Green Light for Yellow Pages Settlement with R.H. Donnelley

June 20, 2012

Investors in the yellow pages company R.H. Donnelley Corporation recently secured a significant victory against the company’s executives when Robbins Geller Rudman & Dowd LLP partner Robert J. Robbins negotiated a $25 million settlement on behalf of shareholders.

The securities class action arose from a series of false and misleading statements made by the company and its executives in SEC filings, press releases, and conference calls between October 26, 2006 and May 29, 2009. The company ran into trouble when demand for its core print business deteriorated significantly with the permanent migration of advertisers to the Internet. Robbins Geller attorneys argued that the company’s high-ranking officers and directors misleadingly masked and denied the permanent decline in the company’s core business – the print yellow pages. As that business declined, R.H. Donnelley experienced substantial economic losses, increasing bad debt levels, and an inability to pay its significant debt obligations. The company and its executives, however, misrepresented the true extent of the company’s woes (blaming a faltering economy), which caused the company’s stock to trade at artificially inflated levels. When the truth regarding the company’s financials came out, the price of R.H. Donnelley stock plummeted, and the company ultimately went bankrupt.

Upon completing an expansive investigation that included interviews with several former R.H. Donnelley executives, Robbins Geller attorneys filed a comprehensive consolidated complaint. After full briefing on defendants’ motion to dismiss and hearing oral argument in May 2011, Judge Michael M. Baylson, sitting for the United States District Court for the District of Delaware, issued an order on June 14, 2011 denying every aspect of the motion to dismiss. Robbins Geller partner Robert J. Robbins argued for the plaintiffs. Despite defendants’ arguments, Judge Baylson held that the consolidated complaint more than adequately described plaintiffs’ 26 confidential witnesses, who provided many of the details behind defendants’ fraud, and that defendants’ statements characterizing the downturn in the yellow pages market as temporary were materially false and misleading. Discussing defendants’ state of mind, Judge Baylson found the inference that defendants “withheld material information because they did not want the market to learn that a secular shift was eroding the commercial viability of their key product” to be cogent and compelling.

“The breadth and depth of our investigation into defendants’ fraud gave us a strategic advantage. It is unusual for judges to rule from the bench in securities fraud class actions, but Judge Baylson made it clear at the motion to dismiss hearing that he would deny defendants’ motion,” said Robbins Geller associate Kathleen L. Barber.

Having cleared that procedural hurdle, Robbins Geller’s litigation team launched into extensive fact and expert discovery, reviewing millions of pages of documents produced by defendants. After plaintiffs moved for class certification, defendants agreed to attend formal mediation, where extended negotiations led to a $25 million settlement for R.H. Donnelley investors. “We reached this settlement after more than two years of exhaustive investigation, discovery, and negotiation. It represents the fruits of our sustained efforts and the hard work of our extremely driven litigation team,” said Robert J. Robbins.

Local 731 I.B. of T. Excavators and Pavers Pension Trust Fund, Private Scavenger and Garage Attendants Pension Trust Fund and Textile Maintenance and Laundry Craft Pension Fund v. David C. Swanson, et al., No. 1:09-cv-00799-MMB (D. Del.).

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