According to the Company’s Form 10-Q for the quarterly period ended September 30, 2008, in November 2003, plaintiffs Tony Christ, individually and as custodian for Brian and Katelyn Christ, Casey Crawford, Thomas Orndorff and Marvin Rich, filed a purported class action complaint against Bernard L. Schwartz and Richard J. Townsend in the United States District Court for the Southern District of New York. The complaint seeks, among other things, damages in an unspecified amount and reimbursement of plaintiffs’ reasonable costs and expenses. The complaint alleges (a) that defendants violated Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder, by making material misstatements or failing to state material facts about Old Loral’s financial condition relating to the restatement in 2003 of the financial statements for the second and third quarters of 2002 to correct accounting for certain general and administrative expenses and the alleged improper accounting for a satellite transaction with APT Satellite Company Ltd. and (b) that each of the defendants is secondarily liable for these alleged misstatements and omissions under Section 20(a) of the Exchange Act as an alleged “controlling person” of Old Loral. The class of plaintiffs on whose behalf the lawsuit has been asserted consists of all buyers of Old Loral common stock during the period from July 31, 2002 through June 29, 2003, excluding the defendants and certain persons related to or affiliated with them. In October 2004, a motion to dismiss the complaint in its entirety was denied by the Court. The defendants filed an answer to the complaint in December 2004. Discovery in this case had been stayed, but the stay ended in June 2008. On September 30, 2008, the parties entered into an agreement to settle the case, pursuant to which a settlement will be funded entirely by Old Loral’s directors and officers liability insurer, and New Loral will not be required to make any contribution toward the settlement. The settlement, which was preliminarily approved by the Court on October 8, 2008, is subject to final approval by the Court after a hearing, scheduled for December 18, 2008, to decide whether to approve the settlement as fair, reasonable and adequate. Since this case was not brought against Old Loral, but only against certain of its officers, we believe, although no assurance can be given, that, should the settlement not be consummated, to the extent that any award is ultimately granted to the plaintiffs in this action, the liability of New Loral, if any, with respect thereto is limited solely to the D&O Claims as described above under “Indemnification Claims.”
According to a press release dated December 12, 2008, the Settlement Hearing regarding the Settlement achieved in the above captioned action, which was scheduled to take place on December 18, 2008, has been adjourned. The Settlement Hearing shall now be held on February 26, 2009, at 1:00 p.m., before the Honorable John E. Sprizzo, United States District Judge, at the United States District Court for the Southern District of New York, 500 Pearl Street, New York, New York, Courtroom 14C, to determine whether: (a) the proposed Settlement should be approved as fair, reasonable and adequate, and whether an order approving the Settlement should be entered thereon; (b) the Plan of Allocation of the Settlement Fund should be approved; and (c) to award attorneys’ fees and reimbursement of expenses to Class Counsel from the Settlement Amount.
On February 26, 2009, after the Settlement Fairness Hearing concluded the judge entered the Order and Final Judgment, approving the settlement and dismissing the case with prejudice. Lead counsel were awarded 27.5% of the gross settlement fund and reimbursement of expenses in the amount of $263,446.61.
As summarized by the Company's Form 10-K For The Fiscal Year Ended December 31, 2010, certain class members objected to the settlement and filed a notice of appeal, and other class members, who together had class period purchases valued at approximately $550,000, elected to opt out of the class action settlement and commenced individual lawsuits against the defendants. In August 2009, the objecting and opt-out class members entered into an agreement with the defendants to settle their claims, pursuant to which a settlement will be funded entirely by Old Loral’s directors and officers liability insurer, and Loral will not be required to make any contribution toward the settlement. In addition, in March 2009, at the time that they filed a notice of appeal with respect to the Beleson decision (discussed above), the plaintiffs in the Beleson case also filed a notice of appeal with respect to the court’s decision approving the Christ settlement, arguing that the Christ settlement impairs the rights of the Beleson class. In September 2010, counsel for the Beleson class agreed to voluntarily dismiss this appeal and, in November 2010, a stipulation of voluntary dismissal was approved by the court. In February 2011, the court approved distribution of the settlement proceeds. As a result of the settlement and final dismissal of all appeals, Loral will not incur any liability as a result of this case.