On April 17, 2007 the United States Court of Appeals issued a mandate withdrawing plaintiffs' appeal.
According to a press release dated January 30, 2007, Milberg Weiss & Bershad was awarded a little more than one-third of the $101 million (U.S.) in fees and expenses it sought for winning a billion-dollar shareholder settlement from Nortel Networks Corp. U.S. District Judge Richard Berman in New York awarded Milberg $37.7 million and said a $101 million award would have been "excessive." The ruling is a setback for Milberg, which has been charged with paying clients kickbacks to bring class-action lawsuits. Milberg was lead law firm in a securities class action against Brampton-based Nortel over what investors said were accounting manipulations.
On January 25, 2007, a Notice of Appeal from the December 26, 2006 Decision and Order approving the Nortel I settlement was filed by Rinis Travel Service, Inc. Profit Sharing Trust, David Carpenter in the Second Circuit Court of Appeals.
According to a press release dated December 26, 2006, two U.S. judges on Tuesday gave their blessings to an estimated $2.45 billion settlement between Nortel Networks Corp. and shareholders, moving the pact closer to final approval. Nortel and shareholders had agreed in principle to the settlement in February to put an end to class-action lawsuits stemming from an accounting scandal at the telecommunications equipment company. The settlement still requires approval by various Canadian courts. Under the settlement, the company has agreed to pay $575 million in cash and issue shares equal to about 14.5 percent of its current outstanding equity, worth more than $1.64 billion based on Nortel 's current stock value. The settlement, which in addition includes $228.5 million in payments from Nortel's insurers, also is to include one-half of any money that the company recovers in its lawsuits against former Chief Executive Frank Dunn and other senior officers fired in connection with the accounting debacle. The complex litigation involved two separate class-action securities fraud suits brought by different shareholder groups. U.S. District Judges Richard Berman and Loretta Preska in Manhattan, who oversaw the two halves of the total case, each issued written decisions on Tuesday approving the settlements. "The settlement is approved as fair, reasonable and adequate," Judge Preska wrote in her decision.
The complaint against Nortel Networks Corporation was first filed in the U.S. District Court for the Eastern District of New York on February 16, 2001. That case was then transferred to the U.S. District Court for the Southern District of New York. On March 17, 2004, a separate case was also filed in the U.S. District Court for the Southern District of New York against Nortel Networks, purporting different allegations. In September 2005, Nortel Networks Corporation announced that, in connection with these two pending class action lawsuits in the Southern District of New York against Nortel and others, the two presiding United States District Judges, the Honorables Richard M. Berman and Loretta A. Preska, appointed the Honorable Robert W. Sweet as a mediator to oversee settlement negotiations between Nortel and the lead plaintiffs in such actions. The appointment was pursuant to a request by Nortel and the lead plaintiffs for the Courts' assistance to facilitate the possibility of achieving a global settlement encompassing these two actions. The two class actions noted above relate to alleged violations of United States federal securities laws and encompass two alleged class periods, between October 24, 2000 and February 15, 2001 in one action (the action known as “Nortel I”), and between April 24, 2003 and April 27, 2004 in the other action (the action known as “Nortel II”).
According to two separate summary notices of proposed settlements, both dated August 11, 2006, a Settlement of the Nortel I and Nortel II Actions has been established. The Settlement in the Nortel I Action will provide total proceeds consisting of approximately $438,667,428 in cash, plus 314,333,875 shares of Nortel common stock for the benefit of members of the Classes. The Settlement of the Nortel II Action will provide total proceeds consisting of approximately $370,157,418 in cash, plus 314,333,875 shares of Nortel common stock for the benefit of members of the Classes. In addition, Nortel will adopt certain corporate governance enhancements. The Settlements are contingent on approval by the Courts in the Nortel I Actions and in certain related actions against Nortel in the United States and Canada (the "Nortel II Actions") for which there is a separate notice. The Settlement is further subject to certain regulatory approvals. In order for the Settlements to become effective, it must be approved by the New York Court, the Ontario Court, the Quebec Court and the B.C. Court, each of which must be satisfied that the Settlement is fair, reasonable, adequate and in the best interests of Class Members. The Settlement Fairness/Approval Hearings have been scheduled with the respective courts. The U.S. Action hearing is scheduled for October 26, 2006, in the United States District Court for the Southern District of New York.
In a press release dated June 21, 2006, Nortel Networks Corp. said Wednesday it has reached an agreement with the plaintiffs of two Canadian shareholder class-action lawsuits sparked by revised financial results that helped drive down the value of the company's stock in recent years. Settlement of the two Canadian suits was a condition of Nortel's previously announced agreement in principle to settle two related major U.S. shareholder suits, which were essentially based on the same events. The Canadian telecommunications company said the settlements encompass 'most' pending class- actions suits and demands filed by shareholders against Nortel due to financial revisions between 2001 and 2005. 'Nortel has now also reached agreement with the plaintiffs in those Canadian actions with respect to the global settlement as set forth in the stipulations and agreements of settlement,' the company said in a brief statement Wednesday. The company said it and the lead plaintiffs in the two U.S. suits pending in New York have entered into 'stipulations and agreements of settlement,' but noted various court, regulatory and stock exchange approvals were still required. In the U.S. suits, announced in February, Nortel said it would make a payment of $575 million in cash and issue 628,667,750 of its common shares -- about 14.5 percent of its equity -- as a major part of its compensation to shareholders. The company has also agreed to contribute one-half of any recovery in the existing litigation by Nortel against three former senior officers, including former chief executives Frank Dunn, who were fired in April 2004. The settlement contains no admission of wrongdoing by the company or any of the other defendants.
In a press release dated March 20, 2006, Nortel Networks Corp. said its insurers have agreed to pay $228.5 million toward a proposed settlement of a shareholder lawsuit. As part of the settlement announced in February, Toronto-based Nortel will make a payment of $575 million in cash, issue 628.7 million common shares, and contribute half of any funds it recovers from lawsuits against former senior officers who were fired in April 2004. The proposed settlement was hinged upon several conditions, including insurance coverage. Nortel said Friday it has also agreed to certain corporate governance measures.
In a press release dated February 8, 2006, the contingent settlement announced settles the securities fraud claims being prosecuted against the company and certain of its directors in Nortel case of 2004, as well as the claims asserted in the Nortel case of 2001. Under the terms of the proposed global settlement contemplated by the agreement in principle, the Nortel would make a payment of US$575 million in cash, issue 628,667,750 of its common shares (representing 14.5% of its current equity), and contribute one-half of any recovery in the existing litigation by Nortel against the Nortel’s former senior officers who were terminated for cause in April 2004. The agreement in principle is also conditioned on the contribution of available insurance, which has yet to be resolved. The total settlement amount will include all plaintiffs' court-approved attorneys' fees. Nortel has also agreed to respond to the corporate governance proposals of the lead plaintiffs and enter into a dialogue to review the company's corporate governance.
According to the docket 04-CV-2115, for the action filed in 2004, on February 23, 2005, a Notice of Case Reassignment was filed, assigning the case to U.S. District Judge Loretta A. Preska. On March 1, 2005, the Multi-District Litigation Panel transferred the case to Multi-District Litigation for coordinated or consolidated pretrial proceedings with the actions pending in that district. The complaint filed on March 17, 2004, charges defendants with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder. More specifically, the complaint alleges that, shortly before the start of the Class Period, Nortel advised investors that it would be restating its financial results for 2000, 2001 and 2002 and the first and second quarters of 2003. Then, after reporting solid fourth quarter results during the Class Period that far surpassed analysts' expectations, the Company shocked investors by announcing that it would be restating its financial results yet again, this time for the just- reported fourth quarter of 2003 as well. Subsequently, in a clear indication of the severity of the Company's problems, the Company announced that it would be placing certain individual defendants on paid leave of absence, pending the completion of the Company's independent review being undertaken by its audit committee. Following this announcement, shares of Nortel common stock fell $1.19 per share, or 18.5%, to close at $5.24 per share on extremely high trading volume.
According to the docket, 01-CV-1855, for the 2001 action, on May 15, 2003, the Court entered Final Judgment Order relating to case 01-cv-2041, the Weisburgh action. According to the Order, the Weisburgh action was consolidated with In re Nortel Networks Corp. Sec. Litig., civil action no. 2001 cv 01855 for the limited purpose of discovery. The two cases were not consolidated for the purposes of ruling upon the motion to dismiss filed by defendants with respect to both actions. Plaintiffs' amended complaint in the Weisburgh action is dismissed with prejudice pursuant to FRCP 12(b)(6).
On June 8, 2001, the U.S. District Court for the Eastern District of New York entered the Stipulation and Order signed by Raymond J. Dearie, transferring the first filed complaint, case number 01-cv-945, to the U.S.D.C. for the Southern District of New York under new case number 01-cv-5676. According to the docket for 01-cv-5676, on October 16, 2001, the Court entered the Order signed by Judge Richard M. Berman consolidating the actions, appointing lead plaintiffs and approving selection of co-lead counsel. Further, according to the Order, case 01-cv-5676 was consolidated with 00-cv-1855, which is the lead case number.
The original complaint first filed on February 16, 2001, against Nortel Networks Corporation alleges that defendants violated Sections 10(b) and 20(a) of the Securities Act of 1934, arising from misrepresentations made by defendants concerning the demand for Nortel's products. The complaint also alleges that defendants made repeated, affirmative and misleading statements - in the face of decreased capital expenditures in the telecommunications industry regarding the level of demand for Nortel's products and Nortel's growth in revenues, earnings and market share. On 02/15/2001, Nortel issued a press release admitting that demand for its products had in fact slowed and that the company would fall drastically short of previously-stated revenue and earnings guidance and that the "inflated" price of Nortel's shares quickly collapsed. Nortel's shares lost approximately 33% of their value in one day, falling from $29.75 per share to $20.00 per share.
