Category Archives: Settlement

Delphi Corp. (PINKSHEETS: DPHIQ), a Michigan-based automotive parts manufacturer, has announced the preliminary settlement of the securities class action pending against the company in the E.D. of Michigan. The case, originally filed in 2005, stems from Delphi’s financial restatement and subsequent bankruptcy.

The global settlement covers both ERISA and securities class action claims and has a total potential value of $342 million. The securities class action portion is as follows: “the class of purchasers of Delphi’s debt securities will receive an allowed claim and the class of purchasers of Delphi’s equity securities will receive an allowed interest in the combined amount of $204 million in Delphi’s Chapter 11 case as well as approximately $90 million in cash from other defendants and insurance carriers.” For the allowed interest in the Chapter 11 case, the investors will receive the “same treatment as Delphi’s general unsecured creditors.” Bloomberg has an article on the settlement.

The recent string of notable settlements reached its crescendo yesterday. Tyco International Ltd. (NYSE: TYC), a diversified global company, has announced the preliminary settlement of the securities class action pending against the company in the D. of N.H. The case was filed in 2003 and alleges an enormous accounting fraud scheme (which has led to related criminal law convictions for individual Tyco officers).

The settlement is for $2.975 billion and is being heralded as the largest payout ever by a single corporate defendant in a securities fraud lawsuit. As part of the settlement, Tyco has agreed to assign its related claims against PricewaterhouseCoopers, its former auditor, to the plaintiffs. Press coverage can be found in the Associated Press, the New York Times, and Business Week.

Cardinal Health, Inc. (NYSE: CAH), an Ohio-based healthcare company, has announced the preliminary settlement of the securities class action pending against the company in the S.D. of Ohio. The case was filed in 2004 and alleges that the company made false or misleading statements concerning its financial results.

The settlement is for $600 million, but is still subject to approval by the lead plaintiffs. MarketWatch has an article on the settlement. (The 10b-5 Daily has previously posted about the lead plaintiff, discovery stay, and motion to dismiss decisions in the case.)

Priceline.com, Inc. (Nasdaq: PCLN), a Connecticut-based online travel service, has announced the preliminary settlement of the securities class action pending against the company in the D. of Conn. The case was originally filed in 2000 and alleges that the company misrepresented its financial condition. Discovery in the case was scheduled to have been completed by the end of this year. The settlement is for $80 million, with $30 million being paid by the company’s insurance carriers.

Doral Financial Corp. (NYSE: DRL), a Puerto Rico-based financial services company, has announced the preliminary settlement of the securities class action pending against the company in the S.D.N.Y. The case was filed in 2005 and alleges that Doral improperly accounted for its derivative portfolio of interest-only strips.

The settlement is for $130 million, consisting of payments from Doral ($95 million), its insurers ($34 million), and one or more individual defendants ($1 million). Doral also agreed to certain corporate governance changes. Because of Doral’s precarious financial situation, the settlement is contingent on the company’s ability to obtain outside funding for its business.

Motorola, Inc. (NYSE: MOT), an Illinois-based wireless and broadband communications company, has announced the preliminary settlement of the securities class action pending against the company in the N.D. of Ill. The case was filed in 2002 and alleges that Motorola failed to disclose vendor financing to a Turkish wireless telephone company in connection with the sale of telecommunications equipment. The Turkish company eventually defaulted on its loans owed to Motorola. The trial had been scheduled to begin this week.

The settlement is for $190 million, with $75 million coming from insurance proceeds. The Newark Star-Ledger has an article on the settlement.

Royal Dutch Shell p.l.c. (NYSE: RDS/A) has announced a landmark settlement with non-U.S. shareholders resolving claims related to the company’s recategorizations of certain proved oil and gas reserves. Under the settlement, which was executed pursuant to a new Dutch statute allowing the Amsterdam Court of Appeals to declare binding a collective resolution of a commercial dispute, Shell will pay $352.6 million plus administrative costs to shareholders who bought on non-U.S. exchanges and were resident or domiciled outside the U.S. from April 1999 to March 2004. The parties have also requested that the $120 million Shell paid to the SEC in a related settlement be distributed in a non-discriminatory manner among certain U.S. and non-U.S. shareholders.

Shell also announced that it plans to extend the same proportional settlement offer to shareholders who bought in the U.S. or were resident or domiciled in the U.S. during the same period. According to the press, it is the second-largest settlement of a securities fraud dispute by a European-based company, behind Royal Ahold’s $1.1 billion settlement in late 2005. Media coverage can be found in the Wall Street Journal (subscrip. req’d), Bloomberg, and the New York Times.

Time Warner, Inc. (NYSE: TWX) has settled the claims of five large institutional shareholders who opted-out of a 2005 settlement of the the securities class action against the company over accounting fraud at AOL. Under the opt-out settlement, Time Warner will pay $400 million, $246 million of which will go to the University of California, with other smaller amounts being paid to the California Public Employees Retirement System, Amalgamated Bank, and two pension funds for Los Angeles County employees. The University of California claims that it will receive “between 16 and 24 times what we would have gotten through the class.” The Wall Street Journal Law Blog and the New York Sun have reports on the settlement. Best In Class thinks it may be the largest opt-out settlement ever.

CMS Energy, a Michigan-based energy provider, has announced the preliminary settlement of the securities class action pending against the company in the E.D. of Michigan. The case, which was originally filed in May 2002, alleges that CMS Energy made various false and misleading statements by including the results of certain “round-trip” energy trades entered into by one of its Texas-based subsidiaries as part of its revenues and expenses. The proposed settlement is for $200 million, of which CMS Energy will pay $123.5 million and its insurers will pay $76.5 million.

CIGNA Corp. (NYSE: CI), a Philadelphia-based employee benefits provider, last week announced the preliminary settlement of the securities class action pending against the company in the E.D. of Pa. The case, which was filed in 2002 and scheduled for trial in March 2007, alleges that CIGNA made various false and misleading statements by providing unrealistically high income guidance to the market and failing to disclose that it had been under-reserving for certain reinsurance obligations. The proposed settlement is for $93 million.