Nortel Networks Ltd. is on its way to getting a major shareholder lawsuit off its back, as two New York judges yesterday approved a roughly $2.2 billion settlement plan.

Judges Richard Berman and Loretta Preska, who worked on the two halves of the case, issued their approvals yesterday, according to press reports. This would complete part of a global settlement that Nortel and the plaintiffs had agreed in principle on Feb. 8. (See Nortel Takes $2.5B Hit.)

The suit in question is the class-action combination of 25 of the shareholder lawsuits filed against Nortel since February 2001, when Nortel sharply cut guidance, signaling the beginning of what would be a long run of restatements and general financial misery. (See Nortel's Nasty Surprise, Nortel Keeps to Profit Path, Nortel Refiles Results, and Nortel Rattles Nerves.)

Getting these lawsuits out of the way, then, would clear a psychological hurdle for Nortel, closing the book on its troubled years during the telecom crash. Back in February, Nortel said the settlement would "remove a significant impediment to Nortel's future success and allow [new CEO] Mike Zafirovski and the Nortel team to move forward."

Assuming the New York piece of the case truly is approved -- a Nortel spokesman notes he hadn't personally seen both judge's decisions yet -- Nortel still has to get the OK of Canadian courts in the provinces of British Columbia, Ontario, and Québec. Only then will the entire global settlement be settled. (And maybe some kind of harmonic convergence will come around, too.)

Now for the gory details: Nortel's February proposal involves a payment of $575 million in cash and 628,667,750 shares -- then 14.5 percent of its equity. Nortel's insurers agreed in March to pay $228.5 million toward the settlement, according to Nortel's 10-K filing with the SEC.

A 1-for-10 reverse split undergone at the start of the month will presumably reduce the number of shares to about 62.9 million. (See Nortel Implements Split .) Based on yesterday's closing price of $26.16, the Nortel shares would be worth about $1.64 billion.

On top of all that, Nortel is going to add half of any money it recovers in suits against former executives Frank Dunn, Douglas Beatty, and Michael Gollogly, who were terminated for cause in April 2004. (See Nortel Stock Dives on Dunn Downfall and Nortel Dismisses Dunn.)

Nortel shares reacted modestly to the news, climbing 38 cents (1.5%) to $26.54 by midday.

— Craig Matsumoto, Senior Editor, Light Reading