In-flight wifi service provider Gogo appears to be headed toward a $17.3 million settlement to end a class action from investors alleging the company violated federal securities laws through false statements about one of its new products.
Attorneys who led the action say they will ask for one-third of the total settlement, or nearly $5.8 million
On April 14, lawyers for court-appointed lead plaintiff Daniel Rogers filed a memorandum asking U.S. District Judge Jorge Alonso to approve their motion for approval of the settlement and class certification. Peter Lubin, of the Oakbrook Terrace firm Lubin Austermuehle, is liaison counsel for Rogers. Attorneys Nicholas I. Porritt and Adam M. Apton, from the firm of Levi & Korsinsky, of Washington, D.C., and Casey Sadler and Natalie S. Pang, of Glancy Prongay & Murray, of Los Angeles, represent Rogers and are lead counsel for the settlement class. Attorneys from the firm of Labaton Sucharow, of New York, served as additional settlement class counsel.
The dispute focuses on Gogo’s 2Ku global satellite system, which plaintiffs alleged was rendered inoperable due to de-icing fluid used to treat airplanes. According to the filing, the $17.3 million represents 8 percent of the maximum damages available to the class should the action proceed to trial, which they estimated at approximately $213.5 million for holders of Gogo common stock between Feb. 27, 2017, and May 4, 2018.
Rogers centered his allegations — initially field June 27, 2018 — on a February 2018 conference call in which Gogo acknowledged, but downplayed, the de-icing issues, and a May 2018 conference call revealing the magnitude of the issue followed four days later by Moody’s downgrading Gogo’s credit ratings. The complaint also detailed significant drop in Gogo’s stock price from the February conference call through the Moody’s announcement.
The plaintiffs said the allegedly materially false and misleading statements about the viability of 2Ku — specifically regarding a significant defect in the product design — violated two sections of the Securities and Exchange Act as well as Securities and Exchange Commission rules promulgated under that law. The result, Rogers alleged, was an artificially inflated stock price that ultimately dropped to $5.06 per share by May 8, 2018.
In October 2019, Alonso granted Gogo’s motion to dismiss the first amended complaint. Gogo moved to dismiss the second amended complaint on Feb. 21, 2020, but the onset of COVID-19 mitigations prompted extensions of lead times for the plaintiffs to respond until July 22, 2020. At that time, Rogers filed a third amended complaint, this time introducing “allegations relating to information obtained from one of Gogo’s largest investors during the class period, as well as information from five former Gogo employees who were alleged to have been directly involved in discovering and attempting to remedy the alleged 2Ku deicing defect,” according to the settlement motion.
In April 2021, Alonso denied Gogo’s motion to dismiss the entire action, which lifted an automatic discovery stay. During that process, the parties agreed to mediation, ultimately leading to the proposed settlement.
Distribution of the funds would involve a formula to measure “damages consistent with the alleged violations of the federal securities laws as opposed to losses caused by market, industry or company-specific factors unrelated to the allegations,” according to the memorandum. “The formula also takes into consideration when each claimant purchased and/or sold Gogo securities,” among other factors.
In arguing for settlement, attorneys noted the likelihood Gogo would defend itself by arguing the class period spanned two winters, while evidence would show there was no material problem with de-icing agent during the first winter and could attempt to convince a jury it made timely disclosures of problems during the second winter. They also said Gogo believed it was addressing the problem, undercutting allegations of intentional fraud or misleading statements.
Furthermore, Gogo was likely to attribute the drop in its stock price to declining average revenue per plane, pricing model transition and competition, while also stating the information leading to the Moody’s downgrade was in the public domain. The memorandum also expressed concerns about Gogo’s plans to contest class certficiation.
Gogo has been represented in the case by attorneys Jonathan S. Quinn and Andrew G. May, of Neal Gerber Eisenberg, of Chicago, and Jerome S. Fortinsky, of Shearman & Sterling, of New York.