ADT 2007 Annual Report Download - page 120

provides that if any party defaults on its obligations, the other parties would be jointly and severally
liable for those obligations. Most of the securities class actions have now been transferred to the
United States District Court for the District of New Hampshire by the Judicial Panel on Multidistrict
Litigation for coordinated or consolidated pretrial proceedings. On January 28, 2003, a consolidated
securities class action complaint was filed in these proceedings. On January 7, 2005, the Company
answered the plaintiffs’ consolidated complaint. On January 14, 2005, lead plaintiffs made a motion for
class certification, which the Company opposed on July 22, 2005. On July 5, 2005, the Company moved
for revision of the court’s October 14, 2004 order in light of a change in law, insofar as the order
denied the Company’s motion to dismiss the consolidated complaint for failure to plead loss causation.
On December 2, 2005, the court denied the Company’s motion. On April 4, 2006 plaintiffs filed a
partial motion for summary judgment that was denied without prejudice to its later renewal. On
June 12, 2006, the court entered an order certifying a class ‘‘consisting of all persons and entities who
purchased or otherwise acquired Tyco securities between December 13, 1999 and June 7, 2002, and
who were damaged thereby, excluding defendants, all of the officers, directors and partners thereof,
members of their immediate families and their legal representatives, heirs, successors or assigns, and
any entity in which any of the foregoing have or had a controlling interest.’’ On June 26, 2006, Tyco
filed a petition for leave to appeal the class certification order to the United States Court of Appeals
for the First Circuit. On September 22, 2006, the United States Court of Appeals for the First Circuit
denied Tyco’s petition.
Class Action Settlement
On May 14, 2007, we entered into a Memorandum of Understanding with plaintiffs’ counsel in
connection with the settlement of 32 purported securities class action lawsuits. The actions previously
had been consolidated and transferred by the Judicial Panel on Multidistrict Litigation to the United
States District Court for the District of New Hampshire and include Williams v. Tyco International Ltd.,
Brazen v. Tyco International Ltd., et al., Philip Cirella v. Tyco International Ltd., et al., Hromyak v. Tyco
International Ltd., et al., Myers v. Tyco International Ltd., et al., Goldfarb v. Tyco International Ltd., et al.,
Rappold v. Tyco International Ltd., et al., Mandel v. Tyco International Ltd., et al., and Schuldt v. Tyco
International Ltd., et al. and 23 other consolidated securities cases.
The Memorandum of Understanding does not resolve the following securities cases, which remain
outstanding: Stumpf v. Tyco International Ltd., New Jersey v. Tyco International Ltd., et al., Ballard v. Tyco
International Ltd., Jasin v. Tyco International Ltd., et al., and Hall v. Kozlowski, et al. The proposed
settlement does not release claims arising under the Employee Retirement Income Security Act of
1974, 29 U.S.C. Sec. 1001, et seq. (‘‘ERISA’’), which are not common to all Class Members, including
any claims asserted in Overby, et al. v. Tyco International Ltd., Civil Action No. 02-MD-1357-PB.
Under the terms of the Memorandum of Understanding, the plaintiffs agreed to release all claims
against Tyco, the other settling defendants and ten other individuals in consideration for the payment of
$2.975 billion from Tyco to the certified class and assignment to the class of any net recovery of any
claims possessed by Tyco and the other settling defendants against Tyco’s former auditor,
PricewaterhouseCoopers. Defendant PricewaterhouseCoopers was not a settling defendant and is not a
party to the memorandum. However, PricewaterhouseCoopers subsequently agreed to participate in the
settlement as a settling defendant, and in consideration of a release of all claims against it by the
parties to the Memorandum of Understanding, agreed to make a payment of $225 million. We and the
other settling defendants have denied and continue to deny any wrongdoing and legal liability arising
from any of the facts or conduct alleged in the actions.
Pursuant to the terms of the Memorandum of Understanding, L. Dennis Kozlowski, Mark H.
Swartz and Frank E. Walsh, Jr., also are excluded from the settling defendants, and the class will assign
28 2007 Financials