FAT Brands Inc. announced that it has reached an agreement in principle to settle the consolidated securities class action lawsuit captioned In re FAT Brands Inc. Securities Litigation, Case No. 2:22-cv-01820-MCS-RAO (C.D. Cal.), pending against the company and certain of its current and former officers and directors in the U.S. District Court for the Central District of California. The consolidated class action complaint was filed in March 2022, as described in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 23, 2022. The agreement to settle the lawsuit was reached following a voluntary mediation process.
The agreement in principle contemplates a cash payment by the company of $2.5 million and issuance of $500,000 in Class A common stock to settle the claims brought on behalf of all persons who purchased or otherwise acquired FAT Brands securities between December 4, 2017 and February 18, 2022. The parties have agreed to negotiate in good faith to execute a definitive stipulation of settlement and related documents to be filed with the court. The company anticipates that the stipulation of settlement will provide a full release of all claims by the settlement class members against all defendants, including the company and the named officers and directors, and will expressly deny any liability, wrongdoing or responsibility by any of the defendants. The company anticipates that, upon final court approval of the settlement, the litigation will be dismissed with prejudice. Approval by the court, notice to the putative class, and the satisfaction of customary conditions to effectiveness may take several months.
While FAT Brands continues to deny liability, it also believes that eliminating the distraction, expense and risk of continued litigation is in the best interests of the Company and its stockholders.
As previously disclosed, given the uncertainties of litigation, the company had not been in a position to assess the likelihood of any potential loss or outcome of the complaint. As a result of the entry into the agreement in principle, the company expects that the above-referenced settlement will be included in its results of operations and financial condition for the fiscal quarter ending September 25, 2022.