By the Order and Final Judgment signed by U.S. District Judge Elizabeth A. Kovachevich, the Stipulation as set forth in the Stipulation of Settlement is approved, and the case is dismissed. Parties settled for $3 million dollars and the judged awarded plaintiffs' counsel 30% or the settlement amount ($900,000) plus $191,524 in expenses reimbursement.
According to Paradyne Networks, Inc.'s 10-Q filing for the quarterly period ended October 31, 2003, on October 14, 2003, the parties filed a notice with the Court that they had reached an agreement to settle the Florida Securities Actions. In exchange for a payment of $3 million, the plaintiff class has agreed to release the Defendants and dismiss the Florida Securities Actions. Defendants admitted no liability in making this settlement. The settlement is subject to the following conditions: execution of Stipulation of Settlement, preliminary approval by the Court of the terms of the Settlement, notice to the plaintiff class of the terms of the settlement and an opportunity to opt out of the settlement, funding by the Defendants’ insurer, and final approval by the Court.
The original complaint charges that, throughout the Class Period, defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of material misrepresentations that artificially inflated the price of Paradyne common stock. For example, on August 14, 2000, a little more than thirty business days before to the disclosure of the Company's true financial condition, defendants filed a quarterly report on Form 10-Q signed by both defendants May and Murphy, which reiterated the Company's second quarter 2000 financial results. There was mention in the Management's Discussion and Analysis section of the Form 10-Q of any of the problems then allegedly facing the Company, including a lack of customer demand for the Company's products. On September 28, 2000, defendants shocked the market by revealing that, contrary to the repeated class-period statements touting "record" growth and financial performance, third quarter results would be significantly lower than previously estimated, due to "reduced shipments to a few network service provider customers." The Company's press release also revealed that Paradyne expects results in the fourth quarter of 2000 and calendar 2001 to be impacted by these changes. In response to the news, Paradyne stock plummeted 42%, from $10 on September 27, 2000, to slightly over $5 on September 28, 2000, after the news was revealed, on unusually high trading volumes of over 7 million shares.