On September 22, 2006, the Court entered the Order granting the motion to appoint lead counsel and lead plaintiff. On October 2, 2006, the plaintiffs filed a Class Action Amended Complaint. On October 18, 2006, the defendants filed a motion to dismiss Class Action Amended Complaint. On May 24, 2007, the Court entered the Order staying the Purchase Action pursuant to the Preliminary Order approving settlement dated May 24, 2007 in related action, Lan v. Ludrof, No. 1:06-cv-114. On March 21, 2008, the Court in the Lan Action entered a Memorandum Opinion and Order approving the settlement and dismissing the action with prejudice.
As summarized in the March 21, 2008 Memorandum Opinion and Order, on May 15, 2006, Plaintiff Lin Lan commenced her action by filing a Class Action Complaint on behalf of herself and all similarly situated minority shareholders of EFL who had suffered or would suffer injury as a result of the Defendants’ actions in connection with the Tender Offer. Lan’s sole cause of action was one for breach of fiduciary duty against following Defendants. On June 1, 2006, a separate class action lawsuit arising out of the Tender Offer was commenced in this Court by Naomi Purchase, naming essentially the same Defendants as were named in the Lan action. However, unlike Lan, Purchase included in her complaint a claim under Section 14(e) of the Securities Exchange Act of 1934 (commonly known as the “Williams Act”). On April 27, 2007, the parties in the Lan action entered into settlement. The Stipulation of Settlement provides for the payment of total Settlement Consideration equal to $5,234,277.17 (or $2.45 per share for 2,136,439.66 total shares held by the members of the Class on May 25, 2006) in settlement of all claims that were or could have been asserted in connection with the Tender Officer, including but not limited to the Williams Act and fiduciary duty claims asserted in the Purchase Action. There was no objection to Defendants’ demand that any potential settlement be accompanied by a global release of all claims, including the Purchase Williams Act claim.
The original complaint alleges an effort by Erie Indemnity Company ("Erie Indemnity"), Erie Insurance Exchange ("Erie Exchange") and EFL's board of directors to "freeze out" EFL's minority shareholders at an unreasonably low price. As described in the Complaint, defendants artificially depressed the price of EFL shares to as low as $26.50 per share even though they had traded at above $32 per share for nearly two years. Defendants then announced that a "third-party" purchaser would pay the minority shareholders $32 for their shares. The purchaser was not a "third party" at all, but rather a shell entity owned and controlled by Erie Indemnity and Erie Exchange.
The Complaint alleges that EFL and its directors, along with Erie Indemnity and Erie Exchange, violated Section 14(e) of the Securities and Exchange Act of 1934 by issuing false and misleading tender offer documents in which they misrepresented or failed to disclose the true facts regarding the proposed tender offer.