OpenText's Carbonite to pay $27.5 million to resolve investor lawsuit

Open Text

31/01/2024 20:52

* 
      Settlement resolves class action lawsuit filed against
Carbonite
in 2019
    

        * 
      Case centered on data backup program
    

  
    By Nate Raymond
       Jan 31 (Reuters) - OpenText Corp  OTEX.TO  has agreed to
pay $27.5 million to resolve claims that the software provider
Carbonite misled investors before its acquisition by the
Canadian company by promoting a new, "super strong" data backup
program that executives knew did not work.
    The proposed settlement was disclosed in a filing in federal
court in Boston on Wednesday. It would resolve a long-running
securities class action lawsuit that predated OpenText's
purchase of Massachusetts-based Carbonite in 2019.
    David Rosenfeld, a lawyer for the plaintiffs at Robbins
Geller Rudman & Dowd, in a statement credited the lead
plaintiff, Construction Industry and Laborers’ Joint Pension
Trust, for helping secure an "excellent recovery" for investors.
    OpenText's Carbonite did not admit wrongdoing as part of the
settlement, which is subject to approval by U.S. District Judge
Leo Sorokin. 
    James Carroll, a lawyer for the company at Skadden, Arps,
Slate, Meagher & Flom, did not immediately respond to a request
for comment.
     Filed in 2019 before Carbonite's merger was announced, the
lawsuit alleged that the company falsely touted to investors a
“super strong” and “extremely competitive” data backup product
called "Server VM Edition" that launched in October 2018.
    The company said the product would allow businesses to
recover virtual machine data from a single location.
    But the lawsuit alleged that the product in fact never
worked as intended and that it "never once successfully backed
up a customer's data."
    Carbonite eventually announced on July 25, 2019 that it was
withdrawing the product from the market. 
    Its stock price fell more than 24% the next day, according
to the lawsuit, which accused the company of violating the
Securities Exchange Act of 1934.
    Sorokin initially dismissed the case. But the 1st U.S.
Circuit Court of Appeals reversed him in 2021, and Sorokin
certified the case as class action in July.
    The case is Luna v. Carbonite Inc, U.S. District Court for
the District of Massachusetts, No. 19-cv-11662.
    For investors: David Rosenfeld of Robbins Geller Rudman &
Dowd
    For Carbonite: James Carroll of Skadden, Arps, Slate,
Meagher & Flom
    
    Read more:
    In reversal, Carbonite investors can sue over 'super strong
product' claim
    Canada's Open Text to buy cloud security firm Carbonite for
$800 million

 (Reporting by Nate Raymond in Boston)
 ((Nate.Raymond@thomsonreuters.com and Twitter @nateraymond;
347-243-6917; Reuters Messaging:
nate.raymond.thomsonreuters.com@reuters.net))