Newspaper article THE JOURNAL RECORD

Shareholders Get Better Deal with New Class Action Suit Legislation

Newspaper article THE JOURNAL RECORD

Shareholders Get Better Deal with New Class Action Suit Legislation

Article excerpt

NEW YORK -- An important part of the securities legislation passed over President Clinton's veto last year gave control over class action lawsuits against companies to the largest shareholder in the group -- not to the lawyers who managed to file the first suit.

The idea was to assure that the client had a genuine stake in the matter and would watch a lawyer like any good client, not standing either for a suit that was simply corporate harassment or for a settlement that let a company off the hook while rewarding the lawyers who controlled the class action suit.

As that legislation was being considered, a federal judge effectively placed it into effect in one class action by rejecting a settlement negotiated by one law firm and handing control of the case to another firm. Now a new settlement has been reached, and it appears that shareholders have done much better under the new deal. The company involved is California Micro Devices, a maker of electronic components in Milpitas, Calif., which has admitted publishing inaccurate financial statements in 1994. A spate of class action suits was filed as a result of those reports. The original settlement, announced more than two years ago, called for the company to pay $1 million in cash and issue 1.5 million shares to holders who bought shares between Sept. 7, 1993, and Jan. 9, 1995, when the stock price was elevated, as a result of the phony financial figures. It also included a guarantee that the company would make up the difference if the stock did not rise to $8 within three years, giving the settlement a total value of $13 million before lawyers' fees. The new settlement, which Federal District Judge Vaughn Walker said earlier this month he would accept, provided much more for holders, in part by bringing in more defendants. The company will pay $6 million in cash and 608,696 shares of stock, which are guaranteed to rise to $11.50 within three years or the company will make up the difference. That adds up to $13 million, as did the prior settlement, although it involves more cash. In addition, however, the former auditors, Coopers & Lybrand, will pay $4 million, and $2 million will eventually be made available from the company's directors and officers insurance. …

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