Broadcom has agreed to pay plaintiffs $118 million to settle allegations of stock options backdating, the second-largest settlement in a derivative action to date. But The Am Law Litigation Daily noticed the legal fees from the litigation could exceed the settlement itself.
The Lit Daily's Susan Beck reports that depending on how you look at the agreement, all of the settlement money will be used to pay plaintiffs and defense lawyers. A copy of a separate Broadcom settlement with its D&O insurers obtained by the Lit Daily shows that 19 Broadcom directors and officers, including cofounders Henry Nicholas III and WIlliam Ruehle, racked up a legal tab of $130 million for their defense.
According to Beck, the $118 million that Broadcom will receive from its D&O insurers to cover the derivative action will be eaten up by the $130 million defense tab, which the company is obligated to pay under indemnification agreements signed with officers and directors. Broadcom is also on the hook for another $11.5 million fee due plaintiffs lawyers. (Click here for a copy of Broadcom's derivative settlement.)
Irell & Manella's David Siegel, who represents Broadcom, gave a different account to the Lit Daily. Siegel says the company's insurers disputed their obligation to cover legal fees, so without a settlement, it wasn't certain that Broadcom could have recovered from insurers anything close to the full amount it has paid defense lawyers.
Before the settlement insurers had paid just $43.3 million of the more than $130 million sought by Broadcom to cover legal expenses--Beck reports that the $43.3 million is included in the $118 million settlement amount.
Broadcom was represented by Howrey's David Steuber in negotiations with insurers. Kaye Scholer served as counsel to Broadcom's special litigation committee.
Lieff Cabraser Heimann & Bernstein served as lead plaintiffs counsel.
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