In December 2006, the appellate court overturned the certification of classes in six test cases that were selected by the underwriter defendants and plaintiffs in the coordinated proceedings. Because class certification was a condition of the settlement, it was unlikely that the settlement would receive final Court approval. On June 25, 2007, the Court entered an order terminating the proposed settlement based upon a stipulation among the parties to the settlement.
This is one of a number of actions coordinated for pretrial purposes as In re Initial Public Offering Securities Litigation, 21 MC 92 with the first action filed on January 12, 2001. Plaintiffs in the coordinated proceeding are bringing claims under the federal securities laws against numerous underwriters, companies, and individuals, alleging generally that defendant underwriters engaged in improper and undisclosed activities concerning the allocation of shares in the IPOs of more than 300 companies during late 1998 through 2000. In June 2004, a stipulation of settlement and release of claims against the issuer defendants, including the Company, was submitted to the court for approval. The terms of the settlement if approved, would dismiss and release all claims against the participating defendants (including the Company). In exchange for this dismissal, D&O insurance carriers would agree to guarantee a recovery by the plaintiffs from the underwriter defendants of at least $1 billion, and the issuer defendants would agree to an assignment or surrender to the plaintiffs of certain claims the issuer defendants may have against the underwriters. On August 31, 2005, the court confirmed preliminary approval of the settlement.
According to a press release dated Friday May 18, 2001, a complaint has been filed against MP3.com, Inc. The complaint alleges violations under Sections 11, 12 and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5. The complaint alleges that MP3.com, Inc. and certain of its current and former officers and directors violated the federal securities laws by issuing and selling MP3.com common stock pursuant to the IPO without disclosing to investors that at least two of the lead underwriters in the offering had solicited and received excessive and undisclosed commissions from certain investors. In exchange for the excessive commissions, the complaint alleges, lead underwriters Credit Suisse First Boston Corp. and BancBoston Robertson Stephens, Inc. allocated MP3.com shares to customers at the IPO price of $28.00 per share. To receive the allocations the defendant underwriters' brokerage customers had to agree to purchase additional shares in the aftermarket at progressively higher prices. Rather than allowing their customers to keep their profits from the IPO, the complaint alleges, the defendant lead underwriters required their customers to 'kick back' some of their profits in the form of secret commissions. These secret commission payments were sometimes calculated after the fact based on how much profit each investor had made from his or her IPO stock allocation. The complaint further alleges that the Prospectus and the Registration Statement contained material misstatements regarding the commissions that the underwriters would derive from the IPO transaction.