Shareholders have filed a lawsuit against Cleveland-based Eaton Corp., but a possible settlement would give plaintiff lawyers $6 million for their fees and expenses, with nothing going to their clients.
The settlement will be reviewed in an Ohio Common Pleas court hearing with Judge John P. O’Donnell presiding on July 23.
“This amount was the subject of extensive negotiations which were initiated only after the other terms of the settlement were reached,” according to settlement document quoted by the Cleveland Plain Dealer. “The company and the individual defendants will not oppose the application of plaintiff’s counsel nor make any statements or comment criticizing, disparaging or calling it into question.”
The lawsuit related to a trade secrets case heard in a Mississippi court. Eaton managers allegedly were negligent and forfeited a lawsuit with a value of about $1 billion in a Jackson, Miss., courtroom, the report said.
Eaton had filed the lawsuit against Frisby Aerospace and six former Eaton engineers. They allegedly stole trade secrets and took them to Frisby, after they began working there. The lawsuit was dismissed in December 2010. A short time later the plaintiffs made up of shareholders, filed a derivative lawsuit against Eaton.
Even though the possible settlement has no money for shareholders, if approved, Eaton’s general counsel would have to meet with board members at least twice a year to discuss litigation. In addition, Eaton has to set up an “Outside Counsel Management Committee” as part of the settlement.
“Its objective is to enhance the Law Department’s ability to evaluate, select and manage outside legal counsel to ensure that only qualified firms represent the company in litigation,” the Plain Dealer further reported.
Shareholders who own the largest percentages of Eaton stock include Vanguard and Wellington Management.
“Obviously Eaton has reached a point where it wants to put all of this behind itself,” Andrew Pollis, an assistant professor at Case Western Reserve University School of Law, told the Plain Dealer.
This is not the only big legal case that Eaton has faced. Eaton was facing a $2.4 billion damage claim from Meritor, but recently announced it will pay $500 million before a trial began in Wilmington, Delaware.
Meritor Transmission and ZF Meritor sued Eaton for allegedly violating antitrust laws. The settlement pleased Meritor. “This is an important outcome for Meritor that delivers significant benefits to the company, our shareholders and our customers,’’ Ike Evans, the company’s chairman and CEO, said in a statement quoted by Bloomberg News. “We are successfully putting this lawsuit behind us.”