Court Grants Final Approval to Settlement of Individual and Derivative Action Against Flowserve Corporation and Its Directors

2/28/2017 - On February 28, 2017, Judge Katherine Polk Failla of the United States District Court for the Southern District of New York approved the settlement of Stein v. Freidery, et al., Civil Action No. 16-cv-2487, an individual and derivative shareholder action that challenged Flowserve Corporation’s executive compensation plans.  The litigation challenged Flowserve’s continued use of two expired compensation plans to grant compensation to Flowserve directors and executives.  The settlement of this action required board resolutions to approve, clarify, confirm, and ratify these compensation plans so that they will depend on the current stockholder-approved compensation plan, which remains in effect through January 1, 2020.  The settlement also provides for enhanced disclosures in Flowserve’s proxy statements concerning these compensation plans through 2019.

Praising the settlement achieved as providing for nearly-complete relief regarding the claims in this action, the Court said,

[T]he settlement agreement as defined by the parties secures for plaintiff and therefore the shareholders virtually all of the relief that plaintiff Flowserve and Flowserve's shareholders could likely achieve. 

I am noting that the fact is that the compensation will be tax deductible in the future, and that benefit stands to accrue an annual benefit of [$]4.34 million for at least the next three years.

I also note that the settlement agreement secures worthwhile nonmonetary benefits for Flowserve and its shareholders, because the terms of the settlement agreement promote transparency in the manner I've discussed with the parties.

The Court also commended the attorneys for both sides for their work in achieving this outstanding result without wasting resources:

These are complicated claims, and if you're getting in settlement the best that you can achieve, it makes no sense to continue litigating, and certainly there would be significant time and resources spent that don't need to be.

As of today, I have no objections from any one. No one has said anything. They've said nothing, and I think that is because the claim brought was what it was and the parties entered into prompt negotiations and ended up with a resolution that is the fairest that members of the shareholder class could hope to obtain.

If you have any questions, please contact Barrack, Rodos & Bacine at (212) 688-0782.