COTCHETT, PITRE & MCCARTHY, LLP JOSEPH W. COTCHETT …

Microsoft Word - Medical Capital - BNYM Settlement Brief (FINAL)MEMO. OF LAW ISO PLS.’ MOT. FOR ORDER GRANTING FINAL APPROVAL OF CLASS ACTION
SETTLEMENT, ENTERING FINAL JUDGMENT, AND APPROVING PLAN OF ALLOCATION; Lead
Case No. SA 10-ML-02145-DOC (RNBx)
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COTCHETT, PITRE & MCCARTHY, LLP JOSEPH W. COTCHETT (36324) [email protected] MARK C. MOLUMPHY (168009) [email protected] BRYAN M. PAYNE (272971) [email protected] San Francisco Airport Office Center 840 Malcolm Road Suite 200 Burlingame, CA 94010 Telephone: (650) 697-6000 Facsimile: (650) 697-0577 WESTERMAN LAW CORP. JEFF S. WESTERMAN (94559) [email protected] JORDANNA G. THIGPEN (232642) [email protected] 1925 Century Park East, Suite 2100 Los Angeles, CA 90067 Telephone: (310) 698-7450 Facsimile: (310) 201-9160 Lead Counsel for Plaintiffs and the Class [Additional Counsel Listed on Signature Page]
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
SOUTHERN DIVISION
) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )
Lead Case No. SA-10-ML-02145 DOC (RNBx) MEMORANDUM OF LAW IN SUPPORT OF NOTEHOLDER PLAINTIFFS’ MOTION FOR ORDER GRANTING FINAL APPROVAL OF CLASS ACTION SETTLEMENT, ENTERING FINAL JUDGMENT, AND APPROVING PLAN OF ALLOCATION DATE: June 24, 2013 TIME: 10:00 A.M. CTRM.: 9D JUDGE: Hon. David O. Carter
Case 8:10-ml-02145-DOC-RNB Document 589 Filed 04/18/13 Page 1 of 30 Page ID #:27617
i MEMO. OF LAW ISO PLS.’ MOT. FOR ORDER GRANTING FINAL APPROVAL OF CLASS ACTION
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III. ARGUMENT .................................................................................................. 8
A. The Proposed Settlement is Fair, Reasonable, and Adequate .............. 8
1. The Strength of Plaintiffs’ Case, When Balanced Against the Risk, Expense, Complexity, and Likely Duration of Further Litigation, Supports Approval of the Settlement ......... 10
a. Complexity of proof of liability and damages ............... 10
b. Expense and duration of further litigation ..................... 12
2. Plaintiffs Engaged in Extensive Discovery and Conducted a Thorough Investigation to Identify the Strengths and Weaknesses of Their Case and the Propriety of Settlement ............................................................. 14
3. The Recommendations of Experienced Counsel After Extensive Litigation and Arm’s-Length Settlement Negotiations Favor the Approval of the Settlement ................. 16
4. The Risks of Maintaining the Class Action Through Trial Weigh in Favor of the Settlement ............................................. 18
5. The Settlement Amount Supports the Settlement .................... 19
6. The Reaction of the Class Members to the Proposed Settlement Supports the Settlement .......................................... 20
B. The Plan of Allocation is Fair and Reasonable .................................. 21
IV. CONCLUSION ............................................................................................. 24
ii MEMO. OF LAW ISO PLS.’ MOT. FOR ORDER GRANTING FINAL APPROVAL OF CLASS ACTION
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Armstrong v. Davis 275 F.3d 849 (9th Cir. 2001) ......................................................................... 18
Boyd v. Bechtel Corp. 485 F. Supp. 610 (N.D. Cal. 1979) ............................................................... 21
CFTC v. Topworth Int'l, Ltd. 205 F.3d 1107 (9th Cir. 1999) ....................................................................... 22
Churchill Vill., L.L.C. v. Gen. Elec. 361 F.3d 566 (9th Cir. 2004) ....................................................................... 8, 9
Dell’Oca v. The Bank of New York Trust Co. 159 Cal. App. 4th 531 (2008) ........................................................................ 11
Facebook, Inc. v. Pac. Nw. Software, Inc. 640 F.3d 1034 (9th Cir. 2011) ......................................................................... 9
Fulford v. Logitech, Inc. 2010 U.S. Dist. LEXIS 29042 (N.D. Cal. Mar. 5, 2010) .............................. 12
Hanlon v. Chrysler Corp. 150 F.3d 1011 (9th Cir. 1998) ..................................................................... 8, 9
In re Apollo Grp., Inc. Sec. Litig. 2008 WL 3072731 (D. Ariz. Aug. 4, 2008) .................................................. 11
In re Bankers Trust Co. 450 F.3d 121 (2d Cir. 2006) .......................................................................... 11
In re Bluetooth Headset Products Liability Litig. 654 F.3d 935 (9th Cir. 2011) ......................................................................... 17
In re Broadcom Corp. Sec. Litig. 2005 U.S. Dist. LEXIS 41976 (C.D. Cal. Sept. 12, 2005) ............................ 21
In re First Capital Holdings Corp. Fin. Prods. Sec. Litig. 1992 U.S. Dist. LEXIS 14337 (C.D. Cal. June 10, 1992) ............................ 17
In re Heritage Bond Litig. 2005 U.S. Dist. LEXIS 13555 (C.D. Cal. June 10, 2005) ............................ 19
In re Mercury Interactive Corp. Sec. Litig. 618 F.3d 988 (9th Cir. 2010) ......................................................................... 20
In re Omnivision Techs., Inc. 559 F. Supp. 2d 1036 (N.D. Cal. 2008) .................................................. 16, 21
In re Oracle Sec. Litig. 1994 U.S. Dist. LEXIS 21593 (N.D. Cal. June 16, 1994) ...................... 21, 22
iii MEMO. OF LAW ISO PLS.’ MOT. FOR ORDER GRANTING FINAL APPROVAL OF CLASS ACTION
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In re Skilled Healthcare Group, Inc. Sec. Litig. 2011 U.S. Dist. LEXIS 10139 (C.D. Cal. Jan. 26, 2011) ............................. 19
In re Tedlock Cattle Company, Inc. 552 F.2d 1351 (9th Cir. 1977) ....................................................................... 22
In re Wash. Pub. Power Supply Sys. Sec. Litig. 1988 U.S. Dist. LEXIS 16532 (W.D. Wash. July 28, 1988) ................. passim
Joy v. Davis (In re Schwarz Publ’g, Inc.) 2009 Bankr. LEXIS 4546 (B.A.P. 9th Cir. Aug. 4, 2009) ........................... 14
Linney v. Cellular Alaska P’ship 151 F.3d 1234 (9th Cir. 1998) ......................................................................... 9
Lo v. Oxnard European Motors, LLC 2011 U.S. Dist. LEXIS 144490 (S.D. Cal. Dec. 15, 2011) ........................... 16
Lundell v. Dell, Inc. 2006 U.S. Dist. LEXIS 90990 (N.D. Cal. Dec. 5, 2006) .............................. 16
Meckel v. Cont’l Res. Co. 758 F.2d 811 (2d Cir. 1985) .......................................................................... 10
Nat’l Rural Telecomms. Coop. v. DIRECTV, Inc. 221 F.R.D. 523 (C.D. Cal. 2004) ............................................................ 12, 14
Officers for Justice v. Civil Serv. Comm’n 688 F.2d 615 (9th Cir. 1982) ........................................................... 8, 9, 14, 18
Robbins v. Koger Props., Inc. 116 F.3d 1441 (11th Cir. 1997) ..................................................................... 11
Rodriguez v. W. Publ’g Corp. 563 F.3d 948 (9th Cir. 2009) ......................................................... 8, 16, 17, 21
SEC v. Capital Consultants, LLC 2002 U.S. Dist. LEXIS 27399 (D. Or. 2002) aff'd, 397 F.3d 733 (9th Cir. Dec. 5, 2005) ................................................... 22
Semi-Tech Litig., LLC v. Bankers Trust Co. 353 F. Supp. 2d 460 (S.D.N.Y. 2005) ........................................................... 11
Shawmut Bank, N.A. v. Kress Assoc. 33 F.3d 1477 (9th Cir. 1994) ......................................................................... 10
Staton v. Boeing Co. 327 F.3d 938 (9th Cir. 2003) ........................................................................... 8
White v. Experian Info. Solutions, Inc. 803 F. Supp. 2d 1086 (C.D. Cal. 2011) ....................................... 11, 15, 16, 20
iv MEMO. OF LAW ISO PLS.’ MOT. FOR ORDER GRANTING FINAL APPROVAL OF CLASS ACTION
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RULES
Fed.R.Civ. P. 23(e) .................................................................................................... 8
Fed.R.Civ.P. 54 .................................................................................................... 1, 20
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MEMO. OF LAW ISO PLS.’ MOT. FOR ORDER GRANTING FINAL APPROVAL OF CLASS ACTION
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I. PRELIMINARY STATEMENT
Pursuant to Rules 23(e) and 54(b) of the Federal Rules of Civil Procedure,
the Court-appointed Class Representatives for the certified Class of Medical
Capital Noteholders (“Plaintiffs” or the “Class”) submit this motion for an order (i)
granting final approval of the Settlement of Plaintiffs’ claims against The Bank of
New York Mellon (“BNYM”) in this Action for $90,675,600 in cash (plus accrued
interest) (the “Class Settlement” or “Settlement”), (ii) entering the Class Action
Final Order and Judgment (“Final Judgment”), and (iii) approving the Plan of
Allocation of the Settlement Proceeds (“Plan of Allocation”). This motion is
supported by the Joint Declaration of Mark C. Molumphy and Jeff S. Westerman
(“Joint Declaration” or “Joint Decl.”), the Declaration of Stefanie C. Gardella
(“Gardella Declaration”), the Declaration of the Hon. John W. Kennedy (Ret.)
(“Kennedy Declaration”), and the Declaration of Babak Lalezari (“Lalezari
Declaration”) filed concurrently herewith.
The Class Settlement is a result of over three years of hard-fought litigation,
including the briefing of two rounds of motions to dismiss, over one and a half
million pages of document discovery, over 35 depositions, briefing of Plaintiffs’
motion for class certification, briefing of BNYM and Plaintiffs’ cross-motions for
summary judgment addressing claims that Plaintiffs had no standing to bring their
claims, and protracted arm’s-length settlement negotiations.
This action stems from an alleged fraudulent Ponzi scheme in the offer and
sale of notes perpetrated by Medical Capital Holdings, Inc. (“MCH”), Medical
Capital Corporation (“MCC”), and those companies’ officers (collectively referred
to as “Medical Capital”). See Securities and Exch. Comm. v. Medical Capital
Holdings, Inc., et al., Case No. SACV 09-0818 (RNBx) (filed July 16, 2009) (the
“SEC Action”). On or about August 18, 2009, the Court entered an order in the
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SEC Action appointing Thomas A. Seaman as permanent receiver (the “Receiver”)
for MCH and its affiliates (the “Receivership Entities”).
Plaintiffs alleged that Defendant BNYM materially breached contractual
duties that it owed to Plaintiffs and other investors who purchased notes issued by
three special-purpose corporations for which BNYM served as indenture trustee:
Medical Provider Financial Corporation II (“MP II”), Medical Provider Financial
Corporation IV (“MP IV”), and Medical Provider Funding Corporation VI (“MP
VI”) (collectively, the “SPCs”). Plaintiffs alleged that they were third party
beneficiaries of separate Note Issuance and Security Agreements (“NISAs”)
between the SPCs and BNYM, which set forth BNYM’s contractual duties to
Plaintiffs and other noteholders. Plaintiffs alleged that, as a result of BNYM’s
breaches, millions of dollars in funds that were held in trust for Plaintiffs’ benefit
were wrongfully disbursed, resulting in damage to Plaintiffs. Plaintiffs alleged that
BNYM acted both negligently and in bad faith in performing its duties under the
NISAs, and failed to perform other duties entirely.1 See Joint Decl. ¶¶ 17-18.
BNYM vigorously contested Plaintiffs’ allegations from the outset, first
filing a motion to dismiss that was granted by the Court and resulted in the
dismissal of Plaintiffs’ claims. See id. ¶¶ 23, 27-29. After Plaintiffs filed a Second
Amended Complaint, BNYM again filed a motion to dismiss, which was granted
in part and denied in part. The Court dismissed all of Plaintiffs’ tort-based claims
against BNYM, and permitted Plaintiffs’ breach of contract claim to move
forward. See id. ¶¶ 30, 33-35.
1 Plaintiffs continue to litigate their claims in this action, pending expected execution of a settlement agreement soon with defendant Wells Fargo Bank, N.A. (“Wells Fargo”), which served as indenture trustee for special-purpose corporations Medical Provider Financial Corporation III (“MP III”) and Medical Provider Funding Corporation V (“MP V”). BNYM and Wells Fargo are referred to collectively as “Defendants.”
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After substantial discovery, including the deposition of each proposed Class
Representative, BNYM also opposed Plaintiffs’ motion for class certification,
arguing that Plaintiffs’ claims did not meet the certification requirements of Rule
23. Following the Court’s granting of class certification, BNYM unsuccessfully
petitioned the Ninth Circuit for an interlocutory appeal of the Court’s class
certification order. Ultimately, Plaintiffs obtained certification of a class (the
“Class”) consisting of:
All persons or entities who purchased or otherwise acquired notes issued by one or more of Medical Provider Financial Corporation II, III, and IV and Medical Provider Funding Corporation V and VI and did not receive some or all of their principal or interest payments.
See Joint Decl. ¶¶ 37-43.
Counsel firms Cotchett, Pitre & McCarthy, LLP (“Cotchett”) and Westerman Law
Corp. (“WLC”) (each, “Co-Lead Counsel”) together with the other Plaintiffs’ firms
on the Executive Committee2 (collectively, “Class Counsel”), diligently obtained
and analyzed over one and a half million pages of documents produced by BNYM,
Wells Fargo, the Receiver appointed by the Court over the Receivership Entities,
and various other third parties located throughout the United States. In virtually
every case, these documents were secured only after time-intensive negotiations
with the parties and non-parties over the scope of the discovery sought and the
methods and search terms used to identify responsive documents. Class Counsel
took the depositions of 30 percipient witnesses, including 12 depositions of current
2 The current members of the Executive Committee are Milberg LLP; Minami Tamaki LLP; Law Office of Michael D. Liberty; and Aitken*Aitken*Cohn. From December 21, 2009 through April 4, 2013, Milberg LLP served as Court-appointed Co-Lead Counsel for Plaintiffs and the Class. The discussion in this memorandum of the work performed by Co-Lead Counsel includes the work performed by Milberg LLP in its capacity as Co-Lead Counsel. Mr. Westerman was previously a partner at Milberg LLP.
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and former BNYM employees who were involved on the Medical Capital account,
and depositions of Medical Capital employees who dealt with BNYM. Class
Counsel also served multiple sets of document requests, interrogatories and
requests for admission on BNYM and Wells Fargo, and carefully analyzed
Defendants’ responses to those discovery requests. Plaintiffs’ discovery efforts
also involved multiple motions to compel discovery from Defendants and third
parties. See id. ¶¶ 58-61.
In June 2012, BNYM and Wells Fargo entered into proposed settlements
with the Court-appointed Receiver that purported to extinguish Plaintiffs’ claims
against Defendants, and Defendants filed a motion for summary judgment which
sought to establish that Plaintiffs did not have standing to continue to pursue their
claims. Plaintiffs vigorously opposed Defendants’ summary judgment motion,
arguing that Plaintiffs had independent standing to pursue claims against
Defendants for breaches of the NISAs that resulted in damages to noteholders.
Plaintiffs also filed their own motion for partial summary judgment, asking the
Court to find that Plaintiffs had standing to pursue their claims. See Joint Decl. ¶
52.
Beginning in the summer of 2012, Plaintiffs and the Class, along with the
plaintiffs in two “mass actions” filed against BNYM and Wells Fargo, engaged in
extensive settlement negotiations with BNYM facilitated by an experienced
mediator, the Hon. John W. Kennedy, Jr. (Ret.).3 The parties continued those
negotiations while the summary judgment motions were being briefed and as the
3 The mass actions that are parties to the Stipulation of Settlement are Bain v. Wells Fargo Bank, N.A., Case No. SACV09-2218 LJO-GSA (the “Bain Action”) and Abbate v. Wells Fargo Bank, N.A., Case No. SACV10-6561 DOC (RNBx) (the “Abbate Action”). The Abbate Action, the Bain Action, and the Class Action are collectively referred to as the “Trustee Actions”).
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parties prepared for oral argument on those motions. See Declaration of John W.
Kennedy, Jr. (Ret.); Joint Decl. ¶¶ 53-54.
After the summary judgment motions relating to standing, and the
Receiver’s motion for approval of his settlements with Defendants, were fully
briefed, and literally on the eve of argument, the Noteholder Action plaintiffs and
BNYM reached an agreement-in-principle for the settlement of their claims against
BNYM. On December 21, 2012, as the parties appeared in Court for the hearing
on the summary judgment motions and the Receiver’s motion for approval of
settlements, BNYM and the Noteholder Action plaintiffs executed a term sheet
setting forth the essential terms of the “Global Settlement” between the parties.
Following extensive and hard-fought negotiations between the parties, the
Noteholder Action plaintiffs and BNYM executed the Stipulation of Settlement on
February 13, 2013. See Joint Decl. ¶ 62.
The total amount of the “Global Settlement” between BNYM and the three
Trustee Actions – i.e., the Class, Bain and Abbate actions – is $114 million, with
$90,675,600 to be paid to the Class (“Class Settlement Fund”), $18,764,400 to the
Abbate Action plaintiffs, and $4,560,000 to the Bain Action plaintiffs.
Further, upon final approval, BNYM will release any and all claims it may
have asserted against the Receivership Entities, including claims for indemnity.
See Stipulation of Settlement at ¶ 59(b); see also Stipulation Re: Settlement
Between Receiver and BNYM, ECF. No. 985 in the SEC Action.
With regard to the instant action, the Class Settlement is the result of the
skill and tenacity of Class Counsel. Among the signature achievements of Class
Counsel during this Action were the successful defense of Plaintiffs’ breach of
contract claim against Defendants’ motions to dismiss; the certification of the
Class over vigorous challenges by Defendants concerning the propriety of class
certification and the commonality of the Class, including Defendants’ petition to
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the Ninth Circuit; defending against efforts by Defendants and Medical Capital’s
Receiver to negotiate a settlement that negated Plaintiffs’ claims, including
opposing motions that sought to establish that Plaintiffs had no standing to bring
their claims; and the negotiation of the production of over one and a half million
pages of documents by the Defendants and non-parties.
In order to successfully prosecute this Action and bring it to this favorable
conclusion, Class Counsel also (a) thoroughly investigated, with the assistance of
in-house investigators, the facts underlying the allegations in the Fourth Amended
Consolidated Complaint for Breach of Contract (the “Complaint”); (b) thoroughly
researched the law pertinent to the claims and defenses asserted; (c) analyzed
issues of trust liability and damages in this Action and consulted with trust and
economic experts regarding corporate trust practices and the calculation of
damages; (d) litigated two complex motions to dismiss, defeating Defendants’
challenge to prior versions of the Complaint; (e) prepared responses to Defendants’
discovery requests and prepared and propounded discovery requests upon
Defendants; (f) served subpoenas on 27 non-parties for documents relevant to the
Action, and negotiated with those non-parties concerning the scope of their
document production; (g) successfully obtained discovery in the United States
District Court for the District of Colorado from a third party after that party refused
to provide discovery; (h) reviewed approximately 1.7 million pages of documents
produced by Defendants and non-parties, including much of Medical Capital’s
business records for a period of almost five years; (i) took the depositions of over
30 persons with knowledge relevant to the case; (j) closely monitored all activity in
the parallel S.E.C. proceeding, and the broker securities action, that could have had
an impact on the Class and its claims; (k) successfully obtained certification of the
Class over vigorous challenges by Defendants concerning the propriety of class
certification and the commonality of the Class, including Defendants’ appeal to the
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Ninth Circuit; (l) vigorously and successfully opposed the Receiver’s plan of
distribution to the extent that it negatively impacted the Class’s claims against the
Defendants; (m) successfully defended Plaintiffs’ standing to pursue their claims;
(n) prepared for and attended three sessions of mediation of this Action before a
private mediator, with many subsequent conversations with the mediator and
opposing counsel, and successfully negotiated, at arm’s length, a favorable
settlement with BNYM for the Class, which included extensive post-mediation
negotiations over the specific terms of the Settlement; (o) received preliminary
approval of the Settlement from this Court; (p) established a website for regular
updates and information for the Class regarding the case; (q) communicated with
Class members who contacted Class Counsel, including those who contacted for
regular updates; and (r) communicated regularly with all named class
representatives, regarding all of the issues, facts and circumstances in this Action,
and received their approval to settle this Action with BNYM. Joint Decl. ¶ 9.
Class Counsel and Class Representatives believe this Action has significant
merit and that they would likely prevail on the issues presented. However, they are
also aware that continued litigation is not without substantial risks given BNYM’s
steadfast denial of liability, and would be costly and time-consuming. Joint Decl. ¶
77.
Class Counsel are highly experienced in prosecuting complex litigation such
as the instant Action. At the time of settlement, Class Representatives and Class
Counsel fully assessed the strengths and weaknesses of Plaintiffs’ claims as a
result of more than three years of investigation and litigation and concluded that
the Class Settlement is a very good result under the circumstances and is in the best
interest of the Class. Id.
While the deadline for objecting to the Settlement is May 9, 2013, to date no
Class members have objected to the Settlement, although one objected to elements
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of the Plan of Allocation. The lack of objections to the Class Settlement is very
strong evidence that it represents an excellent result for the Class and should be
approved. Joint Decl. ¶ 69.
Additionally, the Court should approve the Plan of Allocation. Class
Counsel developed the Plan of Allocation based on a straightforward calculation of
each Class member’s unreturned principal investment in Medical Capital notes.
The Plan of Allocation provides a fair and reasonable basis for allocating the net
Class Settlement proceeds among all Class members, and is based on the “MIMO”
methodology already approved by this Court in the related SEC Action, taking into
account any funds already received from other third party recoveries, such as with
brokers. Id. ¶¶ 90-91.
For all of the reasons discussed herein and in the declarations filed herewith,
Class Counsel respectfully submit that the Court should approve the Settlement
and Plan of Allocation.
A more detailed description of the factual background and procedural
history of this Action is set forth in the Joint Declaration. For the sake of brevity,
it is not repeated here, but is instead incorporated by reference.
III. ARGUMENT
A. The Proposed Settlement is Fair, Reasonable, and Adequate
In deciding whether to approve a proposed settlement of a class action under
Rule 23(e), the court must first find that the proposed settlement is “fair, adequate,
and reasonable.” Churchill Vill., L.L.C. v. Gen. Elec., 361 F.3d 566, 576 (9th Cir.
2004); Staton v. Boeing Co., 327 F.3d 938, 959 (9th Cir. 2003); Officers for Justice
v. Civil Serv. Comm’n, 688 F.2d 615, 625 (9th Cir. 1982). In exercising its
discretion in approving a settlement, the court need only determine that the
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settlement is “not the product of fraud or overreaching by, or collusion between,
the negotiating parties, and that the settlement, taken as a whole, is fair, reasonable
and adequate to all concerned.” Officers for Justice, 688 F.2d at 625; see also
Hanlon v. Chrysler Corp., 150 F.3d 1011, 1027 (9th Cir. 1998) (“[T]he question
we address is . . . whether [the settlement] is fair, adequate and free from
collusion.”); Rodriguez v. W. Publ’g Corp., 563 F.3d 948, 965 (9th Cir. 2009)
(finding “the negotiated amount [to be] fair and reasonable . . . . There is no
evidence of fraud, overreaching, or collusion.”). The court should not “reach any
ultimate conclusions” about the merits of the case. Officers for Justice, 688 F.2d at
625; see also In re Wash. Pub. Power Supply Sys. Sec. Litig., MDL No. 551, 1988
U.S. Dist. LEXIS 16532, at *7 (W.D. Wash. July 28, 1988) (“In determining
whether to approve this settlement, the Court does not reach any conclusions as to
the outcome of contested factual issues. . . . [T]his Court will not attempt to
evaluate the likelihood of plaintiffs’ success at trial.”).
Class action suits readily lend themselves to compromise because of the
difficulties of proof, the uncertainties of the outcome, and the typical length of the
litigation. As the Ninth Circuit has noted, “[t]here are also very important policies
that favor giving effect to agreements that put an end to the expensive and
disruptive process of litigation.” Facebook, Inc. v. Pac. Nw. Software, Inc., 640
F.3d 1034, 1039 (9th Cir. 2011); see also Linney v. Cellular Alaska P’ship, 151
F.3d 1234, 1238 (9th Cir. 1998) (noting “the strong judicial policy that favors
settlements, particularly where complex class action litigation is concerned”)
(internal quotation marks omitted); Officers for Justice, 688 F.2d at 625
(“[V]oluntary conciliation and settlement are the preferred means of dispute
resolution. This is especially true in complex class action litigation.”). These
policies favoring settlement are readily implicated here, where, after over three
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years of investigation and litigation, the parties have finally agreed upon a
resolution and the Class can finally be compensated.
When evaluating the fairness of a class action settlement, courts in the Ninth
Circuit are instructed to balance the following factors:
[T]he strength of the plaintiffs’ case; the risk, expense, complexity, and likely duration of further litigation; the risk of maintaining class action status throughout the trial; the amount offered in settlement; the extent of discovery completed and the stage of the proceedings; the experience and views of counsel; . . . and the reaction of the class members to the proposed settlement.
Hanlon, 150 F.3d at 1026; see also Churchill Vill., 361 F.3d at 575-76; Officers for
Justice, 688 F.2d at 625.
1. The Strength of Plaintiffs’ Case, When Balanced Against the
Risk, Expense, Complexity, and Likely Duration of Further
Litigation, Supports Approval of the Settlement
a. Complexity of proof of liability and damages
Plaintiffs believe that, based on the evidence adduced to date, they would be
able to prove that BNYM materially breached the NISAs, and that those breaches
caused substantial damages to Plaintiffs and the Class. BNYM, however, has
adamantly denied, and continues to deny, any liability and has asserted several
defenses from the outset of the action. See Joint Decl. ¶¶ 19, 70-77, 88, 97.
Plaintiffs face considerable case-specific risks in establishing the essential
elements of their claims, both at the summary judgment stage and at trial. This is
especially true in light of the controlling case law which recognizes limitations on
liability for indenture trustees. See Shawmut Bank, N.A. v. Kress Assoc., 33 F.3d
1477, 1491 (9th Cir. 1994) (“Unlike the ordinary trustee, who has historic
common-law duties imposed beyond those in the trust agreement, an indenture
trustee is more like a stakeholder whose duties and obligations are exclusively
defined by the terms of the indenture agreement.”) (quoting Meckel v. Cont’l Res.
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Co., 758 F.2d 811, 816 (2d Cir. 1985)). The Joint Declaration discusses the
significant risks that Plaintiffs face in establishing the required elements of
standing, material breach, causation and damages. See Joint Decl. ¶¶ 70-77, 98-
102.
Even assuming Plaintiffs defeated BNYM’s anticipated motion for summary
judgment after completion of discovery, Plaintiffs would face significant risks at
trial, including having to rely on testimony from former BNYM employees and
customers about matters that occurred up to nine years ago, and having to present
to a jury inherently complex issues such as breaches of contractual and fiduciary
duties, causation, damages, and the administration of indenture trusts. Moreover,
there is always the very real possibility that a jury would find that some or all of
the alleged breaches were not material, or that BNYM did not act negligently or in
bad faith in breaching its contractual duties. See White v. Experian Info. Solutions,
Inc., 803 F. Supp. 2d 1086, 1095 (C.D. Cal. 2011) (“A review of the legal
landscape certainly suggests that Plaintiffs’ case was far from a slam dunk. The
uncertainty involved in continued litigation militates in favor of approving the
settlement.”).
Proof of liability and damages would have also depended, in part, on expert
testimony, posing significant risk to Plaintiffs at trial. Plaintiffs would have faced
motions in limine by Defendants to exclude Plaintiffs’ trust and damages experts’
testimony under the Daubert test and risked a decision that their testimony might
not be admissible. Even if such evidence was admitted, the reaction of a jury to
battling expert testimony is unpredictable and could have resulted in no damages
or only a fraction of the amount of damages Plaintiffs contended. See, e.g., In re
Apollo Grp., Inc. Sec. Litig., No. CV 04-2147-PHX-JAT, 2008 WL 3072731, at *6
(D. Ariz. Aug. 4, 2008) (overturning jury award of approximately $280 million as
a matter of law because the evidence at trial was insufficient to establish loss
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causation); Robbins v. Koger Props., Inc., 116 F.3d 1441, 1449 (11th Cir. 1997)
(overturning $81 million jury verdict because no reasonable jury could have
concluded that defendant’s misleading representations caused the plaintiff’s loss);
Semi-Tech Litig., LLC v. Bankers Trust Co., 353 F. Supp. 2d 460, 487 (S.D.N.Y.
2005) (awarding nominal damages of $1 for indenture trustee’s breach of indenture
agreement), aff’d, In re Bankers Trust Co., 450 F.3d 121 (2d Cir. 2006); Dell’Oca
v. The Bank of New York Trust Co., 159 Cal. App. 4th 531 (Cal. App. 1st Dist.
2008) (affirming trial court’s overturning of $15.79 million jury damages award
against indenture trustee and granting new trial based on finding that damages
awarded were speculative and excessive).
While it is possible that Plaintiffs could obtain a recovery at trial that
exceeds the amount of the proposed Settlement, that assumes that most, if not all,
of the significant liability and damage issues would have been resolved in
Plaintiffs’ favor. All of these issues could affect Plaintiff’s likelihood of success at
trial. Therefore, the amount of damages the Class would actually recover if
successful at trial is uncertain.
b. Expense and duration of further litigation
The immediacy and certainty of a recovery is an additional factor for the
Court to balance in determining whether this proposed Settlement is fair, adequate,
and reasonable. See In re Wash. Pub. Power Supply, 1988 U.S. Dist. LEXIS
16532, at *12 (“[T]he Court finds that the best interests of the class are served by
assuring that amount to the class now, before it is subjected to the vagaries of
litigation.”); Nat’l Rural Telecomms. Coop. v. DIRECTV, Inc., 221 F.R.D. 523,
526 (C.D. Cal. 2004) (“The Court shall consider the vagaries of litigation and
compare the significance of immediate recovery by way of the compromise to the
mere possibility of relief in the future, after protracted and expensive litigation.”).
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Here, BNYM has demonstrated a commitment to defend this case through
and beyond trial, if necessary, and is represented by well-respected and highly
capable counsel. If not for this Settlement, the case would have continued to be
fiercely contested by all parties, and the expense and time of continuing litigation
would have been substantial. See In re Wash. Pub. Power Supply, 1988 U.S. Dist.
LEXIS 16532, at *5 (approving settlement and noting the “zealous advocacy
displayed by counsel on both sides” throughout the four-year period preceding
settlement); Fulford v. Logitech, Inc., No. 08-cv-02041 MMC, 2010 U.S. Dist.
LEXIS 29042, at *10-11 (N.D. Cal. Mar. 5, 2010) (noting that “[c]ontinued
litigation . . . would likely be expensive and lengthy. The Settlement avoids a
lengthy trial that likely would have involved testimony by numerous witnesses and
experts. It also avoids the likely appeal process that could continue for many
months or even years after entry of a judgment.”).
Fact discovery was completed at the time the parties reached the Settlement.
However, Plaintiffs’ claims against BNYM would require extensive expert
discovery and testimony. Although Plaintiffs have retained experts to support their
ongoing claims against Wells Fargo, those experts would also be required to
analyze and render opinions about BNYM’s conduct. Further, Plaintiffs would
have to engage in discovery of BNYM’s expert witnesses, including depositions.
All of that expert discovery would have resulted in considerable additional expense
to the Class. See Joint Decl. ¶ 79.
After completion of expert discovery, BNYM’s expected motion for
summary judgment would have to be briefed and argued, a pre-trial order would
have to be prepared, proposed jury instructions would have to be submitted, and
motions in limine would have to be filed and argued. Substantial time and expense
would be expended in preparing the case for trial. The trial itself would be long,
expensive and uncertain. Although Plaintiffs have done a substantial amount of
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work in preparation for trial against Wells Fargo, proceeding to trial against
BNYM would have required significant additional work to address the separate
arguments raised by BNYM on summary judgment and in motions in limine, to
compile a separate list of trial exhibits for the case against BNYM, and to examine
and cross-examine witnesses for the case against BNYM at the trial.
Even if Plaintiffs prevailed and obtained a substantial judgment after trial,
there is little doubt that BNYM would appeal. The appeals process would likely
span several years, during which the Class would receive no distribution from any
damage award. In addition, an appeal of any verdict would carry the risk of
reversal, in which case the Class would receive no recovery even after having
prevailed on the claims at trial. This would add considerably to the expense and
duration of the Action. The Settlement agreed to with BNYM eliminates all of
these concerns. Id. ¶ 81.
At this juncture, the $90,675,600 Settlement results in an immediate and
substantial tangible recovery, without the considerable risk, expense and delay of
discovery, summary judgment motions, and trial and post-trial litigation. See Nat’l
Rural Telecomms., 221 F.R.D. at 526 (concluding that it is often in the class’s best
interest to “take the bird in hand instead of a prospective flock in the bush”)
(internal quotation marks omitted); Joy v. Davis (In re Schwarz Publ’g, Inc.), No.
SC-09-1032-PaRMo, 2009 Bankr. LEXIS 4546, at *10 (B.A.P. 9th Cir. Aug. 4,
2009) (“[T]o most creditors a dollar today is worth more than one received next
year.”).
Thorough Investigation to Identify the Strengths and Weaknesses
of Their Case and the Propriety of Settlement
The stage of the proceedings and the amount of discovery completed when a
settlement is reached is another factor that courts consider in determining the
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fairness, reasonableness and adequacy of a settlement, which in this case, weighs
in favor of approval. Officers for Justice, 688 F.2d at 625 (noting that “the extent
of discovery completed, and the stage of the proceedings” are relevant inquiries);
In re Wash. Pub. Power Supply, 1988 U.S. Dist. LEXIS 16532, at *8 (noting that
because “monumental discovery . . . is essentially complete” counsel had a
“sufficient basis” to “evaluate the risks of settlement versus continued litigation”).
As detailed herein and in the Joint Declaration, Class Counsel litigated this
case for almost three years, and conducted extensive discovery and a thorough
investigation on the matters alleged, at the time settlement was reached. For
instance, Class Counsel:
thoroughly investigated the facts underlying the allegations in the Complaint;
held numerous meet-and-confer discussions with Defendants and non-parties;
engaged in extensive negotiations with opposing counsel over discovery requests;
reviewed and analyzed over one and a half million pages of documents produced by Defendants and non-parties;
took the depositions of over 30 individuals, including every key BNYM employee working on the Medical Capital account;
responded to the discovery requests of the Defendants;
prepared and defended Plaintiffs at depositions;
served multiple sets of detailed interrogatories and requests for admission on Defendants, and analyzed Defendants’ responses;
researched the law pertinent to the claims and defenses asserted by BNYM; and
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analyzed the damages in this Action and consulted with economic experts regarding the calculation of damages.
Class Counsel also prepared a fact-intensive Complaint, and fully briefed
Defendants’ motions to dismiss, a motion for class certification, and summary
judgment motions. Finally, the parties prepared for and participated in extensive
settlement negotiations, including individual sessions with the mediator to discuss
damages specifically. Joint Decl. ¶¶ 20-63. Thus, at the time of Settlement, and
having expended almost 38,000 hours in the prosecution of the Action over the
course of over three years, Class Counsel had a full understanding of the strengths
and weaknesses of the Class’ claims, as well as the difficulties they would have
faced in obtaining a more favorable result after continued litigation.
Accordingly, this factor supports approval of the Settlement. See Experian,
803 F. Supp. 2d at 1099 (the fact that the settlement was only reached after
significant deposition practice and document review, as well as briefing of motions
for class certification and summary judgment, “speaks positively of the fairness of
the settlement”).
Approval of the Settlement
As the Ninth Circuit has observed, “[t]his circuit has long deferred to the
private consensual decision of the parties” and their counsel in settling an action.
Rodriguez, 563 F.3d at 965; see also Experian, 803 F. Supp. 2d at 1099 (“[T]he
fact that experienced counsel involved in the case approved the settlement after
hard-fought negotiations is entitled to considerable weight.”) (internal quotation
marks omitted); In re Wash. Pub. Power Supply, 1988 U.S. Dist. LEXIS 16532, at
*8 (“Class counsel are experienced in securities class action litigation, and their
recommendation for approval is based on a thorough understanding of the
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strengths and weaknesses of their case from both a factual and legal standpoint.
Their recommendation is entitled to great weight.”) (emphasis added).
Where, as here, a proposed class settlement has been reached after arm’s-
length negotiation conducted by capable counsel, under the supervision of a highly
experienced mediator, it is presumptively fair. See Lo v. Oxnard European
Motors, LLC, No. 11CV1009 JLS (MDD), 2011 U.S. Dist. LEXIS 144490, at *18
(S.D. Cal. Dec. 15, 2011) (holding that a “presumption of reasonableness is
warranted based on Plaintiff’s counsel’s ample experience in class action litigation,
. . . as well as the fact that the parties engaged in arm’s-length negotiations”);
Lundell v. Dell, Inc., No. CIVA C05-3970 JWRS, 2006 U.S. Dist. LEXIS 90990,
at *8 (N.D. Cal. Dec. 5, 2006) (approving class action settlement that was “the
result of intensive, arms’-length negotiations between experienced attorneys
familiar with the legal and factual issues of this case”); In re Omnivision Techs.,
Inc., 559 F. Supp. 2d 1036, 1043 (N.D. Cal. 2008) (“The recommendations of
plaintiffs’ counsel should be given a presumption of reasonableness.”) (internal
quotation marks omitted).
Class Counsel, having carefully considered and evaluated, inter alia, the
relevant legal authorities and evidence to support the claims asserted against
BNYM, the likelihood of prevailing on these claims, the risk, expense, and
duration of continued litigation, and the likely appeals and subsequent proceedings
necessary if Plaintiffs did prevail against BNYM at trial, have concluded that the
Settlement is a highly favorable result for the Class. The parties had three formal
mediation sessions with an experienced mediator, Judge Kennedy, and engaged in
several additional mediator-facilitated discussions between and after the formal
sessions. See Kennedy Declaration. It was only after expending this considerable
amount of time, effort, and money that Class Counsel concluded that the proposed
Settlement is in the best interest of the Class as a whole.
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Where, as here, the Settlement is the product of serious, informed, non-
collusive negotiations after over three years of litigation, significant weight should
be attributed to the belief of experienced counsel that settlement is in the best
interest of the class. See Rodriguez, 563 F.3d at 965 (“[The Ninth Circuit] put[s] a
good deal of stock in the product of an arms-length, non-collusive, negotiated
resolution.”); In re First Capital Holdings Corp. Fin. Prods. Sec. Litig., MDL No.
901, 1992 U.S. Dist. LEXIS 14337, at *8 (C.D. Cal. June 10, 1992) (finding belief
of counsel that the proposed settlement represented “the most beneficial result” for
class compelling factor in approving settlement).4
4. The Risks of Maintaining the Class Action Through Trial Weigh
in Favor of the Settlement
The Ninth Circuit has held that “the risk of maintaining class action status
throughout the trial” should be considered in approving settlement. Officers for
Justice, 688 F.2d at 625. The Court conducted a thorough and reasoned analysis
and certified the Class on July 26, 2011. However, under Rule 23, a court may
exercise its discretion to re-evaluate the appropriateness of class certification at any
time. See Armstrong v. Davis, 275 F.3d 849, 872 n.28 (9th Cir. 2001) (noting that
Rule 23 “provides district courts with broad discretion to determine whether a class
4 In In re Bluetooth Headset Products Liability Litig., 654 F.3d 935, 947 (9th Cir. 2011), the Ninth Circuit identified three signs of potential collusion by counsel for parties in a class action settlement: “(1) ‘when counsel receive a disproportionate distribution of the settlement, or when the class receives no monetary distribution but class counsel are amply rewarded’; (2) when the parties negotiate a ‘clear sailing’ arrangement providing for the payment of attorneys’ fees separate and apart from class funds . . . ; and (3) when the parties arrange for fees not awarded to revert to defendants rather than be added to the class fund.” (internal citations omitted).
None of those signs of potential collusion are present here: (1) Class Counsel have not been promised any amount of attorneys’ fees, and Class members with valid claims will receive monetary distributions from the Settlement funds; (2) there is no “clear sailing” arrangement here, and Class Counsel will only receive fees that are awarded by the Court from the class funds; and (3) no amount of unawarded attorneys’ fees will revert back to BNYM.
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should be certified, and to revisit that certification throughout the legal proceedings
before the court”). While Plaintiffs believe that nothing has changed since the
Court’s certification that would undermine its decision to certify the Class, there is
certainly a possibility that a change in law or facts could occur that would cause
BNYM to take a different view. Indeed, Wells Fargo recently filed a motion for
decertification asserting that a recent Supreme Court case rendered continued class
treatment inappropriate. Joint Decl. ¶ 86. Accordingly, the risk of failing to
maintain a class through trial weighs in favor of the Settlement.
5. The Settlement Amount Supports the Settlement
The amount of the Class Settlement, $90,675,600 in cash, is substantial by
any measure. At the time of the Receiver’s proposed settlement, Plaintiffs’
damages expert James Skorheim estimated that Noteholders who held notes issued
by the SPCs for which BNYM served as indenture trustee (MPII, MPIV and
MPVI) suffered potentially recoverable damages ranging between $275.7 million
and $309.5 million. See Noteholders’ Joint Objection to Receiver’s Motion For
Approval of Settlement With Wells Fargo and Bank of New York Mellon (ECF
No. 842 in the SEC Action) at 35-36. The amount of the Global Settlement with
BNYM ($114 million) represents between 36.8% and 41.4% of those estimated
recoverable losses, which is a substantial recovery in light of the risks of ongoing
litigation. By any standard, this is an outstanding result that supports the approval
of the Settlement. See, e.g., In re Skilled Healthcare Group, Inc. Sec. Litig., Case
No. CV 09-5416 DOC (RZx), 2011 U.S. Dist. LEXIS 10139, at *11 (C.D. Cal.
Jan. 26, 2011) (“In light of the risks of proceeding, accepting a settlement fund that
recoups twenty percent of the class’s estimated maximum possible damages seems
like a sound choice.”) (emphasis in original); In re Heritage Bond Litig., MDL
Case No. 02-ML-1475 DT, 2005 U.S. Dist. LEXIS 13555, at *28 (C.D. Cal. June
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10, 2005) (settlement fund amounting to approximately 36 percent of the class’ net
losses was an “exceptional result”) .
If the case against BNYM had proceeded to summary judgment and to trial,
BNYM would have certainly argued that it was not liable at all for Noteholders’
losses, and that even if it was held liable, recoverable damages were substantially
lower than Plaintiffs’ estimates. BNYM would have undoubtedly introduced
expert testimony supporting its argument for minimal (or zero) damages, setting up
a “battle of the experts” between the parties. In fact, in support of its proposed
settlement with the Receiver, BNYM submitted estimates from a damages expert
showing that total recoverable damages suffered by Noteholders for MPII, MPIV
and MPVI were as low as $6.5 million. See the Declaration of Bruce Strombom,
Ph.D. in Support of The Bank of New York Mellon’s Reply Memorandum in
Support of Receiver’s Motion For Approval of Settlement With Trustees (ECF.
No. 872-1 in the SEC Action). While Class Counsel obviously disagree with
BNYM’s damages estimates, the Court or a jury could have agreed with BNYM’s
arguments (in whole or in part), which could have substantially reduced the
amount of damages that Plaintiffs ultimately obtained from BNYM. Thus, the
Settlement amount represents a substantial portion of the damages that were
potentially recoverable from BNYM, and is fair, reasonable and adequate
compensation for Noteholders’ losses.
6. The Reaction of the Class Members to the Proposed Settlement
Supports the Settlement
The absence of objections to the Class Settlement strongly supports final
approval. See In re Wash. Pub. Power Supply, 1988 U.S. Dist. LEXIS 16532, at
*8-9 (noting that there were fewer than ten written objections from a class of more
than 24,000 and holding that “[t]he reaction of the class members to the proposed
settlement is also an important factor in evaluating the fairness of the settlement”);
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Experian, 803 F. Supp. 2d at 1099-1100 (holding that a positive reaction by the
class “overall” supported settlement even when objectors and opt-outs existed).
Under Federal Rules of Civil Procedure 23(h) and 54, this motion is being
submitted before the objection deadline so that Class members have a chance to
read and comment on it. See In re Mercury Interactive Corp. Sec. Litig., 618 F.3d
988, 994 (9th Cir. 2010). In addition, notice of the Class Settlement was mailed to
all Class members, published in USA Today, and posted on the designated class
action website on or around March 21, 2013. See Joint Decl. ¶¶ 66-69, 89, 114.
Finally, BNYM provided notice to federal regulators and to each State’s Attorney
General pursuant to the Class Action Fairness Act, 28 U.S.C. § 1715. See Decl. of
Lalezari, ¶ 2.
While the deadline for submitting objections is May 9, 2013, not a single
Class member has objected to the Class Settlement to date (and the one objection
received pertains solely to the proposed Plan of Allocation).5 See Joint Decl.
¶¶ 69, 89. The reaction of the Class is very favorable and supports final approval
of the Class Settlement.
B. The Plan of Allocation Is Fair And Reasonable
The Plan of Allocation, which is set forth in full in the Settlement Notice
mailed to Class members, should also be approved. Assessment of a plan of
allocation of settlement proceeds in a class action under Rule 23 is governed by the
same standards of review applicable to the settlement as a whole. In re Oracle Sec.
Litig., No. C-90-0931-VRW, 1994 U.S. Dist. LEXIS 21593, at *3 (N.D. Cal. June
16, 1994) (“Approval of a plan of allocation of settlement proceeds in a class
5 Plaintiffs will address objections to the Class Settlement, if any, in the Response to Objections to the Settlement, to be filed with the Court on or before June 10, 2013.
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action under FRCP 23 is governed by the same standards of review applicable to
approval of the settlement as a whole: the plan must be fair, reasonable and
adequate.”); see also In re Omnivision, 559 F. Supp. 2d at 1045. Moreover, “‘[a]n
allocation formula need only have a reasonable, rational basis, particularly if
recommended by experienced and competent counsel.’” In re Broadcom Corp.
Sec. Litig., No. SACV 01-275 DT (MLGx), 2005 U.S. Dist. LEXIS 41976, at *7
(C.D. Cal. Sept. 12, 2005) (alteration in original) (internal quotation marks
omitted); see also In re Omnivision, 559 F. Supp. 2d at 1043 (“‘The
recommendations of plaintiffs’ counsel should be given a presumption of
reasonableness.’”) (quoting Boyd v. Bechtel Corp., 485 F. Supp. 610, 622 (N.D.
Cal. 1979)).
District courts have broad discretion over the administration of class action
settlements. See Rodriguez, 563 F.3d at 963-964 (noting that district courts have
broad supervisory powers over the administration of class actions settlements in
order to allocate the proceeds equitably among competing class members).
The Plan of Allocation here reflects the core allegation that BNYM’s
material breaches of contract led to Medical Capital’s inability to pay Noteholders
the amounts of principal and interest that they were contractually entitled to
receive. Joint Decl. ¶¶ 90-91. The Plan of Allocation, developed by Class
Counsel, with the assistance of their damages expert, tracks the plan that was
approved by the Court in the SEC Action for the distribution of amounts recovered
by the Receiver. See SEC Action ECF Nos. 844, 880. The Plan of Allocation is
based on a straightforward calculation of each Class member’s “MIMO” losses --
i.e., the total amount that each Class member invested to purchase notes issued by
MPII, MPIII, MPIV, MPV, and MPVI, minus the amounts that the Class member
received in interest and returned principal. The “MIMO” approach is based on the
premise that where investors are all victims of the same scheme, as Noteholders
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were here, equity requires that all recover as much of their principal as possible
before any recover interest or profits. CFTC v. Topworth Int'l, Ltd., 205 F.3d
1107, 1116 (9th Cir. 1999). This goal is best achieved by calculating claims on a
net or MIMO basis, and numerous courts in this Circuit have recognized the
appropriateness of the MIMO approach. See e.g. id.; In re Tedlock Cattle
Company, Inc., 552 F.2d 1351 (9th Cir. 1977); SEC v. Capital Consultants, LLC,
No. Civ. 00-1290-KI, 2002 U.S. Dist. LEXIS 27399 (D. Or. 2002) aff'd, 397 F.3d
733 (9th Cir. Dec. 5, 2005).
Further, under the proposed Plan of Allocation, each Class member’s
recognized loss will also be reduced, dollar-for-dollar, by any amounts received by
the Class member (net of attorneys’ fees) from any recovery from any broker
litigation or arbitration initiated by or on behalf of the Class member, as
determined based on data, if available, received by the Receiver. Again, this
reduction was approved by this Court with respect to distribution of Receivership
Estate proceeds, and Class Counsel believe the reduction is appropriate and in line
with the premise that Class Members recover their principal before any recover
interest or profits, especially here where there are not sufficient funds to satisfy
Class Members’ unpaid principal. See SEC Action ECF Nos. 844 at 2, 880; Joint
Decl. ¶¶ 90-91. The reduction is also consistent with damages’ arguments made in
this case, including that contractual damages must be reduced to the extent Class
members recover a portion of their damages from other sources.
Further, after each Class member’s allowed claim is determined, they will
each receive his or her pro rata share of the funds based on the calculation of total
recognized losses of the Class. Courts have found that this type of distribution is a
reasonable approach. See In re Oracle, 1994 U.S. Dist. LEXIS 21593, at *3 (“A
plan of allocation that reimburses class members based on the extent of their
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injuries is generally reasonable.”). The Plan of Allocation should therefore be
approved.
IV. CONCLUSION
For all the reasons set forth above and in the declarations filed herewith,
Plaintiffs respectfully submit that the proposed Settlement and Plan of Allocation
warrant this Court’s final approval.
Dated: April 18, 2013 COTCHETT, PITRE & MCCARTHY, LLP
/s/ Mark C. Molumphy MARK C. MOLUMPHY
JOSEPH W. COTCHETT (36324) [email protected] MARK C. MOLUMPHY (168009) [email protected] BRYAN M. PAYNE (272971) [email protected] 840 Malcolm Road, Suite 200 Burlingame, CA 94010 Telephone: (650) 697-6000 Fax: (650) 697-0577
Dated: April 18, 2013
JEFF S. WESTERMAN
JEFF S. WESTERMAN (94559) JORDANNA G. THIGPEN (232642) 1925 Century Park East, Suite 2100 Los Angeles, CA 90067 Telephone: (310) 698-7450 Facsimile: (310) 201-9160 Email: [email protected] Co-Lead Counsel for the Class
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MILBERG LLP DAVID E. AZAR (218319) [email protected] MICHIYO MICHELLE FURUKAWA (234121) [email protected] 300 S. Grand Avenue, Suite 3900 Los Angeles, CA 90071 Telephone: (213) 617-1200 Fax: (213) 617-1975
MINAMI TAMAKI DEREK G. HOWARD (118082) [email protected] BETHANY L. CARACUZZO (190687) [email protected] 360 Post Street, 8th Floor San Francisco, CA 94108 Telephone: (415) 788-9000 Facsimile: (415) 398-3887
LAW OFFICE OF MICHAEL D. LIBERTY MICHAEL D. LIBERTY (136088) [email protected] 1290 Howard Avenue, Suite 303 Burlingame, CA 94010 Telephone: (650) 685-8085 Facsimile: (650) 685-8086
AITKEN* AITKEN* COHN WYLIE A. AITKEN (37770) [email protected] DARREN O. AITKEN (145251) [email protected] 3 MacArthur Place, Suite 800 Santa Ana, CA 92707 Telephone: (714) 434-1424 Facsimile: (714) 434-3600 Attorneys for Class and Members of Class’ Executive Committee

COTCHETT, PITRE & MCCARTHY, LLP JOSEPH W. COTCHETT …

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