NEW YORK (Legal Newsline) - A New York federal judge has given approval of a $9 million shareholder settlement in a lawsuit against a company that designs online ordering systems.
Judge Jed Rakoff gave preliminary approval to the settlement with Olo, Inc., which suffered a loss in the value of its stock following the loss of Subway as a client. Objectors may now raise any issue they have with the agreement, and class action lawyers will be asking for $3 million in fees.
A final settlement fairness hearing will take place June 10.
After attorney fees, expenses and administrative cost, the money will be doled out in a pro rata fashion among the class, which consists of purchasers between March 17, 2021, and Aug. 11, 2022.
"The recovery of individual Class Members under the Plan of Allocation will depend on several variables, including: the aggregate value of the Recognized Claims from valid Proofs of Claim submitted by Class Members; when the Class Member's shares were purchased and/or acquired and the price at t time of purchase and/or acquisition; and whether the shares were sold, and if so, when they were sold and for how much," the motion for preliminary approval says.
Rakoff denied two of Olo's motions to dismiss during the pendency of the litigation. It took only two weeks after his latest ruling for the settlement guidance of a mediator to be accepted by both sides.
Suits allege that in August of 2021, Olo reported its "active locations" to demonstrate its business growth as having approximately 15,000 Subway locations, which caused its stock price to "soar" above $45 per share before falling.
The plaintiffs claim Olo misled investors and omitted material facts about Subway locations that were set to end their relationship with Olo.
Olo countered by claiming Subway generated only a few million dollars of its 2021 revenue of $150 million. The company receives a fee on online transactions from other large chains like Jimmy John's, Jack in the Box and Panda Express.
The litigation, which is led by the firm Scott + Scott, seeks compensation for investors like lead plaintiff Steamship Trade Association - International Longshoreman's Association. Scott + Scott will seek up to $3 million in fees and up to $900,000 in expenses.
Though plaintiffs say the company was aware its Subway agreement was in peril and should have disclosed it to shareholders earlier, Olo said securities laws do not require disclosure of ongoing customer discussions "that could potentially sabotage an evolving business relationship before the outcome of those discussions was certain."
Lawsuits said Olo's misleading of the investing public led to the inflated price of the company's stock and that Olo "engaged in a scheme to deceive the market." The plaintiff alleges Olo's actions caused it to purchase Olo stock at artificially inflated prices since the stock price fell to $12.99 per share on Aug. 11 and fell to $8.26 per share on Aug. 12, 2022.