According to the docket latest posted, on April 12, 2005, the Court entered the Order signed by U.S. District Judge Ed Kinkeade preliminarily approving the settlement and approving the form and manner of notice. On November 9, 2005, the Court entered the Orders approving the settlement, the plan of allocation of settlement proceeds and awarding attorneys' fees of 22.2% of the Settlement and reimbursement of expenses in an aggregate amount of $541,203.77. The Court further entered that day the Findings of Fact and Conclusions of Law as well as the Final Judgment and Order of Dismissal with Prejudice. Several notices of appeal have since been filed and are currently pending.
In a press release dated January 21, 2005, TXU Corp said it reached a settlement on consolidated securities class-action litigation, agreeing to pay $150 million to the parties that filed the suit-buyers of TXU securities. The Dallas-based company also agreed to adopt certain corporate governance initiatives, subject to board approval. TXU said insurance will cover $66 million of the payment and it expects to recover additional amounts from other insurance carriers. The remaining payment amount is less than what the company has reserved for settlement of litigation, it said. The corporate governance initiatives to be considered by the board include a review of director compensation, a policy requiring majority shareholder approval prior to the adoption of any stock-option plan, more stringent criteria for determining director independence and the establishment of stock-ownership guidelines for directors.
As summarized on a lawfirm's website, on November 15, 2002, the Court issued an order consolidating all related cases into one class action lawsuit entitled Schwartz v. TXU Corp., C.A. No. 3:02-CV-2243-K. Beginning on December 13, 2002 competing motions for the appointment of Lead Plaintiff and Lead Counsel were filed with the Court. On May 8, 2003, the Court appointed a Lead Plaintiff Group and their selection of Co-Lead Counsel. On July 21, 2003, Lead Plaintiffs filed their Consolidated Complaint on behalf of all persons who purchased the publicly traded securities of TXU and TXU Europe Limited, its wholly-owned subsidiary including TXU Europe Capital I, 9 ¾% Trust Originated Preferred Securities (“TOPrS”), between April 26, 2001 and October 11, 2002, and including those who purchased TXU securities pursuant to TXU’s May 31, 2002 secondary stock offering and its offering of FELINE PRIDES. Defendants filed their Motions to Dismiss the complaint on September 24, 2003 which Lead Plaintiffs opposed on November 24, 2003. On January 21, 2005, prior to a ruling on Defendants’ motions, TXU issued a press release announcing that it agreed to settle the claims against it.
The original complaint charges TXU and certain of its officers and directors with violations of the Securities Exchange Act of 1934. TXU provides electric and natural gas services, merchant energy trading, energy marketing, telecommunications and energy-related services. The complaint alleges that during the Class Period, defendants represented that the Company could succeed in the competition created by deregulation. Defendants then represented that TXU's European operations were improving, it would succeed competition in the U.K. market and it was on track to report EPS of $4.35+ and $4.60+ in 2002 and 2003, respectively. As a result of these allegedly false statements, TXU's stock traded at artificially inflated levels, as high as $56 per share. Due to this inflation, defendants were able to complete a secondary offering of 11.8 million shares of common stock, priced at $51.15 per share and 8.8 million units of FELINE PRIDES (equity linked debt securities), raising nearly a billion dollars in much needed financing. Subsequent to the offering, defendants needed to maintain a high stock price to avoid triggering additional debt and the conversion of preferred stock into common stock pursuant to a partnership agreement. On 10/4/02, TXU issued an earnings warning, indicating that due to customer attrition and ongoing problems in Europe the Company would report 2002 EPS of only $3.25. On this news, the Company's stock price declined to $27 per share, from more than $40 per share the prior week. However, the stock continued to be inflated as defendants concealed the extreme liquidity problems from which the Company was suffering. Defendants even assured the market that the Company was strong financially and that the dividend was 'sound and secure.' Then, on 10/14/02, before the market opened, TXU stunned the market with news that it was cutting its dividend 80%, to $0.125 per share and would no longer support its European operations. The Company's stock price immediately collapsed on this news to as low as $10.10 per share before closing at $12.94, a one day drop of 31%, on volume of 39 million shares.