EDS Strikes Deal on Company Stock Suit

May 9, 2005 (PLANSPONSOR.com) - Electronic Data Systems Corp. said Friday it has reached a preliminary $16.5 million settlement of a class action lawsuit that will require the computer-services company to make changes to its 401(k) plan.

Participants who had invested in company stock in the Plano, Texas-based company’s 401(k) plan brought suit alleging the company withheld material information about its financial condition ahead of a preliminary announcement of 2002 earnings, which resulted in a drop in the company stock price, according to the Associated Press.  

Specifically, the suit charged that defendants never disclosed that certain amounts of EDS’ outsourcing revenue were far from a sure thing because contracts with those clients allowed the customers to unilaterally suspend the agreements. EDS never said its outsourcing revenue relating from airlines was subject to a drastic decrease in value if an airline, such as US Airways, declared bankruptcy, according to the suit. That happened August 11, 2002 (see  Lawyers Add Stock Reimbursement Claim to EDS Suit ).

In a quarterly SEC filing, EDS said the settlement calls for the company to make a cash payment to the plaintiffs, though the firm hasn’t admitted to any liability or wrongdoing in the case.