Johnson Fistel, LLP Secures Sweeping Reforms with Potential Value in the Hundreds of Millions of Dollars for The Southern Company
— Johnson Fistel, LLP (@JF_LLP) July 29, 2022
On June 9, 2022, The Hon. Mark H. Cohen granted final approval of a shareholder derivative settlement which resolved consolidated shareholder lawsuits pending in the United States District Court for the Northern District of Georgia as well as a related shareholder lawsuit pending in Georgia superior court.
Johnson Fistel, court-appointed lead counsel, negotiated the settlement that commits The Southern Company, through its Board and/or committees of the Board or duly authorized officers of The Southern Company, to adopt and/or maintain for a minimum period of five years a comprehensive package of oversight and internal controls reforms designed to address the alleged lapses in Board- and management-level supervision of large capital projects that the plaintiffs contend contributed to the project’s failure and caused The Southern Company significant losses. In approving the settlement, Judge Cohen praised Johnson Fistel for its diligence and efforts in the case which resulted in beneficial and long-lasting changes in the company’s corporate governance. More specifically, he stated that “the Settlement is the product of hard-fought, arm’s-length negotiations by prepared, skilled, and experienced counsel” who are “nationally recognized leaders in shareholder litigation” and that the “decision to lock in the Settlement’s guarantee that the Reforms will be implemented and maintained for at least half a decade, rather than to sacrifice that benefit in order to pursue the remote possibility that a monetary recovery might exceed the Reforms’ value, is eminently reasonable.” The corporate reforms obtained by Johnson Fistel in the settlement were valued by one expert as having the potential to contribute hundreds of millions of dollars in value to the Company.
The actions, brought on behalf of nominal defendant The Southern Company and against certain current and former directors and officers of the company, arose from The Southern Company’s construction and subsequent decommissioning of a commercial-scale integrated gasification combined cycle lignite coal-fired power plant in Kemper County, Mississippi. Specifically, the actions alleged these directors and officers breached fiduciary duties of loyalty and care owed to The Southern Company and its stockholders by: (i) failing to exercise oversight over the design, planning and construction of the Project; (ii) failing to establish effective systems for monitoring and controlling Project design and construction, budget and schedule estimates, actual costs and schedules, and mitigation plans to address design and construction problems, cost overruns, and schedule delays; (iii) failing to ensure accurate and timely disclosure of material Project developments and changes in key Project assumptions, including material increases in actual and estimated costs and schedules, escalating risks to achievement of operational and financial objectives, qualification for government-funded incentives, and prospects for ratepayer recovery, and sustained declines in current and projected natural gas prices; and (iv) failing to prevent billions of dollars in foreseeable losses resulting from, inter alia, forfeited government incentives, rejected applications for ratepayer cost recovery, and excess construction and decommissioning costs by scuttling the Project’s IGCC component years earlier, if not prior to commencement of construction.
Attorneys Michael I. Fistel, Jr., William W. Stone, and Adam J. Sunstrom led the prosecution of the litigation for Johnson Fistel and helped achieve this superb result on behalf of plaintiffs and The Southern Company.
In re Southern Company Shareholder Derivative Litigation, No. 1:17-cv-00725-MHC (N.D. Ga.).