(CN) - A federal judge approved a $10 million settlement for former Towers Perrin employee-shareholders who allegedly lost millions when the global professional services firm merged to form Towers Watson.
For much of Towers, Perrin, Forster & Crosby Inc.'s history, employees who were promoted to "principals" could buy its stock at much lower than book value, as long as they agreed to resell the shares to the company at book value upon retirement.
Though the Stamford, Conn.-based firm allegedly promised shareholders that it would remain employee-owned, it merged with the global consulting corporation Watson Wyatt Worldwide to form a publicly-traded company, Towers Watson, in late 2009.
That made the value of resold shares fly through the roof, Alan Dugan and other former employee-shareholders claimed in three federal complaints filed soon after the merger's approval.
The complaints, which were later consolidated in the federal court in Philadelphia, asserted claims for breach of contract, express trust and fiduciary duty, as well as for promissory estoppel and unjust enrichment.
But U.S. District Judge Mitchell Goldberg awarded the Towers Perrin directors summary judgment on Dec. 11, 2012, finding that they never promised to keep the firm employee-owned.
On appeal, and after consulting with the 3rd Circuit's chief mediator, the parties ultimately reached a $10 million settlement agreement to be split among 1,050 class members based on tenure and the number of shares they held when they left the company.
The proposed settlement class includes all former principals who ended their services between January 1971 and June 2005, except for those who received any consideration arising from the merger, participated in the company's voluntary separation program in 2006, signed a release of claims related to reselling stock, were employees of Towers Perrin or Watson Wyatt at the time of the merger, or are current employees of Towers Watson.
Goldberg preliminarily certified the class last week, finding that it met all requirements put forth by Federal Rule of Civil Procedure 23.
"Given the common threads tying all the class members' claims together, class adjudication is plainly superior to hundreds of individual cases challenging essentially the same conduct," Goldberg wrote.
The judge also preliminarily approved the settlement and the 16-page notice and manner of service.
"At this stage, the settlement appears within the bounds of reasonableness warranting preliminary approval," Goldberg wrote. "While the $10 million recovery reflects but a fraction of the increased value from the public sale, plaintiffs were fighting an uphill battle by the time the settlement was reached."
He continued: "This court had granted summary judgment as to all claims against all defendants, leaving plaintiffs with a substantial chance of receiving no recovery at all. Plaintiffs faced an uncertain outcome in the 3rd Circuit, followed by more litigation in this court, if they hoped to obtain a favorable judgment. This lengthy process would have resulted in significant cost and delay.
"When compared to the relatively immediate and certain recovery promised by the settlement, there is good reason to think that the recovery is fair," Goldberg said. "In addition, the participation of the 3rd Circuit's mediator suggests an arms-length negotiation, rather than collusion for the benefit of attorneys or named plaintiffs. Class counsel's requested compensation, which plaintiffs represent will be no more than $3 million (not including expenses), or 30 percent of the total fund, also falls within the bounds of reasonableness."
With more than 14,000 employees across the world and at its headquarters in New York City, Towers Watson reportedly reaped $3.42 billion in revenue last year.
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