As reported by the Company’s Form 10-K for the fiscal year ended December 31, 2000, on October 12, 2000, counsel for the respective parties in the Class Action
and the Derivative Action entered into definitive Stipulations of Compromise and
Settlement (the Stipulations), providing for the settlement of the Actions on
the terms described above, subject to court approval. At separate hearings on
December 13, 2000, the court in the Class Action and the court in the Derivative
Action approved the proposed settlement of the respective Actions as fair,
adequate and reasonable and dismissed the respective Actions with prejudice in
favor of the defendants. In its order, the court in the Class Action also
granted in part plaintiffs' counsels' application for attorneys' fees and
expenses, to be paid from the Settlement Payment. In its order, the court in the
Derivative Action also granted plaintiff's counsels' application for attorneys
fees and expenses in the amount of $975,000, which amount has been paid by the
Corporation but has been fully covered by UPC's insurance carriers.
Prior to any rulings on the defendants' motions to dismiss the Class Action and the Derivative Action, counsel for UPC, the Railroad and the individual defendants in those Actions entered into a Memorandum of Understanding (the MOU), dated June 28, 2000, with counsel for the plaintiffs in the Class Action and Derivative Action, providing for the settlement of both Actions. The MOU provided, among other things, that the Class Action would be settled for $34,025,000 in cash (the Settlement Payment), the full amount of which has been covered by UPC's insurance carriers.
According to the same SEC filing, UPC and certain of its directors and officers (who are also directors of the Railroad) were named as defendants in two purported class
actions filed in 1997 that have been consolidated into one proceeding in the
United States District Court for the Northern District of Texas (the Class
Action). In addition to the Class Action, a purported derivative action was
filed on behalf of UPC and the Railroad in September 1998 in the District Court
for Tarrant County, Texas, naming as defendants the then-current and certain
former directors of UPC and the Railroad and, as nominal defendants, UPC and the
Railroad (the Derivative Action and together with the Class Action, the
The original complaint alleges that Union Pacific and certain officers and directors of the Company during the relevant time period violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, by, among other things, misrepresenting material information concerning the safety and efficiency of the Company's operations and failing to disclose problems the Company was experiencing integrating its operations with those of Southern Pacific Railroad Corp. ("Southern Pacific"), with which it merged in September 1996. As a result of those problems, the benefits defendants claimed to be deriving from the Union Pacific/Southern Pacific merger were creating numerous operational difficulties including slowed traffic, missed schedules, lost or delayed shipments, safety problems and other customer service difficulties which were exposing the Company to over $1 billion of customer claims, great reputational harm and accelerating federal intervention in its operations.