## Facts

- Purchasers of Lucent Technologies, Inc. common stock during October 26, 1999 through December 20, 2000 brought consolidated federal securities-fraud class claims.
- The actions were consolidated from numerous separate suits alleging Lucent used improper accounting and made misleading public statements about revenue, earnings, and business prospects.
- Plaintiffs alleged the alleged misstatements inflated Lucent’s stock price and caused losses when negative disclosures and credit-related events contributed to a price decline.
- After preliminary certification of a settlement class under Rule 23(b)(3), the parties executed a Stipulation and Agreement of Settlement dated September 22, 2003.
- The settlement provided cash, stock, and warrants valued at approximately $517 million when notice was disseminated to the class.
- The court considered a motion for final approval of the settlement and approval of the proposed plan of allocation; Lucent did not oppose the motion.

## Issues

1. Whether the proposed class settlement should be approved as fair, reasonable, and adequate under Federal Rule of Civil Procedure 23(e).
2. Whether the proposed plan of allocation fairly and reasonably distributed the settlement consideration among class members.

## Decision

- The court granted final approval of the settlement under Rule 23(e).
- The court approved the plan of allocation as fair and reasonable.
- In evaluating fairness, the court applied the Third Circuit’s Girsh factors and related Rule 23(e) considerations.
- The court found the settlement resulted from informed, arm’s-length negotiations by experienced counsel.
- The court concluded the settlement consideration fell within a reasonable range given the complexity of the case, the expected cost and delay of continued litigation, and the risks of proving liability and damages.

## Legal Principles

- A class action compromise requires court approval and must be fair, reasonable, and adequate to the class. Fed. R. Civ. P. 23(e).
- In the Third Circuit, settlement approval is guided by the Girsh factors, including: the complexity, expense, and likely duration of litigation; reaction of the class; stage of proceedings and discovery; risks of establishing liability and damages; ability of defendants to withstand a greater judgment; and the range of reasonableness of the settlement in light of the best possible recovery and litigation risks.
- A plan of allocation should treat similarly situated class members similarly and distribute relief in a manner rationally related to recognized losses and the theory of liability.

## Conclusion

The court approved a $517 million mixed-consideration settlement and an allocation plan in the consolidated Lucent securities class action, finding under Rule 23(e) and the Girsh framework that the agreement provided a fair, reasonable, and adequate resolution given the litigation’s complexity and the risks and costs of continued proceedings.


In re Lucent Techs. Inc. Sec. Litig., 307 F. Supp. 2d 633 (D.N.J. 2004)