As reported by the Company’s FORM 10-K for the fiscal year ended December 31, 2002, on October 9, 2002, the court preliminarily approved the Stipulation of Settlement and scheduled a Settlement Hearing for November 25, 2002. On November 25, 2002, District Court Judge Christian A. Snyder signed a Final Judgment and Order of Dismissal with Prejudice and the Judgment and Order, which was entered by the Clerk of the Court on November 27, 2002, inter alia, granting final approval to the terms of the settlement set forth in the Stipulation of Settlement. The settlement was in the amount of $13,750,000.00.
According to the same SEC filing, in April 2001, several plaintiffs filed a purported non-class action complaint against the same defendants named in the Class Action Complaint (including the Company). The plaintiffs in this action subsequently filed an amended complaint (this complaint as amended, the "Butler Complaint") in September 2001. The Butler Complaint alleges claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5, as well as common law fraud and negligent misrepresentation claims relating to the same general types of purported misrepresentations set forth in the Class Action Complaint. However, the alleged misrepresentations set forth in the Butler Complaint allegedly occurred during the period from November 15, 1999 through at least April of 2000. On January 21, 2002 and May 14, 2002, the parties participated in mediation sessions in an attempt to settle matters set forth in the Class Action Complaint, the Third Amended Complaint and the Butler Complaint. The latter mediation session led to all of the parties to this litigation entering into a Memorandum of Understanding (the "MOU") setting forth the material terms of a settlement of all plaintiffs' claims. Under the terms of the MOU, the Company's directors and officers insurance carriers will contribute to a settlement fund and the Company will not be obligated to contribute to the settlement. The MOU was conditioned upon, inter alia, the execution of a comprehensive Stipulation of Settlement and the approval of that Stipulation by the District Court and the acceptance of the terms of the settlement by plaintiffs-shareholders comprising a material part of the class of the Company's shareholders.
At least four nearly identical complaints were filed shortly after the original action was filed. On June 30, 2000, Plaintiffs filed a consolidated and amended complaint (the "Class Action Complaint"), IN RE MUSICMAKER.COM SEC. LITIG., No. 00-02018 CAS (MANx). On September 27, 2000, the defendants filed a motion to dismiss the Class Action Complaint. In June 2001, the court denied the motion to dismiss in part, granted it in part, and, in August 2001, denied a subsequent motion for reconsideration with respect to the motion to dismiss. In September 2001 plaintiffs filed a Third Consolidated Amended and Supplemental Class Action Complaint, asserting the same causes of action against the Company as were alleged in the Class Action Complaint (the "Third Amended Complaint"). In October 2001, the Company answered the Third Amended Complaint, denying liability to the plaintiffs on any cause of action.
The original lawsuit alleged that Musicmaker (HITS) and the other defendants made material omissions and disseminated materially false and misleading statements regarding the nature of the Musicmaker's operations. These alleged actions drove up the price of Musicmaker stock and enabled company insiders to sell shares at artificially inflated prices, the law firm
alleged. The suit seeks to represent shareholders during a class period between July 7 and Nov. 15, 1999.