Ruling puts wrench in Bottomline settlement
An old class action suit might come back to haunt Bottomline Technologies if a settlement arrangement unravels in the wake of a recent federal appeals court decision, according to the Portsmouth’s company’s quarterly filing with the Securities and Exchange Commission.
The suit was filed in 2001 in U.S. District Court in New York and was mainly aimed at underwriters of various initial public offerings, including Bottomline’s IPO, in the dot-com craze of the late 1990s.
According to the suit, Bottomline’s prospectus didn’t accurately describe the compensation earned by the underwriters at the offering nor did it describe alleged arrangements among underwriters and some of the initial purchasers of the stock.
The suit originally included Bottomline’s chairman, Daniel M. McGurl, who was then also chief executive officer, and current CEO Robert Eberle, who then CFO, but charges against those individuals were dismissed in 2002, leaving only Bottomline and the underwriters.
In February, the court approved a settlement, but late last year, a U.S. appellate court overturned the district court’s certification of a class, which put the settlement on hold.
The district court had said it would hold off to see if the plaintiffs in the case could get the appeals court to reverse itself, but in April the appeals court ruled against the plaintiffs.
The quarterly filing also went into a little more detail about Bottomline’s purchase of Formscape, a British company, for approximately $22.2 million. Bottomline will end up spending about $1 million shutting down two Formscape facilities, one in England and one in the United States, with more than half of that money going to severance pay due to “involuntary termination.”
Bottomline also will assume half of a $300,000 settlement in a discrimination suit filed by an employee against Formscape that was filed in North Carolina.
The company also indicated another factor that might be contributing to recent losses of $1.87 million last quarter and $5.47 million in the first three quarters of fiscal 2007. The company has increasingly been emphasizing on-site service contracts as opposed to software sales. However these more complex arrangements might delay revenue recognition, and if the initial investment doesn’t pan out with lucrative contracts, this might undermine Bottomline’s bottom line. – BOB SANDERS