FPL Settlement puts Corporate Executives on hook
for $22.25 Million
The law firm of Milberg Weiss Bershad & Schulman LLP, along with its
co-counsel, has negotiated a precedent-setting proposed settlement in
which eight current and former Florida Light and Power (FPL) Group (NYSE:FPL)
executives have agreed to return millions of dollars in compensation
to the Company, one of the nation's largest public utility holding
corporations. The case stems from the failed 2001 merger of FPL Group
with another public utility, Entergy Corporation (NYSE: ETR).
On December 15, 2000, FPL shareholders
approved the merger. However, shortly thereafter, the merger was
mutually abandoned. Despite a return to the status quo, FPL executives
claimed that the shareholder approval constituted a "change in
control" under their incentive plans, thus triggering accelerated
payments of $62 million in compensation to FPL's top eight executives.
Milberg Weiss filed a derivative action in
Miami federal court on behalf of FPL shareholders seeking return of
the multi-million dollar payouts. Under the applicable corporate
derivative law, the company created a committee to investigate the
claims and recommend whether the lawsuit should continue. This
committee recommended that the lawsuit be dismissed. Milberg Weiss
filed a comprehensive objection to the committee's report, arguing
that its members were not independent. In January 2004, the District
Court agreed, finding that "the committee and the Board did not act
independently," and allowed the lawsuit to proceed. See Klein v. FPL
Group, Inc., 2004 U.S. Dist. LEXIS 919, 2004 WL 302292 (S.D. Fla. Jan.
20, 2004).
After hard-fought discovery, the
executives and an insurance carrier agreed to return $22.25 million to
the Company. This settlement represents a groundbreaking and
significant recovery, and it is one of the largest amounts of money
ever returned to a public company by members of its management in an
executive compensation type lawsuit. In addition, while the full
amount will not be returned, that was expected because the $62 million
was an accelerated payment of compensation, some of which was
eventually earned by certain executives over the course of the
lawsuit.
In addition to the millions of dollars of
cash being returned, the plaintiffs were also instrumental in
negotiating important corporate governance changes at FPL Group. For
example, the non-management members of the Board will have standing
authority to retain their own legal counsel or other advisors to
investigate and advise them on any situation that may arise with the
company, there will be five year term limits on the majority of
members of the Audit, Compensation, and Governance Committees, the
members of these Committees must all be independent, and strict limits
on how much business a director may conduct through other entities
affiliated with FPL will be implemented.
