Spectrum Brands Investors Seek Settlement Nod After Claim Split

Spectrum Brands Holdings Inc., related entities, and investors who say the consumer goods conglomerate misled them asked a federal judge in Wisconsin to sign off on their revised $32 million settlement Monday.

A judge in February rejected an earlier $39 million settlement because it didn’t include adequate notice to and representation of some stock purchasers. The new deal comes on the heels of a U.S. District Court for the Western District of Wisconsin order severing the claims of those other investors.

The company now known as Spectrum formed after a 2018 merger between HRG Group Inc. and Spectrum Brands Holdings. The former changed its name to Spectrum, and the latter became Spectrum Brands Legacy Inc.

The investors—who say Spectrum misled them about the success of a facilities consolidation plan—lost their bid for approval of the previous settlement because the notice at the start of the suit didn’t mention that the proposed class included pre-merger HRG stock purchasers. That deal also arbitrarily discounted the HRG stock purchasers’ claims, Judge James D. Peterson said in February.

Peterson in an Aug. 27 order severed the case so that investors who bought pre- and post-merger Spectrum stock could move forward with a settlement and investors who purchased pre-merger HRG stock could file an amended complaint of their own.

The new $32 million cash deal resolves the Spectrum investors’ claims and “represents approximately 15% of the realistic maximum recoverable damages,” according to a memo filed in support of the investors’ preliminary settlement approval motion.

The settlement class consists of everyone who purchased pre-merger Spectrum stock from Jan. 26, 2017, through July 13, 2018, or purchased post-merger Spectrum stock from July 13, 2018, to Nov. 19, 2018, and lost money as a result, with exclusions for those with close ties to the company.

Bernstein Litowitz Berger & Grossmann LLP, lead counsel for the Spectrum investors, plans to ask for no more than 15% of the settlement fund—$4.8 million—in attorneys’ fees. That’s “well within the percentages that courts in the Seventh Circuit approve in securities class actions with comparable recoveries,” where awards of just over 33% aren’t unheard of, the investors said. The firm will also seek up to $400,000 as reimbursement for litigation expenses.

Paul, Weiss, Rifkind, Wharton & Garrison LLP, Holland & Knight LLP, Foley & Lardner LLP, and Quarles & Brady LLP represent Spectrum.

The case is In re Spectrum Brands Sec. Litig., W.D. Wis., No. 3:19-cv-00347, preliminary settlement approval motion filed 8/30/21.