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No-Cash Settlement OK'd for Marvell in Backdating Case, but Attorney Fees on Hold
The National Law Journal
May 12, 2009
A federal judge in California has approved a stock options backdating settlement with Marvell Technology Group Ltd. that involves no cash payments to the company.
U.S. District Judge Ronald M. Whyte in San Jose approved the substance of the deal on May 8 but delayed approving $16 million in attorney fees to be paid to the two plaintiffs firms, Coughlin Stoia Geller Rudman & Robbins of San Diego and Scott & Scott, which is based in Colchester, Conn.
The settlement, which resolves all derivative claims associated with stock options backdating at Marvell, came as other federal judges have questioned attorney fees paid to plaintiffs firms as part of noncash settlements in derivative actions involving backdated stock options.
In March, Coughlin Stoia, which served as lead counsel in a noncash settlement with Cirrus Logic Inc., agreed to drop its fees after a judge described them as "almost entirely unmerited." Last year, a federal judge in San Francisco initially rejected a settlement for similar reasons in a backdating case involving Zoran Corp.
The derivative action against Santa Clara, Calif.-based Marvell claimed that the company from 2000 to 2006 hid its stock options backdating from its shareholders. In October 2006, Marvell, which makes circuits for data storage and broadband communications devices, disclosed a noncash charge of $327 million for the compensation associated with the backdated stock options.
The Marvell settlement provides for the cancellation, forfeiture and re-pricing of about 12.1 million stock options, plus numerous corporate governance reforms. In court papers, lawyers involved in the settlement valued the deal at about $54.9 million.
Whyte, in granting preliminary approval, said that he had "reservations about the amount of fees."
The fees request and final approval of the settlement were expected to be addressed during a hearing on July 17.
The plaintiffs lawyers -- Jeffrey Light, a partner at Coughlin Stoia, and Arthur Shingler, a partner in the San Diego office of Scott & Scott, did not return calls for comment.
"The company is happy to put this chapter behind it," said Steven Schatz, a partner in the Palo Alto, Calif., headquarters of Wilson Sonsini Goodrich & Rosati, who represents the nominal defendant, Marvell.
He declined to comment about the attorney fees request.
In re: Marvell Technology Group Ltd. Derivative Litigation, 5:2006-cv-03894 (N.D. Calif.).
