According to a press release dated January 18, 2002, with trial set for November 5, 2001, a settlement was reached in October 2001. Alcatel agreed to pay $75 million to the class. The Court approved the settlement and entered final judgment on December 18, 2001. The Court awarded attorneys' fees of $14,280,314.40 to counsel for the plaintiffs. Pursuant to an agreement with co-counsel, Susman Godfrey recovered $5,407,503.39 in fees. The settlement became final on January 18, 2002 because there were no appeals from the final judgment.
As summarized by the Company’s Form 20-F for the fiscal year ended December 31, 2002, the Actions purported to be brought on behalf of classes consisting of persons who (i) acquired Class A ADSs in connection with our acquisition of DSC Communications Corporation in September 1998, or (ii) purchased Class A ADSs between March 19, 1998 through September 17, 1998, or acquired call and put options on Class A ADSs between March 19, 1998 and September 17, 1998. The Actions were consolidated in the U.S. District Court for the Eastern District of Texas. The Company moved to dismiss the complaints brought by the two categories of plaintiffs. On November 18, 1999, the court dismissed the complaint of those persons who acquired Class A ADSs and call and put options between March 19, 1998 and September 17, 1998, with leave to amend. Those plaintiffs appealed, but the U.S. Court of Appeals for the Fifth Circuit affirmed the dismissal of their complaint on July 1, 2002. The time period for these plaintiffs to seek a writ of certiorari from the U.S. Supreme Court expired on September 30, 2002, and this matter can now be considered closed. The claims of the other group of plaintiffs, representing those parties that received Class A ADSs as a result of the Company's acquisition of DSC by merger, were settled in December 2001, without admission by the Company of any liability or wrongdoing. The cost to the Company of this settlement not covered by its insurance was $4 million.
Several purported class action complaints were also filed in the U.S. District Courts for the Southern District of New York and Delaware. In March 1999, the cases were transferred to the U.S. District Court for the Eastern District of Texas. The case was then handled in Multidistrict Litigation, case number 4:99md1263.
The original class action complaint was filed alleging defendants with violations of securities laws by concealing poor operating results, and inflating its stock price. According to the lawsuit, DSC stockholders were wrongfully induced to exchange their DSC shares for Alcatel ADSs at an artificially inflated rate. The lawsuit alleges that defendants' proxy statement/prospectus failed to disclose that Alcatel's operating results in the first half of 1998 were worse than the Company had led investors to expect. These omissions prompted DSC shareholders to approve the merger, which had terms granting them only .815 ADSs for each DSC share they possessed. According to the lawsuit Alcatel did not hint at the truth of the operating results until Sept. 17, 1998, nine days after it announced completion of the merger, when it dropped a bombshell: its revenues and operating profits for the first half of 1998 declined 29% and 15% respectively from the prior year. This stunning announcement caused an immediate drop in Alcatel's ADS price from $31-5/16 to $19-1/8. This notice to class members is being made pursuant to applicable law. If you acquired Alcatel ADSs pursuant to its subsidiary's merger with DSC, you may wish to join the action. You may move the court to serve as a lead plaintiff on or before 60 days from Nov. 17, 1998.