A nearly $39 million settlement of a 2019 class action lawsuit against Uniti Group Inc. of Little Rock has received preliminary approval from U.S. District Judge Brian S. Miller.
A federal court hearing in Little Rock is scheduled for Nov. 4, at which the settlement could be finalized.
In the suit, investors allege that Uniti (Nasdaq: UNIT) and its executives defrauded them by not disclosing and actively concealing via a public relations strategy several known risks stemming from issues that resulted in a $310 million judgment against Windstream in 2019. That judgment precipitated Windstream’s bankruptcy then privatization.
Uniti, a real estate investment trust, was created in 2015 with the spinoff of Windstream’s copper and fiber assets. Hedge fund and Windstream investor Aurelius Capital Management of New York won the multimillion-dollar judgment after arguing that the spinoff violated the terms of Windstream’s outstanding bonds. Arkansas Business previously spoke to a Little Rock lawyer about the intricacies of the case.
Windstream leasing assets from Uniti still accounts for the majority of Uniti’s revenue, and, though this didn’t come to pass, another risk Uniti investors say they weren’t told about was Windstream discontinuing lease payments following the judgment.
Both Windstream and Uniti have publicly denied any wrongdoing and were confident that Aurelius would not prevail in its case. The former went as far as to countersue, claiming that Aurelius acquired its position in the company just to manufacture a technical default on the bonds that would push it into bankruptcy.
Neither Uniti nor the three out-of-state law firms representing the investors who would benefit from the settlement — those who bought or acquired the company’s stock between April 24, 2015, and June 24, 2019 — responded to emailed requests for comment sent Monday or early Tuesday.
The Uniti investors said in their complaint that Uniti executives were involved in the spinoff, working both sides of the transaction, so they knew there were issues with it that could cause problems for both companies.
In addition, they said drastic dips in Uniti’s stock price as Aurelius waged its legal battle were “foreseeable” to Uniti executives.
The company’s stock price declined 40% over a two-year period, and, following news of the judgment against Windstream, it plummeted by more than 37% over a four-day period, the complaint reads.