WorldCom Inc. investors canceled a $54 million settlement reached last month with the company's former outside directors after a judge voided a provision of the agreement that would have exposed banks to higher damages.
The directors were named in an investor lawsuit claiming WorldCom fraudulently hid costs in 2001 and 2002 to boost profit. The settlement was lauded by investors because it forced the board members to pay money out of their own pockets, and it sparked debate in boardrooms nationwide.
Investment banks named as defendants, including JPMorgan Chase & Co. and Bank of America Corp., objected to the invalidated provision. It would have limited the banks' right to reduce any damages, based on what portion of blame a jury might attach to the directors' conduct. Directors rejoin the banks as defendants at a trial of the suit in federal court in New York on Feb. 28.