In re CNL Hotels & Resorts, Inc. Securities Litigation
As co-lead counsel, in this complex securities case, we secured a $35 million cash settlement, $225 million in savings on behalf of shareholders, and significant corporate governance reforms.
Labaton Sucharow announces that the Court has approved the settlement in In re CNL Hotels & Resorts, Inc. Securities Litigation. The action, where Labaton Sucharow served as co-lead counsel for the Proxy Class, was filed on behalf of two distinct classes of CNL Hotels & Resorts, Inc. shareholders. As a result of the settlement, plaintiffs calculate a savings to CNL's shareholders, including the "Proxy Class" at approximately $225 million. In addition, the plaintiffs recovered an additional $35 million for shareholders in the "Purchaser Class".
The Complaint alleged that the Proxy, used to solicit shareholder approval of a self-dealing merger between the Company and its Advisor, contained false and misleading statements about the value of the Advisor. The settlement reflected approximately $225 million in savings to shareholders by virtue of CNL Hotels & Resorts, Inc. entering into both an Amended Merger Agreement, which significantly reduced the amount that the Company would pay to acquire its Advisor, and an Advisor Fee Reduction Agreement, which reduced certain historic, current and future advisory fees that the Company was previously obligated to pay to its Advisor. Additionally, settlement of the Proxy Claims called for the adoption of significant corporate governance reforms by CNL Hotels & Resorts, Inc.
With respect to the "Purchaser Class" it was alleged that the Company's prospectus and registration statements in connection with its 2000, 2002 and 2003 stock offerings violated the federal securities laws in that they contained materially false and misleading statements, creating the false appearance that the Company had sufficient cash flow from operations to pay distributions to shareholders at stated historic levels. The settlement provided for CNL Hotels & Resorts, Inc. to pay a total of $35 million over the next three years to members of the "Purchaser Class."
In approving the settlement the Court stated that "Plaintiffs' counsel pursued this complex case diligently, competently and professionally" and with specific reference to the Proxy Class claims noted that "...this lawsuit was clearly instrumental in achieving that result."