By the Final Judgment And Order Of Dismissal With Prejudice, the Court approves the settlement set forth in the Stipulation, and the Court dismisses with prejudice and without costs (except as otherwise provided in the Stipulation) the Litigation against the Settling Defendants, Ernst & Young, LLP and a certain Individual Defendant.
In a press release dated April 24, 2003, Superior Financial Corp., holding company of Superior Bank, announced that it has reached an agreement in principle to settle the consolidated federal class action securities suits, a similar derivative suit pending in state court and other related litigation involving the Company's former employees. This litigation is summarized in the Company's 2002 Annual Report on Form 10-K at Item 3, "Legal Proceedings - Bauman Litigation". The settlement agreements are subject to final court approval and call for the Company and its insurance carrier to pay sums well within the Company's policy limits and materially less than the Company's estimates of the costs of litigation. The Company's contribution to the settlement is approximately $475,000 pretax, or $0.04 diluted earnings per share, which amount has been recorded as a non-recurring expense in the first quarter of 2003. Superior plans to release its first quarter 2003 earnings announcement and concurrently file its Quarterly Report on Form 10-Q reflecting the settlement expense as scheduled on May 5, 2003.
As reported by the Company’s FORM 10-Q for the quarterly period ended June 30, 2003, on December 19, 2002, the court entered an order staying the action until March 20, 2003, to provide parties time to discuss a possible settlement of the Consolidated Suit. A mediation of the Bauman Litigation and the related suits of Cottrell v. Gardner, et al., Case No. CV-2002-121(I), Sebastian County, Arkansas (the “derivative suit”) and Superior Bank v. Bauman, et al., Case No. CV-2001-1089, Circuit Court, Sebastian County (the “Superior Bank Suit”) was held on January 29, 2003 and another mediation took place in late March. In April 2003, the Company reached an agreement in principle to settle the Bauman litigation, the derivative suit and the Superior Bank suit.
On March 4, 2002, the federal district court for the Eastern Division of Arkansas consolidated Bauman et al v. Superior Financial Corp., et al., Civ No. 4-01-CV-0075668 and Kashima v. Superior Financial Corp., et al., Civ No. 4-02-CV007SWW into a single action encaptioned Teresa Bauman et al. v. Superior Financial et al., Civ No. 4-01-CV756GH (the "Consolidated Suit"). On April 18, 2002, the Plaintiffs in the Consolidated suit filed a Consolidated Complaint, which added several individual defendants. On July 10, 2002, the Plaintiffs in the Consolidated Suit filed a second Consolidated Complaint, which added five state law claims against the Company and the individual defendants, consisting of two claims under the Arkansas Deceptive Trade Practice Act and claims for common law fraud, constructive fraud and breach of fiduciary duty. It is not expected that the Company's liability, if any, would increase as a result of the newly added claims. On August 9, 2002, the Company filed a motion to dismiss the Consolidated Suit in its entirety.
The original suit was filed against Superior Financial Corp. names the Company, two of its executive officers and the Company's independent auditors as defendants. The complaint alleges that, in 2000 and 2001, the Company had overstated income in press releases and financial reports, and thus improperly inflated its stock price. The complaint seeks undetermined damages for shareholders who purchased stock in that period.