In 2008, as the national economy began its downturn, many businesses started to lose money. Large corporations saw the value of their stock plummet and many businesses could not survive. However, New Jersey business owners may be interested to know that those businesses that did survive could face business litigation over the losses they faced because of the recession.
In fact, many large companies have been sued by shareholders over losses sustained in 2008. While many of these lawsuits were eventually dismissed, some were allowed to continue. One in particular, the suit against General Electric Co., has been in the news recently.
In that case, GE was sued by shareholders in a class action suit. The judge in the case allowed the action. Shareholders claimed that company engaged in deceptive practices by misleading shareholders about dividends, its ability to make money and about the company’s overall financial health especially during an Oct. 2008 stock offering. Shareholders blamed the company for the $200 billion — or 77 percent — loss of market value that occurred in six months in 2008.
In 2009, dividends were cut by 68 percent and the company lost its “AAA” credit score rating. Eventually share prices bottomed out at $5.87 down from $25.68.
Recently, the class-action suit has been settled. Under the terms of the settlement, GE will pay shareholders a total of $40 million.
In this case, as in other commercial litigation, settlement has offered a quick end to the litigation. By settling, the investors did not have to risk losing at trial and GE did not risk a larger payout. Other companies looking to avoid full blown litigation may also consider settlement. In many cases, it allows New Jersey companies to reach an agreement that is crafted to meet everyone’s needs.
Source: Fox Business, “GE settles crisis-era shareholder lawsuit for $40 million,” Jonathan Stempel, April 30, 2013