600 million settlement was announced last March. The class action, originally filed in 2000, alleges that Lucent misled investors concerning the demand for optical networking products and engaged in improper accounting.