HP and shareholder groups settle and agree to turn legal sights on former Autonomy execs

The seemingly never-ending HP-Autonomy saga took another turn Monday night when Hewlett-Packard ( s hpq)and two law firms representing shareholder groups agreed to settle their differences, meaning they can now work together to pursue legal action against former Autonomy CEO Mike Lynch (pictured below) and CFO Shushovan Hussain.

To  recap this tortuous tale, HP under then CEO Leo Apotheker, agreed to buy Autonomy in 2011 for more than $11 billion in a deal that was controversial even before it was formally announced — news of it leaked in advance. Apotheker left the company within a year and his successor Meg Whitman alleged in November 2012 that Autonomy — including Lynch — misrepresented the size of its business and engaged in bad accounting practices — essentially duping HP into overpaying. HP also pushed U.K. and U.S. authorities to investigate Autonomy for fraud. 

Former Autonomy CEO Mike Lynch

Former Autonomy CEO Mike Lynch

The shareholder groups in turn then  charged that HP management, including Whitman, didn’t perform due diligence in ferreting out Autonomy’s problems earlier than it did.

The agreement hammered out in mediation means that the plaintiffs and their law firms, Cotchett, Pitre & McCarthy and Robbins Geller Rudman & Dowd, will now help HP bring claims against Lynch, Hussain and potentially others. And, in a positive bit of news for HP, all claims against its current and former directors — “other than legacy Autonomy officials and advisors” — will be dismissed.

And there are material benefits to the former plaintiffs and their attorneys as well — as in they’ll get a cut of whatever money is recovered from the former Autonomy execs. According to the agreement:

“In recognition of the substantial benefits conferred upon HP, HP, by and through its Independent Committee, has entered into an engagement letter with the Settling Plaintiffs’ Counsel that provides for a fixed fee and fee contingent upon the amount recovered by HP. More particularly, in addition to a fixed monthly retainer in the amount of $562,500 for 32 months, Settling Plaintiffs’ Counsel will be eligible to receive a contingent fee equal to 10% of the amount recovered by HP up to $100 million, and 25% of any amount in excess of $100 million, up to a maximum contingent amount of $30 million.

Lynch has repeatedly denied allegations of wrongdoing.

In addition, HP agreed to adopt better policies for vetting potential mergers and acquisitions.

News of these settlement talks first surfaced in a Reuters report on Friday.

 This story was updated at 8:28 p.m. PST with details on how the plaintiffs and their attorneys stand to benefit from this deal.