$17.5M Settlement In Suit V. Rhythms Execs Gets OK

$17.5M Settlement In Suit V. Rhythms Execs Gets OK - 4/6/2009

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News	News 2009
HEADLINES \| SETTLEMENTS AND DISMISSALS \| COURT FILINGS LINKS TO OTHER NEWS \| NEWS ARCHIVE	HEADLINES ARCHIVED SETTLEMENTS AND DISMISSALS ARCHIVED

SETTLEMENT NEWS:

$17.5M Settlement In Suit V. Rhythms Execs Gets OK
Evan Weinberger

Securities Law 360. April 6, 2009
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EXCERPT: A long-running class action securities lawsuit against the officers and directors of now-defunct high-speed Internet provider Rhythms NetConnections Inc. came to a close last week, when the judge overseeing the case gave final approval to a $17.5 million settlement. Judge John K. Lane of the U.S. District Court for the District of Colorado gave his final approval of the settlement on Friday, providing the culmination of a class action launched in January 2002, less than six months after Rhythms NetConnections filed for Chapter 11 bankruptcy protection and ultimately went out of business. A class of shareholders who purchased shares in Rhythms between Jan. 6, 2000, and April 2, 2001, brought the case alleging that the officers and directors “knowingly or recklessly” made false statements about the company's subscriber line count, growth and financial condition in an effort to inflate its stock price, according to the settlement agreement filed in December 2008. Rhythms was not named as a defendant in the case because of the bankruptcy proceedings. The parties reached a settlement at the end of November, with the help of two separate mediators. Rhythms NetConnections was based in Engelwood, Colo. It filed for bankruptcy protection in August 2001, part of a wave of bankruptcies that hit digital subscriber line, or DSL, Internet service providers during the recession the U.S. was mired in at the time. The bankruptcy filing came soon after Rhythms stock was delisted from the Nasdaq Stock Exchange, the settlement agreement said. Microsoft Corp. held a $30 million minority stake in the company, according to U.S. Securities and Exchange Commission filings. Judge Lane awarded the plaintiffs' attorneys, from Milberg LLP and Stull Stull & Brody, 30 percent of the settlement fund as well as nearly $2.6 million in expenses from the fund.

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