Court approves $284.1 million partial settlement in Delphi Securities Litigation
January 10, 2008
Case Caption: In re Delphi Corporation Securities Litigation, MDL Case No. 05-md-1725, No. 06-10026, United States District Court for the Eastern District of Michigan (Detroit)
In In re Delphi Corporation Securities Litigation, NPR serves as Co-Lead Counsel on behalf of Co-Lead Plaintiff, the Teachers Retirement System of Oklahoma, and named plaintiff, the Oklahoma Law Enforcement Retirement System. Through the determination and efforts of our client and our firm, we obtained settlements for the class valued in excess of $320 million.
This securities fraud case against Delphi, its officers and directors, its underwriters, and its outside auditor arose from conduct causing Delphi’s massive restatement of all of its financial statements for a period of five years dating back to its spin-off from General Motors. Adding a significant layer of complexity to an already complex case, Delphi filed for Chapter 11 bankruptcy protection during the pendency of this action, which caused us to litigate on two fronts – in the trial court in Michigan and the bankruptcy court in New York.
The securities action was transferred for pre-trial purposes to the United States District Court for the Eastern District of Michigan, in Detroit, where it is pending before the Honorable Gerald Rosen. On March 10, 2006, Lead Plaintiffs filed a Motion to Lift the PSLRA Discovery Stay in order to obtain access to various documents turned over by Delphi and certain other Defendants to the Securities Exchange Commission, FBI, Department of Justice and the United States Postal Inspector in the ongoing federal investigations into the alleged accounting improprieties. On May 12, 2006, Lead Plaintiffs filed an Omnibus Response to various motions to dismiss the Consolidated Complaint, which were filed by the Defendants in the case. On February 15,2007, the Honorable Gerald Rosen Granted Lead Plaintiffs' Motion to Lift the PSLRA Discovery Stay, Subsequently, Lead Plaintiffs' and Delphi entered into an interim agreement in the United States Bankruptcy Court for the Southern District of New York whereby Delphi, as debtor, will produce documents pursuant to Judge Rosen's Order, subject to certain limitations.
In July 2007, we reached a $284,100,000.00 settlement of the Class’ claims against Delphi and several of its former officers, directors and underwriters. In December 2007, we reached a $38,250,000.00 settlement with Delphi’s former auditor, Deloitte & Touche, LLP.
On January 10, 2008, the trial court granted final approval for the first settlement of $284.1 from Delphi, its officers and directors, and its underwriters. In this order, the court praised NPR not only for its sophistication and outstanding legal work but also for its unwavering commitment to its clients:
The Court is able to add that it had extensive interaction, both on the record and in chambers, with all Co-Lead Counsel, and has been considerably impressed, not only by counsel’s skill, knowledge of the substantive and procedural law, and sophistication—all of which were consistently evident to the Court—but also by their dedication and commitment to their clients’ cause. In short, these lawyers have practiced at the highest levels of professional competency.…
Subsequently, on February 06, 2008, the trial court entered an order preliminarily approving a second settlement in the amount $38.25 million from Delphi’s Auditor, Deloitte & Touche, LLP. The trial court has granted preliminary approval of the settlement with Deloitte has scheduled a final approval hearing on April 29, 2008.
Beyond the magnitude of the $320 million-plus recovery, this case is significant for several reasons:
- Lead Plaintiffs secured what we believe to be one of the largest securities fraud recoveries from a bankrupt entity in the Nation’s history.
- In an aggressive and virtually unprecedented move, Lead Plaintiffs secured a ruling partially lifting the PSLRA discovery stay which required Delphi and certain other defendants to produce various documents they turned over to the Securities Exchange Commission, FBI, Department of Justice and the United States Postal Inspector in the federal investigations relating to Delphi’s alleged accounting improprieties.
- We successfully objected to Delphi’s attempts to reward the very executives who may have been involved in the alleged fraud and drove Delphi into bankruptcy. After Delphi filed for bankruptcy protection, it sought to implement a Key Employee Compensation Program (“KECP”), under which it could give extensive bonuses to executives and management level employees, while it was seeking approval to close several plants and cut hourly wages by up to 50%. We objected because we believed that the KECP did not adequately ensure that the Delphi executives and employees who may have been involved in Delphi’s fraud would be excluded from receiving bonuses. While we did not stand to obtain a recovery in bankruptcy court, both our client and we believed that the KECP program was an egregious attempt to reward the same executives who perpetrated securities fraud upon Delphi’s shareholders and bondholders.
- NPR partners Brad Beckworth and Jeff Angelovich tried a one-day summary trial on this issue before the United States Bankruptcy Court for the Southern District of New York in January 2006. After the trial, the Court ordered that several significant prophylactic measures be included in the final version of the KECP program in order to ensure that wrongdoers would not be rewarded with bonuses going forward and that bonuses already paid to such employees would be disgorged in the event they are later determined to liable for fraud. These prophylactic measures have been referred to as “unprecedented.”
- NPR challenged Delphi’s decision to retain Deloitte & Touche, LLP, one of the defendants in this action, as its auditor. After facing this challenge, Delphi severed its relationship with Deloitte and retained another auditing firm.
To see the following case-specific documents, please click on the links below:
View Motion to Lift Stay
View Order Lifting Discovery Stay
View Order Approving Settlement