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Mercury Interactive Corp. agreed to pay $117.5 million to settle a shareholder claims of stock-options backdating in what is the largest settlement to date over backdating, according to plaintiffs’ lawyers. The settlement, announced Monday, must be approved by U.S. District Judge Jeremy Fogel in San Jose. “We are pleased to have accomplished a really good settlement for Mercury shareholders,” said Joel Bernstein, lead plaintiffs’ attorney with Labaton, Sucharow & Rudoff in New York. He represented Mercury Pension Fund Group, lead plaintiff in the 2005 class action. Mercury Interactive, which makes computer testing software, was purchased by Hewlett-Packard Co. last year. Emma McCulloch, an HP spokeswoman, confirmed by email that Mercury and plaintiffs’ counsel entered into a memorandum of understanding to resolve the shareholder suit related to options backdating but declined to describe the details. Last month, computer chip designer, Rambus, agreed to pay $18 million to settle an investor lawsuit related to backdating. Mercury was one of the earliest to disclose potentially improper options backdating was under review by the Securities and Exchange Commission. The chief executive officer, Ammon Landan, resigned in 2005. The company’s general counsel, Susan Skaer and chief financial officer Douglas Smith, allegedly participated in the practice between 1996 and 2002. Skaer still faces civil claims by the SEC related to the backdating. In July, Fogel dismissed the entire class action but allowed the plaintiffs to amend the case and refile, which was underway when the settlement was reached, according to Bernstein. As to why Hewlett-Packard and Mercury agreed to settle at this point, “My sense was they recognized they would have problems with the litigation,” Bernstein said. During the mediation and in Judge Fogel’s order there was discussion of the potential effect of the Supreme Court’s Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336 (2005), which imposed more stringent proof of the loss to shareholders to survive. “It was an issue to consider,” Bernstein said. “If Dura was not out there we might have considered a larger settlement,” he said.

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