According to a press release dated October 27, 2005, PricewaterhouseCoopers LLP ("PwC") has agreed to pay $27.9 million to settle all claims asserted against it by class members who purchased Telxon Corp. ("Telxon") securities during the period from June 29, 1998 through February 23, 1999. The settlement with PwC is in addition to the prior settlement of $40 million reached with Telxon and certain individuals and previously approved by the Court on February 11, 2004. That earlier settlement, which covered purchasers of Telxon securities from May 21, 1996 through February 23, 1999, has now reached $40 million as a result of an additional $3 million which became payable to the class members on September 30, 2005 after Telxon settled its claims against PwC. The Settlement with PwC now brings the total of these two class action settlements to $67.9 million, one of the top seventy-five securities class action settlements of all time.
Class counsel expects formal class notice to be issued shortly and a final settlement hearing to be held in the near future before the Honorable Kathleen O'Malley, United States District Judge for the Northern District of Ohio.
In a press release dated February 12, 2004, the United States District Court in the Northern District of Ohio gave final approval to the pending shareholder class action lawsuit against Telxon Corporation, and two former officers of Telxon. Under the settlement agreement, which in November 2003 was tentatively agreed and today was approved, Telxon will pay $37 million to the class. As a result of anticipated contributions by Telxon's insurers, Telxon expects that its net payment will be no more than $25 million. Telxon has not settled its lawsuit against its former auditors, PricewaterhouseCoopers, and, as part of the approved settlement of the class action announced today, Telxon has agreed to pay to the class, under certain circumstances, up to $3 million of the proceeds of that lawsuit.
Previously, on August 26, 2002, the court certified a class against PriceWaterhouseCoopper (PWC) for all person and entities the purchased the securities of Telxon during the period of June 29, 1998 through February 23, 1999. Although the PWC’s class overlaps the Telxon class, the claims of behalf of the PWC Class were not settled. Moreover, in or about July 16, 2004 the Judge Patricia A. Herman recommended that the court enter default judgment on Liability against PWC and in favor of Telxon Corporation and Plaintiffs.
In May 2004, Class Plaintiffs and Telxon Corporation ("Telxon") filed motions for discovery sanctions against PWC, alleging that PWC engaged in various discovery violations throughout the course of the litigation. PWC has objected to the findings of the Report and Recommendation of Judge Patricia A. Herman. Judge O'Malley heard oral argument on PWC’s objections during December 2004 and January 2005. Judge O'Malley will decide whether to adopt, modify or reject the Report and Recommendation.
The Hayman action, alleging that PwC violated the Securities Exchange Act of 1934, was filed in May 2001. Class Plaintiffs allege that PwC's audits of Telxon Corporation were not in accordance with Generally Accepted Auditing Standards, and that PWC issued misleading audit opinions on Telxon's financial statements. On August 26, 2002, the Court certified Class Plaintiffs' claims against PWC on behalf of a class of purchasers of Telxon common stock for the period of June 29, 1998 through February 23, 1999.
The original complaint alleges that throughout the Class Period, Telxon, Telxon's President and Chief Executive Officer, and Telxon's Senior Vice President and Chief Financial Officer, violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by issuing false and misleading statements regarding, inter alia: the Company's financial results for the second quarter ended September 30, 1998; revenues and earnings for fiscal year 1999; and the availability of and demand for certain products. In this regard, on December 11, 1998, Telxon announced that, based on advice from its outside auditors, the Company will restate its previously released results for its second quarter ended September 30, 1998 to reduce reported revenue by about $14 million and to report a loss, prior to non-recurring items, of about $.05 per share (diluted), as compared to previously reported earnings of $.22 per share (diluted). The Company further announced that its revenues and earnings for fiscal year 1999 will be negatively affected. Telxon stock traded as high as $32-1/8 during the Class Period and closed at $15 on December 11, 1998, losing over 40% of its previous day's closing price after the disclosure.