$56M Deal Gets Initial OK In Peregrine Securities Case
By Shannon Henson
Law360, New York (July 14, 2009, 12:00 AM ET)
A judge has given preliminary approval to an approximately $56 million class action settlement between shareholders and the former outside directors of software maker Peregrine Systems Inc., in what may be the largest cash recovery ever involving outside directors.
Judge Roger T. Benitez of the U.S. District Court for the Southern District of California on Monday granted the deal preliminary approval and scheduled a settlement fairness hearing for Oct. 16.
Counsel for the plaintiffs intend to apply for fees of 20 percent of the settlement amount and expenses of $500,000, according to the settlement notice.
If given final approval, the deal will end the litigation between the shareholders and the software maker, which had to file for bankruptcy protection in 2002 amid an accounting scandal.
The former outside directors included in the settlement are John J. Moores, Charles E. Noell III, Norris van den Berg, Richard A. Hosley II, Christopher A. Cole and Rodney T. Dammeyer, according to the settlement.
Also included in the deal are former company officers, including former CEO Stephen P. Gardner, former Chief Financial Officer Matthew C. Gless, former Chief Technology Officer Frederic B. Luddy and former general counsel Richard T. Nelson, who are coughing up $125,000 total.
A judge sentenced Nelson to spend six months confined to his home and three years on supervised release after he pled guilty to one count of bank fraud in relation to the scheme at Peregrine. Gardner was sentenced to eight years and a month in prison for his role.
The settling defendants deny all allegations of wrongdoing or liability, the settlement added.
“This is absolutely a major achievement and a major recovery,” said Solomon Cera of Gold Bennett Cera & Sidener LLP, co-counsel for the lead plaintiffs. “We think it’s a historic and outstanding result.”
Cera said the district court had dismissed the Section 10(b) claims against the settling outside directors — a ruling that was on appeal before the U.S. Court of Appeals for the Ninth Circuit when the settlement was reached.
Some defendants still faced Section 11 claims at the district court level, but those had been stayed pending resolution of the appeal, he said.
The class, which Cera said likely consists of thousands of people, includes anyone who bought or acquired Peregrine securities from July 22, 1999, to May 3, 2002, as well as those who owned shares of Harbinger Corp. or Remedy Corp. and exchanged those shares for stock in Peregrine.
Settlements were previously reached with accounting firm Arthur Andersen LLP and other former officers and directors.
The case is the result of the 2002 consolidation of a number of proposed class actions alleging securities law violations against Peregrine and others.
The consolidated complaint alleged, among other things, that class members purchased shares of the company at artificially inflated prices as a result of the dissemination of false and misleading statements about Peregrine’s financial condition.
The plaintiffs are represented by Gold Bennett Cera & Sidener LLP, Abraham Fruchter & Twersky LLP and Stull Stull & Brody, among others.
The defendants are represented by Quinn Emanuel Urquhart Oliver & Hedges LLP, Bewley Lassleben & Miller LLP and Paul Hastings Janofsky & Walker LLP, among others.
The case is In re: Peregrine Systems Inc. et al., case number 02-cv-00870, in the U.S. District Court for the Southern District of California.
–Additional reporting by Ben James