Based in large part on Judge Lewis A. Kaplan’s June 11, 2008 opinion in the case of CSX v. TCI and 3G (which was detailed in the June 19, 2008 the Hedge Fund Law Report), a CSX shareholder recently filed a lawsuit against TCI and 3G alleging violations of Section 16(b) of the Securities Exchange Act of 1934, the provision prohibiting short-swing profits.  The parties have settled the suit, pending court approval – but, as always, the settlement occurred in the “shadow” of relevant law and legal uncertainty.  We detail the legal backdrop before which the case has provisionally settled, and we show how legal uncertainty can translate into a dollars-and-cents reduction of claimed damages in the context of settlement of securities claims.