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Host bus adapter (HBA) maker Emulex Corp., Costa Mesa, Calif., put a number of lawsuits to rest on Wednesday when it announced that it has reached "tentative" settlements to conclude securities class action and derivative lawsuits brought against the company and certain directors and officers in 2001.
Under the settlements, all claims will be dismissed and the litigation will be terminated in exchange for a payment of $39.5 million, according to Emulex. Additionally, the company will receive approximately 32% of the settlement from its insurance coverage, which means Emulex is on the hook for $16.7 million in the third fiscal quarter.
Robin Austin, senior manager of public relations for Emulex, said this was a common securities lawsuit that resulted from the economic slowdown causing Emulex to experience order deferrals and resulting in the decrease of the company's stock price.
Austin would not comment on the plaintiffs or officers named in the suits.
"This was to settle a class action from a few years ago," said Steve Duplessie, founder and senior analyst, Enterprise Storage Group Inc., Milford, Mass.
Duplessie said the settlement is "no big deal by itself", but it removes an albatross from the neck of management and will allow them to get on with the business of storage.
According to the Tech Law Journal, in February 2001 a civil suit was filed in U.S. District Court against Emulex and eight of its officers and directors alleging violation of federal securities laws. The suit named CEO Paul Folino, CEO, Michael Rockenbach, CFO, and six other officers.
Emulex maintains that despite its past problems it's flush with cash. Michael Rockenbach, Emulex executive vice president of finance and CFO said Emulex remains a financially strong company, with cash, cash equivalents and investments in excess of $570 million.
Emulex said it agreed to the settlements to end the litigation and believes that settling is in the best interest of shareholders.
The terms of the agreements, which are subject to final court approval and notice to class members, includes no admission of liability or wrongdoing by the company or other defendants, the company said.
The bulls and bears have taken more than a pound of flesh from Emulex in the past few years.
In August of 2000, a former employee of the Internet Wire perpetrated a hoax by manufacturing a false press release that stated the company was under investigation by the SEC and that it's CEO, Folino, intended to resign.
Emulex's stock plummeted, wiping out billions in stock value for the company.
The suspect was subsequently arrested and jailed.
Emulex makes Fibre Channel HBAs, ASICs and software products for Fibre Channel SANs, NAS and RAID systems.
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