Sonic Solutions, Inc. ("Sonic" or the Company) develops and markets computer software related to digital media, such as data, photographs, audio and video in digital formats.
The original Complaint charges Sonic and certain of its officers and directors with violations of the Securities Exchange Act of 1934. The Complaint alleges that prior to the Class Period, Sonic had manipulated its stock option accounting which caused its SEC filings made during the Class Period to be false. Also during the Class Period, Sonic and its top officers made false and misleading statements about its business and prospects, all while concealing its false stock option grant practices, causing its stock to trade at artificially inflated levels.
On February 1, 2007, Sonic announced that it had commenced a voluntary review of its historical and current stock option grant practices and related accounting. Then, on May 17, 2007, after the market closed, Sonic announced its preliminary unaudited financial results for the fourth quarter ended March 31, 2007, and stated that based on its previous review, Sonic lacked sufficient documentation for certain historical option grants and that the measurement dates associated with these option grants will need to be adjusted. The Company further stated that it will have to record additional cash and non-cash charges for stock-based compensation expense and restate previous financial statements, and that such charges will be material.
On this news, Sonic's stock collapsed from $13.37 per share to as low as $11.76 per share on volume of 1.8 million shares. This drop continued a decline from $18 per share which began in February 2007, when Sonic first disclosed its stock option problems.
On January 10, 2008, the Court issued the Order by Martin J. Jenkins granting the motion to appoint City Of Westland Police and Fire Retirement System and Plymouth County Retirement System as lead Plaintiffs and approved their selection of Coughlin Stoia Geller Rudman & Robbins LLP and Labaton Sucharow LLP as lead Counsels. On March 21, 2008, a Consolidated Class Action Complaint was filed. On May 27, 2008, the Plaintiffs filed a Corrected Consolidated Class Action Complaint. The Defendants then filed a motion to dismiss the Corrected Consolidated Class Action Complaint, which was then pending before the Court.
As summarized by the Company’s FORM 10-Q For the Quarterly Period Ended September 30, 2009, on April 6, 2009, the judge issued an order granting in part and denying in part the Company’s motion to dismiss, with leave to amend. On May 8, 2009, Plaintiffs filed a first amended class action Complaint, alleging violations of §§ 10(b), 14(a), 20(a), and 20A of the Securities Exchange Act. In July 2009, the parties reached an agreement in principle to settle this action. On October 15, 2009, the parties executed a stipulation of settlement providing for the creation of a settlement fund of $5 million to satisfy claims submitted by class members and to pay any attorneys fees awarded by the Court. As part of the settlement, the Company’s Directors and Officers liability insurers agreed to fund the settlement amount. Also on October 15, 2009, class Counsel submitted a motion for preliminary approval of the settlement which was set to be heard on December 3, 2009. In the event that the court preliminarily approves the settlement, notice will be provided to all class members and a date will be set for a final approval hearing.
On December 2, 2009, Judge Claudia Wilken preliminarily approved the settlement. The Fairness Hearing was set for April 8, 2010. The motions for settlement, the plan of allocation and attorney fees and expenses were approved on April 8, 2010. The case is now dismissed with prejudice.
