Seagate Technology has agreed to a preliminary $175 million settlement to resolve a class-action lawsuit in which investors accused the company of misleading the market about sales to Huawei Technologies that allegedly violated U.S. export control laws.
The settlement filing, submitted late on Friday in U.S. federal court in San Francisco, covers claims against Seagate as well as its Chief Executive Dave Mosley and Chief Financial Officer Gianluca Romano. The proposed deal remains subject to judicial approval.
Plaintiffs - led by pension funds in Arkansas, Mississippi, Germany and Luxembourg - assert Seagate concealed shipments that totaled more than $1.1 billion in hard disk drives to Huawei. The complaint alleges those shipments amounted to over 7.4 million hard disk drives, and that by hiding that conduct the company overstated profits and its share price.
In consenting to the settlement, Seagate did not admit any wrongdoing, according to court papers. The company previously faced enforcement action from the U.S. government: in April 2023 the U.S. Department of Commerce’s Bureau of Industry and Security imposed a $300 million civil penalty related to the same conduct. That penalty was described in the filing as the largest civil penalty in the agency’s history that was not linked to a criminal case.
Seagate has set aside $105 million to cover the settlement and estimated that insurers would contribute about $70 million toward the $175 million amount. The proposed class period in the lawsuit runs from September 14, 2020 through April 19, 2023.
The filing notes that Seagate is based in Singapore and is incorporated in Ireland, while maintaining U.S. operations in Fremont, California. The complaint also references Huawei, which is headquartered in Shenzhen and operates in more than 170 countries with about 213,000 employees.
Lawyers for the shareholder plaintiffs have indicated they will seek up to 25% of the settlement fund for legal fees. The company did not immediately respond to requests for comment on Monday, according to the filing.
Context and implications
The settlement resolves civil claims by investors that the company misrepresented its compliance with U.S. export controls and the financial effects of alleged sales to a company that has been subject to U.S. trade restrictions. The agreement follows regulatory enforcement that resulted in a separate, substantial civil penalty.
As a preliminary deal, the settlement must be reviewed and approved by the court before it becomes final. The filings identify both the monetary provisions the company has set aside and the anticipated contribution from insurers toward the settlement amount.