CHICAGO (CN) – Class counsel will receive 27.5 percent – or $55 million – of a $200 million settlement Motorola will pay to end a class action that claimed it inflated its share price by concealing the delayed introduction of new 3G phones.
Shareholders filed a class action against Motorola executives in 2007. The February 2012 settlement was the third largest ever in the 7th Circuit.
Motorola repeatedly assured shareholders that it would roll out new 3G phones before Thanksgiving 2006, but the vendor it relied on to produce integrated circuits for the phones failed to deliver. The delay set the rollout date back to January 2007, missing the entire Christmas season.
The class claimed that the setback caused an “earnings gap” of $1.1 billion and produced internal emails indicating that Motorola executives were aware of the delays even as the company released public statements that “product launches are on track.”
For example, in one email introduced by the plaintiffs, the company’s lead platform engineer wrote that “the considerable consequences will be our stock price sinking because we are losing our ass on 3G products.”
Motorola lost its motion for summary judgment in 2011.
U.S. District Judge Amy St. Eve granted class counsel 27.5 percent of the settlement amount in attorneys fees, for a total of $55 million. She also awarded an additional $4.7 million in costs.
During the course of the litigation, the parties briefed 15 discovery disputes, subpoenaed more than 40 parties, produced over 3.8 million pages of documents and conducted 60 depositions.
Only one class member, Edward Falkner, objected to the fee request. He argued that the court should award no more than 15 percent of the settlement amount, but St. Eve said that the request of 27.5 percent is “consistent with the market rate.”
“The risk of nonpayment and the stakes of this complex securities fraud case were significant. Class Counsel litigated this case aggressively for four and one-half years, on a fully contingent basis, before securing what appears to be the third-largest settlement amount in a securities fraud class action in the Seventh Circuit. Despite successfully defeating Motorola’s motion for summary judgment, plaintiffs faced significant risks at trial in proving both loss causation and damages. Trial undoubtedly would have been lengthy and would have involved numerous witnesses, both fact and expert,” the judge continued.
St. Eve also noted that, as opposed to comparable securities fraud class actions, “there were no governmental investigations or prosecutions related to the alleged fraud upon which Class Counsel could rest their theory of the case. Rather, they investigated the facts and developed their theory of liability from scratch, involving significant time and expense.”