Qualcomm Investors Seek Approval for $75M Settlement

Qualcomm Inc. investors have asked a California federal judge to approve a $75 million settlement to resolve claims that the chipmaker misled the market by asserting it kept its licensing and chip-supply businesses separate, while actually bundling the two in negotiations and agreements.

The proposed settlement covers all individuals who purchased Qualcomm stock between February 1, 2012, and January 20, 2017, and who were financially harmed by the alleged misconduct. Qualcomm is accused of exploiting its monopoly to force cellphone makers into unfair agreements, contrary to its claims of licensing its patents on a nondiscriminatory basis.

Lead plaintiffs Sjunde AP-Fonden and Metzler Asset Management GmbH highlighted that the all-cash settlement follows extensive litigation, including a trip to the Ninth Circuit and a summary judgment ruling in Qualcomm’s favor. This settlement, if approved, would mark the first time a U.S. plaintiff has secured any recovery from Qualcomm related to the alleged anti-competitive conduct.

Investors first filed suit in 2017, accusing Qualcomm of misleading shareholders about its licensing practices. The Federal Trade Commission’s actions in early 2017 brought these practices to light, leading to a 33% drop in Qualcomm’s stock, which erased $32 billion in shareholder value.

In May 2017, the investor actions were consolidated, with Sjunde AP-Fonden and Metzler Asset Management GmbH appointed as lead plaintiffs, and Bernstein Litowitz Berger & Grossmann LLP and Motley Rice LLC appointed as lead counsel.

Qualcomm’s attempt to dismiss the suit was denied in March 2019 by U.S. District Judge John A. Houston, who rejected Qualcomm’s argument that its statements about licensing practices were opinions and not actionable. In March 2023, U.S. District Judge Jinsook Ohta certified the claim that Qualcomm misled the market about keeping its licensing and chip-supply businesses separate but did not certify the licensing misrepresentation claims.

Discovery and Negotiations

The discovery phase of the litigation was intense, with lead counsel issuing over 115 document requests, serving 38 interrogatories, 20 requests for admissions, multiple subpoenas, and reviewing more than 60 million pages of discovery. Following negotiations, an agreement in principle to resolve the action for $75 million was reached on May 31.

If the settlement is approved, the net settlement fund will be distributed to class members who submit valid claim forms. Lead counsel plans to request 23% of the settlement fund for their fees and reimbursement of expenses, which is below the 25% benchmark and the 30% norm in similar contingency-based cases.

Legal Representation

The investors are represented by Jonathan D. Uslaner, Lauren M. Cruz, Salvatore J. Graziano, and Rebecca E. Boon of Bernstein Litowitz Berger & Grossmann LLP, and Gregg S. Levin, William S. Norton, Christopher F. Moriarty, and William H. Narwold of Motley Rice LLC.

Qualcomm is represented by Robert A. Van Nest, Eugene M. Paige, Laurie Carr Mims, Cody S. Harris, Maria F. Buxton, and Daniel B. Twomey of Keker Van Nest & Peters LLP; Antony L. Ryan, Yonatan Even, and M. Brent Byars of Cravath Swaine & Moore LLP; and Christopher Durbin and Koji F. Fukumura of Cooley LLP.

The case is In Re: Qualcomm Inc. Securities Litigation, case number 3:17-cv-00121, in the U.S. District Court for the Southern District of California.