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September 28, 1978

The MUNSEY TRUST, Plaintiff,
SYCOR, INC., Drexel Burnham & Co. Incorporated, Samuel N. Irwin, Herbert S. Amster, K. Dieter Heidrich, G. William Ince, Raymond P. Kavlick, Paul C. LaVoie, Richard A. Phillips, Henry M. Lapeza, Frederick B. Dean, James E. Dingman, Michael E. Gellert, Harvey G. Melhouse, Theodore J. Smith, Trude C. Taylor, Electronic Memories & Magnetics Corporation, Windcrest Partners, Viking, Inc., Delta N.V., Coordinated Apparel, Inc., Gavrin Associates, Harold Lamport, Account R Partnership, Anthony M. Lamport, Trustee, and Anthony M. Lamport, Defendants

The opinion of the court was delivered by: MACMAHON

The parties in this securities fraud class action apply for approval of a proposed settlement. Rule 23(e), Fed.R.Civ.P. Counsel for plaintiff also apply for an allowance of attorneys' fees and disbursements.

The complaint alleges that defendants Sycor, Inc. ("Sycor"), its officers and directors, certain sellers of Sycor stock, and Drexel Burnham & Co., managing underwriter of a public offering of Sycor stock, violated Sections 11, 12(2) and 17(a) of the Securities Act of 1933, 15 U.S.C. §§ 77k, 77L and 77q, and Section 10(b) of the Securities Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5.

 Plaintiff, a former shareholder of Sycor, alleges that defendants unlawfully conspired to use a false and misleading prospectus in connection with a public offering of Sycor stock, in furtherance of a common scheme to defraud plaintiff, by inducing it to purchase the stock at an artificially high price. Plaintiff claims that the prospectus was false and misleading because it failed to reveal the existence of new Brazilian import restrictions, which could adversely affect sales of Sycor's products, and the importance of the Brazilian market to Sycor.

 After completion of discovery and on the eve of trial, the parties entered into a stipulation of compromise and settlement by which they agreed to settle this action, subject to court approval, in consideration of $ 950,000.00. Proper notice of the proposed settlement was sent to all class members, and the instant application for approval of the settlement was made. After hearing the parties and the objectants and after extending the time for the filing of further objections, none of which were forthcoming, we approve the proposed settlement.

 The standards governing approval of a proposed settlement are well established. The proponents of the settlement must demonstrate: (1) that it is not collusive but was arrived at after arms' length negotiation; (2) that the proponents are counsel experienced in similar cases; (3) that there has been sufficient discovery to enable counsel to act intelligently; and (4) that the number of objectants or their relative interest is small. If the foregoing is established, then a presumption in favor of the settlement arises. Feder v. Harrington, 58 F.R.D. 171, 174-75 (S.D.N.Y.1972).

 We conclude that the above test is satisfied here. The settlement was reached only after intensive adversarial negotiations free from even a hint of collusion. Counsel for plaintiff are able and respected members of the bar of this court, who are experienced in many cases of this nature. They persevered with trial preparation during settlement negotiations, and there can be no doubt that they would have proceeded to trial had that been in their client's best interests.

 Furthermore, the discovery had here was extensive. At least twenty depositions were taken of defendants and third-party witnesses alike. Broad interrogatories were propounded and answered. Approximately 50,000 documents were produced and inspected. With this discovery complete and with a trial date less than two weeks away, counsel were well situated to evaluate intelligently the strength and weaknesses of their cases.

 Finally, there have been no objections to the substance of the proposed settlement. Although approximately 1,000 notices of settlement were originally mailed to class members, only three objectants have come forward, challenging only the breadth of the release to be executed by plaintiff. The absence of substantive objections is persuasive evidence of the fairness of the settlement. City of Detroit v. Grinnell Corp., 495 F.2d 448, 462 (2d Cir. 1974); Burger v. CPC Int'l, Inc., 76 F.R.D. 183, 186 (S.D.N.Y.1977).

 Furthermore, the objection raised is without merit. The objectants demur to the scope of the release, which would free defendants from further liability for all claims which have been or "which Might have been asserted " in this action. It seems to us that such a release is eminently proper if the defendants are indeed to "buy their peace" through this settlement, as properly they should. Should the defendants remain subject to suit on claims arising out of the very occurrences at issue here, the settlement would hardly be efficacious in terminating this litigation, and the defendants could rest only upon the running of the statute of limitations. See Fox v. Glickman Corp., 253 F. Supp. 1005, 1013 (S.D.N.Y.1966). Cf. American Emp. Ins. Co. v. King Resources Co., 556 F.2d 471, 475, 478 (10th Cir. 1977). In any event, the objectants fail to specify any particular prejudice resulting from the broad release, and we will not withhold approval of the settlement upon mere speculation that some unknown plaintiff may someday unearth a claim heretofore unasserted. Thus, the objection raised here does nothing to alter our view that the proposed settlement is fair.

 In light of the foregoing, a presumption arises in favor of the settlement. That presumption, however, must still withstand the test of plaintiff's likelihood of success had the case proceeded to trial. Feder v. Harrington, supra, 58 F.R.D. at 175. As we stated in Burger v. CPC Int'l, Inc., supra, 76 F.R.D. at 186-87:

"A determination of plaintiff's probability of ultimate success requires an educated estimate of the strength and weaknesses of plaintiff's case, considering the novelty and complexity of the legal questions, the issues of fact, the expenses involved, and the likely duration of the trial. We must then compare the likely rewards of litigation with the terms of the settlement in order to evaluate and determine the fairness and adequacy of the settlement. Protective Comm. for Independent Stockholders of TMT Trailer Ferry, Inc. v. Anderson, 390 U.S. 414, 424-25, 88 S. Ct. 1157, 20 L. Ed. 2d 1 (1968)."

 In this case, close questions of law and fact surrounded the issue whether the challenged statements in the Sycor prospectus were material. Plaintiff challenged the following passage from the prospectus:

"The Company (Sycor) believes that the risks attendant to the Company's foreign revenues are not substantially greater than those attendant to revenues generated with the United States. Because its products are distributed to users in 38 countries, the impact of political or economic dislocations in any given country is likely to be minimal."

 Discovery, however, revealed that Sycor's Brazil sales, effected through a subsidiary of Olivetti Corp., amounted to only 6% Of Sycor's total sales. Thus, the materiality of any misstatements concerning the effect of Brazilian import restrictions was cast in doubt. Furthermore, Sycor's overall foreign sales increased from 1975 ...

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