Diamond Foods to Pay $11 Million to Settle Investor SuitSophia Pearson
Diamond Foods Inc. agreed to pay $11 million in cash to settle a class-action lawsuit over accounting errors that led to earnings restatements and ended its bid for the Pringles potato-chip brand.
Diamond also will issue 4.45 million common shares to a settlement fund to resolve claims on behalf of investors who bought stock from Oct. 5, 2010, to Feb. 8, 2012, the San Francisco-based company said today in a statement. Diamond denied all claims of wrongdoing or liability in the suit, which targeted the snack-and-nut company and two former officers.
Diamond rose 19 percent to $22.79 in Nasdaq Stock Market trading.
“We believe this proposed settlement eliminates the burden of further time, expense and risk related to the class action,” Chief Executive Officer Brian J. Driscoll said in the statement.
The accord is valued at $96.1 million based on Diamond’s closing share price yesterday, according to court documents filed today. Diamond rose as much as 22 percent today after giving a fiscal fourth-quarter sales outlook that exceeded estimates.
In February, a Delaware judge threw out an investor suit against the company brought by a retirement fund for Hialeah, Florida, employees, saying their claims should be decided by a court overseeing a similar case in California. The retirement fund had blamed directors for Diamond’s inability to file its financial statements and derailing its planned $2.4 billion acquisition of Procter & Gamble Co.’s Pringles division.
A portion of the $11 million settlement announced today will be funded by Diamond’s insurers, the company said. The accord is subject to court approval.
The case is In re Diamond Foods Inc. Securities Litigation, 11-cv-05386, U.S. District Court, Northern District of California (San Francisco).