Posted on 04.06.2010 - 11:00 UTC in SUBSEA TELECOMS NEWS by Rons_ROV_Links
A $79 million settlement has been reached in a long-running class action suit that accuses Tyco International Ltd. of misleading investors in its undersea cable subsidiary, TyCom Ltd.
The parties reached a deal on April 13 that would end the 7-year-old suit, and the plaintiffs moved on Monday for preliminary approval from U.S. District Judge Garrett Brown Jr. in Trenton, N.J. He has set a May 6 hearing date.
The settlement, if approved, calls for class counsel to petition the court for attorney fees, to be paid out of the settlement amount.
The plaintiffs' compensation will depend on how many class members make claims, says co-lead counsel Gregory Keller of Chitwood Harley Harnes in Atlanta.
The suit, In re Tycom Ltd. Securities Litigation, 03-cv-3540, was filed on behalf of investors who bought 70 million shares of Tycom at $32 each in an initial public offering from July 2000 and through December 2001.
They claim the prospectus overstated the demand for undersea transmission of voice and data communications and failed to disclose that bandwidth was in oversupply.
Before the public offering, Tycom's main business was building and repairing underseas communications networks for other companies. In 1999, the company decided to build its own transoceanic cable network, with funding from the sale of stock. But the supply of undersea bandwidth far exceeded the demand, the plaintiffs claimed.
Princeton, N.J.-based Tyco repurchased the shares for $17 each a few years later.
The suit also named as defendants three underwriters -- Goldman Sachs, Merrill Lynch and Salomon Smith Barney -- who allegedly included false statements about the demand for bandwidth in the IPO registration statement.
The underwriters moved for summary judgment, claiming any misrepresentations about the bandwidth market are immaterial under the "bespeaks caution" doctrine, which says that forecasts or projections in a disclosure statement are not misleading when accompanied by cautionary language.
Tyco and Tycom also moved for summary judgment, raising the statute of limitations. Both motions are pending.
The underwriter defendants are included in the proposed settlement.
The plaintiffs did not reach a deal with two individual defendants, former Tyco International chief executive officer L. Dennis Kozlowski and former chief financial officer Mark Swartz. The suit would continue against them.
The suit, filed in July 2003 in Trenton, was transferred that October by the Judicial Panel on Multidistrict Litigation to the District of New Hampshire, where it was consolidated with other Tyco securities and ERISA litigation because of Tyco's disclosure in 2002 that Kozlowski and Swartz received multimillion-dollar bonuses in connection with the Tycom offering.
The New Hampshire court granted the plaintiffs' motion to certify in June 2007. The defendants moved for leave to appeal that order to the 1st U.S. Circuit Court of Appeals, which denied the petition in September 2007.
The Tycom case was sent back to New Jersey in March 2009 after the JPML determined that all pretrial matters on common issues had been resolved.
Besides Keller, the plaintiffs are represented by Robert Finkel of Wolf Popper in New York.
Elizabeth Edwards, of McGuire Woods in Richmond, Va., represents Tyco and Tycom.
Lawrence Friedman of Cleary Gottlieb Steen & Hamilton in New York, represents the underwriters.
Karen Confoy, of Sterns & Weinroth in Trenton, is local counsel for Tyco, Tycom and the underwriters.