According to the Company’s FORM 10-Q for the quarterly period ended March 31, 1999, in July 1998, the parties executed a stipulation and agreement of settlement in which the Company agreed to pay $21 million in cash to a settlement fund to settle this litigation. The Company paid $0.5 million as an advance to the settlement fund. On July 29, 1998, the court issued a preliminary approval order in which it certified the purported class for settlement purposes. The court held a settlement fairness hearing on December 15, 1998. At that hearing, the court announced its opinion that the settlement was fair and reasonable and should be approved. On April 2, 1999, the remaining balance of the settlement funds in the amount of $20.5 million, plus interest thereon in the amount of $1.4 million, were paid in full settlement of the litigation.
As reported by the same SEC filing, between November 20, 1996 and January 31, 1997, nine shareholder class-action lawsuits were filed against RISCORP and other defendants in the United States District Court for the Middle District of Florida (the "Securities Litigation"). In March 1997, the court consolidated these lawsuits and appointed co-lead plaintiffs and co-lead counsel. The plaintiffs subsequently filed a consolidated complaint. The consolidated complaint named as defendants RISCORP, three of its executive officers, one non-officer director, and three of the underwriters for RISCORP's initial public offering. The plaintiffs in the consolidated complaint purport to represent the class of shareholders who purchased RISCORP's Class A Common Stock between February 28, 1996 and November 14, 1996. The consolidated complaint alleges that RISCORP's Registration Statement and Prospectus of February 28, 1996, as well as subsequent statements, contained false and misleading statements of material fact and omissions, in violation of Sections 11 and 15 of the Securities Act of 1993, Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder. The consolidated complaint seeks unspecified compensatory damages.
The original Complaint alleges that Riscorp, certain of its officers and directors, and the underwriters of the IPO violated the Securities Act of 1933 and the Securities Exchange Act of 1934 by issuing to the investing public false and misleading statements regarding, among other things, Riscorp's financial performance, revenue, and earnings growth and their impact on the company's future. The Complaint alleges that as a result of these misrepresentations and omissions Riscorp's Class A common stock was artificially inflated throughout the Class Period.