Omanghana
Data storage giant Seagate Technology has agreed to a preliminary $175 million settlement to resolve a shareholder class-action lawsuit that accused the company of concealing more than $1.1 billion in hard drive sales to Chinese telecommunications firm Huawei.
The proposed settlement, filed in federal court in San Francisco, brings a significant step toward ending nearly three years of litigation. The agreement remains subject to approval by U.S. District Judge Rita F. Lin.
Investors reacted positively to the news, with Seagate Technology shares rising more than 6% following the announcement.
Lawsuit Centered on Huawei Sales Allegations
The class-action lawsuit alleged that Seagate continued shipping hard drives to Huawei after the Chinese technology company had been placed on a U.S. trade blacklist.
According to investors, Seagate became Huawei’s primary supplier of hard drives after competing manufacturers halted shipments in compliance with U.S. export restrictions. Plaintiffs claimed the company shipped approximately 7.4 million hard drives to Huawei and failed to adequately disclose the risks associated with those transactions.
The lawsuit argued that investors suffered losses when details of the company’s business dealings and subsequent regulatory scrutiny became public.
Investor Class Period
The settlement covers shareholders who purchased Seagate stock between September 14, 2020, and April 19, 2023.
In addition to the company itself, the lawsuit named Seagate Chief Executive Officer Dave Mosley and Chief Financial Officer Gianluca Romano as defendants.
Although agreeing to the settlement, Seagate and the individual defendants continue to deny any wrongdoing or liability related to the claims.
Breakdown of the Settlement
Under the terms of the proposed agreement, Seagate will contribute $105 million toward the settlement fund, while the remaining $70 million will be paid through insurance coverage.
If approved by the court, the settlement will resolve claims brought on behalf of affected shareholders and avoid the uncertainty and expense of continued litigation.
Follows Previous Export Control Penalty
The shareholder lawsuit comes in the wake of separate regulatory action involving the company’s sales to Huawei.
In April 2023, Seagate agreed to pay a $300 million civil penalty to the U.S. Department of Commerce after authorities determined that the company had violated U.S. export control regulations through shipments made to Huawei.
That settlement marked one of the largest export-control enforcement actions involving a technology company and intensified scrutiny of Seagate’s business practices during the period covered by the shareholder lawsuit.
Market Reaction
Investors welcomed news of the proposed settlement, viewing it as a step toward resolving a major legal overhang that has weighed on the company in recent years.
Shares of Seagate Technology climbed more than 6% following the announcement, reflecting market optimism that the agreement could provide greater certainty regarding the company’s legal and regulatory exposure.
While court approval is still required before the settlement becomes final, the agreement represents a significant milestone in one of the most closely watched legal disputes involving the data storage industry and U.S.-China technology trade restrictions.
Source: Omanghana
