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A San Francisco bankruptcy court has approved a $400 million settlement between creditors of defunct At Home Corp. and AT&T Corp. over the telecommunications giant’s alleged role in the demise of the broadband services provider. The settlement originally was announced May 3 following mediation between representatives of At Home’s bondholders and AT&T. It ends litigation over whether AT&T breached its fiduciary duties as the controlling shareholder of At Home and whether the Bedminster, N.J.-based telecom misused the company’s trade secrets in seeking to build its own high-speed Internet network. Judge Thomas Carlson of the U.S. Bankruptcy Court Northern District of California approved the settlement in a closed hearing late Tuesday despite objections from former At Home shareholders, who were pushing creditors to pursue larger monetary damages. “I think the judge was predisposed to make this kind of decision,” said Brian Lewis, a member of the shareholders’ committee, noting that there was little chance the judge would throw out such a large settlement. “It shows the failure of the bankruptcy courts to protect shareholder rights.” The $400 million claim is more than half of the $750 million At Home owed to bondholders, who also received $120 million from an earlier distribution from the company’s estate. Lewis complained that lawyers for the bondholders will collect high contingency fees stemming from the settlement, while shareholders will recoup nothing. Attorneys with New York law firm Weil, Gotshal & Manges LLP, which represented the trust for the estate, received a 10 percent fee for the first $350 million collected and 15 percent for the remaining $50 million, or a total of $42.5 million. “It’s outrageous that we got nothing, and we were the ones who were ripped off,” Lewis said. Weil, Gotshal & Manges could not be reached for comment. Although shareholders have 10 days to appeal the decision, they are unlikely to pursue the case. “I tend to think it’s not going to really matter and that it’s probably just a waste of time,” said Mike Kelly, another member of the shareholders’ committee. Shareholders were represented by Sonnenschein Nath & Rosenthal LLP of New York. At issue in the case was whether AT&T, in its position as controlling shareholder of what became [email protected], in 2001 misused inside information regarding the broadband provider’s impending bankruptcy by planning and building its own Internet network. Shareholders argued that AT&T should be liable for up to $3 billion in damages based on the value of At Home’s broadband business. Redwood City, Calif.-based At Home filed for bankruptcy in 2001. Separate complaints filed against cable companies Cox Communications Inc. of Atlanta and Comcast Corp. of Philadelphia are pending. Investors have accused the cable companies of breaching their fiduciary duties in connection with the sale of their interests in [email protected] to AT&T in 2001. Copyright 2005 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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