WWE has officially settled the class action lawsuit with investors who claimed the company misled them about problems with business ties to the Kingdom of Saudi Arabia.
As noted in early July, WWE and investors behind the suit secured final approval for a $39 million settlement. This came after it was first revealed in November 2020 that the company had closed on the $39 million settlement for the class action lawsuit led by the Firefighters’ Pension System of the Kansas City, Missouri Trust. The suit, originally filed in March 2020, alleged that WWE executives deceived investors over their business dealings in Saudi Arabia, inflating the company stock and selling more than $280 million worth of shares at fraudulently inflated prices. The suit had been consolidated by six different law firms, and included multiple separate suits, including one filed by the City of Warren, Michigan Police & Fire Retirement System. It alleged that WWE officials failed to disclose how the expected business agreements with Saudi Arabia for Middle Eastern TV deal had not been consummated, but that by allowing investors to believe otherwise, the company had caused the stock to rise when it should not have.
A new SEC filing by WWE confirms that the settlement was finalized on Monday, August 16. It was stated that WWE continues to deny all claims made by the plaintiffs in the class action suit, but they believe resolving the suit in accordance with the terms of the settlement is the “proper business decision” and that it is “prudent to end the protracted and uncertain derivative litigation process.”
As noted in July, the cash settlement represents around 18.2% of estimated class-wide damages. Judge Jed S. Rakoff of the U.S. District Court for the Southern District of New York rejected WWE’s bid to dismiss the suit in late 2020, but then gave his final sign-off to the settlement in early July, after approving the settlement in March.
There were no objections to the settlement. The settlement class consists of everyone who acquired WWE common stock from February 7, 2019 through February 5, 2020, and lost money as a result, with exceptions for those with other close ties to the company.
Labaton Sucharow LLP of New York City, lead counsel on the suit, will receive $7.02 million in attorney’s fees, which translates to 18% of the settlement fund. The law firm will also get more than $468,000 as reimbursement for litigation expenses. The pension fund representing the investors as lead plaintiff, which was the Firefighters’ Pension System of the Kansas City, Missouri Trust, will receive more than $6,200 as reimbursement of its reasonable costs and expenses, as ruled by the judge.
WWE was represented by two firms in the suit – Day Pitney LLP and Paul, Weiss, Rifkind, Wharton & Garrison LLP.
The SEC filing from this week notes the following:
On August 16, 2021, World Wrestling Entertainment, Inc. (the “Company”) reached an agreement in principle and signed a term sheet to settle the previously disclosed shareholder derivative actions titled (i) Merholz et al. v. McMahon et al., No. 3:20-cv-00557-VAB; (ii) Kooi v. McMahon et al., No. 3:20-cv-00743-VAB; (iii) Nordstrom v. McMahon et al., No. 3:20-cv-00904-VAB; (iv) Merholz/Jimenez v. McMahon et al., No. 3:21-cv-00789-VAB; (v) Rezendes v. McMahon et al., No. 3:21-cv-00793-VAB; and (vi) City of Pontiac Police and Fire Retirement System v. McMahon et al., No. 3:21-cv-00930-VAB, currently pending in the United States District Court for the District of Connecticut (collectively, the “Derivative Actions”), as well as related lawsuits filed in the Court of Chancery of the State of Delaware titled (i) Leavy v. World Wrestling Entertainment, Inc., No. 2020-0907-KSJM; (ii) Dastgir v. McMahon et al., No. 2021-0513-LWW; and (iii) Lowinger v. McMahon et al., No. 2021-0656-LWW (together with the Derivative Actions, the “Actions”). Among other things, the plaintiffs in the Actions have alleged violations by certain current and former Company directors and officers related to disclosures concerning the Company’s business relationship in and with the Kingdom of Saudi Arabia and that certain of these defendants engaged in improper stock trading.
The proposed settlement would include, among other things, a full release of all defendants in connection with all allegations made in the Actions, and it would not contain any admission of liability or admission as to the validity or truth of any or all allegations or claims by the Company or any of the other defendants. The proposed settlement also would provide that the Company will implement and maintain certain corporate governance measures. As part of the settlement, the plaintiffs have indicated an intent to seek payment of their attorneys’ fees, reimbursement of expenses, and case contribution awards, which the proposed settlement provides would be paid by the Company’s insurance carriers. The proposed settlement remains subject to shareholder notice, court approval and other customary conditions. In the event that the parties are not able to cause all of these conditions to be satisfied, the Company and the other defendants intend to continue to vigorously defend against the claims asserted in the Actions.
Although the Company and the other defendants have denied, and continue to deny, all claims asserted by the plaintiffs in the Actions, the Company believes that resolving the Actions in accordance with the terms of the proposed settlement is the proper business decision and that it is prudent to end the protracted and uncertain derivative litigation process on the terms of the proposed settlement.