pro hac vice · this motion is based upon the notice of motion and motion, the memorandum of points...

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PLAINTIFF’S PRELIMINARY APPROVAL MOTION No. 4:16-CV-06654-CW

Benjamin Heikali SBN 307466 Email: [email protected] FARUQI & FARUQI, LLP 10866 Wilshire Boulevard, Suite 1470 Los Angeles, CA 90024 Telephone: 424-256-2884 Facsimile: 424-256-2885 Richard W. Gonnello (pro hac vice) Katherine M. Lenahan (pro hac vice) Sherief Morsy (pro hac vice) FARUQI & FARUQI, LLP 685 Third Avenue, 26th Floor New York, NY 10017 Telephone: 212-983-9330 Facsimile: 212-983-9331 Email: [email protected] [email protected] [email protected] Attorneys for Lead Plaintiff Troy Larkin

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

TROY LARKIN, Individually and on Behalf of All Others Similarly Situated, Plaintiff, vs. GOPRO, INC., NICHOLAS D. WOODMAN, BRIAN MCGEE and ANTHONY BATES, Defendants

Case No. 4:16-CV-06654-CW PLAINTIFF’S NOTICE OF MOTION AND MOTION FOR PRELIMINARY APPROVAL OF THE CLASS ACTION SETTLEMENT, AND MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT THEREOF CLASS ACTION Date: April 9, 2019 Time: 2:30 p.m. Judge: The Hon. Claudia Wilken Date Action Filed: November 16, 2016

Case 4:16-cv-06654-CW Document 116 Filed 02/14/19 of 27

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TABLE OF CONTENTS

NOTICE OF MOTION AND MOTION AND STATEMENT OF COURT ACTION SOUGHT .......... 1

MEMORANDUM OF POINTS AND AUTHORITIES .......................................................................... 1

FACTUAL AND PROCEDURAL BACKGROUND.............................................................................. 2

A. Description of the Action .................................................................................................. 2

B. The Proposed Settlement .................................................................................................. 3

ARGUMENT ........................................................................................................................................... 5

I. The Settlement Warrants Preliminary Approval ........................................................................... 5

A. The Proposed Settlement Is The Product Of Arm’s-Length Negotiations ....................... 6

B. The Proposed Settlement Has No Obvious Deficiencies .................................................. 7

C. The Settlement Does Not Unjustly Favor Any Settlement Class Members ..................... 9

D. The Proposed Settlement Is Within The Range Of Reasonableness .............................. 10

II. THE CLASS SHOULD BE CERTIFIED FOR SETTLEMENT PURPOSES .......................... 11

A. The Proposed Settlement Class Meets The Requirements Of Rule 23(a) ...................... 12

1. The Settlement Class Is Sufficiently Numerous ................................................. 12

2. There Are Common Questions of Law and Fact ................................................ 12

3. The Proposed Class Representative’s Claims Are Typical ................................. 13

4. The Proposed Class Representative Will Fairly and Adequately Protect the Interests of the Settlement Class ......................................................................... 13

B. The Proposed Settlement Class Satisfies Rule 23(b)(3) ................................................. 14

1. Common Questions of Law and Fact Predominate Over Questions Affecting Only Individual Members of the Class ............................................................... 14

2. A Class Action Is Superior to Other Methods of Adjudication .......................... 15

C. The Faruqi Firm Should Be Appointed Class Counsel ................................................... 15

III. THE PROPOSED CLASS NOTICE PROGRAM SHOULD BE APPROVED ........................ 16

IV. THE PROPOSED SCHEDULE OF EVENTS ........................................................................... 19

CONCLUSION ....................................................................................................................................... 21


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TABLE OF AUTHORITIES

Cases Page(s)

Altamirano v. Shaw Indus., Inc., 2015 WL 4512372 (N.D. Cal. July 24, 2015) ................................................................................... 9

Amchem Prods. v. Windsor, 521 U.S. 591 (1997) ........................................................................................................................ 15

In re Banc of Cal. Sec. Litig., 326 F.R.D. 640 (C.D. Cal. 2018) .................................................................................................... 12

Basic Inc. v. Levinson, 485 U.S. 224 (1988) .......................................................................................................................... 8

Booth v. Strategic Realty Trust, Inc., 2015 WL 3957746 (N.D. Cal. June 28, 2015) ................................................................................ 12

In re Bridgepoint Educ., Inc. Sec. Litig., 2015 WL 224631 (S.D. Cal. Jan. 15, 2015) .................................................................................... 15

In re Celera Corp. Sec. Litig., 2015 WL 1482303 (N.D. Cal. Mar. 31, 2015) .................................................................................. 5

Chao v. Aurora Loan Servs., LLC, 2014 WL 4421308 (N.D. Cal. Sept. 5, 2014) .................................................................................. 14

In re Dynavax Techs. Corp. Sec. Litig., No. 3:13-cv-02796-CRB (N.D. Cal.), ECF No. 144 ....................................................................... 19

In re Ebix Inc. Sec. Litig., No 1:11-CV-02400-RWS (N.D. Ga. Jan. 19, 2018), ECF No. 95 .................................................... 8

Epstein v. MCA, Inc., 179 F.3d 641 (9th Cir. 1999) ........................................................................................................... 16

Franklin v. Kaypro Corp., 884 F.2d 1222 (9th Cir. 1989) ........................................................................................................... 5

Hanlon v. Chrysler Corp., 150 F.3d 1011 (9th Cir. 1998) ......................................................................................................... 13

Harris v. Vector Mktg. Corp., 2011 WL 1627973 (N.D. Cal. Apr. 29, 2011) ................................................................................... 6

Hatamian, et al. v. Advanced Micro Devices, Inc., et al., No. 14-cv-00226-YGR (JSC) (N.D. Cal.), ECF No. 227 ................................................................ 18


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Hendricks v. StarKist Co., 2015 WL 4498083 (N.D. Cal. July 23, 2015) ............................................................................. 9, 11

In re Heritage Bond Litig., 2005 WL 1594403 (C.D. Cal. June 10, 2005) ................................................................................... 5

Hofmann v. Dutch LLC, 317 F.R.D. 566 (S.D. Cal. 2016) ....................................................................................................... 8

In re Magma Design Automation, Inc. Sec. Litig., 2007 WL 2344992 (N.D. Cal. Aug. 16, 2007) ................................................................................ 12

McCabe v. Six Continents Hotels, Inc., 2015 WL 3990915 (N.D. Cal. June 30, 2015) .................................................................................. 7

In re Omnivision Techs., Inc., 559 F. Supp. 2d 1036 (N.D. Cal. 2008) ............................................................................................. 9

In re Online DVD-Rental Antitrust Litig., 779 F.3d 934 (9th Cir. 2015) ........................................................................................................... 16

Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985) ........................................................................................................................ 16

In re Portal Software, Inc. Sec. Litig., 2007 WL 1991529 (N.D. Cal. June 30, 2007) ................................................................................ 17

Rihn v. Acadia Pharms. Inc., 2018 WL 513448 (S.D. Cal. Jan. 22, 2018) ...................................................................................... 8

Rihn v. Acadia Pharms. Inc., No. 3:15-cv-00575-BTM-DHB (S.D. Cal.), ECF No. 71 ............................................................... 19

Rubio-Delgado v. Aerotek, Inc., 2015 WL 3623627 (N.D. Cal. June 10, 2015) ................................................................................ 11

Ruch v. AM Retail Grp., Inc., 2016 WL 1161453 (N.D. Cal. Mar. 24, 2016) ........................................................................ 7, 9, 10

Satchell v. Fed. Express Corp., 2007 WL 1114010 (N.D. Cal. Apr. 13, 2007) ................................................................................... 6

Shapiro v. Matrixx Initiatives Inc., et al., No. CV-09-01479-PHX-ROS (D. Ariz. Jan. 3, 2017), ECF No. 113 ............................................... 8

Thomas v. MagnaChip Semiconductor, Inc., 2016 WL 1394278 (N.D. Cal. Apr. 7, 2016) ..................................................................................... 8

In re Verisign, Inc. Sec. Litig., 2005 WL 7877645 (N.D. Cal. Jan. 13, 2005) ........................................................................... 12, 15


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Villegas v. J.P. Morgan Chase & Co., 2012 WL 5878390 (N.D. Cal. Nov. 21, 2012) .................................................................................. 8

Vizcaino v. Microsoft Corp., 290 F.3d 1043 (9th Cir. 2002) ........................................................................................................... 9

In re Volkswagen “Clean Diesel” Mktg., Sales Practices, and Prods. Liab. Litig., 2016 WL 4010049 (N.D. Cal. July 26, 2016) ................................................................... 6, 7, 11, 12

In re Zynga Inc. Sec. Litig., 2015 WL 6471171 (N.D. Cal. Oct. 27, 2015) .......................................................................... passim

Statutes

15 U.S.C. §78u-4(a)(4) ............................................................................................................................ 9

15 U.S.C. §78u-4(a)(7) .......................................................................................................................... 16

Other Authorities

Fed. R. Civ. P. 23 ........................................................................................................................... passim

Stefan Boettrich and Svetlana Starykh, Recent Trends in Securities Class Action Litigation: 2017 Full-Year Review (NERA 2018) .......................................................................... 11


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1 PLAINTIFF’S PRELIMINARY APPROVAL MOTION No. 4:16-CV-06654-CW

NOTICE OF MOTION AND MOTION AND STATEMENT OF COURT ACTION SOUGHT

TO: ALL PARTIES AND THEIR RESPECTIVE COUNSEL OF RECORD

PLEASE TAKE NOTICE that on April 9, 2019 at 2:30 p.m., or as soon thereafter as the matter

may be heard before the Honorable Claudia Wilken, Lead Plaintiff Troy Larkin (“Lead Plaintiff”) will

move this Court for an order: (i) preliminarily approving the proposed settlement of this action; (ii)

preliminarily certifying the proposed class for purposes of settlement; (iii) approving the form and

manner of giving notice of the proposed settlement to the class; and (iv) scheduling a final approval

hearing before the Court.1 The grounds for this motion are that the proposed settlement is within the

range of what could be found to be fair, reasonable, and adequate so that notice of its terms may be

disseminated to members of the class and a hearing for final approval of the proposed settlement may

be scheduled.

This motion is based upon the Notice of Motion and Motion, the Memorandum of Points and

Authorities set forth below, the Stipulation filed simultaneously herewith, the pleadings and records on

file in this action, and other such matters and argument as the Court may consider at the hearing of this

motion.

MEMORANDUM OF POINTS AND AUTHORITIES

Lead Plaintiff, on behalf of himself and the putative Class, and defendants GoPro, Inc.

(“GoPro”), Nicholas Woodman (“Woodman”), Brian McGee (“McGee”), and Anthony Bates

(“Bates” ) (collectively with GoPro, “Defendants”) have reached a proposed settlement for $6,750,000

that, if approved, will resolve all claims in the above-captioned action (the “Action”). Lead Plaintiff

respectfully submits this memorandum of law in support of his motion and requests that the Court

enter the proposed Order Preliminarily Approving Settlement and Providing for Notice (“Preliminary

Approval Order”). The Preliminary Approval Order will, among other things: (1) preliminarily

approve the settlement on the terms set forth in the Stipulation; (2) certify the Class for settlement

purposes; (3) appoint Lead Plaintiff as Class Representative and Faruqi & Faruqi, LLP (the “Faruqi

Firm”) as Class Counsel; (4) approve the form and manner of giving notice of the settlement to the

1 All capitalized terms that are not otherwise defined herein shall have the same meaning as those provided in the Stipulation of Settlement dated as of February 14, 2019 (the “Stipulation”), filed concurrently herewith. All quotations and citations are omitted unless otherwise noted.


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Class; and (5) set a date for the Settlement Hearing.

FACTUAL AND PROCEDURAL BACKGROUND

A. Description of the Action

On November 16, 2016, plaintiff Anton Bielousov filed the initial class action complaint in the

United States District Court for the Northern District of California naming GoPro and Woodman as

defendants and alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934

(“Exchange Act”), 15 U.S.C. §§78j(b), 78t(a), and Securities and Exchange Commission (“SEC”) Rule

10b-5, 17 C.F.R. §240.10b-5, promulgated thereunder. See ECF No. 1. On February 6, 2017, Senior

District Judge Claudia Wilken appointed Troy Larkin as Lead Plaintiff and approved his selection of

Faruqi & Faruqi, LLP as Lead Counsel. ECF No. 47. Mr. Larkin filed the amended complaint (“AC”)

(ECF No. 51) on March 14, 2017, adding McGee and Bates as defendants.

The AC alleges that during the Class Period, Defendants made false and/or misleading

statements and opinions about, inter alia, GoPro’s revenue and profitability estimates, the Karma

quadcopter drone, and the HERO5 cameras. See ¶¶96, 98, 100, 111, 114, 116, 118.2 Meanwhile, the

AC alleges Defendants failed to disclose, inter alia, that both the HERO5 and Karma product lines

suffered from production issues and supply shortages that undermined GoPro’s revenue and

profitability estimates, ¶¶70-83, that the only retailer selling the Karma drone—if any retailer was

selling it at all—was GoPro’s lone U.S. third party retailer BestBuy, ¶80, and that the Karma drone

suffered from dangerous design defects that would result in its recall, ¶¶67-69, 88-89. As alleged in

the AC, the true facts concealed by Defendants came out gradually over time in disclosures on October

23-24, 2016, November 3, 2016, November 8, 2016, and February 2, 2017, each of which led to a

decline in the price of GoPro common stock. See, e.g., ¶¶158-66.

On April 13, 2017, Defendants filed a motion to dismiss the AC (ECF No. 57), which the Court

denied in an order filed on July 26, 2017 (“MTD Order”) (ECF No. 74). Pursuant to the MTD Order,

Lead Plaintiff filed the Second Amended Complaint (“SAC”)—the operative complaint in this

Action—on August 4, 2017, revising the caption to reflect the newly added defendants. ECF No. 79.

On September 8, 2017, Defendants filed their Answer to the SAC. See ECF No. 82.

2 All “¶___” references are to the AC unless otherwise specified.


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Shortly thereafter, the Court entered an order setting forth the schedule for the action that

reflected the parties’ agreement to divide discovery into two phases, “Phase I” and “Phase II.” ECF

No. 90 at 1. Phase I was scheduled to end and Phase II was scheduled to begin on May 10, 2018. Id.

After agreeing on the categories of information sought during Phase I, the parties proceeded to

exchange discovery within those categories. During Phase II of discovery, Lead Plaintiff served

formal discovery on Defendants and filed a class certification motion. ECF No. 105. The parties

agreed to mediate and filed a stipulation seeking to temporarily stay the proceedings, with the

exception of Lead Plaintiff’s deposition and Defendants’ class certification opposition. ECF No. 109.

The Court approved the stay on July 12, 2018 (ECF No. 110), and thereafter terminated the class

certification motion (ECF No. 111). On September 11, 2018, the parties engaged in an in-person

mediation before Robert Meyer, Esq., a highly experienced securities litigation mediator. See ECF No.

112. In the weeks following the session, the parties continued to negotiate with Mr. Meyer’s

assistance and reached an agreement in principle to settle the claims against Defendants. The parties

then worked over the course of several months to finalize the terms of the Stipulation.

B. The Proposed Settlement

Briefly, the settlement provides that Defendants will cause to be paid $6,750,000, in cash, to

settle all claims in the Action. In exchange for the payment of the Settlement Amount, Lead Plaintiff

and the settlement Class will release all Released Claims against the Released Defendant Parties.

No litigation class has been certified in this Action, but the settlement Class definition and the

claims to be released in the settlement are substantially similar to those in the operative complaint, as

explained further in §I.B, infra.

It is currently estimated that if Class Members submit claims for 100% of the shares eligible for

distribution, the average distribution per share of common stock will be approximately $0.14 before

deduction of Court-approved fees and expenses.3 As further explained below, this is approximately

5.23% of the maximum damages that Lead Plaintiff’s expert estimated the Class would receive, before

deduction of Court-approved fees and expenses, if Lead Plaintiff were to prevail on all of its claims.

See §I.D, infra. This is much higher than the median percentage of 2.6% for securities class actions

3 Additional details about Class Members’ expected response rate are set forth in §III, below.


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settlements in 2017. Id.

Pursuant to the settlement Stipulation, after Court-approved fees and expenses and other costs

of settlement are paid, the Net Settlement Fund will be distributed to Authorized Claimants (i.e., Class

Members whose claims for recovery have been allowed pursuant to the Stipulation’s terms), in

accordance with the Plan of Allocation described in the Notice of Pendency and Proposed Settlement

of Class Action (“Notice”). See, e.g., Stipulation ¶5.3; Stipulation, Ex. A-1 (the Notice) at 14-19. The

Plan of Allocation was drafted with the assistance of a consulting damages expert and reflects

causation and damages theories that are consistent with the applicable federal securities laws. See

Stipulation, Ex. A-1 (the Notice) at 14-15. It seeks to equitably distribute the Net Settlement Fund

among Authorized Claimants based on their respective alleged economic losses as a result of the

alleged fraud. See id. Class Members’ recovery will depend on several factors, including when and at

what price they purchased GoPro common stock and when such stock was sold. See id.

No portion of the Settlement Fund shall revert to any defendant after the Effective Date. See

Stipulation ¶2.9. Should any amount below $5,000 remain in the Net Settlement Fund after all feasible

distributions are made to Authorized Claimants, it will be donated to the Investor Protection Trust

(“IPT”), Stipulation ¶5.6, which is an appropriate cy pres recipient for the reasons described further

herein. See §I.B, infra.

Lead Plaintiff entered into this settlement with a full and comprehensive understanding of the

strengths and weaknesses of the SAC’s claims, which are based on Lead Counsel’s extensive

experience with securities litigation, the investigation performed in connection with the filing of the

AC, the legal research conducted in connection with the motion to dismiss and the motion for class

certification, the numerous discovery documents reviewed by Lead Counsel, and consultation with

experts. Lead Plaintiff believes that the claims asserted in this Action have merit and that the evidence

developed to date supports the claims. Lead Plaintiff and Lead Counsel recognize, however, the

expense and length of continued proceedings necessary to prosecute the Action through trial and

possible appeals, as well as the uncertain outcome of any litigation, especially in complex actions such

as this. Lead Plaintiff and Lead Counsel also are mindful of the inherent problems of proof under and

possible defenses to the securities law violations asserted in the Action. In light of these obstacles,


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Lead Plaintiff and Lead Counsel believe the settlement set forth in the Stipulation confers substantial

benefits upon, and thus is in the best interests of, the Class.

Although it is unclear whether the notice provisions of the Class Action Fairness Act of 2005

(“CAFA”), 28 U.S.C. §1715, were intended to apply to class actions brought pursuant to the federal

securities laws, Defendants will provide CAFA notice. Within ten days of the filing of the Stipulation

with the Court, Defendants will cause notice of the proposed settlement to be served upon the

appropriate State official of each State in which a Class Member resides and the Attorney General of

the United States in compliance with CAFA’s requirements.

ARGUMENT

I. The Settlement Warrants Preliminary Approval4

Fed. R. Civ. P. 23(e) provides that any compromise of a class action must receive court

approval. The Ninth Circuit has a “strong judicial policy that favors settlements, particularly where

complex class action litigation is concerned.” In re Heritage Bond Litig., 2005 WL 1594403, at *2

(C.D. Cal. June 10, 2005). “[T]here is an overriding public interest in settling and quieting litigation.

This is particularly true in class action suits. . . . ” Franklin v. Kaypro Corp., 884 F.2d 1222, 1229 (9th

Cir. 1989).

The settlement approval process involves two steps: “(1) preliminary approval of the

settlement; and (2) final approval of the settlement at a fairness hearing following notice to the class.”

In re Celera Corp. Sec. Litig., 2015 WL 1482303, at *3 (N.D. Cal. Mar. 31, 2015). “Preliminary

approval is appropriate where the proposed settlement is neither illegal nor collusive and is within the

range of possible approval.” Id. Thus, at this juncture, the court should preliminarily approve a

settlement and notice to the class if “[1] the proposed settlement appears to be the product of serious,

informed, noncollusive negotiations, [2] has no obvious deficiencies, [3] does not improperly grant

preferential treatment to class representatives or segments of the class, [4] and falls within the range of

possible approval.” In re Zynga Inc. Sec. Litig., 2015 WL 6471171, at *8 (N.D. Cal. Oct. 27, 2015).

4 To help the Court evaluate the proposed settlement, Exhibit 1 submitted herewith contains a chart comparing the proposed settlement to one of Lead Counsel’s past comparable settlements, as suggested by the Northern District of California’s Procedural Guidance for Class Action Settlements (“Procedural Guidance”). Exhibits 1-3 referenced herein are annexed to the declaration of Katherine M. Lenahan, submitted herewith.


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A. The Proposed Settlement Is The Product Of Arm’s-Length Negotiations

The first factor considers the method by which the parties arrived at the settlement. “An initial

presumption of fairness is usually involved if the settlement is recommended by class counsel after

arm’s-length bargaining.” Harris v. Vector Mktg. Corp., 2011 WL 1627973, at *8 (N.D. Cal. Apr. 29,

2011). Here, the parties engaged in a mediation session after, inter alia, (1) Lead Counsel conducted a

lengthy investigation into the facts alleged in the Action; (2) Lead Counsel drafted an amended

complaint; (3) Defendants and Lead Plaintiff engaged in motion to dismiss briefing; (4) Defendants

filed an Answer to the SAC; (5) Defendants and Lead Plaintiff exchanged discovery requests; (6) Lead

Counsel reviewed thousands of pages of documents from Defendants; (7) Lead Plaintiff filed a motion

for class certification; and (8) Defendants reviewed documents produced by Lead Plaintiff and took

Lead Plaintiff’s deposition. Thus, the parties engaged in negotiations with a comprehensive

understanding of the strengths and weaknesses of their positions and the procedural hurdles facing this

Action. See Zynga, 2015 WL 6471171, at *8 (“For the parties to have brokered a fair settlement, they

must have been armed with sufficient information about the case to have been able to reasonably

assess its strengths and value.”).

The negotiations first took place in a formal, in-person session with the assistance of Mr.

Meyer, a well-respected mediator with significant experience mediating securities fraud class actions.

Satchell v. Fed. Express Corp., 2007 WL 1114010, at *4 (N.D. Cal. Apr. 13, 2007) (“The assistance of

an experienced mediator in the settlement process confirms that the settlement is non-collusive.”); ECF

No. 112. The parties vigorously debated their positions during the mediation. Over the next few

weeks, the parties continued to negotiate with the help of Mr. Meyer and were eventually able to reach

a resolution.

Furthermore, counsel is experienced in this type of litigation. Lead Counsel is a nationally-

recognized law firm with substantial experience prosecuting securities class actions. See Ex. 2.

Additionally, Defendants’ Counsel, Fenwick & West, LLP, is renowned for its securities litigation

practice. Courts in this District have found that where a settlement is “the result of arm’s-length

negotiations by experienced Class Counsel[,] . . . [it] is entitled to an initial presumption of fairness.”

In re Volkswagen “Clean Diesel” Mktg., Sales Practices, and Prods. Liab. Litig., 2016 WL 4010049,


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at *14 (N.D. Cal. July 26, 2016). Having settled numerous securities class actions, Lead Counsel

believes that the terms of the settlement are fair, adequate, and reasonable.

B. The Proposed Settlement Has No Obvious Deficiencies

The Court must next consider whether the proposed settlement has any obvious deficiencies.

Courts often look at the class definition, the scope of the release, the cy pres beneficiaries, and whether

the requested attorneys’ fees are reasonable. See McCabe v. Six Continents Hotels, Inc., 2015 WL

3990915, at *8-9 (N.D. Cal. June 30, 2015). The proposed settlement meets all four criteria.

Here, the Class appropriately includes all investors who purchased common stock during the

time in which Defendants were purportedly committing securities fraud and who allege to have been

damaged as a result. The settlement Class definition is nearly identical to that alleged in the SAC and

proposed in Lead Plaintiff’s class certification motion, with the only difference being the description of

those excluded from the Class. Those excluded from the settlement Class are described with greater

specificity in the Stipulation than in the SAC.5

Next, the Released Claims are narrow in scope and differ only slightly from the SAC’s claims

in that the Released Claims include “Unknown Claims,” claims that could have been brought, and

claims that “arise out of, are based upon, or relate in any way to” the “purchase, acquisition, sale or

disposition of GoPro common stock during the Class Period.” Stipulation ¶1.24 (emphasis added).

Thus, the settlement releases only those claims against the Released Defendant Parties that are “based

on the same factual predicate as the underlying claims in this case.” Ruch v. AM Retail Grp., Inc., 2016

WL 1161453, at *11 (N.D. Cal. Mar. 24, 2016). “Such a narrow release warrants preliminary

approval.” Id.

5 Lead Plaintiff’s SAC and class certification motion exclude from the class, “the Defendants[,]” “members of their immediate families, any firm, trust, partnership, corporation, officer, director or other individual or entity in which a Defendant has a controlling interest or which is related to or affiliated with any of the Defendants, and the legal representatives, heirs, successors-in-interest or assigns of such excluded persons.” SAC ¶151; ECF No. 105 (class certification motion) at 1. The Stipulation is more specific, providing as follows: “Excluded from the Class are (i) the Defendants; (ii) members of the immediate families of any Individual Defendant; (iii) any firm, trust, partnership, corporation, or entity in which a Defendant or an immediate family member of any Individual Defendant has a controlling interest; (iv) the directors and officers of GoPro at all relevant times; and (v) the legal representatives, heirs, successors-in-interest or assigns of such excluded persons. Also excluded from the Class are those Persons who timely and validly request exclusion from the Class.” Stipulation ¶1.3.


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Moreover, the proposed cy pres beneficiary, the Investor Protection Trust, or IPT, is an

appropriate recipient for any unclaimed or non-distributable funds left in the Net Settlement Fund. See

Stipulation ¶5.6. The Ninth Circuit allows “a cy pres distribution of unclaimed class action settlement

funds only if it bears ‘a substantial nexus to the interests of the class members[.]’” Thomas v.

MagnaChip Semiconductor, Inc., 2016 WL 1394278, at *8 (N.D. Cal. Apr. 7, 2016) (quoting Lane v.

Facebook, Inc., 696 F.3d 811, 821 (9th Cir. 2012)). “‘[C]y pres distribution must be guided by (1) the

objectives of the underlying statutes and (2) the interests of the silent class members.’” Hofmann v.

Dutch LLC, 317 F.R.D. 566, 577 (S.D. Cal. 2016) (quoting Nachshin v. AOL, 663 F.3d 1034, 1040

(9th Cir. 2011)). IPT is a 501(c)(3) non-profit organization that serves as an independent source of

non-commercial investor education at the state and national level. See Investor Protection Trust,

About IPT, http://www.investorprotection.org/ipt-activities/?fa=about (last visited Feb. 13, 2019);

Investor Protection Trust, IPT Financials, http://www.investorprotection.org/ipt-

activities/?fa=financials (last visited Feb. 13, 2019). As this action was brought under the Exchange

Act, which was enacted “to protect investors against manipulation of stock prices[,]” Basic Inc. v.

Levinson, 485 U.S. 224, 230 (1988), on behalf of a Class that has members nationwide, IPT is an

appropriate potential cy pres beneficiary. See Rihn v. Acadia Pharms. Inc., 2018 WL 513448, at *4

(S.D. Cal. Jan. 22, 2018) (finding IPT to be an appropriate cy pres recipient in a securities fraud class

action).6

Lastly, Lead Counsel is requesting attorneys’ fees not to exceed 25% of the Settlement Fund

and up to $250,000 in litigation expenses. “In common fund cases such as this, [the Ninth Circuit has]

established twenty-five percent (25%) of the common fund as the benchmark award for attorney fees.”

Villegas v. J.P. Morgan Chase & Co., 2012 WL 5878390, at *7 (N.D. Cal. Nov. 21, 2012). Although

attorney’s fees will not be approved at this stage of the litigation, this District’s Procedural Guidance

suggests that class counsel include information about their lodestar calculation in the preliminary

6 Lead Counsel does not have a relationship with IPT, but it has successfully proposed IPT as a cy pres beneficiary for unclaimed or non-distributable funds in other securities fraud class actions in which it served as Lead or Co-Lead Counsel because the organization fulfills the requirements for cy pres beneficiaries. See, e.g., Acadia, 2018 WL 513448, at *4; In re Ebix Inc. Sec. Litig., No 1:11-CV-02400-RWS (N.D. Ga. Jan. 19, 2018), ECF No. 95; Shapiro v. Matrixx Initiatives Inc., et al., No. CV-09-01479-PHX-ROS (D. Ariz. Jan. 3, 2017), ECF No. 113.


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approval motion. A “[c]alculation of the lodestar, which measures the lawyers’ investment of time in

the litigation, provides a check on the reasonableness of the percentage award.” Vizcaino v. Microsoft

Corp., 290 F.3d 1043, 1050 (9th Cir. 2002). To date, Lead Counsel has expended a total of 2,938.55

hours over the course of approximately two years of litigation, resulting in a lodestar of $1,528,458.75.

When compared to the fee of approximately $1,687,500 (25% of the Settlement Fund) requested by

Lead Counsel, this lodestar results in a multiplier of approximately 1.1.7 Courts in this Circuit often

approve fees that result in lodestar multipliers “ranging between 1 and 4.” In re Omnivision Techs.,

Inc., 559 F. Supp. 2d 1036, 1048 (N.D. Cal. 2008); Vizcaino, 290 F.3d at 1051 (approving a fee

representing a multiplier of 3.65). Lead Counsel respectfully submits that the requested award is

reasonable and should not weigh against preliminary approval. See Ruch, 2016 WL 1161453, at *12.

C. The Settlement Does Not Unjustly Favor Any Settlement Class Members

Under the third factor, the Court examines whether the settlement grants preferential treatment

to any Class Member. Here, Lead Counsel enlisted the help of a consulting damages expert to prepare

a Plan of Allocation that is designed to distribute a pro rata share of the Net Settlement Fund to

Authorized Claimants based upon their claimed losses. Since the “[P]lan of [A]llocation submitted to

the Court compensates class members in a manner generally proportionate to the harm they suffered on

account of [the] alleged misconduct[,]” this factor supports approval. Altamirano v. Shaw Indus., Inc.,

2015 WL 4512372, at *8 (N.D. Cal. July 24, 2015).

While Lead Plaintiff will receive a distribution from the Net Settlement Fund in accordance

with the Plan of Allocation, he may also seek award of up to $10,000 for his reasonable time and

expenses as a result of the activities related to his representation of the Class, as authorized by the

PSLRA. See 15 U.S.C. §78u-4(a)(4). “The Ninth Circuit has recognized that service awards to named

plaintiffs in a class action are permissible and do not render a settlement unfair or unreasonable.”

Hendricks v. StarKist Co., 2015 WL 4498083, at *6 (N.D. Cal. July 23, 2015). Lead Plaintiff devoted

over 80 hours of time to this action. In addition to attending numerous in person meetings at Lead

Counsel’s offices, Lead Plaintiff frequently communicated with Lead Counsel by phone and email

7 Lead Counsel will provide a detailed lodestar report with its motion for an award of attorneys’ fees and reimbursement of expenses, which it anticipates filing pursuant to the proposed schedule of events set forth in §IV below.


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over this Action’s approximately two-year span to discuss all aspects of the case. Lead Plaintiff was

careful to schedule his personal and business travel around the litigation schedule, making himself

available to: review drafts of documents prior to filing; answer numerous interrogatories from

Defendants; produce necessary materials to Lead Counsel to respond to Defendants’ numerous

document requests; prepare for and attend his deposition in San Francisco; and evaluate the pros and

cons for the Class of settling or continuing to litigate the Action. Lead Plaintiff plans to support his

request for an award at the final approval stage of the litigation with a declaration attesting to the

amount of time he devoted to the Action and any reasonable expenses he personally incurred in

representing the Class.

D. The Proposed Settlement Is Within The Range Of Reasonableness

“To evaluate the range of possible approval criterion, which focuses on substantive fairness and

adequacy, courts primarily consider plaintiff’s expected recovery balanced against the value of the

settlement offer.” Zynga, 2015 WL 6471171, at *10. Thus, the Court may preview the factors that

ultimately inform final approval: (1) the strength of plaintiff’s case; (2) the risk, expense, complexity,

and likely duration of further litigation; (3) the risk of maintaining class action status throughout the

trial; (4) the amount offered in settlement; (5) the experience and views of counsel; (6) the presence of

a governmental participant; and (7) the reaction of the class members to the proposed settlement. See

Ruch, 2016 WL 1161453, at *13.

Here, all of the factors applicable to this Action support preliminary approval. If the Action

were to continue, Lead Plaintiff would face numerous obstacles and risks. While Lead Plaintiff has

always believed that his positions have merit, Defendants have raised numerous challenges and

adamantly deny any wrongdoing. Defendants’ positions might prevail on summary judgment, or the

Court might deny class certification. If the Action were to survive those hurdles, the outcome of trial

would involve considerable costs and a significant investment of time by the parties and their

respective counsel and would burden the Court’s resources. In contrast to these risks and challenges,

the Settlement provides an immediate and certain benefit to the Class.

In addition to providing the Class with a prompt recovery, Lead Plaintiff submits that the

Settlement Amount is an excellent result, constituting a material percentage of the likely provable


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damages suffered by the Class. It is currently estimated that if Class Members submit claims for 100%

of the shares eligible for distribution, the average distribution per share of common stock will be

approximately $0.14 before deduction of Court-approved fees and expenses. If Lead Plaintiff were to

prevail on each of the claims in the SAC at trial, the damages per share of common stock would be

approximately $2.77. The Settlement Amount is 5.23% of the maximum damages Lead Plaintiff’s

expert estimated the Class sustained as a result of Defendants’ alleged fraudulent activity. This is

much higher than the median ratio of settlement amounts to investor losses for 2017, which NERA

Economic Consulting determined was 2.6%. See Ex. 3 at 38, Stefan Boettrich and Svetlana Starykh,

Recent Trends in Securities Class Action Litigation: 2017 Full-Year Review (NERA 2018). As one

court in this District noted, “[a]lthough the proposed settlement is only a small percentage of the total

expected recovery at trial, there is no reason, at least in theory, why a satisfactory settlement could not

amount to a hundredth or even a thousandth part of a single percent of the potential recovery.” Rubio-

Delgado v. Aerotek, Inc., 2015 WL 3623627, at *9 (N.D. Cal. June 10, 2015).

In regard to the other factors, as set forth more fully above, the Settlement was reached after

more than two years of hard-fought litigation and is supported by experienced counsel. Finally, there

is no governmental entity involved and notice has not yet been distributed to the Class, so these factors

are not relevant. See Hendricks, 2015 WL 4498083, at *7 (finding that the settlement agreement fell

“within the range appropriate for preliminary approval” even though no governmental entity was

involved). Thus, the settlement is within the range of possible approval and warrants preliminary

approval to permit Class Members to at least consider the settlement’s terms.

II. THE CLASS SHOULD BE CERTIFIED FOR SETTLEMENT PURPOSES

Lead Plaintiff seeks approval of the following settlement Class: “all Persons and entities who

purchased GoPro common stock between September 19, 2016 and November 8, 2016, inclusive, and

were damaged thereby.” See Stipulation ¶1.3. The scope of this Class is nearly identical to that

alleged in the SAC and Lead Plaintiff’s class certification motion, except for minor differences in the

description of those who are excluded from the Class. See §I.B, supra. “[W]here, as here, the [P]arties

negotiate a settlement before a class has been certified, courts must peruse the proposed compromise to

ratify both the propriety of the certification and the fairness of the settlement.” Volkswagen, 2016 WL


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4010049, at *13. To obtain class certification, a plaintiff must establish the requirements of Rule 23(a)

and one of the three subsections of Rule 23(b). See Zynga, 2015 WL 6471171, at *6. “As in almost all

lawsuits by shareholders of public companies, the investors in this case easily satisfy the requirements

of Rule 23.” In re Magma Design Automation, Inc. Sec. Litig., 2007 WL 2344992, at *1 (N.D. Cal.

Aug. 16, 2007).

A. The Proposed Settlement Class Meets The Requirements Of Rule 23(a)

Rule 23(a) empowers a court to certify a class when: (1) the class is so numerous that joinder of

all members impracticable; (2) there are questions of law or fact common to the class; (3) the claims or

defenses of representative parties are typical of the claims or defenses of the class; and (4) the

representative parties will fairly and adequately protect the interests of the class. Fed. R. Civ. P. 23(a).

1. The Settlement Class Is Sufficiently Numerous

Under Rule 23(a), a class may be certified if it is “so numerous that joinder of all members is

impracticable[.]” Fed. R. Civ. P. 23(a)(1). “In cases involving securities traded on national stock

exchanges, numerosity is practically a given.” In re Verisign, Inc. Sec. Litig., 2005 WL 7877645, at *4

(N.D. Cal. Jan. 13, 2005)

During the Class Period, GoPro stock was traded on the NASDAQ. See SAC ¶28.

Additionally, the average weekly trading volume for GoPro common stock during the Class Period

was more than 48 million shares. See ECF No. 108 at ¶ 24. “Given this trading volume, common

sense dictates that the proposed class is surely sufficiently large to make joinder impracticable.” See In

re Banc of Cal. Sec. Litig., 326 F.R.D. 640, 646 (C.D. Cal. 2018) (finding numerosity satisfied where

the average weekly trading volume was about 5 million shares) (quoting Maiman v. Talbott, 2011 WL

13065750, at *3 (C.D. Cal. Aug. 29, 2011) (finding an average of 1.32 million shares traded per week

sufficient for numerosity)).

2. There Are Common Questions of Law and Fact

Rule 23(a)(2) requires the existence of “questions of law or fact common to the class[.]” Fed.

R. Civ. P. 23(a)(2). “Courts regularly hold that commonality is plainly satisfied in a securities case

where the alleged misrepresentations obviously present important common issues.” Booth v. Strategic

Realty Trust, Inc., 2015 WL 3957746, at *3 (N.D. Cal. June 28, 2015).


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In this case, the overarching issue shared by all members of the proposed settlement Class is

whether Defendants violated the Exchange Act and the rules promulgated thereunder in connection

with Lead Plaintiffs’ factual allegations discussed above. See SAC ¶155. This issue involves common

questions because each Class Member has to prove the same elements to establish Defendants’ liability

and thus the low hurdle of Rule 23(a)(2) is satisfied. See Zynga, 2015 WL 6471171, at *6.

3. The Proposed Class Representative’s Claims Are Typical

A class may be certified if the claims of the representative parties are typical of the claims of

the class. Fed. R. Civ. P. 23(a)(3). “Under the rule’s permissive standards, representative claims are

typical if they are reasonably co-extensive with those of absent class members; they need not be

substantially identical.” Hanlon v. Chrysler Corp., 150 F.3d 1011, 1020 (9th Cir. 1998).

Lead Plaintiff’s claims arise from the same events and alleged misconduct and are based on the

same legal theories as those of the proposed settlement Class. Specifically, Lead Plaintiff claims that

(a) Defendants violated §§10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5 by issuing false

and/or misleading statements; (b) Lead Plaintiff and other settlement Class Members purchased GoPro

common stock at artificially inflated prices based on those false and/or misleading statements and were

damaged thereby; and (c) by proving Lead Plaintiff’s own claims, Lead Plaintiff would prove the

claims of the settlement Class Members. Thus, there is a sufficient nexus between Lead Plaintiff’s

claims and the Class’s claims to satisfy Rule 23(a)(3).

4. The Proposed Class Representative Will Fairly and Adequately Protect the Interests of the Settlement Class

Rule 23(a)(4) requires that “the representative parties will fairly and adequately protect the

interests of the class.” Fed. R. Civ. P. 23(a)(4). “Resolution of two questions determines legal

adequacy: (1) do the named plaintiffs and their counsel have any conflicts of interest with other class

members and (2) will the named plaintiffs and their counsel prosecute the action vigorously on behalf

of the class?” Hanlon, 150 F.3d at 1020.

Lead Plaintiff’s interests in this case are directly aligned with those of the other members of the

proposed settlement Class. Lead Plaintiff claims that he suffered damages from the same alleged

conduct as the other members of the Class, and through those claims seeks the same recovery from


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Defendants. Furthermore, Lead Plaintiff has demonstrated his ability and willingness to pursue the

Action on the Class’s behalf through his active involvement in the litigation and in approving the

settlement.

Additionally, Lead Plaintiff’s counsel is qualified, experienced, and able to conduct this

litigation. Indeed, Lead Counsel, a national law firm, has successfully litigated numerous securities

fraud and complex class action cases. See Ex. 2, Faruqi Firm resume. Lead Counsel has devoted

significant efforts to identifying and investigating the potential claims in this Action and fought

vigorously to preserve those claims. Based on the foregoing, Lead Plaintiff is an adequate

representative for the settlement Class.

B. The Proposed Settlement Class Satisfies Rule 23(b)(3)

A class may be certified under Rule 23(b)(3) if the Court finds that: (1) the questions of law or

fact common to class members predominate over any questions affecting only individual members, and

(2) a class action is superior to other available methods for fairly and efficiently adjudicating the

controversy. Fed. R. Civ. P. 23(b)(3).

1. Common Questions of Law and Fact Predominate Over Questions Affecting Only Individual Members of the Class

“[T]he predominance requirement tests whether proposed classes are sufficiently cohesive to

warrant adjudication by representation.” Zynga, 2015 WL 6471171, at *7. Rule 23(b)(3) does not

require plaintiffs “to prove that each element of their claim is susceptible to class-wide proof.” Chao

v. Aurora Loan Servs., LLC, 2014 WL 4421308, at *5 (N.D. Cal. Sept. 5, 2014).

Here, the common questions of law and fact described above predominate over any individual

questions. The same set of operative facts applies to each Class Member (i.e., each Class Member

purchased GoPro common stock during the settlement Class Period at prices alleged to be artificially

inflated as a result of Defendants’ false and misleading statements and/or omissions and each Class

Member was allegedly harmed when the undisclosed facts came to light). See Zynga, 2015 WL

6471171, at *7 (finding predominance satisfied when each class member purchased stock and suffered

damages as a result). As is the case in most securities fraud class actions, the answer to each of these

common questions will be subject to common evidence because the misconduct alleged affected all


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Class Members in the same way (i.e., false and/or misleading statements and omissions caused the

price of GoPro common stock to be artificially inflated during the Class Period). See In re Bridgepoint

Educ., Inc. Sec. Litig., 2015 WL 224631, at *6 (S.D. Cal. Jan. 15, 2015) (“In the typical securities-

fraud case, as in this case, the factual and legal issues related to most of these elements are common to

the class, so the requirements for class certification are usually readily met.”).

2. A Class Action Is Superior to Other Methods of Adjudication

With respect to the superiority prong of Rule 23(b)(3), four factors should be considered: (i)

class members’ interest in individually prosecuting separate actions; (ii) the extent of any litigation

already commenced by class members; (iii) the desirability of concentrating the litigation in the

particular forum; and (iv) the difficulties in management of a class action. See Amchem Prods. v.

Windsor, 521 U.S. 591, 616 (1997). Courts have recognized that “[c]lass actions are particularly well-

suited in the context of securities litigation, wherein geographically dispersed shareholders with

relatively small holdings would otherwise have difficulty in challenging wealthy corporate

defendants.” VeriSign, 2005 WL 7877645, at *9.

All four factors are satisfied in this case. First, prosecution of this lawsuit on a class action

basis will be more efficient than adjudication of the numerous individual shareholder claims because

the shareholders are geographically dispersed and have relatively small claims. See id. (finding class

action superior where “[m]illions of VeriSign shares were traded daily during the Class Period, and

over a billion shares were traded during the Class Period.”).

Second, Lead Plaintiff and Lead Counsel have already invested significant resources thus far in

preserving and prosecuting the claims asserted in the SAC. Any additional individual litigation would

simply be duplicative of Lead Plaintiff’s efforts. As well, certification is the superior method to

facilitate the resolution of the Class’s claims against Defendants because, absent certification,

Defendants would not be able to obtain a Class-wide release and thus would have little incentive to

enter into a settlement. Thus, Lead Plaintiff has satisfied the superiority requirement of Rule 23(b)(3)

and this Court should certify the proposed settlement Class.

C. The Faruqi Firm Should Be Appointed Class Counsel

“[A] court that certifies a class must appoint class counsel.” Fed. R. Civ. P. 23(g). Lead


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Plaintiff respectfully requests that the Court appoint the Faruqi Firm as Class Counsel for the

settlement Class. As discussed above, the Faruqi Firm has and will continue to fairly and adequately

represent the Class. See §II.A.4, supra. The firm is knowledgeable about the applicable law,

experienced in handling class actions, has performed substantial work in pursuing the claims and in

reaching a settlement, and has committed the necessary resources to representing the settlement Class.

See Fed. R. Civ. P. 23(g)(1). Accordingly, the Faruqi Firm fulfills Rule 23(g)’s requirements and

should be appointed Class Counsel.

III. THE PROPOSED CLASS NOTICE PROGRAM SHOULD BE APPROVED

Due process for class action plaintiffs requires that counsel provide “notice plus an opportunity

to be heard and participate in the litigation[.]” Epstein v. MCA, Inc., 179 F.3d 641, 649 (9th Cir.

1999). The Supreme Court has held that due process is satisfied “where a fully descriptive notice is

sent first-class mail to each class member, with an explanation of the right to opt out[.]” Phillips

Petroleum Co. v. Shutts, 472 U.S. 797, 812 (1985).

As well, “[f]or any class certified under Rule 23(b)(3), class members must be afforded the best

notice practicable under the circumstances, which includes individual notice to all members who can

be identified through reasonable effort.” Zynga, 2015 WL 6471171, at *13. Under this standard, the

notice must state the following in plain language: (i) the nature of the action; (ii) the class definition;

(iii) the class claims, issues, or defenses; (iv) that a class member may enter an appearance through an

attorney; (v) that the court will exclude from the class any member who requests exclusion; (vi) the

time and manner for requesting exclusion; and (vii) the binding effect of a class judgment on members.

Id. Rule 23(e) requires notice that describes “the terms of the settlement in sufficient detail to alert

those with adverse viewpoints to investigate and to come forward and be heard.” In re Online DVD-

Rental Antitrust Litig., 779 F.3d 934, 946 (9th Cir. 2015). Furthermore, the PSLRA requires that the

notice contain: (i) a statement of the recovery; (ii) a statement of the potential outcome of the case; (iii)

a statement of attorneys’ fees and costs; (iv) identification of the lawyers’ representatives; (v) reasons

for settlement; (vi) other information the court requires; and (vii) a cover page summarizing that

information. See 15 U.S.C. §78u-4(a)(7).

Here, the Notice and Summary Notice (collectively, the “Notices”), which along with the Proof


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of Claim and Release form, will be sent by U.S. mail to Class Members and will be available on the

website www.GoProSecuritiesLitigation.com, and the Summary Notice will be published in Investor’s

Business Daily and on Globe Newswire, have been carefully drafted to notify the Class of the

settlement’s terms, the Class Members’ rights in connection with the settlement, and the date of the

Settlement Hearing in compliance with Rules 23(c)(2) and 23(e), the PSLRA, and due process.

Indeed, the Notice includes: (i) the case caption; (ii) a description of the Action’s claims; (iii) a

description of the settlement Class; (iv) the names of counsel for the settlement Class; (v) the

maximum amount of attorneys’ fees, expense reimbursement, and the compensatory award for Lead

Plaintiff that will be sought; (vi) the Settlement Hearing date; (vii) a description of the settlement Class

Members’ opportunity to appear at the hearing; (viii) a statement of the deadline for filing objections to

and exclusions from the settlement; (ix) the consequences of exclusion; (x) the consequences of

remaining in the settlement Class; and (xi) the manner in which to obtain more information.

The parties have agreed to use the traditional methods for notifying the Class Members:

notification by mail and by publication by wire service, in a national newspaper focusing on investors,

and on a designated website. This manner of providing notice represents the best notice practicable

under the circumstances, and satisfies the requirements of Rule 23, the PSLRA, and due process. See,

e.g., In re Portal Software, Inc. Sec. Litig., 2007 WL 1991529, at *7 (N.D. Cal. June 30, 2007)

(approving notice by mail and publication to all reasonably identifiable class members as best

practicable). Furthermore, the proposed settlement administrator, Epiq Class Action & Claims

Solutions, Inc. (“Epiq”), was chosen after Lead Counsel solicited estimates from Epiq and two other

well-respected claims administrators. All three potential claims administrators proposed methods of

notice that are similar to those set forth above. Lead Counsel chose Epiq, which submitted the second

lowest overall claims administration estimate, after determining that its overall estimate was more

realistic and amounted to a lower price per claim submitted than the lowest overall estimate. Epiq has

served as a claims administrator in the last two years in the following cases in which the Faruqi Firm

served as lead or co-lead counsel: In re Comverge, Inc. S’holders Litig., C.A. No. 7368-VCMR (Del.

Ch.) (appointed as claims administrator by the court on June 16, 2017) and In re Geron Corp. Sec.

Litig., No. 3:14-cv-01224 (CRB) (N.D. Cal.) (appointed as claims administrator by the court on April


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10, 2017).

Epiq’s estimated administration expenses are $174,285.35. These administration expenses will

amount to only $0.004—less than one cent—per share of common stock, which is a very reasonable

amount given the high quality of Epiq’s services. Accordingly, Lead Plaintiff respectfully requests

that the Court approve the Notices and the procedures for their dissemination.

Based on Epiq’s and Lead Counsel’s experience in the settlement of similar cases, it is

estimated that approximately 20% of potential class members to whom notice can be provided will

submit a claim form. Epiq based its estimate of a 20% response rate upon its experience with past

securities fraud class action settlements, including Hatamian, et al. v. Advanced Micro Devices, Inc., et

al., No. 14-cv-00226-YGR (JSC) (N.D. Cal.), a recent securities fraud class action settlement from this

District brought on behalf of a class of investors under Sections 10(b) and 20(a) of the Exchange Act,

and SEC Rule 10b-5. See Hatamian docket, ECF No. 332 (preliminary approval motion) at 2-3. That

case used methods of notice similar to those proposed in this Action, and had a response rate of

approximately 19%. See Hatamian docket, ECF No. 227 (Order Approving Class Notice and Proposal

for Dissemination) at 1-3 (explaining notice procedures); Hatamian docket, ECF No. 372 (distribution

motion) at 3-4 (stating that 42,676 claims were submitted out of the 224,669 notices that were mailed).

Lead Counsel cross-checked the reasonableness of the estimated 20% response rate by

comparing it to the approximate response rates in two recent cases from this Circuit in which it served

as Lead Counsel, In re Dynavax Techs. Corp. Sec. Litig., No. 3:13-cv-02796-CRB (N.D. Cal.), which

had a 19% response rate, and Rihn v. Acadia Pharms. Inc., No. 3:15-cv-00575-BTM-DHB (S.D. Cal.),

which had a 22% response rate.8 These examples were selected because, like Hatamian, they are both

securities fraud class action settlements from this Circuit that received final approval in the last two

years, were brought on behalf of classes of investors under, inter alia, Sections 10(b) and 20(a) of the

8 The 19% response rate in Dynavax was determined by dividing the 6,434 claims submitted to the claims administrator by the total number of notices sent, 33,117. See Dynavax docket, ECF No. 157-1 (a declaration from the claims administrator in support of the distribution motion) at ¶¶3, 10. The 22% response rate in Acadia was determined by dividing the 6,213 claims submitted to the claims administrator by the total number of notices sent, 27,841. See Acadia docket, ECF No. 81 at ¶2 (a declaration from the claims administrator regarding, inter alia, mailing and claims received); ECF No. 94-2 (a declaration from the claims administrator in support of the distribution motion) at ¶9.


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Exchange Act, and SEC Rule 10b-5, and used methods of notice similar to those proposed in this

Action.9 See Dynavax docket, ECF No. 141 (preliminary approval motion) at 1-3, 10; Dynavax

docket, ECF No. 144 (preliminary approval order); Acadia docket, ECF No. 69-1 (brief in support of

preliminary approval motion) at 2-3; Acadia docket, ECF No. 71 (preliminary approval order).

IV. THE PROPOSED SCHEDULE OF EVENTS

No later than seven calendar days after entry of the Preliminary Approval Order, GoPro will

cause a list of record owners to be provided to the Claims Administrator. See Stipulation, Ex. A,

Proposed Preliminary Approval Order, at ¶10. Within ten business days after receipt of the record

owners list, the Claims Administrator will mail a copy of the Notices and Proof of Claim and Release

form, substantially similar to the form attached as Exhibits A-1 and A-2 to the Stipulation, to the

record owners on the list and will post a copy of the Notices and Proof of Claim and Release form on

the website established for the Action (“Notice Date”). Id. at ¶11. Within ten calendar days after

receipt of the Notice and Proof of Claim and Release form, nominees or custodians are to either: (a)

request additional copies of those documents in quantities sufficient to send to the beneficial owners

and then send them to such beneficial owners within ten calendar days after receipt of the additional

copies; or (b) provide the Claims Administrator with the beneficial owners’ information, so that the

Claims Administrator may send those documents to the beneficial owners as soon as practicable

thereafter. Id. at ¶13. Not later than 14 calendar days after the Notice Date, the Summary Notice shall

be published once in a national edition of Investor’s Business Daily and on Globe Newswire. Id. at

¶12. In connection with preliminary approval of the Settlement, the Court must set notice and

objection deadlines. The Settling Parties respectfully proposed the following schedule:

Event Time for Compliance

Deadline for GoPro to cause the Claims Administrator to be provided with a list of record holders (Ex. A at ¶10)

7 calendar days after entry of the Preliminary Approval Order

9 Dynavax also included a claim under Section 20A of the Exchange Act. See Dynavax docket, ECF No. 141 (preliminary approval motion) at 10.


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Deadline for Claims Administrator to mail the Notice and Proof of Claim and Release to the list of record holders and to post to the settlement website the Stipulation and its exhibits, the preliminary approval motion, the Preliminary Approval Order, and a copy of the Notice and Proof of Claim and Release (Ex. A at ¶11)

10 business days after receipt of the record owners list (“Notice Date”)

Deadline for publishing the Summary Notice (Ex. A at ¶12)

14 calendar days after the Notice Date

Deadline for nominees or custodians to either: (i) request additional copies of the Notice and Proof of Claim and Release sufficient to send them to all beneficial owners for whom they are nominee or custodian; or (ii) provide the Claims Administrator with such beneficial owners’ information (Ex. A at ¶13)

10 calendar days of the nominees’ or custodians’ receipt of the Notice and Proof of Claim

Deadline for nominees or custodians who choose to send out Notice and Proof of Claim Forms to beneficial owners to do so (Ex. A at ¶13)

10 calendar days after receipt of the additional copies requested

Deadline for Claims Administrator to mail the Notice and Proof of Claim and Release to all settlement Class Members whom the Claims Administrator identifies by reasonable efforts (Ex. A at ¶14)

As soon as practicable after the Claims Administrator receives lists of beneficial owners from nominees and custodians

Deadline for Claims Administrator to mail the Notice and Proof of Claim to such beneficial owners who request it, or otherwise instruct Class Members as to how to receive the Notice electronically and how to submit a Proof of Claim and Release form (Ex. A at ¶15)

Promptly upon receiving requests from Class Members

Deadline for Lead Counsel to serve on Defendants’ counsel and file with the Court proof, by affidavit or declaration, of such mailing and publishing (Ex. A at ¶16)

7 calendar days prior to the Settlement Hearing

Deadline for objecting or requesting exclusion (Ex. A at ¶¶18, 20)



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Deadline for filing briefs in support of final approval of the settlement, the Plan of Allocation, attorneys’ fees and expenses, and for Lead Plaintiff’s expenses (Ex. A at ¶22)


Deadline for filing replies to any objections (Ex. A at ¶22)


Settlement Hearing (Ex. A at ¶5) At least 100 calendar days from the date of the Preliminary Approval Order

Deadline for submitting Proofs of Claim and Release (Ex. A at ¶17)

90 calendar days from the Notice Date

CONCLUSION

Lead Plaintiff respectfully requests that this Court: (a) preliminarily approve the proposed

Settlement and schedule a Settlement Hearing; (b) preliminarily certify the proposed settlement Class,

appoint Lead Plaintiff as settlement Class Representative and the Faruqi Firm as settlement Class

Counsel; and (c) approve the proposed forms of notice and the proposed notice plan.

Dated: February 14, 2019 Respectfully submitted, By: /s/ Richard W. Gonnello Richard W. Gonnello Richard W. Gonnello (pro hac vice)

Katherine M. Lenahan (pro hac vice) Sherief Morsy (pro hac vice) FARUQI & FARUQI, LLP 685 Third Avenue, 26th Floor New York, NY 10017 Telephone: 212-983-9330 Facsimile: 212-983-9331 Email: [email protected] [email protected] [email protected] Benjamin Heikali SBN 307466 FARUQI & FARUQI, LLP 10866 Wilshire Boulevard, Suite 1470 Los Angeles, CA 90024 Telephone: 424-256-2884 Facsimile: 424-256-2885 Email: [email protected]


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Attorneys for Lead Plaintiff Troy Larkin


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DECLARATION IN SUPPORT OF LEAD PLAINTIFF’S PRELIMINARY APPROVAL MOTION No. 4:16-CV-06654-CW

Benjamin Heikali SBN 307466 Email: [email protected] FARUQI & FARUQI, LLP 10866 Wilshire Boulevard, Suite 1470 Los Angeles, CA 90024 Telephone: 424-256-2884 Facsimile: 424-256-2885 Richard W. Gonnello (pro hac vice) Katherine M. Lenahan (pro hac vice) Sherief Morsy (pro hac vice) FARUQI & FARUQI, LLP 685 Third Avenue, 26th Floor New York, NY 10017 Telephone: 212-983-9330 Facsimile: 212-983-9331 Email: [email protected] [email protected] [email protected] Attorneys for Lead Plaintiff Troy Larkin

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

TROY LARKIN, Individually and on Behalf of All Others Similarly Situated, Plaintiff, vs. GOPRO, INC., NICHOLAS D. WOODMAN, BRIAN MCGEE and ANTHONY BATES, Defendants

Case No. 4:16-CV-06654-CW DECLARATION OF KATHERINE M. LENAHAN IN SUPPORT OF PLAINTIFF’S MOTION FOR PRELIMINARY APPROVAL OF THE CLASS ACTION SETTLEMENT CLASS ACTION Date: April 9, 2019 Time: 2:30 p.m. Judge: The Hon. Claudia Wilken Date Action Filed: November 16, 2016

Case 4:16-cv-06654-CW Document 117 Filed 02/14/19 Page 1 of 2

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1 DECLARATION IN SUPPORT OF LEAD PLAINTIFF’S PRELIMINARY APPROVAL MOTION

No. 4:16-CV-06654-CW

I, Katherine M. Lenahan, declare:

1. I am a member in good standing of the bar of the State of New York and have been

admitted pro hac vice to practice before the bar of the Northern District of California. I am a partner

with the law firm of Faruqi & Faruqi, LLP (“Faruqi Firm”), counsel to Lead Plaintiff Troy Larkin. I

submit this declaration in support of Lead Plaintiff’s Motion for Preliminary Approval of the Class

Action Settlement. I have knowledge of the following, and, if called as a witness, I could and would

testify competently thereto.

2. Attached hereto as Exhibit 1 is a true and correct copy of a chart titled “Past

Distributions” created by the Faruqi Firm.

3. Attached hereto as Exhibit 2 is a true and correct copy of the firm resume of the Faruqi

Firm.

4. Attached hereto as Exhibit 3 is a true and correct copy of the NERA report entitled

Recent Trends in Securities Class Action Litigation: 2017 Full-Year Review.

I declare, under penalty of perjury, that the foregoing is true and correct to the best of my

knowledge.

Executed on this 14th day of February, 2019. /s/ Katherine M. Lenahan Katherine M. Lenahan

Case 4:16-cv-06654-CW Document 117 Filed 02/14/19 Page 2 of 2

EXHIBIT 1

Case 4:16-cv-06654-CW Document 117-1 Filed 02/14/19 Page 1 of 2

Past Distributions Chart*

Details Proposed Settlement In re Dynavax Sec. Litig., No. 3:13-CV-02796-CRB

(N.D. Cal.) Settlement Fund

$6,750,000 $4,500,000 Notices

Est. 57,000 33,117 Methods of notice See §III of motion for

preliminary approval

Similar to Proposed Settlement

Claims Submitted Est. 11,400 6,434

% Claims Submitted

Est. 20% 19%

Average recovery**

$0.14 per share $0.05 per share

Admin. Costs Est. $174,285.38

$249,987.67

Attorneys’ fees (25% of the Settlement Fund) and expenses

Fees: $1,687,500 Expenses: $250,000

Fees: $1,097,274 Expenses: $100,902.12

Amount to cy pres To be determined None at this time

Date of Final Approval

To be determined Feb. 6, 2017

Date Distribution Granted

To be determined Nov. 6, 2017

* The precise number of class members in each case is unknown.

** Assuming claims are submitted for 100% of the shares eligible for distribution, and before deduction of Court-approved fees and expenses.


EXHIBIT 2


NEW YORK CALIFORNIA DELAWARE PENNSYLVANIA GEORGIA

Faruqi & Faruqi, LLP focuses on complex civil litigation, including securities, antitrust, wage and

hour, consumer, and pharmaceutical class actions as well as shareholder derivative and merger and

transactional litigation. The firm is headquartered in New York, and maintains offices in California,

Delaware, Pennsylvania and Georgia.

Since its founding in 1995, Faruqi & Faruqi, LLP has served as lead or co-lead counsel in numerous

high-profile cases which have provided significant recoveries to investors, consumers and employees.

PRACTICE AREAS

SECURITIES FRAUD LITIGATION

From its inception, Faruqi & Faruqi, LLP has devoted a substantial portion of its practice to class

action securities fraud litigation. In In re PurchasePro.com, Inc. Securities Litigation, No. CV-S-01-0483

(JLQ) (D. Nev.), as co-lead counsel for the class, Faruqi & Faruqi, LLP secured a $24.2 million settlement

in a securities fraud litigation even though the corporate defendant was in bankruptcy. As noted by Senior

Judge Justin L. Quackenbush in approving the settlement, “I feel that counsel for plaintiffs evidenced

that they were and are skilled in the field of securities litigation.”

Other past achievements include: In re Olsten Corp. Sec. Litig., No. 97-CV-5056 (RDH) (E.D.N.Y.)

(recovered $24.1 million dollars for class members) (Judge Hurley stated: “The quality of representation

here I think has been excellent.”), In re Tellium, Inc. Sec. Litig., No. 02-CV-5878 (FLW) (D.N.J.) (recovered

$5.5 million dollars for class members); In re Mitcham Indus., Inc. Sec. Litig., No. H-98-1244 (S.D. Tex.)

(recovered $3 million dollars for class members despite the fact that corporate defendant was on the verge

of declaring bankruptcy), and Ruskin v. TIG Holdings, Inc., No. 98 Civ. 1068 LLS (S.D.N.Y.) (recovered $3

million dollars for class members).

Recently, Faruqi & Faruqi, LLP, as sole lead counsel, won a historic appeal in the United States

Court of Appeals for the Fourth Circuit in Zak v. Chelsea Therapeutics Inc. Int’l, Ltd., Civ. No. 13-2730

(2015), where the Court reversed a trial court’s scienter ruling for the first time since the enactment of the

Private Securities Litigation Reform Act of 1995 (“PSLRA”). The Court remanded the case to the district

court, where Faruqi & Faruqi, LLP defeated defendants’ motion to dismiss and subsequently obtained

final approval of a $5.5 million settlement for the class. McIntyre v. Chelsea Therapeutics Int’l, LTD, No.

12-CV-213 (MOC) (DCK) (W.D.N.C.). In In re Avalanche Biotechnologies Sec. Litig., No. 3:15-cv-03185-

JD (N.D. Cal.), Faruqi & Faruqi, LLP served as sole lead counsel for the class in the federal court action,

and, together with counsel in the parallel state court action, secured final approval of a $13 million global

settlement of both actions on January 19, 2018. In Rihn v. Acadia Pharmaceuticals, Inc., No. 3:15-cv-

00575-BTM-DHB (S.D. Cal.), the court denied defendants’ first motion to dismiss, and on January 8,

2018, Faruqi & Faruqi, LLP, as sole lead counsel for the class, secured final approval of a $2.95 million



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settlement for the class, which represented approximately 36% of the total recognized losses claimed by

the class. In In re Geron Corp., Sec. Litig., No. 14-CV-1424 (CRB) (N.D. Cal.), Faruqi & Faruqi, LLP, as

sole lead counsel for the class, defeated defendants’ motion to dismiss and, on July 21, 2017, obtained

final approval of a settlement awarding $6.25 million to the class. Also, in In re Dynavax Techs. Corp.

Sec. Litig., No. 13-CV-2796 (CRB) (N.D. Cal.), Faruqi & Faruqi, LLP, as sole lead counsel for the class,

defeated defendants’ motion to dismiss, and on February 6, 2017, secured final approval of a $4.5 million

settlement on behalf of the class. In In re L&L Energy, Inc. Sec. Litig., No. 13-cv-6704 (RA) (S.D.N.Y.),

Faruqi & Faruqi, LLP, as co-lead counsel, obtained final approval on July 31, 2015 of a $3.5 million

settlement for the class. In In re Ebix, Inc. Securities Litigation, No. 11-cv-2400 (RWS) (N.D. Ga.), the

court denied defendants’ motion to dismiss and Faruqi & Faruqi, LLP, as sole lead counsel, obtained final

approval on June 13, 2014 of a $6.5 million settlement for the class. In Shapiro v. Matrixx Initiatives, Inc.,

No. CV-09-1479 (PHX) (ROS) (D. Ariz.), Faruqi & Faruqi, LLP, as co-lead counsel for the class, defeated

defendants’ motion to dismiss, succeeded in having the action certified as a class action, and secured

final approval of a $4.5 million settlement for the class. See also In re Longwei Petroleum Inv. Holding

Ltd. Sec. Litig., No. 13 Civ. 214 (HB) (S.D.N.Y.) (as sole lead counsel, obtained final approval of a $1.34

million settlement on behalf of the class); Simmons v. Spencer, et al., No. 13 Civ. 8216 (RWS) (S.D.N.Y.)

(as co-lead counsel obtained final approval of settlement awarding $1.5 million to the class).

Additionally, Faruqi & Faruqi, LLP is serving as court-appointed lead counsel in the following cases:

Loftus v. Primero Mining Corp., No. 16-01034 (BRO) (RAO) (C.D. Cal.) (appointed sole lead counsel for the class);

Bielousov v. GoPro, Inc., et al., No. 4:16-CV-06654-CW (N.D. Cal.) (as sole lead counsel for the class, defeated defendants’ motion to dismiss);

Attigui v. Tahoe Resources, Inc., et al., No. 2:17-cv-01868 (RFB) (NJK) (D. Nev.) (appointed sole lead counsel for the class).

Khanna v. Ohr Pharmaceutical, Inc., No. 1:18-cv-01284 (LAP) (S.D.N.Y.) (appointed sole-lead counsel for the class);

DeSmet v. Intercept Pharmaceuticals, Inc., No. 1:17-cv-07371 (LAK) (S.D.N.Y.) (appointed sole-lead counsel for the class); and

Lee v. Synergy Pharmaceuticals, Inc. Sec. Litig., No. 1:18-cv-00873 (AMD) (VMS) (E.D.N.Y.) (appointed as co-lead counsel for the class).

SHAREHOLDER MERGER AND TRANSACTIONAL LITIGATION

Faruqi & Faruqi, LLP is nationally recognized for its excellence in prosecuting shareholder class

actions brought nationwide against officers, directors and other parties responsible for corporate

wrongdoing. Most of these cases are based upon state statutory or common law principles involving

fiduciary duties owed to investors by corporate insiders as well as Exchange Act violations.



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Faruqi & Faruqi, LLP has obtained significant monetary and therapeutic recoveries, including

millions of dollars in increased merger consideration for public shareholders; additional disclosure of

significant material information so that shareholders can intelligently gauge the fairness of the terms of

proposed transactions and other types of therapeutic relief designed to increase competitive bids and

protect shareholder value. As noted by Judge Timothy S. Black of the United States District Court for the

Southern District of Ohio in appointing lead counsel Nichting v. DPL Inc., Case No. 3:11-cv-14 (S.D. Ohio),

"[a]lthough all of the firms seeking appointment as Lead Counsel have impressive resumes, the Court is

most impressed with Faruqi & Faruqi.”

For example, in Hall v. Berry Petroleum Co., No. 8476-VCG (Del. Ch.), Faruqi & Faruqi, LLP as

sole lead counsel was credited by the Delaware Chancery Court with contributing to an increase in

exchange ratio in an all-stock transaction that provided Berry Petroleum Co. stockholders with an additional

$600 million in consideration for their shares as well as the disclosure of additional material information

regarding the transaction. The court noted at the settlement hearing “[t]he ability of petitioning counsel

[Faruqi] is known to the Court, and plaintiff's counsel [Faruqi] are well versed in the prosecution of corporate

law actions.” Faruqi & Faruqi, LLP achieved a similar result in In Re Energysolutions, Inc. Shareholder

Litigation, Cons. C.A. No. 8203-VCG (Del. Ch.), in which the Faruqi Firm, as co-lead counsel, was credited

in part with an increase in the merger consideration from $3.75 to $4.15 in cash per Energysolution share

by the acquirer Energy Capital, and credited with additional material disclosures distributed to stockholders.

In approving the settlement of the case and noting that the price increase amounted to an extra $36 million

for stockholders, the Delaware Court stated that the standing and ability of the stockholders’ counsel,

including Faruqi & Faruqi, LLP and its co-counsel, is “…among the highest in our bar.” See In Re

Energysolutions, Inc. S’holder Litig., Cons. C.A. No. 8203-VCG (Del. Ch. Feb. 11, 2014). In In Re Jefferies

Group, Inc. Shareholders Litigation, C.A. No. 8059-CB (Del. Ch.), Faruqi & Faruqi, LLP acted as co-lead

counsel representing Jeffries Group, Inc. stockholders in challenging the transaction with Leucadia National

Corporation. After years of vigorous litigation, the parties reached a settlement that recovered $70 million

additional consideration for the former Jeffries Group Inc. stockholders.

In In re Playboy Enterprises, Inc. Shareholders Litigation, Consol. C.A. No. 5632-VCN (Del. Ch.),

Faruqi & Faruqi, LLP achieved a substantial post close settlement of $5.25 million. In In re Cogent, Inc.

Shareholders Litigation, Consol. C.A. No. 5780-VC (Del. Ch.) Faruqi & Faruqi, LLP, as co-lead counsel,

obtained a post-close cash settlement of $1.9 million after two years of hotly contested litigation; In Rice v.

Lafarge North America, Inc., et al., No. 268974-V (Montgomery Cty., Md. Circuit Ct.), Faruqi & Faruqi, LLP,

as co-lead counsel represented the public shareholders of Lafarge North America (“LNA”) in challenging

the buyout of LNA by its French parent, Lafarge S.A., at $75.00 per share. After discovery and intensive

injunction motions practice, the price per share was increased from $75.00 to $85.50 per share, or a total



4

benefit to the public shareholders of $388 million. The Lafarge court gave Class counsel, including Faruqi

& Faruqi, LLP, shared credit with a special committee appointed by the company’s board of directors for a

significant portion of the price increase.

Similarly, in In re: Hearst-Argyle Shareholder Litig., Lead Case No. 09-Civ-600926 (N.Y. Sup. Ct.)

as co-lead counsel for plaintiffs, Faruqi & Faruqi, LLP litigated, in coordination with Hearst-Argyle’s special

committee, an increase of over 12.5%, or $8,740,648, from the initial transaction value offered for Hearst-

Argyle Television Inc.’s stock by its parent company, Hearst Corporation. Faruqi & Faruqi, LLP, in In re

Alfa Corp. Shareholder Litig., Case No. 03-CV-2007-900485.00 (Montgomery Cty, Ala. Cir. Ct.) was

instrumental, along with the Company’s special committee, in securing an increased share price for Alfa

Corporation shareholders of $22.00 from the originally-proposed $17.60 per share offer, which represented

over a $160 million benefit to class members, and obtained additional proxy disclosures to ensure that Alfa

shareholders were fully-informed before making their decision to vote in favor of the merger, or seek

appraisal.

Moreover, in In re Fox Entertainment Group, Inc. S'holders Litig., Consolidated C.A. No. 1033-N

(Del. Ch. 2005), Faruqi & Faruqi, LLP, a member of the three (3) firm executive committee, and in

coordination with Fox Entertainment Group’s special committee, created an increased offer price from the

original proposal to shareholders, which represented an increased benefit to Fox Entertainment Group, Inc.

shareholders of $450 million. Also, in In re Howmet Int’l S’holder Litig., Consolidated C.A. No. 17575 (Del.

Ch. 1999) Faruqi & Faruqi, LLP, in coordination with Howmet’s special committee, successfully obtained

an increased benefit to class members of $61.5 million dollars).

Recently, in In re Orchard Enterprises, Inc. Stockholder Litigation, C.A. No. 7840-VCL (Del. Ch.),

Faruqi & Faruqi, LLP acted as co-lead counsel with two other firms. That action involved the approval of a

merger by Orchard’s Board of Directors pursuant to which Dimensional Associates LLC would cash-out the

stock of Orchard’s minority common stockholders at a price of $2.05 per share and then take Orchard

private. On April 11, 2014, the parties reached an agreement to settle their claims for a payment of $10.725

million to be distributed among the Class, which considerably exceeded the $2.62 per share difference

between the $2.05 buyout price and the $4.67 appraisal price determined in In re Appraisal of The Orchard

Enterprises, Inc., C.A. No. 5713-CS, 2012 WL 2923305 (Del. Ch. July 18, 2012).

Faruqi also has noteworthy successes in achieving injunctive or declaratory relief pre and post

close in cases where corporate wrongdoing deprives shareholders of material information or an opportunity

to share in potential profits. In In re Harleysville Group, Inc. S’holders Litigation, C.A. Bo. 6907-VCP (Del.

Ch. 2014), Faruqi as sole lead counsel obtained significant disclosures for stockholders pre-close and

secured valuable relief post close in the form of an Anti-Flip Provision providing former stockholders with

25% of any profits in Qualifying Sale. In April 2012, Faruqi as sole lead obtained an unprecedented



5

injunction in Knee v. Brocade Communications Systems, Inc., No. 1-12-CV-220249, slip op. at 2 (Cal.

Super. Ct. Apr. 10, 2012) (Kleinberg, J.). In Brocade, Faruqi, as sole lead counsel for plaintiffs, successfully

obtained an injunction enjoining Brocade’s 2012 shareholder vote because certain information relating to

projected executive compensation was not properly disclosed in the proxy statement. (Order After Hearing

[Plaintiff’s Motion for Preliminary Injunction; Motions to Seal]). In Kajaria v. Cohen, No. 1:10-CV-03141

(N.D. Ga., Atlanta Div.), Faruqi & Faruqi, LLP, succeeded in having the district court order Bluelinx Holdings

Inc., the target company in a tender offer, to issue additional material disclosures to its recommendation

statement to shareholders before the expiration of the tender offer.

SHAREHOLDER DERIVATIVE LITIGATION

Faruqi & Faruqi, LLP has extensive experience litigating shareholder derivative actions on behalf

of corporate entities. This litigation is often necessary when the corporation has been injured by the

wrongdoing of its officers and directors. This wrongdoing can be either active, such as the wrongdoing by

certain corporate officers in connection with purposeful backdating of stock-options, or passive, such as the

failure to put in place proper internal controls, which leads to the violation of laws and accounting

procedures. A shareholder has the right to commence a derivative action when the company’s directors

are unwilling or unable, to pursue claims against the wrongdoers, which is often the case when the directors

themselves are the wrongdoers.

The purpose of the derivative action is threefold: (1) to make the company whole by holding those

responsible for the wrongdoing accountable; (2) the establishment of procedures at the company to ensure

the damaging acts can never again occur at the company; and (3) make the company more responsive to

its shareholders. Improved corporate governance and shareholder responsiveness are particularly

valuable because they make the company a stronger one going forward, which benefits its shareholders.

For example, studies have shown the companies with poor corporate governance scores have 5-year

returns that are 3.95% below the industry average, while companies with good corporate governance

scores have 5-year returns that are 7.91 % above the industry-adjusted average. The difference in

performance between these two groups is 11.86%. Corporate Governance Study: The Correlation between

Corporate Governance and Company Performance, Lawrence D. Brown, Ph.D., Distinguished Professor

of Accountancy, Georgia State University and Marcus L. Caylor, Ph.D. Student, Georgia State University.

Faruqi & Faruqi, LLP has achieved all three of the above stated goals of a derivative action. The firm

regularly obtains significant corporate governance changes in connection with the successful resolution of

derivative actions, in addition to monetary recoveries that inure directly to the benefit of the company. In

each case, the company’s shareholders indirectly benefit through an improved market price and market

perception.



6

In In re UnitedHealth Group Incorporated Derivative Litig., Case No. 27 CV 06-8065 (Minn. 4th

Judicial Dist. 2009) Faruqi & Faruqi, LLP, as co-lead counsel for plaintiffs, obtained a recovery of more than

$930 million for the benefit of the Company and corporate governance reforms designed to make

UnitedHealth a model of corporate responsibility and transparency. At the time, the settlement reached

was believed to be the largest settlement ever in a derivative case. See "UnitedHealth's Former Chief

to Repay $600 Million," Bloomberg.com, December 6, 2007 ("the settlement . . . would be the largest ever

in a 'derivative' suit . . . according to data compiled by Bloomberg.").

As co-lead counsel in Weissman v. John, et al., Cause No. 2007-31254 (Tex. Harris County 2008)

Faruqi & Faruqi, LLP, diligently litigated a shareholder derivative action on behalf of Key Energy Services,

Inc. for more than three years and caused the company to adopt a multitude of corporate governance

reforms which far exceeded listing and regulatory requirements. Such reforms included, among other

things, the appointment of a new senior management team, the realignment of personnel, the institution of

training sessions on internal control processes and activities, and the addition of 14 new accountants at the

company with experience in public accounting, financial reporting, tax accounting, and SOX compliance.

More recently, Faruqi & Faruqi, LLP concluded shareholder derivative litigation in The Booth Family

Trust, et al. v. Jeffries, et al., Lead Case No. 05-cv-00860 (S.D. Ohio 2005) on behalf of Abercrombie &

Fitch Co. Faruqi & Faruqi, LLP, as co-lead counsel for plaintiffs, litigated the case for six years through an

appeal in the U.S. Court of Appeals for the Sixth Circuit where it successfully obtained reversal of the district

court’s ruling dismissing the shareholder derivative action in April 2011. Once remanded to the district

court, Faruqi & Faruqi, LLP caused the company to adopt important corporate governance reforms narrowly

targeted to remedy the alleged insider trading and discriminatory employment practices that gave rise to

the shareholder derivative action.

The favorable outcome obtained by Faruqi & Faruqi, LLP in In re Forest Laboratories, Inc.

Derivative Litigation, Lead Civil Action No. 05-cv-3489 (S.D.N.Y. 2005) is another notable achievement for

the firm. After more than six years of litigation, Faruqi & Faruqi, LLP, as co-lead counsel, caused the

company to adopt industry-leading corporate governance measures that included rigorous monitoring

mechanisms and Board-level oversight procedures to ensure the timely and complete publication of clinical

drug trial results to the investing public and to deter, among other things, the unlawful off-label promotion

of drugs.

ANTITRUST LITIGATION

The attorneys at Faruqi & Faruqi, LLP represent direct purchasers, competitors, third-party payors,

and consumers in a variety of individual and class action antitrust cases brought under Sections 1 and 2 of

the Sherman Act. These actions, which typically seek treble damages under Section 4 of the Clayton Act,



7

have been commenced by businesses and consumers injured by anticompetitive agreements to fix prices

or allocate markets, conduct that excludes or delays competition, and other monopolistic or conspiratorial

conduct that harms competition.

Actions for excluded competitors. Faruqi & Faruqi represents competitors harmed by

anticompetitive practices that reduce their sales, profits, and/or market share. One representative action is

Babyage.com, Inc., et al. v. Toys "R" Us, Inc., et al. where Faruqi & Faruqi was retained to represent three

internet retailers of baby products, who challenged a dominant retailer's anticompetitive scheme, in concert

with their upstream suppliers, to impose and enforce resale price maintenance in violation of §§ 1 and 2 of

the Sherman Act and state law. The action sought damages measured as lost sales and profits. This case

was followed extensively by the Wall Street Journal. After several years of litigation, this action settled for

an undisclosed amount.

Actions for direct purchasers. Faruqi & Faruqi represents direct purchasers who have paid

overcharges as a result of anticompetitive practices that raise prices. These actions are typically initiated

as class actions. A representative action on behalf of direct purchasers is Rochester Drug Co-Operative,

Inc. v. Warner Chilcott Public Limited Company, et al., No. 12-3824 (E.D. Pa.), in which Faruqi & Faruqi

was appointed co-lead counsel for the proposed plaintiff class under Federal Rule of Civil Procedure 23(g).

Faruqi & Faruqi’s attorneys are counsel to direct purchasers (typically wholesalers) in multiple such class

actions.

Actions for third-party payors. Faruqi & Faruqi represents, both in class actions and in individual

actions, insurance companies who have reimbursed their policyholders at too high a rate due to

anticompetitive prices that raise prices. One representative action is In re Tricor Antitrust Litigation, No.

05-360 (D. Del.), where Faruqi & Faruqi represented PacifiCare and other large third-party payors

challenging the conduct of Abbott Laboratories and Laboratories Fournier in suppressing generic drug

competition, in violation of §§ 1 and 2 of the Sherman Act. The Tricor litigation settled for undisclosed

amount in 2010.

Results. Faruqi & Faruqi’s attorneys have consistently obtained favorable results in their antitrust

engagements. Non-confidential results include the following: In re Skelaxin (Metaxalone) Antitrust Litig.,

No. 12-md-2343, (E.D. Tenn.) ($73 million settlement); In re Wellbutrin XL Antitrust Litig., No. 08-2431 (E.D.

Pa.) ($37.5 million partial settlement); In re Iowa Ready-Mixed Concrete Antitrust Litigation, No. C 10-4038

(N.D. Iowa) ($18.5 million settlement); In re Metoprolol Succinate Direct Purchaser Antitrust Litigation, 06-

52 (D. Del.) ($20 million settlement); In re Ready-Mixed Concrete Antitrust Litigation, No. 05-979 (S.D. Ind.)

($40 million settlement); Rochester Drug Co-Operative, Inc., et al. v. Braintree Labs, Inc., No. 07-142-SLR

(D. Del.) ($17.25 million settlement).



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A more complete list of Faruqi & Faruqi's active and resolved antitrust cases can be found on its

web site at www.faruqilaw.com.

CONSUMER PROTECTION LITIGATION

Attorneys at Faruqi & Faruqi, LLP have advocated for consumers’ rights, successfully challenging

some of the nation’s largest and most powerful corporations for a variety of improper, unfair and deceptive

business practices. Through our efforts, we have recovered hundreds of millions of dollars and other

significant remedial benefits for our consumer clients.

For example, in Bates v. Kashi Co., et al., Case No. 11-CV-1967-H BGS (S.D. Cal. 2011), as co-

lead counsel for the class, Faruqi & Faruqi, LLP secured a $5.0 million settlement fund on behalf of

California consumers who purchased Kashi products that were deceptively labeled as “nothing artificial”

and “all natural.” The settlement provides class members with a full refund of the purchase price in addition

to requiring Kashi to modify its labeling and advertising to remove “All Natural” and “Nothing Artificial” from

certain products. As noted by Judge Marilyn L. Huff in approving the settlement, “Plaintiffs’ counsel has

extensive experience acting as class counsel in consumer class action cases, including cases involving

false advertising claims.” Moreover, in Thomas v. Global Vision Products, Case No. RG-03091195

(California Superior Ct., Alameda Cty.), Faruqi & Faruqi, LLP served as co-lead counsel in a consumer

class action lawsuit against Global Vision Products, Inc., the manufacturer of the Avacor hair restoration

product and its officers, directors and spokespersons, in connection with the false and misleading

advertising claims regarding the Avacor product. Though the company had declared bankruptcy in 2007,

Faruqi & Faruqi, LLP, along with its co-counsel, successfully prosecuted two trials to obtain relief for the

class of Avacor purchasers. In January 2008, a jury in the first trial returned a verdict of almost $37 million

against two of the creators of the product. In November 2009, another jury awarded plaintiff and the class

more than $50 million in a separate trial against two other company directors and officers. This jury award

represented the largest consumer class action jury award in California in 2009 (according to VerdictSearch,

a legal trade publication).

Additionally, in Rodriguez v. CitiMortgage, Inc., Case No. 11-cv-04718-PGG-DCF (S.D.N.Y. 2011),

Faruqi & Faruqi, LLP, as co-lead class counsel, reached a significant settlement with CitiMortgage related

to improper foreclosure practices of homes owned by active duty servicemembers. The settlement was

recently finalized pursuant to a Final Approval Order dated October 6, 2015, which provides class members

with a monetary recovery of at least $116,785.00 per class member, plus the amount of any lost equity in

the foreclosed property.

Below is a non-exhaustive list of settlements where Faruqi & Faruqi, LLP and its partners have

served as lead or co-lead counsel:



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In re Sinus Buster Products Consumer Litig., Case No. 1:12-cv-02429-ADS-AKT (E.D.N.Y. 2012). The firm represented a nationwide class of purchasers of assorted cold, flu and sinus products. A settlement was obtained, providing class members with a cash refund up to $10 and requiring defendant to discontinue the marketing and sale of certain products.

In re: Alexia Foods, Inc. Litigation., Case No. 4:11-cv-06119 (N.D. Cal. 2011). The firm represented a proposed class of all persons who purchased certain frozen potato products that were deceptively advertised as “natural” or “all natural.” A settlement was obtained, providing class members with the cash refunds up to $35.00 and requiring defendant to cease using a synthetic chemical compound in future production of the products.

In re: Haier Freezer Consumer Litig., Case No. 5:11-CV-02911-EJD (N.D. Cal. 2011). The firm represented a nationwide class of consumers who purchased certain model freezers, which were sold in violation of the federal standard for maximum energy consumption. A settlement was obtained, providing class members with cash payments of between $50 and $325.80.

Loreto v. Coast Cutlery Co., Case No. 11-3977 SDW-MCA (D.N.J. 2011) The firm represented a proposed nationwide class of people who purchased stainless steel knives and multi-tools that were of a lesser quality than advertised. A settlement was obtained, providing class members with a full refund of the purchase price.

Rossi v Procter & Gamble Company., Case No. 11-7238 (D.N.J. 2011). The firm represented a nationwide class of consumers who purchased deceptively marketed “Crest Sensitivity” toothpaste. A settlement was obtained, providing class members with a full refund of the purchase price.

In re: Michaels Stores Pin Pad Litig., Case No. 1:11-CV-03350 CPK (N.D. Ill. 2011). The firm represented a nationwide class of persons against Michaels Stores, Inc. for failing to secure and safeguard customers’ personal financial data. A settlement was obtained, which provided class members with monetary recovery for unreimbursed out-of-pocket losses incurred in connection with the data breach, as well as up to four years of credit monitoring services.

Kelly, v. Phiten, Case No. 4:11-cv-00067 JEG (S.D. Iowa 2011). The firm represented a proposed nationwide class of consumers who purchased Defendant Phiten USA’s jewelry and other products, which were falsely promoted to balance a user’s energy flow. A settlement was obtained, providing class members with up to 300% of the cost of the product and substantial injunctive relief requiring Phiten to modify its advertising claims.

In re: HP Power-Plug Litigation, Case No. 06-1221 (N.D. Cal. 2006). The firm represented a proposed nationwide class of consumers who purchased defective laptops manufactured by defendant. A settlement was obtained, which provided full relief to class members, including among other benefits a cash payment up to $650.00 per class member, or in the alternative, a repair free-of-charge and new limited warranties accompanying repaired laptops.

Delre v. Hewlett-Packard Co., C.A. No. 3232-02 (N.J. Super. Ct. 2002). The firm represented a proposed nationwide class of consumers (approximately 170,000 members) who purchased, HP dvd-100i dvd-writers (“HP 100i”) based on misrepresentations regarding the write-once (“DVD+R”) capabilities of the HP 100i and the compatibility of DVD+RW disks written by HP 100i with DVD players and other optical storage devices. A settlement was obtained, which provided full relief to class members, including among other benefits, the replacement of defective HP 100i with its more current, second generation DVD writer, the HP 200i, and/or refunds the $99 it had charged some consumers to upgrade from the HP 100i to the HP 200i prior to the settlement.

In addition, Faruqi & Faruqi, LLP and its partners are currently serving as lead or co-lead counsel

in the following class action cases:

Dei Rossi et al. v. Whirlpool Corp., Case No. 2:12-cv-00125-TLN-JFM (E.D. Cal. 2012) (representing a certified class of people who purchased mislabeled KitchenAid brand refrigerators from Whirlpool Corp.)



10

In re: Scotts EZ Seed Litigation, Case No. 7:12-cv-04727-VB (S.D.N.Y. 2012) (representing a certified class of purchasers of mulch grass seed products advertised as a superior grass seed product capable of growing grass in the toughest conditions and with half the water.)

Forcellati et al., v Hyland’s, Inc. et al., Case No. 2:12-cv-01983-GHK-MRW (C.D. Cal. 2012) (representing a certified nationwide class of purchasers of children’s cold and flu products.)

Avram v. Samsung Electronics America, Inc., et al., Case No. 2:11-cv-06973 KM-MCA (D.N.J. 2011) (representing a proposed nationwide class of persons who purchased mislabeled refrigerators from Samsung Electronics America, Inc. for misrepresenting the energy efficiency of certain refrigerators.)

Dzielak v. Whirlpool Corp., et al., Case No. 12-CIV-0089 SRC-MAS (D.N.J. 2011) (representing a proposed nationwide class of purchasers of mislabeled Maytag brand washing machines for misrepresenting the energy efficiency of such washing machines.)

In re: Shop-Vac Marketing and Sales Practices Litigation, Case No. 4:12-md-02380-YK (M.D. Pa. 2012) (representing a proposed nationwide class of persons who purchased vacuums or Shop Vac’s with overstated horsepower and tank capacity specifications.)

In re: Oreck Corporation Halo Vacuum And Air Purifiers Marketing And Sales Practices Litigation, MDL No. 2317 (the firm was appointed to the executive committee, representing a proposed nationwide class of consumers who purchased vacuums and air purifiers that were deceptively advertised effective in eliminating common viruses, germs and allergens.)

EMPLOYMENT PRACTICES LITIGATION

Faruqi & Faruqi, LLP is a recognized leader in protecting the rights of employees. The firm’s

Employment Practices Group is committed to protecting the rights of current and former employees

nationwide. The firm is dedicated to representing employees who may not have been compensated

properly by their employer or who have suffered investment losses in their employer-sponsored retirement

plan. The firm also represents individuals (often current or former employees) who assert that a company

has allegedly defrauded the federal or state government.

Faruqi & Faruqi represents current and former employees nationwide whose employers have failed

to comply with state and/or federal laws governing minimum wage, hours worked, overtime, meal and rest

breaks, and unreimbursed business expenses. In particular, the firm focuses on claims against companies

for (i) failing to properly classify their employees for purposes of paying them proper overtime pay, or (ii)

requiring employees to work “off-the-clock,” and not paying them for all of their actual hours worked.

In prosecuting claims on behalf of aggrieved employees, Faruqi & Faruqi has successfully defeated

summary judgment motions, won numerous collective certification motions, and obtained significant

monetary recoveries for current and former employees. In the course of litigating these claims, the firm has

been a pioneer in developing the growing area of wage and hour law. In Creely, et al. v. HCR ManorCare,

Inc., C.A. No. 3:09-cv-02879 (N.D. OH), Faruqi & Faruqi, along with its co-counsel, obtained one of the first

decisions to reject the application of the Supreme Court’s Fed. R. Civ. P. 23 certification analysis in Wal-

Mart Stores, Inc. v. Dukes et. al., 131 S. Ct. 2541 (2011) to the certification process of collective actions

brought pursuant to the Fair Labor Standards Act of 1938 (“FLSA”). The firm, along with its co-counsel,



11

also recently won a groundbreaking decision for employees seeking to prosecute wage and hour claims on

a collective basis in Symczyk v. Genesis Healthcare Corp. et al., No. 10-3178 (3d Cir. 2011). In Symczyk,

the Third Circuit reversed the district court’s ruling that an offer of judgment mooted a named plaintiff’s claim

in an action asserting wage and hour violations of the FLSA. Notably, the Third Circuit also affirmed the

two-step process used for granting certification in FLSA cases. The Creely decision, like the Third Circuit’s

Genesis decision, will invariably be relied upon by courts and plaintiffs in future wage and hour actions.

Some of the firm’s notable recoveries include Bazzini v. Club Fit Management, Inc., C.A. No. 08-

cv-4530 (S.D.N.Y. 2008), wherein the firm settled a FLSA collective action lawsuit on behalf of tennis

professionals, fitness instructors and other health club employees on very favorable terms. Similarly, in

Garcia, et al., v. Lowe's Home Center, Inc., et al., C.A. No. GIC 841120 (Cal. Sup. Ct. 2008), Faruqi &

Faruqi served as co-lead counsel and recovered $1.6 million on behalf of delivery workers who were

unlawfully treated as independent contractors and not paid appropriate overtime wages or benefits.

The firm’s Employment Practices Group also represents participants and beneficiaries of employee

benefit plans covered by the Employee Retirement Income Security Act of 1874 (“ERISA”). In particular

the firm protects the interests of employees in retirement savings plans against the wrongful conduct of

plan fiduciaries. Often, these retirement savings plans constitute a significant portion of an employee’s

retirement savings. ERISA, which codifies one of the highest duties known to law, requires an employer to

act in the best interests of the plan’s participants, including the selection and maintenance of retirement

investment vehicles. For example, an employer who administers a retirement savings plan (often a 401(k)

plan) has a fiduciary obligation to ensure that the retirement plan’s assets (including employee and any

company matching contributions to the plan) are directed into appropriate and prudent investment vehicles.

Faruqi & Faruqi has brought actions on behalf of aggrieved plan participants where a company

and/or certain of its officers breached their fiduciary duty by allowing its retirement plans to invest in shares

of its own stock despite having access to materially negative information concerning the company which

materially impacted the value of the stock. The resulting losses can be devastating to employees’

retirement accounts. Under certain circumstances, current and former employees can seek to hold their

employers accountable for plan losses caused by the employer’s breach of their ERISA-mandated duties.

The firm’s Employment Practices Group also represents whistleblowers in actions under both

federal and state False Claims Acts. Often, current and former employees of business entities that contract

with, or are otherwise bound by obligations to, the federal and state governments become aware of

wrongdoing that causes the government to overpay for a good or service. When a corporation perpetrates

such fraud, a whistleblower may sue the wrongdoer in the government’s name to recover up to three times

actual damages and additional civil penalties for each false statement made. Whistleblowers who initiate



12

such suits are entitled to a portion of the recovery attained by the government, generally ranging from 15%

to 30% of the total recovery.

False Claims Act cases often arise in context of Medicare and Medicaid fraud, pharmaceutical

fraud, defense contractor fraud, federal government contractor fraud, and fraudulent loans and grants. For

instance, in United States of America, ex rel. Ronald J. Streck v. Allergan, Inc. et al., No. 2:08-cv-05135-

ER (E.D. Pa.), Faruqi & Faruqi represents a whistleblower in an un-sealed case alleging fraud against

thirteen pharmaceutical companies who underpaid rebates they were obliged to pay to state Medicaid

programs on drugs sold through those programs.

Based on its experience and expertise, the firm has served as the principal attorneys representing

current and former employees in numerous cases across the country alleging wage and hour violations,

ERISA violations and violations of federal and state False Claims Acts.

ATTORNEYS NADEEM FARUQI

Mr. Faruqi is Co-Founder and Managing Partner of the firm. Mr. Faruqi oversees all aspects of the

firm’s practice areas. Mr. Faruqi has acted as sole lead or co-lead counsel in many notable class or

derivative action cases, such as: In re Olsten Corp. Secs. Litig., C.A. No. 97-CV-5056 (E.D.N.Y.) (recovered

$25 million dollars for class members); In re PurchasePro, Inc., Secs. Litig., Master File No. CV-S-01-0483

(D. Nev. 2001) ($24.2 million dollars recovery on behalf of the class in securities fraud action); In re Avatex

Corp. S’holders Litig., C.A. No. 16334-NC (Del. Ch. 1999) (established certain new standards for preferred

shareholders rights); Dennis v. Pronet, Inc., C.A. No. 96-06509 (Tex. Dist. Ct.) (recovered over $15 million

dollars on behalf of shareholders); In re Tellium, Inc. Secs. Litig., C.A. No. 02-CV-5878 (D.N.J.) (class action

settlement of $5.5 million); In re Tenet Healthcare Corp. Derivative Litig., Lead Case No. 01098905 (Cal.

Sup. Ct. 2002) (achieved a $51.5 million benefit to the corporation in derivative litigation).

Upon graduation from law school, Mr. Faruqi was associated with a large corporate legal

department in New York. In 1988, he became associated with Kaufman Malchman Kirby & Squire,

specializing in shareholder litigation, and in 1992, became a member of that firm. While at Kaufman

Malchman Kirby & Squire, Mr. Faruqi served as one of the trial counsel for plaintiff in Gerber v. Computer

Assocs. Int’l, Inc., 91-CV-3610 (E.D.N.Y. 1991). Mr. Faruqi actively participated in cases such as: Colaprico

v. Sun Microsystems, No. C-90-20710 (N.D. Cal. 1993) (recovery in excess of $5 million on behalf of the

shareholder class); In re Jackpot Secs. Enters., Inc. Secs. Litig., CV-S-89-805 (D. Nev. 1993) (recovery in

excess of $3 million on behalf of the shareholder class); In re Int’l Tech. Corp. Secs. Litig., CV 88-440 (C.D.



13

Cal. 1993) (recovery in excess of $13 million on behalf of the shareholder class); and In re Triangle Inds.,

Inc. S’holders Litig., C.A. No. 10466 (Del. Ch. 1990) (recovery in excess of $70 million).

Mr. Faruqi earned his Bachelor of Science Degree from McGill University, Canada (B.Sc. 1981),

his Master of Business Administration from the Schulich School of Business, York University, Canada (MBA

1984) and his law degree from New York Law School (J.D., cum laude, 1987). Mr. Faruqi was Executive

Editor of New York Law School’s Journal of International and Comparative Law. He is the author of “Letters

of Credit: Doubts As To Their Continued Usefulness,” Journal of International and Comparative Law, 1988.

He was awarded the Professor Ernst C. Stiefel Award for Excellence in Comparative, Common and Civil

Law by New York Law School in 1987.

Mr. Faruqi is licensed to practice law in New York and is admitted to the United States District

Courts for the Southern, Eastern and Western Districts of New York, and the District of Colorado, and the

United States Court of Appeals for the Second and Third Circuits.

LUBNA M. FARUQI

Ms. Faruqi is Co-Founder of Faruqi & Faruqi, LLP. Ms. Faruqi is involved in all aspects of the firm’s

practice. Ms. Faruqi has actively participated in numerous cases in federal and state courts which have

resulted in significant recoveries for shareholders.

Ms. Faruqi was involved in litigating the successful recovery of $25 million to class members in In

re Olsten Corp. Secs. Litig., C.A. No. 97-CV-5056 (E.D.N.Y.). She helped to establish certain new

standards for preferred shareholders in Delaware in In re Avatex Corp. S’holders Litig., C.A. No. 16334-NC

(Del. Ch. 1999). Ms. Faruqi was also lead attorney in In re Mitcham Indus., Inc. Secs. Litig., Master File

No. H-98-1244 (S.D. Tex. 1998), where she successfully recovered $3 million on behalf of class members

despite the fact that the corporate defendant was on the verge of declaring bankruptcy.

Upon graduation from law school, Ms. Faruqi worked with the Department of Consumer and

Corporate Affairs, Bureau of Anti-Trust, the Federal Government of Canada. In 1987, Ms. Faruqi became

associated with Kaufman Malchman Kirby & Squire, specializing in shareholder litigation, where she

actively participated in cases such as: In re Triangle Inds., Inc. S’holders Litig., C.A. No. 10466 (Del. Ch.

1990) (recovery in excess of $70 million); Kantor v. Zondervan Corp., C.A. No. 88 C5425 (W.D. Mich. 1989)

(recovery of $3.75 million on behalf of shareholders); and In re A.L. Williams Corp. S’holders Litig., C.A.

No. 10881 (Del. Ch. 1990) (recovery in excess of $11 million on behalf of shareholders).

Ms. Faruqi graduated from McGill University Law School at the age of twenty-one with two law

degrees: Bachelor of Civil Law (B.C.L.) (1980) and a Bachelor of Common Law (L.L.B.) (1981).

Ms. Faruqi is licensed to practice law in New York and is admitted to the United States District

Court for the Southern District of New York.



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PETER KOHN

Mr. Kohn is a partner in Faruqi & Faruqi, LLP’s Pennsylvania office.

Prior to joining the firm, Mr. Kohn was a shareholder at Berger & Montague, P.C., where he

prepared for trial several noteworthy lawsuits under the Sherman Act, including In re Buspirone Patent &

Antitrust Litigation, MDL No. 1410 (S.D.N.Y.) ($220M settlement), In re Cardizem CD Antitrust Litigation,

No. 99-MD-1278 (E.D. Mich.) ($110M settlement), Meijer, Inc. v. Warner-Chilcott, No. 05-2195 (D.D.C.)

($22M settlement), In re Relafen Antitrust Litigation, No. 01-12239 (D. Mass.) ($175M settlement), In re

Remeron Direct Purchaser Antitrust Litigation, No. 03-cv-0085 (D.N.J.) ($75M settlement), In re Terazosin

Hydrochloride Antitrust Litigation, No. 99-MDL-1317 (S.D. Fla.) ($72.5M settlement), and In re Tricor Direct

Purchaser Antitrust Litig., No. 05-340 (D. Del.) ($250M settlement). The court appointed him as co-lead

counsel for the plaintiffs in In re Pennsylvania Title Ins. Antitrust Litig., No. 08cv1202 (E.D. Pa.) (pending

action on behalf of direct purchasers of title insurance alleging illegal cartel pricing under § 1 of the Sherman

Act).

A sampling of Mr. Kohn’s reported cases in the antitrust arena includes In re Solodyn (Minocycline

Hydrochloride) Antitrust Litig., Civil Action No. 14-md-02503-DJC, 2015 U.S. Dist. LEXIS 125999 (D. Mass.

Aug. 14, 2015) (denying motion to dismiss reverse payment claims under the Sherman Act); King Drug Co.

of Florence v. Cephalon, Inc., 88 F. Supp. 3d 402 (E.D. Pa. 2015) (reverse payment claims under the

Sherman Act survived summary judgment); In re Suboxone (Buprenorphine Hydrochloride & Naloxone)

Antitrust Litig., 64 F. Supp. 3d 665 (E.D. Pa. 2014) (denying motion to dismiss product hopping claims

under the Sherman Act); In re Lidoderm Antitrust Litig., 74 F. Supp. 3d 1052 (N.D. Cal. 2014) (denying

motion to dismiss reverse payment claims under the Sherman Act); Mylan Pharms., Inc. v. Warner Chilcott

Pub., No. 12-3824, 2013 U.S. Dist. LEXIS 152467 (E.D. Pa. June 11, 2013) (denying motion to dismiss

product hopping claims under the Sherman Act); In re Hypodermic Prods. Antitrust Litig., 484 Fed. Appx.

669 (3d Cir. 2012) (issue of direct purchaser standing under Illinois Brick); Wallach v. Eaton Corp., 814 F.

Supp. 2d 428 (D. Del. 2011) (application of the Third Circuit’s “complete involvement” exception to the in

pari delicto doctrine); Delaware Valley Surgical Supply Inc. v. Johnson & Johnson, 523 F.3d 1116 (9th Cir.

2008) (issue of direct purchaser standing under Illinois Brick); Babyage.com, Inc. v. Toys “R” Us, Inc., 558

F. Supp.2d 575 (E.D. Pa. 2008) (denying defendants’ motion to dismiss following the Supreme Court’s

decisions in Twombly and Leegin, and for the first time in the Third Circuit adopting the Merger Guidelines

method of relevant market definition); J.B.D.L. Corp. v. Wyeth-Ayerst Laboratories, Inc., 485 F.3d 880 (6th

Cir. 2007) (affirming summary judgment in exclusionary contracting case); and Babyage.com, Inc. v. Toys

“R” Us, Inc., 458 F. Supp.2d 263 (E.D. Pa. 2006) (discoverability of surreptitiously recorded statements

prior to deposition of declarant).



15

Mr. Kohn is a 1989 graduate of the University of Pennsylvania (B.A., English) and a 1992 cum

laude graduate of Temple University Law School, where he was senior staff for the Temple Law Review

and received awards for trial advocacy. Mr. Kohn was recognized as a “recommended” antitrust attorney

in the Northeast in 2009 by the Legal 500 guide (www.legal500.com) and was chosen by his peers as a

“SuperLawyer” in Pennsylvania in 2009 - 2013, and 2016. Mr. Kohn was an invited speaker at the ABA

Section of Antitrust Law’s 2016 Spring Meeting in Washington, D.C., for the Health Care & Pharmaceuticals

and State Enforcement Committee’s program, “Exclusionary or Not? Product Hopping and REMS.” He was

also invited to speak for the ABA Section of Antitrust Law’s program "Product Hopping Cases: Where Are

We and Where Are We Headed" in December 2015, as well as Harris Martin Publishing’s Antitrust Pay-for-

Delay Litigation Conference in 2014 and 2015. In 2011, Mr. Kohn was selected as a Fellow in the Litigation

Counsel of America, a trial lawyer honorary society composed of less than one-half of one percent of

American lawyers. He is a member of the bars of the Supreme Court of Pennsylvania (1992-present), the

United States District Court for the Eastern District of Pennsylvania (1995-present), the United States

District Court for the Eastern District of Michigan (2010-present), the United States Court of Appeals for the

Third Circuit (2000-present), the United States Court of Appeals for the Sixth Circuit (2005-present), the

United States Court of Appeals for the Ninth Circuit (2016-present), and the United States Court of Appeals

for the Federal Circuit (2011-present).

RICHARD W. GONNELLO

Richard W. Gonnello is a partner in Faruqi & Faruqi, LLP’s New York office.

Prior to joining the firm, Mr. Gonnello was a partner at Entwistle & Cappucci LLP and an associate

at Latham & Watkins LLP. He began his career representing large corporations in litigation, arbitration, and

governmental investigations. Mr. Gonnello now represents shareholders in securities fraud cases and other

investment disputes.

Mr. Gonnello has represented institutional and individual investors in obtaining substantial

recoveries in numerous class actions, including In re Royal Ahold Sec. Litig., No. 03-md-01539 (D. Md.

2003) ($1.1 billion) and In re Tremont Securities Law, State Law and Insurance Litigation, No. 08-cv-11117

(S.D.N.Y. 2011) ($100 million+). Mr. Gonnello has also obtained favorable recoveries for institutional

investors pursuing direct securities fraud claims, including cases against Qwest Communications

International, Inc. ($175 million+) and Tyco Int’l Ltd ($21 million).

Mr. Gonnello has successfully argued numerous cases, including Zak v. Chelsea Therapeutics Int’l,

Ltd., Civ. No. 13-2370 (2015), which was before the Fourth Circuit Court of Appeals and resulted in the

Court’s first reversal of a district court’s dismissal in the twenty years since the Private Securities Litigation

Reform Act was enacted in 1995.



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Mr. Gonnello has co-authored the following articles: "'Staehr’ Hikes Burden of Proof to Place

Investor on Inquiry Notice, "New York Law Journal, December 15, 2008; and "Potential Securities Fraud:

'Storm Warnings' Clarified," New York Law Journal, October 23, 2008.

Mr. Gonnello attended the University of Chicago, where he was named to the Dean’s List every

quarter, and thereafter graduated summa cum laude from Rutgers University in 1995, where he was named

Phi Beta Kappa. He received his law degree from UCLA School of Law (J.D. 1998), and was a member of

the UCLA Journal of Environmental Law & Policy.

Mr. Gonnello is licensed to practice law in New York and is admitted to the United States District

Courts for the Southern and Eastern Districts of New York and the United States Court of Appeals for the

Second, Fourth, Seventh and Ninth Circuits.

JOSEPH T. LUKENS

Mr. Lukens is a partner in Faruqi & Faruqi, LLP’s Pennsylvania office.

Mr. Lukens was a shareholder at the Philadelphia firm of Hangley Aronchick Segal Pudlin &

Schiller, where he represented large retail pharmacy chains as opt-out plaintiffs in numerous lawsuits under

the Sherman Act. Among those lawsuits were In re Brand Name Prescription Drugs Antitrust Litigation

(MDL 897, N.D. Ill.), In re Terazosin Hydrochloride Antitrust Litigation (MDL 1317, S.D. Fla.), In re TriCor

Direct Purchaser Antitrust Litigation (05-605, D. Del.), In re Nifedipine Antitrust Litigation (MDL1515,

D.D.C.), In re OxyContin Antitrust Litigation (04-3719, S.D.N.Y), and In re Chocolate Confectionary Antitrust

Litigation (MDL 1935, M.D. Pa.). While the results in the opt-out cases are confidential, the parallel class

actions in those matters which are concluded have resulted in settlements exceeding $1.1 billion.

Earlier in his career, Mr. Lukens concentrated in commercial and civil rights litigation at the

Philadelphia firm of Schnader, Harrison, Segal & Lewis. The types of matters that Mr. Lukens handled

included antitrust, First Amendment, contracts, and licensing. Mr. Lukens also worked extensively on

several notable pro bono cases including Commonwealth v. Morales, which resulted in a rare reversal on

a second post-conviction petition in a capital case in the Pennsylvania Supreme Court.

Mr. Lukens graduated from LaSalle University (B.A. Political Science, cum laude, 1987) and

received his law degree from Temple University School of Law (J.D., magna cum laude, 1992) where he

was an editor on the Temple Law Review and received several academic awards. After law school, Mr.

Lukens clerked for the Honorable Joseph J. Longobardi, Chief Judge for the United States District Court

for the District of Delaware (1992-93). Mr. Lukens is a member of the bars of the Supreme Court of

Pennsylvania (1992-present), the United States Supreme Court (1996-present); the United States District

Court for the Eastern District of Pennsylvania (1993-present), the United States Court of Appeals for the



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Third Circuit (1993-present), and the United States Court of Appeals for the District of New Jersey (1994-

present).

Mr. Lukens has several publications, including: Bringing Market Discipline to Pharmaceutical

Product Reformulations, 42 Int'l Rev. Intel. Prop. & Comp. Law 698 (September 2011) (co-author with Steve

Shadowen and Keith Leffler); Anticompetitive Product Changes in the Pharmaceutical Industry, 41 Rutgers

L.J. 1 (2009) (co-author with Steve Shadowen and Keith Leffler); The Prison Litigation Reform Act: Three

Strikes and You’re Out of Court — It May Be Effective, But Is It Constitutional?, 70 Temp. L. Rev. 471

(1997); Pennsylvania Strips The Inventory Search Exception From Its Rationale – Commonwealth v. Nace,

64 Temp. L. Rev. 267 (1991).

STUART J. GUBER

Stuart J. Guber is a Partner in Faruqi & Faruqi, LLP’s Pennsylvania office.

Mr. Guber focuses his practice on representing institutional and individual investors in class actions

under the federal securities laws, shareholder derivative suits and mergers and acquisitions litigation, as

well as other complex litigation representing consumers. During his 25-year career as a securities and

complex litigator, Mr. Guber, as one of the lead attorneys, has successfully litigated numerous shareholder

cases to settlement and verdict including In re Rite Aid Pharmacy Sec. Litig., No. MDL 1360 (E.D. Pa) ($320

Million settlement of securities class action); In re Tycom Ltd. Sec. Litig., No. 03-CV-03540 (D. Conn.) ($79

million settlement in securities class action); In re Providian Financial Corp. Sec. Litig., No. 01-CV-3952

(N.D. Cal.) ($65 million settlement in securities class action); In re Bell South Corp. Sec. Litig., No. 02-CV-

2142 (N.D. Ga.) ($35 million settlement in securities class action); In re Evergreen Ultra Short Opportunities

Fund Sec. Litig., No. 1:08-CV-11064 (D. Mass.) ($25 million class action securities settlement in which

participating class members will recover over 65% of their losses); Robbins v. Koger Properties, No. 90-

896-civ-J-10 (M.D. Flo.) (plaintiffs’ trial counsel in jury verdict awarding $81.3 million in damages); Maiocco,

et al. v. Greenway Capital Corp., et al., NASD No. 94-04396 (Lead trial counsel for plaintiffs in securities

arbitration awarding $227,000 in compensatory damages and $100,000 in punitive damages); Solomon v.

T.F.M., Inc. (achieved defense verdict as lead trial counsel in securities arbitration representing Philadelphia

Stock Exchange options trading firm); Minerva Group LP v. Keane, Index No. 800621 (Sup. Ct. NY)

(mergers and acquisitions case settled for amendments to merger agreement, additional disclosures and a

price bump per share to be paid shareholders from $8.40 per share to $9.25 per share in merger

consideration). Mr. Guber has successfully litigated consumer class actions (for e.g., Nepomuceno v.

Knights of Columbus, No. Civ. A. 96 C 4789 (N.D. Ill.), settled for $22 million in life insurance vanishing

premium consumer fraud case) and successfully defended at trial a union health and welfare fund being

sued by a healthcare provider (Centre for Neuro Skills, Inc.-Texas v. Specialties & Paper Products Union



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No. 527 Health and Welfare Fund, No. CC-07-10150-A (Cty. Ct. Dallas, Tex.), lead trial defense counsel

securing a directed verdict in favor of defendant).

Mr. Guber has also been involved as lead or co-lead counsel in litigation producing a number of

noteworthy published decisions including: South Ferry LP v. Killinger, 542 F.3d 776 (9th Cir. 2008); Koehler

v. Brody, 483 F.3d 590 (8th Cir. 2007); Wagner v. First Horizon Pharm. Corp., 464 F.3d 1273 (11th Cir.

2006); Garfield v. NDC Health, 466 F.3d 1255 (11th Cir. 2006); In re Cerner Corp. Sec. Litig., 425 F.3d

1079 (8th Cir. 2005); Nevius v. Read-Rite Corp., 335 F.3d 843 (9th Cir. 2003); Robbins v. Koger Properties,

116 F.3d 1441 (11th Cir. 1997); Schreiber v. Kellogg, 50 F.3d 264 (3d Cir. 1995); In re Evergreen Ultra

Short Opportunities Fund Se. Litig., 275 F.R.D. 382 (D. Mass. 2011) Marsden v. Select Med. Corp., 246

F.R.D. 480 (E.D. Pa. 2007); In re Friedman’s Inc. Securities Litigation, 385 F. Supp. 2d 1345 (N.D. Ga.

2005); In re Bellsouth Corp. Sec. Litig., 355 F. Supp. 2d 1350 (N.D. Ga. 2005); Tri-Star Farms Ltd. v.

Marconi, PLC, et al., 225 F. Supp. 2d 567 (W.D. Pa. 2002); In re Campbell Soup Company Securities

Litigation, 145 F. Supp. 2d 574 (D.N.J. 2001); In re Rite Aid Corp. Securities Litigation, 146 F. Supp. 2d 706

(E.D. Pa. 2001); In re ValuJet, Inc. Securities Litigation, 984 F. Supp. 1472 (N.D. Ga.1997); Schreiber v.

Kellogg, 194 B.R. 559 (E.D. Pa. 1996); Schreiber v. Kellogg, 839 F. Supp. 1157 (E.D. Pa. 1993); Schreiber

v. Kellogg, 838 F. Supp. 998 (E.D. Pa.1993).

Mr. Guber is admitted to practice before the state bars of Pennsylvania and Georgia and is admitted

to numerous federal courts including: United States District Courts for the Eastern District of Pennsylvania,

Northern District of Georgia, Eastern District of Michigan and District of Colorado; and the United States

Circuit Courts of Appeals for the First, Third, Eighth, Ninth, Tenth and Eleventh Circuits. He graduated with

a Juris Doctor from Temple University School of Law (1990) and with a B.S. in Business Administration,

majoring in accounting from Temple University (1986).

JAMES M. WILSON, JR.

James M. Wilson, Jr. is a Partner in Faruqi & Faruqi LLP’s New York office

Prior to joining Faruqi & Faruqi, Mr. Wilson was a partner at Chitwood Harley Harnes, LLP, and a

senior associate with Reed Smith, LLP. Mr. Wilson has represented institutional pension funds,

corporations and individual investors in courts around the country and obtained significant recoveries,

including the following securities class actions: In re ArthroCare Sec. Litig. No. 08-0574 (W.D. Tex.) ($74

million); In re Maxim Integrated Prod. Sec. Litig., No. 08-0832 (N.D.Cal.) ($173 million); In re TyCom Ltd.

Sec. Litig., MDL No. 02-1335 (D.N.H.) ($79 million); and In re Providian Fin. Corp. Sec. Litig., No. 01-3952

(N.D. Cal.). Mr. Wilson also has obtained significant relief for shareholders in merger suits, including the

following: In re Zoran Corporation Shareholders Litig., No. 6212-VCP (Del. Chancery); and In re The Coca-

Cola Company Shareholder Litigation, No. 10-182035 (Fulton County Superior Ct.).



19

Mr. Wilson has authored numerous articles addressing current developments including the

following Expert Commentaries published by Lexis Nexis: The Liability Faced By Financial Institutions From

Exposure To Subprime Mortgages; Losses Attributable To Sub-Prime Mortgages; The Supreme Court's

Decision in Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc. et al.; Derivative Suite by LLC

Members in New York: Tzolis v. Wolff, 10 N.Y.3d 100 (Feb. 14, 2008).

Mr. Wilson obtained his undergraduate degree from Georgia State University (B.A. 1988), his law

degree from the University of Georgia (J.D. 1991), and Masters in Tax Law from New York University (LL.M.

1992). He is licensed to practice law in Georgia and New York and is admitted to the United States District

Courts for Middle and Northern Districts of Georgia, the Eastern and Southern Districts of New York, the

Eastern District of Michigan and the District of Colorado, and the United States Courts of Appeals for the

Second, Fifth and Eleventh Circuits.

SETH J. MACARTHUR

Seth J. MacArthur is a Partner in the firm’s New York office and focuses his practice on personal

injury law. Mr. MacArthur handles litigation in the areas of construction accidents and Labor Law, premises

liability, as well serious motor vehicle liability cases. For more than nineteen years, Mr. MacArthur has

been helping the injured by representing them in litigation in both federal and state courts.

Prior to joining Faruqi & Faruqi, Mr. MacArthur was the managing attorney at a personal injury

firm. He has extensive experience in all phases of the litigation process.

Mr. MacArthur is active in multiple bar associations, including the Richmond County Bar

Association, the New York State Trial Lawyers Association and the New York State Bar Association.

Mr. MacArthur earned his J.D. from Albany Law School and his B.S. in Political Science from the

New York State University at Oneonta. He is licensed to practice law in New York and is admitted to

practice before the United States District Court for the Eastern District.

ROBERT W. KILLORIN

Robert W. Killorin is a Partner with the firm, and is based in Atlanta. His practice is focused on

shareholder merger and securities litigation. Mr. Killorin is an accomplished trial lawyer with over twenty

years of experience in civil litigation. Prior to joining Faruqi & Faruqi, Mr. Killorin was a partner at the firm

of Chitwood Harley Harnes, LLP where he specialized in complex securities litigation. Mr. Killorin has

represented numerous individual plaintiffs, as well as institutional pension funds, corporations and

individual investors in courts around the country. He has obtained significant recoveries, including the

following securities class actions: In re FireEye, Inc. Sec. Litig., No. 14-266866 ($10 million settlement

pending); In re ArthroCare Sec. Litig. No. 08-0574 (W.D. Tex.) ($74 million); In re Maxim Integrated Prod.



20

Sec. Litig., No. 08-0832 (N.D. Cal.) ($173 million); In re TyCom Ltd. Sec. Litig., MDL No. 02-1335 (D.N.H.)

($79 million); and In re Providian Fin. Corp. Sec. Litig., No. 01-3952 (N.D. Cal.). Mr. Killorin has obtained

significant relief for shareholders in merger suits, including the following: In re The Coca-Cola Company

Shareholder Litigation, No. 10-182035 (Fulton County Superior Ct.).

Mr. Killorin authored “Preparing Clients to Testify” – Chapter 19 of Civil Trial Practice, Winning

Techniques of Successful Trial Attorneys, Lawyers and Judges Publishing Company (2000), and has

written articles and lectured on various legal topics. He is listed in Who’s Who in American Law and is an

AV® Preeminent™ Peer Review Rated attorney.

Mr. Killorin obtained his undergraduate degree from Duke University (B.A., cum laude, 1980) and

his law degree from the University of Georgia (J.D. 1983) where he was on the national mock trial team

and a national moot court team. He is licensed to practice law in Georgia and is admitted to the United

States Supreme Court, the United States Courts of Appeals for the Tenth and Eleventh Circuits, and the

United States District Courts for Middle and Northern Districts of Georgia.

BRADLEY J. DEMUTH

Bradley J. Demuth’s practice is focused on complex antitrust litigation with particular expertise in

cases involving pharmaceutical overcharges resulting from delayed generic entry schemes, price fixing,

and other anticompetitive conduct. Mr. Demuth is a partner in the firm’s New York office.

Upon graduating, cum laude, from American University Washington College of Law (1999), Mr.

Demuth served as a law clerk to the United States Court of Appeals for the Second Circuit. While thereafter

associated with Cadwalader, Wickersham & Taft LLP and Skadden, Arps, Slate, Meager & Flom LLP, Mr.

Demuth successfully represented several national and multinational corporate defendants in a wide range

of antitrust and other commercial disputes. His antitrust experience includes litigating issues in the

pharmaceutical, high-tech, professional sports, consumer goods, luxury goods, financial benchmarking,

commodities, and industrial materials contexts. In 2008, Mr. Demuth received the Pro Bono Service Award

for briefing and arguing an appeal made to the New York Supreme Court Appellate Term (1st Dep’t) on

behalf of displaced low-income tenants. From 2009-2010, Mr. Demuth served as a Special Assistant

Corporation Counsel and acting lead trial counsel for the City of New York, where among other favorable

resolutions, he obtained a verdict for the City after a two-week trial in Richardson v. City of New York (Index.

No. 14216-99).

Upon joining the Plaintiffs’ bar in 2012, Mr. Demuth has made notable contributions in several high-

profile pharmaceutical antitrust cases that resulted in significant recoveries, including in:

• American Sales Company, LLC v. Pfizer, Inc. (E.D. Va.) (re Celebrex) (October 2017 $94 million

dollar settlement pending final approval);



21

• In re Aggrenox Antitrust Litigation (D. Conn.) ($146 million settlement);

• Castro v. Sanofi Pasteur, Inc. (D.N.J.) (re Menactra) ($61.5 million settlement); and

• In re Flonase Antitrust Litigation (E.D. Pa.) ($150 million settlement).

Mr. Demuth is also currently involved in several other pending high-profile pharmaceutical antitrust

matters including: In re Generic Pharmaceutical Pricing Antitrust Litigation (E.D. Pa.); In re Restasis

(Cyclosporine Ophthalmic Emulsion) Antitrust Litigation (E.D.N.Y.); and In re Intuniv Antitrust Litigation (D.

Mass.).

Mr. Demuth is a member of the New York State bar and is admitted to practice before the United

States Court of Appeals for the Second Circuit, and the United States District Courts for the Southern and

Eastern Districts of New York and the District of Colorado.

TIMOTHY J. PETER

Timothy J. Peter is a Partner in Faruqi & Faruqi, LLP’s Pennsylvania office and focuses his practice

on securities law and complex civil litigation.

Prior to joining Faruqi & Faruqi, Mr. Peter was an Associate at Cohen Placittella & Roth, P.C. where

he was involved in such high profile litigation as: In re Vioxx Products Liability Litigation ($8.25 million

recovery for the Commonwealth of Pennsylvania) and In re Evergreen Ultra Short Opportunities Fund

Securities Litigation ($25 million class action securities settlement in which participating class members will

recover over 65% of their losses). In addition, Mr. Peter played an important role in the resolution of In re

Minerva Group LP v. Mod-Pac Corp., et al., in which defendants increased the price of an insider buyout

from $8.20 to $9.25 per share, a significant victory for shareholders. Prior to attending law school, Mr. Peter

worked for one of largest financial institutions in the world where he gained significant insight into the inner

workings of the financial services industry.

Mr. Peter is a 2009 cum laude graduate of the Michigan State University College of Law, where he

served as an associate editor of the Journal of Medicine and Law. He received his undergraduate degree

in Economics from the College of Wooster in 2002.

Mr. Peter is admitted to practice in the Commonwealth of Pennsylvania and the U.S. District Court

for the Eastern District of Pennsylvania.

ADAM STEINFELD

Adam Steinfeld is a Partner in Faruqi & Faruqi, LLP’s New York office. He practices in the area of

antitrust litigation with a focus on competition in the pharmaceutical industry.

Mr. Steinfeld has litigated successfully with significant contributions in In re Buspirone Patent &

Antitrust Litigation, MDL No. 1410 (S.D.N.Y.) ($220M settlement); In re Cardizem CD Antitrust Litigation,



22

No. 99-MD-1278 (E.D. Mich.) ($110M settlement); In re Relafen Antitrust Litigation, No. 01-12239 (D.

Mass.) ($175M settlement); In re Remeron Direct Purchaser Antitrust Litigation, No. 03-cv-0085 (D.N.J.)

($75M settlement); In re Terazosin Hydrochloride Antitrust Litigation, No. 99-MDL-1317 (S.D. Fla.) ($72.5M

settlement); In re Tricor Direct Purchaser Antitrust Litig., No. 05-340 (D. Del.) ($250M settlement); and

Mylan Pharms., Inc. v. Warner Chilcott, No. 12-cv-3824 (E.D. Pa.) ($12 million settlement).

Prior to joining Faruqi & Faruqi, Mr. Steinfeld was associated with Grant and Eisenhofer, P.A.

(2011-2015) and a partner at Garwin, Gerstein and Fisher, LLP, New York (1997-2009).

Mr. Steinfeld is the author of Nuclear Objections: The Persistent Objector and the Legality of the

Use of Nuclear Weapons, 62 Brooklyn L. Rev. 1635 (winter, 1996).

Mr. Steinfeld received his law degree from Brooklyn Law School (J.D., 1997) where he was an

editor on the Brooklyn Law Review and received several academic awards. Mr. Steinfeld is a member of

the bars of the States of New York, New Jersey and Massachusetts; and is admitted to practice before the

United States District Courts for the District New Jersey, Eastern District of New York, Southern District of

New York, and Western District of New York. Mr. Steinfeld graduated from Brandeis University (B.A.,

Politics, 1994).

MICHAEL VAN GORDER

Michael Van Gorder’s practice is focused on securities litigation. Mr. Van Gorder is a Partner in

the firm’s Delaware office.

Prior to joining F&F, Mr. Van Gorder served as a law clerk to the Honorable James T. Vaughn, Jr.

of the Delaware Supreme Court (2015-16). While attending law school, Mr. Van Gorder served as the

Editor-in-Chief of the Delaware Journal of Corporate Law and was selected as a Josiah Oliver Wolcott

Fellow with the Delaware Supreme Court. Before law school, Mr. Van Gorder worked in the private bank

of a global financial services firm where he held multiple securities licenses.

Mr. Van Gorder has authored the following article: Boilermakers v. Chevron: Are Board Adopted

Arbitration Bylaws Valid Under Delaware’s General Corporation Law?, 39 Del. J. Corp. L. 443 (2014).

Mr. Van Gorder received his J.D., magna cum laude, from Widener University School of Law

(2015). Mr. Van Gorder received his B.S., Business Management, 2008; M.B.A., Finance, 2011, from

Wilmington University.

Mr. Van Gorder is licensed to practice law in the state of Delaware and is admitted to the United

States District Courts for the District of Delaware and District of Colorado.

BENJAMIN HEIKALI

Benjamin Heikali’s practice is focused on securities and consumer litigation. Mr. Heikali is a Partner



23

in the firm’s Los Angeles office.

Prior to joining F&F, Mr. Heikali interned at the U.S. Securities and Exchange Commission, Division

of Enforcement, focusing on municipal bond litigation and financial fraud work.

Mr. Heikali graduated U.C.L.A. School of Law (J.D., 2015). During law school, Mr. Heikali was

awarded the Masin Family Academic Excellence Award for outstanding performance; and the 2015

American College of Bankruptcy Law Meet, “Best Term Sheet.” As well, Mr. Heikali served as Staff Editor

of the U.C.L.A. Entertainment Law Review. Mr. Heikali received his B.A. in Psychology, with honors, from

University of Southern California, 2012.

Mr. Heikali is licensed to practice law in California and is admitted to practice before the United

States District Courts for the Central, Northern, Southern, and Eastern Districts of California and the United

States Court of Appeals for the Ninth Circuit.

NINA VARINDANI

Nina Varindani is a Partner in Faruqi & Faruqi, LLP’s New York office.

Prior to joining the firm, Ms. Varindani practiced commercial litigation at Milber Makris Plousadis &

Seiden, LLP where she represented directors, officers and other professionals and corporations in complex

commercial litigation in federal and state courts. Additionally, Ms. Varindani gained further litigation

experience in law school through internships at Collen IP and the New York State Judicial Institute.

Ms. Varindani is licensed to practice law in New York and is admitted to practice before the United

States District Courts for the Southern District of New York and the Eastern District of New York.

Ms. Varindani graduated from the George Washington University (B.A. in Psychology, 2006) and

Pace Law School (J.D., 2010).

INNESSA MELAMED HUOT

Innessa Melamed Huot is a Partner in the firm’s New York office and focuses her practice on

employment law and wage and hour class action litigation.

Ms. Huot represents employees across the country in both individual and class action lawsuits.

Ms. Huot has litigated cases in both federal and state courts, involving FLSA claims, state wage and hour

violations, discrimination and harassment claims, retaliation matters, FMLA and ADA violations, breach of

contract disputes, and other employment-related violations. Ms. Huot has served as lead or co-lead

counsel in numerous cases filed against major businesses and corporations, and has successfully

recovered millions of dollars on behalf of her clients.



24

Ms. Huot is active in multiple bar associations, including the Brooklyn Bar Association’s Young

Lawyers Section, American Bar Association’s Section of Labor and Employment, the National Employment

Lawyers Association (NELA), and the American Association for Justice (AAJ).

Ms. Huot earned her J.D., magna cum laude, from Pace Law School and her M.B.A. in Finance,

summa cum laude, from Pace Lubin School of Business. Ms. Huot graduated from Syracuse University

with a B.A., summa cum laude, in Political Science and International Relations.

Ms. Huot is licensed to practice law in New York, New Jersey, and Connecticut and is admitted to

practice before the United States District Courts for the Southern District, Eastern District, Western District,

and Northern District of New York, the District of New Jersey, and the Second Circuit Court of Appeals.

MEGAN SULLIVAN

Megan Sullivan is a Partner in Faruqi & Faruqi, LLP’s New York office.

Prior to joining the firm, Ms. Sullivan was a litigation associate at Crosby & Higgins LLP where she

represented institutional and individual investors in securities arbitrations before FINRA and counseled

corporate clients in commercial disputes in federal court. Additionally, Ms. Sullivan gained further litigation

experience in law school through internships at the Kings County District Attorney’s Office and the

Adjudication Division of the New York City Department of Consumer Affairs.

Ms. Sullivan graduated from the University of California, Los Angeles (B.A., History, 2008) and from

Brooklyn Law School (J.D., cum laude, 2011). While at Brooklyn Law School, Ms. Sullivan served as

Associate Managing Editor of the Brooklyn Journal of Corporate, Financial and Commercial Law.

Ms. Sullivan is licensed to practice law in the State of New York, and is admitted to the United

States District Courts for the Southern and Eastern Districts of New York and the United States Court of

Appeals for the Ninth Circuit.

KATHERINE M. LENAHAN

Katherine M. Lenahan is a Partner in Faruqi & Faruqi, LLP’s New York office.

Prior to joining Faruqi & Faruqi, Ms. Lenahan practiced securities litigation at Entwistle & Cappucci

LLP. Ms. Lenahan gained further experience through internships for the Honorable Sherry Klein Heitler,

Administrative Judge for Civil Matters, First Judicial District, and the Kings County District Attorney’s Office.

Ms. Lenahan graduated from Fordham University (B.A., Political Science, magna cum laude, 2009)

and Fordham University School of Law (J.D., 2012). While at Fordham Law School, Ms. Lenahan served

as an associate editor of the Fordham Intellectual Property, Media and Entertainment Law Journal and was

a fellow at the Center on Law and Information Policy.



25

Ms. Lenahan is licensed to practice law in New York, and is admitted to the United States District

Court for the Southern District of New York, and the United States Courts of Appeals for the Second and

Ninth Circuits.

STEPHEN G. DOHERTY

Stephen Doherty is Senior Counsel in the Pennsylvania office of Faruqi & Faruqi, LLP. Mr.

Doherty practices in the area of antitrust law and is significantly involved in prosecuting antitrust class

actions on behalf of direct purchasers of brand name and generic drugs and charging pharmaceutical

manufacturers with price fixing and with illegally blocking the market entry of less expensive competitors.

Earlier in his career, Mr. Doherty litigated consumer fraud and employment discrimination cases

in both state and federal courts in Pennsylvania and New Jersey. He has served on numerous volunteer

boards, including Gilda’s Club of Delaware Valley and the BCBA Pro Bono Committee, has served as a

volunteer instructor for VITA Education Services, and as a pro bono lawyer for the Consumer Bankruptcy

Assistance Project.

Mr. Doherty is a 1992 graduate of Temple University Law School, where he was senior staff for

the Temple Law Review and received several academic awards and is the author of Joint Representation

Conflicts of Interest: Toward A More Balanced Approach, 65 Temp. L. Rev. 561 (1992). Mr. Doherty is a

1988 graduate of Dickinson College (B.A., Anthropology and Latin American Studies).

NEILL CLARK

Mr. Clark is Of Counsel in Faruqi and Faruqi, LLP’s Pennsylvania office.

Before joining the firm, Mr. Clark was an associate at Berger & Montague, P.C. where he was

significantly involved in prosecuting antitrust class actions on behalf of direct purchasers of brand name

drugs and charging pharmaceutical manufacturers with illegally blocking the market entry of less expensive

competitors.

Eight of those cases have resulted in substantial settlements totaling over $950 million: In re

Cardizem CD Antitrust Litig. settled in November 2002 for $110 million; In re Buspirone Antitrust Litig.

settled in April 2003 for $220 million; In re Relafen Antitrust Litig. settled in February 2004 for $175 million;

In re Platinol Antitrust Litig. settled in November 2004 for $50 million; In re Terazosin Antitrust Litig. settled

in April 2005 for $75 million; In re Remeron Antitrust Litig. settled in November 2005 for $75 million; In re

Ovcon Antitrust Litig. settled in 2009 for $22 million; and In re Tricor Direct Purchaser Antitrust Litig. settled

in April 2009 for $250 million.



26

Mr. Clark was also principally involved in a case alleging a conspiracy among hospitals and the

Arizona Hospital and Healthcare Association to depress the compensation of per diem and traveling nurses,

Johnson et al. v. Arizona Hospital and Healthcare Association et al., No. CV07-1292 (D. Ariz.).

Mr. Clark was selected as a “Rising Star” by Pennsylvania Super Lawyers and listed as one of the

Top Young Lawyers in Pennsylvania in the December 2005 edition of Philadelphia Magazine. Two cases

in which he has been significantly involved have been featured as "Noteworthy Cases" in the NATIONAL

LAW JOURNAL articles, “The Plaintiffs’ Hot List" (In re Tricor Antitrust Litig. October 5, 2009 and Johnson

v. Arizona Hosp. and Healthcare Ass'n., October 3, 2011).

Mr. Clark graduated cum laude from Appalachian State University in 1994 and from Temple

University Beasley School of Law in 1998, where he earned seven "distinguished class performance"

awards, an oral advocacy award and a "best paper" award.

DAVID CALVELLO

David Calvello is an Associate in Faruqi & Faruqi, LLP’s New York office where his focus is litigating

Antitrust matters.

Mr. Calvello graduated from the University of Richmond (B.S., 2011) with a double major in Finance

and Political Science and Pace Law School (J.D., magna cum laude, 2014). He is licensed to practice law

in New York and New Jersey and is admitted to practice before the United States District Court for New

Jersey.

Prior to joining Faruqi & Faruqi, Mr. Calvello was as an Associate at Kaufman Borgeest & Ryan,

LLP where he focused primarily on insurance coverage matters with respect to Directors & Officers (D&O),

Errors & Omissions (E&O), and Professional Liability lines of coverage. In law school, Mr. Calvello served

as an editor on the Pace International Law Review and received the New Rochelle Bar Association Award

upon graduation. He was also very active in moot court competitions, and competed in the Willem C. Vis

International Commercial Arbitration Moot held in Vienna, Austria.

SHERIEF MORSY

Sherief Morsy’s practice is focused on securities litigation. Mr. Morsy is an Associate in the firm’s

New York office.

Prior to joining F&F, Mr. Morsy was a litigation associate at a New York law firm where he

specialized in New York State Appellate practice. Mr. Morsy also gained litigation experience as an intern

with the Honorable Shira A. Sheindlin, Southern District of New York (2013). He interned as well with a

New York securities firm, a multinational corporation, and the King’s County DA’s office.

Mr. Morsy received his J.D., cum laude, from Brooklyn Law School, 2014. While at Brooklyn Law



27

School, Mr. Morsy was a Notes and Comments Editor of the Brooklyn Law Review. He is the author of The

JOBS Act and Crowdfunding: How Narrowing the Secondary Market Handicaps Fraud Plaintiffs, 79 Brook.

L. Rev. (2014), Brooklyn Law Review, Vol. 79, Issue 3. Mr. Morsy received his B.A. in Political Science

and Philosophy, Rutgers University, 2010.

Mr. Morsy is licensed to practice law in New York and New Jersey and is admitted to the United

States District Courts for the Southern and Eastern Districts of New York and the District of New Jersey.

ALEX HARTZBAND

Alex Hartzband’s practice is focused on employment litigation. Mr. Hartzband is an associate in

the firm’s New York office.

Prior to joining F&F, Mr. Hartzband was an associate at a prominent New York firm where he

represented employees on an individual and class basis on employment matters including, but not limited

to: discrimination; sexual harassment; whistleblower retaliation; and breach of contract. As well during law

school, Mr. Hartzband worked with a New York firm that represented labor unions and individual

employees. Mr. Hartzband was a member of Fordham Law’s Moot Court Board.

Mr. Hartzband earned his J.D. from Fordham University School of Law (J.D. 2015). Mr. Hartzband

earned his undergraduate degree from George Washington University (B.A., History, 2012).

Mr. Hartzband is licensed to practice law in New York and New Jersey. Further, Mr. Hartzband is

admitted to practice before the United States District Courts for the Southern and Eastern Districts of New

York.

ALEX B. HELLER

Alex B. Heller’s practice is focused on securities litigation. Mr. Heller is an associate in the firm’s

Pennsylvania office.

Prior to joining F&F, Mr. Heller was an associate at a prominent law firm in Philadelphia where he

focused on commercial litigation and corporate counsel matters.

While attending law school, Mr. Heller worked as a law clerk for a large national law firm and as a

legal intern for KPMG. During law school, Mr. Heller served as a research assistant to the Law & Economics

Center at George Mason University School of Law. Mr. Heller, also during law school, served as an

associate editor for the George Mason Law Review.

Mr. Heller is a Certified Public Accountant (CPA). Prior to law school, he practiced public

accounting at PricewaterhouseCoopers LLP and Mazars USA LLP, providing audit and assurance services.



28

Mr. Heller has authored the following articles: Corporate Death Penalty: Prosecutorial Discretion

and the Indictment of SAC Capital, 22 GEO. MASON L. REV. 763 (2015); Co-Author, Cybersecurity

Disclosures in SEC Filings: When, How, BLOOMBERG BNA (March 13, 2015).

Mr. Heller earned his J.D. from George Mason University School of Law (J.D. 2015). Mr. Heller

earned his undergraduate degree from American University (B.S. Business Administration, Accounting

Specialization, 2008).

Mr. Heller is licensed to practice law in Pennsylvania and New Jersey. Mr. Heller is admitted to

practice before the United States District Court for the Eastern District of Pennsylvania and the United

States Court of Appeals for the Third Circuit.

KRISTYN FIELDS

Kristyn Fields’ practice is focused on antitrust litigation. Ms. Fields is an Associate in the firm’s

New York office.

Prior to joining F&F, Ms. Fields interned for the Honorable Martin Marcus, New York Supreme

Court, Bronx County. As well, Ms. Fields participated in the Brooklyn Law Incubator & Policy Clinic

providing pro bono counsel to emerging start-up companies. While at Brooklyn Law School, Ms. Fields

served as an Executive Articles Editor of the Brooklyn Journal of Corporate, Financial & Commercial

Law. Also, Ms. Fields was a member of the Moot Court Honor Society.

Ms. Fields earned her J.D. from Brooklyn Law School (2016). Ms. Fields earned her undergraduate

degree from Boston College (B.A., Political Science, 2013).

Ms. Fields is licensed to practice law in New York.

PATRICK J. COLLOPY

Patrick Collopy’s practice is focused on employment litigation. Mr. Collopy is an Associate in the

firm’s New York office.

Prior to joining the firm, Mr. Collopy served as a legal intern at a New York law firm. Mr. Collopy

gained experience in employment law while interning on Capital Hill at the Congressional Office of

Compliance. Additionally, gained further litigation experience as a legal intern at the Kings County District

Attorney’s Office.

Mr. Collopy earned his J.D. from Brooklyn Law School (2016) and his undergraduate degree from

Fordham University (B.A., History; Minor in Economics, 2009).

Mr. Collopy is licensed to practice law in New York.



29

DILLON HAGIUS

Dillon Hagius’s practice is focused on securities litigation. Mr. Hagius is an Associate in the firm’s

New York office.

Prior to joining F&F, Mr. Hagius served as a judicial clerk in Maryland’s 10th Judicial District. At

UCLA Law School, Mr. Hagius was a research assistant; an Empirical Legal Scholar; a staff editor on the

UCLA Journal of International Law and Foreign Affairs and travelled to the Eastern Congo to research

gender violence. As well in law school, Mr. Hagius externed at the Securities and Exchange Commission

in the Division of Corporation Finance, Office of the Enforcement Liaison and the Office of International

Affairs.

Mr. Hagius earned his J.D. from UCLA School of Law, Los Angeles, CA (J.D. 2016, Dean’s

Scholarship). Mr. Hagius graduated from the University of Maryland, College Park (B.S. International

Business with honors, 2013).

Mr. Hagius is barred in the states of New York, Maryland, California and the District of Columbia,

and the United States District Court for the Northern District of California.

JOSHUA NASSIR

Joshua Nassir’s practice is focused on consumer litigation. Mr. Nassir is an associate in the

firm’s California office.

Since joining the F&F team, Mr. Nassir has litigated numerous actions on behalf of consumers

including, but not limited to, cases against Sun-Maid Growers of California; Innovation Ventures; LLC (5-

hour ENERGY®); Dr Pepper Snapple Group, Inc.; Craft Brew Alliances, Inc. (Kona beer); and Skeeter

Snacks, LLC.

Prior to Faruqi & Faruqi, Mr. Nassir worked with a prominent LA firm where he focused on litigation.

During law school, Mr. Nassir served as a full-time Judicial Extern for the Honorable Philip S.

Gutierrez, United States District Court for the Central District of California. As well, he was a staff editor for

the UCLA School of Law Journal of Environmental Law & Policy and was heavily involved in the school’s

Moot Court and Mock Trial tournaments.

Mr. Nassir earned his J.D. from UCLA School of Law, 2017. Mr. Nassir received his undergraduate

degree from UCLA (B.A. History, cum laude, 2014.)

Mr. Nassir is admitted to practice in California.



30

SAMI AHMAD

Sami Ahmad’s practice is focused on securities litigation. Mr. Ahmad is a law clerk in the firm’s

New York office (Bar Admission pending).

While at law school, Mr. Ahmad worked as an honors intern at the Securities and Exchange

Commission, Division of Trading and Markets. Mr. Ahmad was also a research assistant at the George

Washington University School of Business where he assisted on contract law assignments. Also at law

school, Mr. Ahmad served as a staff editor of the George Washington University Business and Finance

Law Review.

Prior to law school, Mr. Ahmad worked as a financial analyst at the firm’s New York office. While

obtaining his bachelor’s degree, Mr. Ahmad gained experience working as an equities research intern and

summer associate at Merrill Lynch and Goldman Sachs.

Mr. Ahmad earned his Juris Doctor from George Washington University Law School (J.D. 2018).

Mr. Ahmad earned his undergraduate degree from McGill University (B.A. with Honors, History and

Economics, 2011).

Mr. Ahmad’s Bar Admission is pending, 2018.


EXHIBIT 3


25th Anniversary Edition

Recent Trends in Securities Class Action Litigation: 2017 Full-Year Review Record Pace of Filings Led by a Continued Surge in Merger Objections

Highest Number of Dismissals and Lowest Settlement Values Since the Early 2000s

By Stefan Boettrich and Svetlana Starykh

29 January 2018


Foreword

I am excited to share our 25th anniversary edition of NERA’s Recent Trends in Securities Class Action Litigation with you. This marks the 25th year of work by members of NERA’s Securities and Finance Practice. In this edition, we document an increase in filings, which we also noted last year, again led by a doubling of merger-objection filings. While this may be the most prominent result, this report contains discussions about other developments in filings, settlements, and case sizes as measured by NERA-defined Investor Losses. Although space limitations prevent us from sharing all of the analyses the authors have undertaken to create this latest edition of our series, we hope you will contact us if you want to learn more, to discuss our data and analyses, or to share your thoughts on securities class actions. On behalf of NERA’s Securities and Finance Practice, I thank you for taking the time to review our work and hope that you will find it informative and interesting.

Dr. David Tabak Managing Director


www.nera.com 1

Recent Trends in Securities Class Action Litigation: 2017 Full-Year Review Record Pace of Filings Led by a Continued Surge in Merger ObjectionsHighest Number of Dismissals and Lowest Settlement Values Since the Early 2000s

By Stefan Boettrich and Svetlana Starykh1

29 January 2018

Introduction and Summary2

In 2017, an explosion in securities class action filings reflected growth not seen in almost two decades, and drove the average filing rate to more than one per day. For a second year in a row, growth was dominated by a record number of federal merger-objection filings, continuing a trend sparked by various state court decisions that restricted “disclosure-only” settlements. In the first quarter, more cases alleging violations of SEC Rule 10b-5 under the Securities and Exchange Act of 1934 were filed than in any quarter since the aftermath of the dotcom boom. Over the entire year, filings alleging violations of Rule 10b-5, or Section 11 or Section 12 of the Securities Act of 1933, grew for a record fifth straight year.

The total size of filed securities cases, as measured by NERA-defined Investor Losses, was $334 billion and well above average for a second year, mostly due to numerous large cases alleging various regulatory violations. Allegations related to regulatory violations and misleading performance projections by management seem to be slowly supplanting claims related to accounting issues and missed earnings guidance.

A record rate of case resolution was motivated by a more than 40% spike in dismissals and a 30% increase in settlements. Despite this, the value of settlements plunged to lows not seen since the early 2000s, stemming from a dearth of large or even moderate settlements. Due to an unprecedented rate of voluntary dismissals, nearly 16% of cases filed in 2017 alleging violations of Rule 10b-5, Section 11, or Section 12 were resolved by the end of the year.


2 www.nera.com

Trends in Filings

Number of Cases FiledThere were 432 federal securities class actions filed in 2017, the third straight year of growth (see Figure 1). For the second year in a row, the filing rate was the highest seen since passage of the Private Securities Litigation Reform Act (PSLRA), with the exception of 2001 when an unusually high number of IPO laddering cases were filed. The number of filings was 44% higher in 2017 than 2016, marking the fastest rate of growth since 2007. The number of filings grew 89% over the past two years, a rate not seen since 1998. The level of 2017 filings was also well above the post-PSLRA average of approximately 244 cases per year, and 84% higher than the five-year average rate, continuing a departure from the generally stable filing rate since the aftermath of the 2008 financial crisis.

Figure 1. Federal Securities Class Action Filings January 1996–December 2017

IPO Laddering Filings

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www.nera.com 3

As of November 2017, there were 5,241 companies listed on the major US securities exchanges, including the NYSE and Nasdaq (see Figure 2). The 432 federal securities class action suits filed in 2017 involved approximately 8.2% of publicly traded companies, nearly double the rate of 2014, when fewer than 4.2% of companies were subject to a securities class action.

Contrasting with the uptick in listed firm counts over the past five years, the longer-term trend is toward fewer publicly listed companies. Since passage of the PSLRA in 1995, the number of publicly listed companies in the United States has steadily declined by about 3,500, or by more than 40%. Recent research attributed this decline to fewer new listings and an increase in delistings, mostly through mergers and acquisitions.3

Figure 2. Federal Filings and Number of Companies Listed on US Exchanges January 1996–December 2017

Federal Filings

Listed Companies

Note: Listed companies include those listed on the NYSE and Nasdaq. Listings data from 2016 and 2017 were obtained from World Federation of Exchanges (WFE). The 2017 listings data is as of November 2017. Data for prior years was obtained from Meridian Securities Markets and WFE.

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4 www.nera.com

Despite the drop in the number of listed companies, the average number of securities class action filings over the preceding five years, of about 235 per year, is still higher than the average filing rate of about 216 over the first five years after the PSLRA went into effect. The long-term trend toward fewer listed companies, coupled with an increased rate of class actions, implies that the average probability of a listed firm being subject to such litigation has increased from 3.2% for the 2000–2002 period to 8.2% in 2017.

Over the past two years, the higher average risk of federal securities class action litigation has been driven by dramatic growth in merger-objection cases, which were previously filed much more often in various state courts, but are now less so, given recent rulings discouraging filings in those jurisdictions. Hence the increase in the average firm’s litigation risk might be lower than is indicated above, especially given that the risk of merger-objection litigation is limited to those planning or engaged in M&A activity. The average probability of a firm being targeted by what is often regarded as a “standard” securities class action—one that alleges violations of Rule 10b-5, Section 11, and/or Section 12—was only 4.1% in 2017; higher than the average probability of 3.0% between 2000 and 2002.

Filings by TypeIn 2017, each of the major filing types currently tracked in NERA’s securities class action database experienced growth (see Figure 3). The continued near-record overall growth rate was driven by a more than doubling of merger-objection filings for the second consecutive year. Federal merger-objection filings typically allege a violation of Section 14(a), 14(d), and/or 14(e) of the Securities and Exchange Act of 1934, and/or a breach of fiduciary duty by managers of the firm being acquired. Filings of standard securities cases were up by 11% over 2016, the fifth consecutive year of steady growth and the longest expansion on record.

While standard filings still predominate in federal dockets, the 197 merger-objection cases constituted about 46% of all filings and were almost at parity with the 216 standard filings. The continued growth in merger objections likely stemmed from the filing of federal merger-objection suits that would have been filed in other jurisdictions but for various state-level decisions limiting “disclosure-only” settlements, with the most prominent of these being the 22 January 2016 Trulia decision in the Delaware Court of Chancery.4

Although aggregate merger-objection filings (including those at the state level) may correspond with the rate of merger and acquisitions, such deal activity does not appear to have historically been the primary driver of federal merger-objection filings over multiple years. The number of federal merger-objection filings generally fell between 2010 and 2015, despite increased M&A activity. The higher filing counts in 2016 and 2017 likely stemmed from trends in the choice of jurisdiction rather than trends in deal volume.5

On a quarterly basis, the filing of 90 standard cases in the first quarter of 2017 was two-thirds higher than in the fourth quarter of 2016 and the highest quarterly rate since 2001. Cases filed during the first quarter resembled filings over the remainder of the year. Coupled with slower filing rates in each of the latter three quarters, this may portend a slowdown in standard filings in early 2018.

Besides filings of standard cases and merger-objection cases, a variety of other filings rounded out 2017. Several filings alleged breaches of fiduciary duty (including cases regarding the safety of alternative investments and shareholder class rights), but we also saw filings related to alleged fraud in the sale of privately held securities in Uber, Inc.


www.nera.com 5

Merger-Objection FilingsIn 2017, federal merger-objection filings more than doubled for the second consecutive year (see Figure 4). While not matching the dramatic growth in filings in 2010, which did coincide with a doubling in M&A activity, the persistent increase in filings over the past two years overlapped with only marginal growth in M&A deal activity: a slowdown in 2016 was followed by a recovery in 2017.6 Rather, the jurisdiction where cases were brought and the attributes of target firms imply that this trend, in part, reflects forum selection by plaintiffs.

Historically, state courts, rather than federal courts, have served as the primary forum for merger-objection cases.7 Between 2010 and 2015, the slowdown in federal merger-objection filings largely mirrored the slowdown in multi-jurisdiction litigation, such as merger objections filed in multiple state courts. This trend, according to researchers, may be due to the increased use and effectiveness of forum selection corporate bylaws that limit the ability of plaintiffs to file claims outside of stipulated jurisdictions.8

Figure 3. Federal Filings by Type January 2008–December 2017

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6 www.nera.com

The increased adoption of forum selection bylaws coincided with various state court decisions in 2015 and 2016, particularly those against “disclosure-only” settlements, including the Trulia decision handed down by the Delaware Court of Chancery on 22 January 2016.9 Prior to the Trulia decision, the Delaware Court of Chancery attracted about half of eligible merger-objection cases.

Research suggested that the Trulia decision would drive merger objections to alternative jurisdictions, such as federal courts.10 This prediction has largely been borne out thus far. In 2016, more than 90% of the growth in federal merger-objection cases was associated with firms incorporated in Delaware. In 2017, firms incorporated in Delaware accounted for more than half of the annual growth in filings. The 2017 increase in federal filings targeting firms incorporated in Delaware was concentrated in the Third Circuit (of which Delaware is part), where 28% of merger objections were filed, and the Ninth Circuit, where 22% of such cases were filed.

Whether the movement of merger-objection suits out of Delaware persists will likely depend on the extent to which other jurisdictions adopt the Delaware Court of Chancery’s lead on disclosure-only settlement disapproval, as well as on the rate of corporate adoption of forum selection bylaws.11 In the latter part of 2016, the Seventh Circuit ruled against a disclosure-only settlement in In re: Walgreen Co. Stockholder Litigation.12 Unsurprisingly, the proportion of merger objections filed in the Seventh Circuit fell by more than 60% in 2017 versus 2016. In 2017, merger-objection cases filed in the Seventh Circuit were dismissed at nearly double the rate of other circuits.

In 2017, 71 federal merger-objection filings targeted firms not incorporated in Delaware, up from 27 in 2016. A quarter of the growth involved firms incorporated in Maryland and Minnesota, cases that made up nearly half of all merger objections targeting non-Delaware firms filed in the Fourth and Eighth Circuits. After Delaware, firms incorporated in Maryland were most frequently targeted in federal merger objections in both 2016 and 2017. This followed a 2013 decision in Maryland State Circuit Court rejecting a request for attorneys’ fees in a disclosure-only settlement.13

Figure 4. Federal Merger-Objection Filings and Merger-Objection Cases with Multi-State Claims January 2009–December 2017

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Notes: Counts of merger-objection cases with multi-state claims based on data obtained from Matthew Cain and Steven Solomon, "Takeover Litigation in 2015," Berkeley Center for Law, Business and the Economy, 14 January 2016. Data on multi-state claims unavailable for 2016 or 2017. State of incorporation obtained from the Securities and Exchange Commission.

1In re Trulia, Inc. Stockholder Litigation, C.A. No. 10020-CB (Del. Ch. Jan. 22, 2016).

Trulia Decision1


www.nera.com 7

Filings Targeting Foreign CompaniesForeign companies continued to be disproportionately targeted in “standard” securities class actions in 2017.14 Despite making up a relatively stable share of listings, foreign companies’ share of filings increased for a fourth consecutive year and such filings made up more than a quarter of all standard filings (see Figure 5).

In 2017, there were 55 standard filings against foreign companies, a 25% increase over 2016 and more than a 50% increase over 2015. Recent growth in filings has been driven by alleged regulatory violations. The number of such cases increased by more than 80% in 2017, which followed more than a 50% increase in 2016. In 2017, more than a third of filings against foreign companies alleged regulatory violations.

Filings against foreign companies spanned several economic sectors, with more than 20% targeting firms in the Health Technology and Services Sector (down from more than 25% in 2016). Half of filings against companies in this sector alleged regulatory violations. Over the last five years, the percentage of filings against foreign companies in the Electronic Technology and Technology Services Sector has persistently fallen, from more than 30% of all filings in 2013 to about 8% in 2017.

In 2011, a record 31% of filings targeted foreign companies, mostly due to a surge in litigation against Chinese companies, which was mainly related to a proliferation in so-called reverse mergers years earlier. A reverse merger is one whereby a company orchestrates a merger with a publicly traded company listed in the US, thereby enabling access to US capital markets without going through the process of obtaining a new listing.

Merger-objection claims infrequently target foreign companies.15 In 2017, there were four merger-objection claims against foreign companies (up from two in 2016). These represent 2% of all merger objections, and about 7% of all filings against foreign companies.


8 www.nera.com

Figure 5. Foreign Companies: Share of Filings and Share of Companies Listed on US Exchanges Shareholder Class Actions with Alleged Violations of Rule 10b-5, Section 11, or Section 12 January 2008–December 2017

13.8%

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Note: Foreign company status based on country of principal executive offices.


www.nera.com 9

Geographically, growth in standard filings against foreign companies in 2017 was driven by claims against European and Chinese firms (see Figure 6). The number of filings against European firms grew for the second consecutive year, while claims against Chinese firms were resurgent. Over the past five years, filings targeting European firms have overtaken those against Chinese firms. This may be due to a recent tendency for Chinese companies to delist from US exchanges and relist their shares in Chinese markets, which historically have had higher relative valuations.16 In addition to reducing the overall count of listed Chinese companies in the United States, such a relisting mechanism is more likely to be taken advantage of by firms with relatively weak accounting or disclosure practices.

Figure 6. Filings Against Foreign Companies Shareholder Class Actions with Alleged Violations of Rule 10b-5, Section 11, or Section 12 by Region January 2013–December 2017

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10 www.nera.com

Section 11 FilingsThere were 25 federal filings alleging violations of Section 11 in 2017 (see Figure 7). This is approximately the average rate since 2014, a year described by the Financial Times as a “bumper IPO year” that precipitated an uptick in Section 11 filings.17 IPO activity has since declined, falling by more than 40% between 2014 and 2017.18

In 2017, Section 11 filings, which spanned multiple economic sectors, were concentrated in the Second and Third Circuits. Filings in the Ninth Circuit were proportionally underrepresented in 2017, accounting for about 60% of the average proportion since 2008.

While potentially just an anomaly, the slowdown in Section 11 litigation in the Ninth Circuit may stem from plaintiffs’ filing Section 11 claims in California state courts, perceived as being relatively plaintiff-friendly, in lieu of federal courts.19 Two factors may reverse this trend in coming years. First, several firms have recently required that Section 11 claims be filed in federal courts.20 Second, on 27 June 2017, the US Supreme Court granted certiorari in Cyan, Inc. v. Beaver County Employees Retirement Fund, to decide whether state courts have jurisdiction over class actions with claims under the Securities Act of 1933, including Section 11 claims.21

Figure 7. Federal Section 11 Filings January 2008–December 2017

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www.nera.com 11

Aggregate NERA-Defined Investor LossesIn addition to the number of cases filed, we also consider the total potential size of these cases using a metric we label “NERA-defined Investor Losses.”

NERA’s Investor Losses variable is a proxy for the aggregate amount that investors lost from buying the defendant’s stock, rather than investing in the broader market during the alleged class period. Note that the Investor Losses variable is not a measure of damages because any stock that underperforms the S&P 500 would have Investor Losses over the period of underperformance; rather, it is a rough proxy for the relative size of investors’ potential claims. Historically, Investor Losses have been a powerful predictor of settlement size. Investor Losses can explain more than half of the variance in the settlement values in our database.

We do not compute NERA-defined Investor Losses for all cases included in this publication. For instance, class actions in which only bonds and not common stock are alleged to have been damaged are not included. The largest excluded groups are IPO laddering cases and merger-objection cases.

In 2017, aggregate NERA-defined Investor Losses (a measure of case size) was $334 billion; 50% more than the five-year average of $222 billion (see Figure 8). The increase in total case size since 2015 was due to a tripling of filings with Investor Losses between $1 billion and $5 billion, and a jump in filings with very large Investor Losses (over $10 billion).

Although down from the 2016 record, 2017 marked the second year in a row since 2008 in which NERA-defined Investor Losses exceeded $300 billion. Like in 2016, the high level of Investor Losses in 2017 stemmed from the number and size of filings claiming regulatory violations (i.e., those alleging a failure to disclose a regulatory issue), which totaled $163 billion. Five of the eight cases in the largest strata of Investor Losses alleged regulatory violations.

A considerable share of NERA-defined Investor Losses in 2016 were tied to two major industrial antitrust investigations. The fact that these were one-off events suggested that aggregate case size would fall back considerably in 2017.22 Although total Investor Losses did decline in 2017, the metric was still more than double that of 2015 due to more filings (especially of cases with $1 to $5 billion in Investor Losses), and, in particular, more regulatory filings. This indicates that filings alleging regulatory violations, which tend to have higher Investor Losses, are becoming more broadly based and potentially a stronger driver of Investor Losses going forward. Details of filings alleging regulatory violations are discussed in the Allegations section below.

Excluding regulatory claims, aggregate NERA-defined Investor Losses were $171 million, down from $262 million in 2016. Notable cases with very large Investor Losses that did not allege regulatory violations included a data breach case against Yahoo! Inc. and a case against Facebook, Inc. related to disclosure of customer video screening times.


12 www.nera.com

Filings by CircuitIn 2017, filings increased in every federal circuit except the Seventh Circuit, primarily due to the jump in federal merger-objection cases (see Figure 9). Although the Second and Ninth Circuits continued to have the most filings, rapid growth in merger objections accounted for the vast majority of filings in the First, Third, and Fourth Circuits, with filings more than doubling in the Third and Fourth Circuits.

Excluding merger objections, filings in the Second Circuit grew by a third to 84, contrasting with the Ninth Circuit, in which non-merger-objection filings fell by 12% to 51. As in the past, non-merger-objection filings in the Ninth Circuit were dominated by claims against firms in the Electronic Technology and Technology Services Sector. There was also a 60% jump in non-merger-objection cases in the Third Circuit. As in the past, the Third Circuit was subject to a disproportionate number of claims in the Health Technology and Services Sector (despite a general slowdown in such filings). This was mostly driven by the fact that the Third Circuit has a higher proportion of firms in the Pharmaceutical Preparations industry (SIC code 2834), an industry that dominates filings in Health Technology and Services Sector.23

Figure 8. Aggregate NERA-Defined Investor Losses ($Billion) Shareholder Class Actions with Alleged Violations of Rule 10b-5, Section 11, or Section 12 January 2008–December 2017

$27 $20 $15 $20 $19 $26 $26 $26 $30 $30

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www.nera.com 13

The number of merger-objection filings quadrupled in the Third Circuit, which includes Delaware. However, acceleration in the number of such filings was greatest in the Eighth Circuit, where the sharpest increase was seen among firms incorporated in Minnesota. The Seventh Circuit is the only circuit where merger-objection filings fell, which follows its 2016 ruling against disclosure-only settlements.24 Despite remarkable growth in merger objections in certain circuits, it may be too early to identify the circuits that would be most likely to accommodate such filings. Rather, growth in merger-objection filings at the circuit level is likely more reflective of opposition to such filings at the state level.

Figure 9. Federal Filings by Circuit and Year January 2013–December 2017

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22

1220

610

7

58

5910

63

24

14 1911 9

3

48

8 89

58

26

6

21

6 8 6

73

511

17

71

36

1417

15 128

86

1212

3

25

97

85

36

20 19

915

89

19 14

DC 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 11th0

10

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Circuit

Num

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14 www.nera.com

Filings by SectorIn 2017, filing counts were highest in the three historically dominant sectors, which include firms involved in health care, technology, and financial services (see Figure 10). However, the share of filings in these sectors fell from 63% in 2016 to 53% in 2017.

Claims against firms in the Health Technology and Services Sector were again dominated by filings against firms in the Pharmaceutical Preparations industry (SIC code 2834), which constituted about 63% of filings in the sector. A rise in the number of filings against firms in the Commercial and Industrial Services Sector coincided with an increase in filings alleging regulatory violations and misleading future performance, both of which targeted firms in that sector.

Of industries with more than 25 publicly traded companies, the industry with the highest percentage of US companies targeted by litigation was the Motor Vehicles and Equipment industry (SIC 371), where 10% of firms were targeted. Nine percent of firms in the Telephone Communications industry (SIC 481) faced litigation, while more than 8% of firms in the Drugs industry (SIC 283) were targeted. Due to alleged manipulative financing schemes by Kalani Investments Limited affecting multiple Greek shipping companies, filings targeted 8% of firms in the Deep Sea Foreign Transport of Freight industry (SIC 441).

Figure 10. Percentage of Federal Filings by Sector and Year Excluding Merger-Objection Cases January 2013–December 2017

2017

2016

2015

2014

2013

3%

3%

3%

4%

5%

7%

1%

3%

3%

3%

4%

3%

5%

2%

4%

5%

9%

2%

6%

1%

0%

2%

3%

8%

2%

4%

2%

2%

7%

8%

Process Industries

Producer and OtherManufacturing

Communications

Transportationand Utilities

Retail Trade

Commercial andIndustrial Services

7%

7%

10%

13%

14%

26%

5%

8%

9%

15%

14%

34%

5%

4%

6%

13%

21%

22%

9%

4%

3%

21%

14%

25%

7%

10%

5%

11%

22%

21%

Consumer andDistribution Services

Energy and Non-Energy Minerals

Consumer Durablesand Non-Durables

Finance

ElectronicTechnology and

Technology Services

Health Technologyand Services

Note: This analysis is based on the FactSet Research Systems Inc. economic sector classification. Some of the FactSet economic sectors are combined for presentation.


www.nera.com 15

AllegationsIn 2017, the number of cases alleging regulatory violations increased for the second consecutive year (see Figure 11). The filing of 56 regulatory cases was 43% higher than 2016, and accounted for about 26% of standard filings in 2017. Such cases accounted for a total of $163.2 billion in NERA-defined Investor Losses, or nearly half of the 2017 total, compared with $161.7 billion in Investor Losses in 2016, or about 38% of the 2016 total.

In 2017, we witnessed the filing of large cases alleging regulatory violations that spanned multiple industries. In 2016, two widespread investigations into two industries accounted for nearly 80% of NERA-defined Investor Losses tied to regulatory violations (about $127 billion).25 However, in 2017, not only did cases alleging regulatory violations account for more Investor Losses, but those Investor Losses were distributed across more cases and industries. Median NERA-defined Investor Losses for regulatory cases were also higher, increasing from $250 million over the 2014-2015 period to $1.05 billion over the 2016-2017 period. The largest regulatory cases involved several industries and included allegations related to safety recalls, emissions defeat devices, customer account creation, and antitrust violations.

The number of filings alleging misleading future performance rose for the second consecutive year. Such allegations are more frequent in the Health Technology and Services Sector, and particularly in the Pharmaceutical Preparations industry (SIC code 2834), which sees many cases related to drug development.

Most complaints include a wide variety of allegations, not all of which are depicted here. Due to multiple types of allegations in complaints, the same case may be included in multiple categories.

Figure 11. Types of Misrepresentations Alleged Shareholder Class Actions with Alleged Violations of Rule 10b-5, Section 11, or Section 12 January 2013–December 2017

2017

2016

2015

2014

2013

30% 30%

22%

7%

1%

6%

39%

24%

20%

23%

3%

29%

21%

18% 18%

1%3%

31%

16%

19%20%

2% 2%

25%

18%

23%

26%

2%

6%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Accounting Issues Missed Earnings Guidance

Misled Future Performance

Regulatory Issues Related to Merger-Integration Issues

Per

centa

ge

of

Fed

eral

Fili

ng

s

the Environment


16 www.nera.com

Alleged Insider SalesThe percentage of Rule 10b-5 class actions that alleged insider sales continued to decrease in 2017, dropping to 3% and marking a fourth consecutive record low (see Figure 12). Cases alleging insider sales were more common in the aftermath of the financial crisis, when a quarter of filings included insider trading claims. In 2005, half of Rule 10b-5 class actions filed included such claims.

Figure 12. Percentage of Rule 10b-5 Filings Alleging Insider Sales by Filing Year January 2008–December 2017

29%

21%

26%

17%

19%

24%

14%

11%

4%3%

0%

5%

10%

15%

20%

25%

30%

35%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Per

centa

ge

of

10

b-5

Fili

ng

s

Filing Year


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Time to FileThe term “time to file” denotes the time that has elapsed between the end of the alleged class period and the filing date of the first complaint. Figure 13 illustrates how the median time and average time to file (in days) have changed over the past five years.

The median time to file fell to a record low of 10 days in 2017, indicating that it took 10 days or less to file a complaint in 50% of cases. This shows a lower frequency of cases with long periods of time between when an alleged fraud was revealed and the filing of a related claim. While the median time to file continued to drop, the average time was affected by 10 cases with very long filing delays. One case against Rio Tinto, regarding the valuation of mining assets in Mozambique, took more than 4.5 years to file and boosted the average time to file by nearly 9%.26

Despite the small minority of cases with very long times to file, the data generally point toward a lower incidence of cases with long periods between the date of discovery of an alleged fraud and the date when a related claim is filed.

Figure 13. Time to File Rule 10b-5 Cases from End of Alleged Class Period to File Date January 2013–December 2017

Median Time to File Average Time to File Percentage of Cases Filed Within 1 Year

17

138

18

75

12

71

13 10

70

107

0

40

80

120

160

Num

ber

of

Day

s

Note: Excludes cases where the alleged class period could not be unambiguously determined.

84%

92%

90%

94%

88%

70%

80%

90%

100%

Per

centa

ge

of

Cas

es F

iled

2017

2016

2015

2014

2013


18 www.nera.com

Analysis of Motions

NERA’s statistical analysis has found robust relationships between settlement amounts and the stage of the litigation at which settlements occur. We track filings and decisions on three types of motions: motion to dismiss, motion for class certification, and motion for summary judgment. For this analysis, we include securities class actions in which purchasers of common stock are part of the class and in which a violation of Rule 10b-5, Section 11, or Section 12 is alleged.

As shown in the below figures, we record the status of any motion as of the resolution of the case. For example, a motion to dismiss which had been granted but was later denied on appeal is recorded as denied, even if the case settles without the motion being filed again.

Motions for summary judgment were filed by defendants in 7.5%, and by plaintiffs in only 2.2%, of the securities class actions filed and resolved over the 2000–2017 period, among those we tracked.27

Outcomes of motions to dismiss and motions for class certification are discussed below.


www.nera.com 19

Out of All Cases Filed and Resolved

Figure 14. Filing and Resolutions of Motions to Dismiss Shareholder Class Actions with Alleged Violations of Rule 10b-5, Section 11, or Section 12 Excluding IPO Laddering Cases Cases Filed and Resolved January 2000–December 2017

Denied: 25%

Granted: 38%

Granted Without Prejudice: 7%

Filed: 94%

Not Filed: 6%

Court Decision Prior to CaseResolution: 77%

No Court Decision Prior to Case Resolution: 12%

MTD Withdrawn by Defendants: 3%

Plaintiffs VoluntarilyDismissed Action: 8%

Out of Cases with MTD Filed Out of Cases with MTD Decided

Note: Includes cases in which holders of common stock are part of the class.

Partially Granted/ Partially Denied: 30%

Motion to DismissA motion to dismiss was filed in 94% of the securities class actions tracked. However, the court reached a decision on only 77% of the motions filed. In the remaining 23% of cases in which a motion to dismiss was filed, either the case resolved before a decision was reached, plaintiffs voluntarily dismissed the action, or the motion to dismiss itself was withdrawn by defendants (see Figure 14).

Out of the motions to dismiss for which a court decision was reached, the following three outcomes capture all of the decisions: granted with or without prejudice (45%), granted in part and denied in part (30%), and denied (25%).


20 www.nera.com

Motion for Class CertificationMost cases were settled or dismissed before a motion for class certification was filed: 72% of cases fell into this category. Of the remaining 28%, the court reached a decision in only 55% of the cases in which a motion for class certification was filed. Overall, only 15% of the securities class actions filed (or 55% of the 28%) reached a decision on the motion for class certification (see Figure 15). According to our data, 89% of the motions for class certification that were decided were granted in full or partially.

Figure 15. Filing and Resolutions of Motions for Class Certification Shareholder Class Actions with Alleged Violations of Rule 10b-5, Section 11, or Section 12 Excluding IPO Laddering Cases Cases Filed and Resolved January 2000–December 2017

Denied Without Prejudice: 5%

Denied: 6%

Partially Granted/Partially Denied: 9%

Granted: 80% Filed: 28%

Not Filed: 72%

Court Decision Prior to Case Resolution: 55%

No Court Decision Priorto Case Resolution: 44%

Out of All Cases Filed and Resolved

MCC Withdrawn by Plaintiffs: 1%

Out of Cases with MCC Filed Out of Cases with MCC Decision



www.nera.com 21

Approximately 65% of the decisions handed down on motions for class certification were reached within three years from the original filing date of the complaint (see Figure 16). The median time was about 2.5 years.

Figure 16. Time from First Complaint Filing to Class Certification Decision Shareholder Class Actions with Alleged Violations of Rule 10b-5, Section 11, or Section 12 Excluding IPO Laddering Cases Cases Filed and Resolved January 2000–December 2017

Less than 1 Year,11, 4%

1–2 Years, 66,26%

2–3 Years, 87,34%

3–4 Years, 47,19%

4–5 Years,15,

6%

More than5 Years,27, 11%



22 www.nera.com

Trends in Case Resolutions

Number of Cases Settled or DismissedIn 2017, 353 securities class actions were resolved, which is a post-PSLRA record high (see Figure 17). Of those, 148 cases settled, approaching the record 150 in 2007. The number of settlements was up by more than 30% over 2016, when 113 cases settled. A record 205 cases were dismissed in 2017, which marked the second consecutive year (and second year since the PSLRA became law) in which more cases were dismissed than settled. More than 40% of cases dismissed in 2017 were done so within a year of filing, the fastest pace since the passage of the PSLRA.

As with filings of securities class actions, case resolution statistics were affected by the surge in federal merger-objection cases. Merger objections made up 30% of all active cases during 2017, but constituted 43% of dismissals and 46% of settlements.28 Moreover, of merger-objection cases dismissed in 2017, 89% were done so within one year of filing, compared with 29% for non-merger-objections cases.29

Beside merger-objection cases, most securities class actions in NERA’s database allege violations of Rule 10b-5, Section 11, and/or Section 12, and are often regarded as “standard” securities class actions.30 There were 116 dismissals of such cases in 2017, a record high. Contrasting with the record high number of dismissals, only 80 cases settled, near the 2012 record post-PSLRA low. In 2017, settlements of non-merger-objection cases constituted less than 41% of all case resolutions, a post-PSLRA low.

Figure 17. Number of Resolved Cases: Dismissed or Settled January 2008–December 2017

73

107 10892

78 81 70 76104

116

6 1328

18 119 8

42

89

113

113111

85

65 7891 92

94

80

10

5

21

43

33 2510

17

19

68

197

231

253 248

194 195

180193

259

353

0

50

100

150

200

250

300

350

400

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Num

ber

of

Fed

eral

Cas

es

Resolution Year

Merger Objection Settled

Settled

Merger Objection Dismissed

Dismissed


www.nera.com 23

Case Status by YearFigure 18 shows the current resolution status of cases by filing year. Each percentage in the figure represents the current resolution status of cases filed in each year as a proportion of all cases filed in that year. IPO laddering cases are excluded, as are merger-objection cases, and verdicts.

Historically, more cases settled than were dismissed. However, the rate of case dismissal has steadily increased. While only about a third of cases filed between 2000 and 2002 were dismissed, in 2011, the most recent year with substantial resolution data, about half of cases filed were dismissed.31

While dismissal rates have been climbing since 2000, at least until 2011, the ultimate dismissal rate for cases filed in more recent years is less certain. On one hand, it may increase further, as there are more pending cases awaiting resolution. On the other hand, it may decrease because recent dismissals have more potential than older ones to be appealed or re-filed, and cases that were recently dismissed without prejudice may ultimately result in settlements.

Figure 18. Status of Cases as Percentage of Federal Filings by Filing Year Excluding Merger Objections and IPO Laddering Cases and Verdicts January 2000–December 2017

DismissedSettled Pending

Note: Dismissals may include dismissals without prejudice and dismissals under appeal.

36%32%

36%42% 44% 46%

42%46% 48%

53%50% 52%

39%43%

35%

46%

24%

15%

2%

3%3%

10%

8%

20%

24%

29%

41%

70%85%

64%68%

62%57% 55% 53% 56%

51% 48%

37%42%

47%41%

32%35%

13%6%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Filing Year


24 www.nera.com

Number of Cases PendingThe number of securities class actions pending in the federal system has steadily increased from a post-PSLRA low of 555 in 2011 (see Figure 19).32 Since then, pending case counts have increased every year (indeed at a faster rate in every year except 2015). In 2017, the number pending cases in the federal system increased to 785, up by 12% from 2016 and 41% from 2011.

Generally, since cases are either pending or resolved, a change in filing rate or a lengthening of the time to case resolution potentially contributes to changes in the number of cases pending. If the number of new filings is constant, the change in the number of pending cases can be indicative of whether the time to case resolution is generally shortening or lengthening.

The increase in pending cases in 2017 partially stemmed from a record number of recent filings, which was only partially offset by the record number of case resolutions. Approximately 20% of the growth in pending cases in 2017 is tied to new filings. In other words, despite the record number of cases filed in the past year also being resolved at a record rate, new filings are adversely affecting the pending case load.

The recent influx of merger-objection filings corresponded with considerable differences in the growth of pending cases between circuits. Growth in pending cases between 2015 (just before the Trulia decision) and 2017 was about 5.5 times higher in the four circuits with the most new merger-objection filings relative to historical filing rates, versus the four circuits with the fewest new merger-objection filings relative to historical filing rates. Overall, in 2016 and 2017, merger-objection filings in the Third, Fourth, Eighth, and Tenth Circuits exceeded the total number of all types of filings in those circuits in 2014 and 2015 by about 6.5%. This corresponded with a 41.9% increase in pending cases in those circuits. That contrasts with the Second, Fifth, Seventh, and Eleventh Circuits, where new merger objections in 2016 and 2017 were about 82.7% less than aggregate filings in 2014 and 2015. This corresponded with only about a 7.5% increase in pending cases in those circuits.33 It remains to be seen whether the recent influx of merger-objection cases significantly slows processing of standard securities class actions.


www.nera.com 25

Figure 19. Number of Pending Federal Cases Excluding IPO Laddering Cases January 2008–December 2017

668

627

588555 559

587

625657

702

785

0

100

200

300

400

500

600

700

800

900

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Num

ber

of

Pen

din

g F

eder

al C

ases

Year

Years Since Filing

5–12 Years 4–5 Years 3–4 Years 2–3 Years 1–2 Years <1 Year

Note: Years since filing are year-end calculations. The figure excludes, in each year, cases that had been filed more than 12 years earlier, which ensures that all pending cases were filed post-PSLRA and that years are comparable.

61

145

228

44

141

49

84

179

183

31

131

19

117

133

193

53

76

16

81

138

203

53

72

40

99

158

207

35

89

37

113

161

210

69

86

18

104

140

249

83

69

57

91

170

274

73

107

70

85

116

191

74

56

33

73

133

187

63

59

44


26 www.nera.com

Time to ResolutionThe term “time to resolution” denotes the time between the filing of the first complaint and resolution (whether through settlement or dismissal). Figure 20 illustrates the time to resolution for all securities class actions filed between 2001 and 2013, and shows that about 38% of cases are resolved within two years of initial filing and about 60% are resolved within three years.34

The median time to resolution for cases filed in 2015 (the last year with sufficient resolution data) was 2.3 years, similar to the range observed over the preceding five years. Over the previous decade, the median time to resolution declined by more than 5%, primarily due to an increase in the dismissal rate (dismissals are generally resolved faster than settlements) and due to shorter time to settlement, as opposed to a shorter time to dismissal.

Figure 20. Time from First Complaint Filing to Resolution Excludes Merger Objection and IPO Laddering Cases Cases Filed January 2001–December 2013

Less than1 Year13%

1–2 Years25%

2–3 Years22%

3–4 Years15%

More than4 Years

25%


www.nera.com 27

Trends in Settlements

We present several settlement metrics to highlight attributes of cases that settled in 2017 and to compare them with cases settled in past years. We discuss two ways of measuring average settlement amounts and calculate the median settlement amount. Each calculation excludes IPO laddering cases, merger-objection cases, and cases that settle with no cash payment to the class, as settlements of such cases may obscure trends in what have historically been more typical cases.

Each of our three metrics indicates a decline in settlement values on an inflation-adjusted basis to lows not observed since the early 2000s. The recent drop is in sharp contrast with a steady increase in overall settlement values over the preceding two years. However, excluding settlements of over $1 billion, 2017 saw the second consecutive annual drop in the average settlement value. For the first time since 1998, no case settled for more than $250 million (without adjusting for inflation).

Record-low settlement metrics in 2017 do not necessarily indicate that cases were, on average, especially weak, as the aggregate size of settled cases in 2017 (indicated by aggregate NERA-defined Investor Losses) was the lowest since 2003. The trends in 2017 settlements do not necessarily portend low aggregate settlements in the future.35 In fact, aggregate Investor Losses of pending cases, a factor that has historically been significantly correlated with settlement amounts, increased for the second consecutive year and currently exceed $900 billion.36 Average Investor Losses of pending standard cases have also increased for the second consecutive year to $2.1 billion, but have fallen from a 10-year high of $3.8 billion in 2011.

To illustrate how many cases settled over various ranges in 2017 compared with prior years, we provide a distribution of settlements over the past five years. We also tabulated the 10 largest settlements of 2017.


28 www.nera.com

Average and Median Settlement AmountsIn 2017, the average settlement amount fell to less than $25 million, a drop of about two-thirds compared with 2016, adjusted for inflation (see Figure 21). This contrasts with increases in year-over-year average settlements between 2014 and 2016. While infrequent large settlements are generally responsible for the wide variability in average settlement amounts over the past decade, in 2017 there was a dearth of even moderate settlements.

Figure 21. Average Settlement Value ($Million) Excluding Merger-Objection Cases, IPO Laddering Cases, and Settlements for $0 Payment to the Class January 2008–December 2017

Nominal $

Inflation Adjustment

$ Adjusted for Inflation +

$41 $42

$108

$31

$52

$85

$35

$52

$72

$25

$47 $48

$121

$34

$55

$89

$36

$54

$74

$25

$0

$20

$40

$60

$80

$100

$120

$140

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

($M

illio

n)

Settlement Year


www.nera.com 29

Figure 22 illustrates that, even excluding settlements over $1 billion, the $25 million average settlement in 2017 is more than 40% less than the comparable figure from 2016, and more than 25% less than the next lowest average settlement over the last decade (in 2011). Adjusted for inflation, the average settlement in 2017 was the lowest since 2001.

Figure 22. Average Settlement Value ($Million) Excluding Settlements over $1 Billion, Merger-Objection Cases, IPO Laddering Cases, and Settlements for $0 Payment to the Class January 2008–December 2017

Nominal $



$32

$42 $40

$31

$36

$54

$35

$52

$43

$25

$36

$48

$45

$34

$39

$57

$36

$54

$44

$25

$0

$10

$20

$30

$40

$50

$60

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

($M

illio

n)

Settlement Year


30 www.nera.com

Despite the dramatic drop in 2017 average settlement metrics, over the longer term, settlement amounts have not declined as considerably across the board. The 2017 median settlement amount, or the amount that is larger than half of the settlement values over the year, is only moderately below the median settlement values in 2014 and 2015, even after adjusting for inflation (see Figure 23). Despite this, the median settlement in 2017 is the lowest since 2001.

Figure 23. Median Settlement Value ($Million) Excluding Settlements over $1 Billion, Merger-Objection Cases, IPO Laddering Cases, and Settlements for $0 Payment to the Class January 2008–December 2017

Nominal $



$8

$9

$11

$7

$12

$10

$7 $7

$9

$6

$9

$10

$12

$8

$13

$10

$7 $7

$9

$6

$0

$2

$4

$6

$8

$10

$12

$14

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

($M

illio

n)

Settlement Year


www.nera.com 31

Securities class actions targeting foreign issuers settled for an average of $22.9 million in 2017, close to parity with settlements of cases against domestic issuers (see Figure 24). Contrasting with the slowdown in high and moderate settlements against domestic issuers, there were two relatively large settlements against foreign issuers in 2017. BP p.l.c. (2010) settled for $175 million, while Elan Corporation plc (2012) settled for $135 million, with both settlements among the top 10 settlements in 2017. Excluding these two cases, the 2017 average was $8.2 million.

Figure 24. Average Settlement Value—US vs. Foreign Companies ($Million) Excluding Settlements over $1 Billion, Merger-Objection Cases, and Settlements for $0 Payment to the Class January 2013–December 2017

US

Foreign$63.5

$44.4

$65.8

$50.5

$25.5

$9.8$8.5

$12.8$15.2

$22.9

$0

$10

$20

$30

$40

$50

$60

$70

2013 2014 2015 2016 2017

($M

illio

n)

Settlement Year



32 www.nera.com

In 2017, the median settlement of securities class actions targeting foreign issuers was $3.4 million, in line with prior years. Securities class actions against foreign issuers are generally smaller, as measured by NERA-defined Investor Losses. Cases targeting firms located in China also tend to settle for less than comparable cases against domestic firms.

Figure 25. Median Settlement Value—US vs. Foreign Companies ($Million) Excluding Settlements over $1 Billion, Merger-Objection Cases, and Settlements for $0 Payment to the Class January 2013–December 2017

US

Foreign$10.0

$9.5

$8.5

$10.0

$6.9

$3.7 $3.7

$2.8

$5.1

$3.4

$0

$2

$4

$6

$8

$10

$12

2013 2014 2015 2016 2017

($M

illio

n)

Settlement Year



www.nera.com 33

Distribution of Settlement AmountsIn 2017, a dearth of moderate and large settlements resulted in a higher proportion of cases that settled for amounts less than $10 million (see Figure 26). This reversed a persistent trend between 2014 and 2016 toward a higher proportion of settlements that exceeded $20 million. As such, in 2017 the distribution of settlements dramatically skewed toward the lower end of the range.

Figure 26. Distribution of Settlement Values Excluding Merger-Objection Cases and Settlements for $0 Payment to the Class January 2013–December 2017

20172016201520142013

51%

14%17%

6%

12%

58%

19%

7%10%

6%

58%

13%9%

7%

13%

51%

13%

17%

5%

15%

61%

11%

14%

7% 8%

0%

10%

20%

30%

40%

50%

60%

Less than $10 $10–$19.9 $20–$49.9 $50–$99.9 $100 or Greater

Per

centa

ge

of

Sett

led

Cas

es

Settlement Size ($Million)


34 www.nera.com

The 10 Largest Settlements of Securities Class Actions of 2017The 10 largest securities class action settlements of 2017 are shown in Table 1. Three of the 10 largest settlements involved defendants in the Health Technology and Services Sector. This contrasts with the preceding two years, in which the majority of large settlements involved financial sector defendants. Overall, these 10 cases accounted for more about $1.2 billion out of about $1.8 billion in aggregate settlements (67%) over the period. The largest settlement, which involved Salix Pharmaceuticals, Ltd., was for $210 million, making up about 11% of total dollars spent on settlements during the year.

Table 1. Top 10 2017 Securities Class Action Settlements

Plaintiffs’ Attorneys’ Total Settlement Fees and ExpensesRanking Case Name Value ($Million) Value ($Million)

1 Salix Pharmaceuticals, Ltd. $210.0 $48.7

2 BP p.l.c. (2010) $175.0 $24.3

3 NovaStar Mortgage Funding Trusts $165.01 $49.7

4 Clovis Oncology, Inc. (2015) $142.0 $32.9

5 Elan Corporation, plc (2012) $135.0 $29.5

6 Halliburton Company $100.0 $40.8

7 J. C. Penney Company, Inc. $97.5 $33.5

8 Dole Food Company, Inc. (2015) $74.0 $19.1

9 Rayonier Inc. $73.0 $25.4

10 Ocwen Financial Corporation $56.0 $17.3

Total $1,227.5 $321.2

Note:

1 The settlement was preliminarily approved on 9 May 2017. The final hearing was originally scheduled for 13 September 2017 and later rescheduled for 20 September 2017, but did not occur due to an appeal. At the time of this report’s publication, the appeal was pending before the Second Circuit.


www.nera.com 35

These settlements pale in comparison to the largest settlements since passage of the PSLRA. Enron Corp. settled for more than $7.2 billion in aggregate, while Bank of America Corp. settled for more than $2.4 billion in 2013, making it the largest Finance Sector settlement ever (see Table 2).

Table 2. Top 10 Securities Class Action Settlements As of 31 December 2017

Codefendant Settlements

Total Financial Accounting Plaintiffs’ Attorneys’ Settlement Settlement Institutions Firms Fees and ExpensesRanking Defendant Year(s) Value Value Value Value ($Million) ($Million) ($Million) ($Million)

1 ENRON Corp. 2003–2010 $7,242 $6,903 $73 $798

2 WorldCom, Inc. 2004–2005 $6,196 $6,004 $103 $530

3 Cendant Corp. 2000 $3,692 $342 $467 $324

4 Tyco International, Ltd. 2007 $3,200 No codefendant $225 $493

5 AOL Time Warner Inc. 2006 $2,650 No codefendant $100 $151

6 Bank of America Corp. 2013 $2,425 No codefendant No codefendant $177

7 Household International, Inc. 2006–2016 $1,577 $0 Dismissed $427

8 Nortel Networks (I) 2006 $1,143 No codefendant $0 $94

9 Royal Ahold, NV 2006 $1,100 $0 $0 $170

10 Nortel Networks (II) 2006 $1,074 No codefendant $0 $89

Total $30,298 $13,249 $967 $3,252


36 www.nera.com

Aggregate SettlementsWe use the term “aggregate settlements” to denote the total amount of money to be paid to settle litigation by (non-dismissed) defendants based on court-approved settlements during a year.

Aggregate settlements were about $1.8 billion in 2017, a drop of more than 70% to a level not seen since 2001 (see Figure 27). This dramatic decline reflects both a drop in the number of standard case settlements in 2017 and the near-record low overall average settlement value.

Figure 27. Aggregate Settlement Value by Settlement Size ($Billion) January 2008–December 2017

$0.3$0.7

$1.2

$1.0$1.4 $1.2 $1.1 $0.9 $1.0 $1.0 $1.0 $0.7

$1.3

$2.3

$1.3

$0.7 $1.2 $1.2 $1.0

$2.3 $2.6

$0.9

$0.8

$0.9

$1.4

$0.6

$1.8

$0.7

$1.5$1.1

$7.2

$1.0

$2.4$2.6

$4.5

$5.1

$11.6

$2.7

$3.3

$6.6

$2.9

$4.9

$6.4

$1.8

$0

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

$11

$12

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

($B

illio

n)

Settlement Year

$1 Billion or Greater

$500–$999 Million

$100–$499 Million

$10–$99 Million

Less than $10 Million

Settlement Size


www.nera.com 37

NERA-Defined Investor Losses vs. SettlementsAs noted above, our proxy for case size, NERA-defined Investor Losses, is a measure of the aggregate amount that investors lost from buying the defendant’s stock rather than investing in the broader market during the alleged class period.

In general, settlement size grows as NERA-defined Investor Losses grow, but the relationship is not linear. Based on our analysis of data from 1996 to 2017, settlement size grows less than proportionately with Investor Losses. In particular, small cases typically settle for a higher fraction of Investor Losses (i.e., more cents on the dollar) than larger cases. For example, the median ratio of settlement to Investor Loss was 19.2% for cases with Investor Losses of less than $20 million, while it was 0.7% for cases with Investor Losses over $10 billion (see Figure 28).

Our findings regarding the ratio of settlement amount to NERA-defined Investor Losses should not be interpreted as the share of damages recovered in settlement but rather as the recovery compared to a rough measure of the “size” of the case. Notably, the percentages given here apply only to NERA-defined Investor Losses. Use of a different definition of investor losses would result in a different ratio. Also, the use of the ratio alone to forecast the likely settlement amount would be inferior to a proper all-encompassing analysis of the various characteristics shown to impact settlement amounts, as discussed in the next section.

Figure 28. Median of Settlement Value as a Percentage of NERA-Defined Investor Losses by Level of Investor Losses Excluding Settlements for $0 Payment to the Class January 1996–December 2017

19.2%

8.4%

4.7%

3.2%2.6%

1.7% 1.4% 1.2% 0.9% 0.7%

0%

5%

10%

15%

20%

25%

Less than$20

$20–$49 $50–$99 $100–$199 $200–$399 $400–$599 $600–$999 $1,000–$4,999

$5,000–$9,999

$10,000or Greater

Sett

lem

ent

Val

ue

as a

Per

centa

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of

Inve

sto

r Lo

sses

Investor Losses ($Million)


38 www.nera.com

Median NERA-Defined Investor Losses over TimePrior to 2014, median NERA-defined Investor Losses for settled cases had been on an upward trajectory since the passage of the PSLRA. As described above, the median ratio of settlement size to Investor Losses generally decreases as Investor Losses increase. Over time, the increase in median Investor Losses coincided with a decreasing trend in the median ratio of settlement to Investor Losses. Of course, there are year-to-year fluctuations.

As shown in Figure 29, the median ratio of settlements to NERA-defined Investor Losses was 2.6% in 2017. This was the second consecutive yearly increase and at least a short-term reversal of a long-term downtrend of the ratio between passage of the PSLRA and 2015. The increase in the median settlement ratio is to be expected given relatively few settlements of large and moderately-sized cases.

Figure 29. Median NERA-Defined Investor Losses and Median Ratio of Settlement to Investor Losses Shareholder Class Actions with Alleged Violations of Rule 10b-5, Section 11, or Section 12 January 2008–December 2017

$584

$339

$389

$493

$631

$750

$492

$449 $451

$249

2.7%

2.4%2.4%

1.3%

1.8%

1.9%

1.7%1.6%

2.1%

2.6%

0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

$0

$100

$200

$300

$400

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$600

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$800

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Med

ian R

atio

of

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(%

)

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ian Inve

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Settlement Year

Median Investor Losses

Median Ratio of Settlement to Investor Losses


www.nera.com 39

Explaining Settlement AmountsThe historical relationship between case attributes and other case- and industry-specific factors can be used to measure the factors that are correlated with settlement amounts. NERA has examined settlements in more than 1,000 securities class actions and identified key drivers of settlement amounts, many of which have been summarized in this report.

Generally, we find that the following factors have historically been significantly correlated with settlement amounts:

• NERA-definedInvestorLosses(aproxyforthesizeofthecase);• Themarketcapitalizationoftheissuer;• Typesofsecuritiesallegedtohavebeenaffectedbythefraud;• Variablesthatserveasaproxyforthe“merit”ofplaintiffs’allegations(suchaswhetherthe

company has already been sanctioned by a governmental or regulatory agency or paid a fine in connection with the allegations);

• Admittedaccountingirregularitiesorrestatedfinancialstatements;• Theexistenceofaparallelderivativelitigation;and• Aninstitutionorpublicpensionfundasleadplaintiff.

Together, these characteristics and others explain most of the variation in settlement amounts, as illustrated in Figure 30.37

Figure 30. Predicted vs. Actual Settlements

$100,000

$10BB

Act

ual

Set

tlem

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in L

og

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Predicted Settlement in Log Values

$1MM

$10MM

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$100,000 $1MM $10MM $100MM $1BB $10BB


40 www.nera.com

Trends in DismissalsIn 2017, the number of dismissals (excluding merger objections) matched the high of 108 over the last decade (see Figure 31). This was largely due to a substantial increase in voluntary dismissals, which more than doubled.38 In particular, the number of voluntary dismissals without prejudice increased from two in 2016 to 32 in 2017. Out of all voluntary dismissals in 2017, 83% occurred within one year of filing, the highest rate in 10 years and well above the five-year average of 73%.

Generally, most voluntary dismissals occur within a year of filing, and the increase in 2017 can partially be attributed to more cases being filed. More filings also occurred in the first quarter of 2017, providing a longer dismissal window. However, filings of standard securities class actions grew at a slower rate in 2017 than in 2011, and growth was only somewhat faster than in 2013. Despite that, the number of voluntary dismissals within one year of filing was unchanged in 2011 and fell in each year between 2012 and 2014.

Figure 31. Number of Dismissed Cases by Case Age Excluding Merger Objections January 2008–December 2017

Years Since Filing (Dismissal Type)

11 12 148 10 10 12 11

24

13

1420 17

17 11 10 9 12

13 34

21

36 39

36

25 31 25

37

36

35

4

46

4

2

5

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31

2527

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107 108

92

7881

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1–2 Years (Dismissed) <1 Year (Voluntarily Dismissed) <1 Year (Dismissed)


www.nera.com 41

In 2017, 15.7% of standard cases were filed and resolved within the same calendar year, which was the highest rate in at least a decade (see Figure 32). By the end of the year, 12% of cases were voluntarily dismissed, of which the vast majority were voluntary dismissals without prejudice. This may indicate that certain securities cases filed in 2017 were particularly weak, perhaps a result of plaintiffs’ managing a more diverse portfolio of casework. Alternatively, the dramatic increase in such dismissals may be driven by plaintiff forum selection.39

The rate of voluntary dismissals was not particularly concentrated in terms of jurisdiction or the specific allegations we track.

Figure 32. Year-End Status of Class Actions Filed and Resolved Within Each Calendar Year Excluding Merger Objections January 2008–December 2017

0.9%2.2% 2.5%

1.8% 2.0% 1.8%0.6%

2.2%2.9% 3.0%

5.6%

4.9%

7.6%

7.2%

4.6%4.2%

1.1%

5.4%5.2%

12.3%

0.9%0.5%

1.9%

0.6%

2.0%2.4%

5.1%

4.9%

1.0%7.3%

7.7%

12.0%

9.6%

8.5% 8.3%

6.7%

12.4%

9.0%

15.7%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Per

centa

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of

Filin

gs

Filing and Resolution Year

Case Status

Settled

Voluntarily Dismissed

Dismissed


42 www.nera.com

Trends in Attorneys’ Fees

Plaintiffs’ Attorneys’ Fees and ExpensesUsually, plaintiffs’ attorneys’ remuneration is determined as a fraction of any settlement amount in the form of fees, plus expenses. Figure 33 depicts plaintiffs’ attorneys’ fees and expenses as a proportion of settlement values over ranges of settlement amounts. The data in the figure exclude settlements of merger-objection cases and cases with no cash payment to the class.

A strong pattern is evident in Figure 33: typically, fees grow with settlement size, but less than proportionally (i.e., the fee percentage shrinks as the settlement size grows).

To illustrate that the fee percentage typically shrinks as settlement size grows, we grouped settlements by settlement value and reported the median fee percentage for each group. While fees are stable at around 30% of settlement values for settlements below $10 million, this percentage declines as settlement size increases.

We also observe that fee percentages have been decreasing over time, except for fees awarded on very large settlements. For settlements above $1 billion, fee rates have increased.

Figure 33. Median of Plaintiffs' Attorneys' Fees and Expenses by Size of Settlement Excluding Merger-Objection Cases and Settlements for $0 Payment to the Class

Median Fees

Median Expenses

30.0%

30.0%

25.0%

25.0%

22.0%

17.0%

12.7%

4.1%

2.9%

2.5%

2.3%

1.3%

0.7%

1.5%

≥5 and <10

≥10 and <25

≥25 and <100

≥100 and <500

≥500 and <1,000

7.6%

17.0%

22.0%

26.8%

30.0%

30.0%

33.3%

8.1% 0.5%

17.7% 0.7%

23.4% 1.4%

28.7% 1.9%

32.7% 2.7%

33.7% 3.7%

38.4% 5.1%

14.2%

17.7%

23.3%

27.3%

27.5%

32.9%

34.1%

Settlement Value($Million)

Percentage of Settlement Value2012–2017

Percentage of Settlement Value1996–2011

≥1,000

<5


www.nera.com 43

Aggregate Plaintiffs’ Attorneys’ Fees and ExpensesAggregate plaintiffs’ attorneys’ fees and expenses are the sum of all fees and expenses received by plaintiffs’ attorneys for all securities class actions that receive judicial approval in a given year.

In 2017, aggregate plaintiffs’ attorneys’ fees and expenses were $467 million, a drop of about 65% to a level not seen since 2004 (see Figure 34). This decrease in fee amounts partially reflects the trend toward fewer and smaller settlements. However, the drop in aggregate plaintiffs’ attorneys’ fees is still less than the 70%+ drop in aggregate settlements, as most cases that settled were smaller, and smaller cases typically have higher fee payout ratios.

Note that this figure differs from the other figures in this section, because the aggregate includes fees and expenses that plaintiffs’ attorneys receive for settlements in which no cash payment was made to the class.

Figure 34. Aggregate Plaintiffs’ Attorneys’ Fees and Expenses by Settlement Size ($Million) January 2008–December 2017

$1BB or Greater

$500MM–$999.9MM

$100MM–$499.9MM

$10MM–$99.9MM

Less than $10MM

Settlement Sizes

$85 $97 $52 $62 $51 $58 $90 $64 $62 $50

$340 $259 $351 $288 $276 $248

$243 $269 $255 $191

$277 $418

$123 $142 $169 $250

$138

$481 $586

$226

$946

$839

$1,481

$604 $639

$1,085

$628

$1,023

$1,330

$467

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Settlement Year

($M

illio

n)

$155 $65

$217

$112$143

$351

$157

$210

$427

$177

$738

$89


44 www.nera.com

Notes1 This edition of NERA’s report on recent

trends in securities class action litigation expands on previous work by our colleagues Lucy Allen, Dr. Renzo Comolli, the late Dr. Frederick C. Dunbar, Dr. Vinita M. Juneja, Sukaina Klein, Dr. Denise Neumann Martin, Dr. Jordan Milev, Dr. John Montgomery, Robert Patton, Dr. Stephanie Plancich, and others. The authors also thank Dr. Milev and Benjamin Seggerson for helpful comments on this edition. In addition, we thank Edward Flores and other researchers in NERA’s Securities and Finance Practice for their valuable assistance. These individuals receive credit for improving this paper; all errors and omissions are ours.

2 Data for this report have been collected from multiple sources, including Institutional Shareholder Services, Inc., complaints, case dockets, Dow Jones, Bloomberg L.P., FactSet Research Systems Inc., the US Securities and Exchange Commission (SEC) filings, and public press reports.

3 Craig Doidge, G. Andrew Karolyi, and René M. Stulz, “The U.S. Listing Gap,” National Bureau of Economic Research Working Paper No. 21181, May 2015.

4 In re Trulia, Inc. Stockholder Litigation, C.A. No. 10020-CB (Del. Ch. Jan. 22, 2016).

5 Despite a 13% year-over-year drop in US M&A deals in 2016, merger-objection suits doubled from 2015 levels (see “Global M&A Review: Full Year 2016 Final Results,” Dealogic, January 2017.) The doubling of merger-objection filings again in 2017 far exceeded the 18% increase in deals over the first nine months of 2017 (see “Global M&A Review 3Q 2017,” Thomson Reuters, October 2017).

6 2010 deal growth and litigation rates obtained from M. D. Cain and S. D. Solomon, “A Great Game: The Dynamics of State Competition and Litigation,” Iowa Law Review, Vol. 100, No. 165, 2015, Table 1. 2016 M&A activity growth obtained from “Global M&A Review: Full Year 2016 Final Results,” Dealogic, January 2017. 2017 deal activity obtained from “Global M&A Review 3Q 2017,” Thomson Reuters, October 2017.

7 M. D. Cain and S. D. Solomon, “A Great Game: The Dynamics of State Competition and Litigation,” Iowa Law Review, Vol. 100, No. 165, 2015.

8 M. D. Cain and S. D. Solomon, “Takeover Litigation in 2015,” Berkeley Center for Law Business and the Economy, 14 January 2016. Alison Frankel, “Forum Selection Clauses Are Killing Multiforum M&A litigation,” Reuters, 24 June 2014.

9 In re Trulia, Inc. Stockholder Litigation, C.A. No. 10020-CB (Del. Ch. Jan. 22, 2016), n. 36.

10 M. D. Cain and S. D. Solomon, “Takeover Litigation in 2015,” Berkeley Center for Law Business and the Economy, 14 January 2016.

11 Warren S. de Wied, “Delaware Forum Selection Bylaws After Trulia,” Harvard Law School Forum on Corporate Governance and Financial Regulation, 25 February 2016.

12 In re: Walgreen Co. Stockholder Litigation, No. 15-3799 (7th Cir. Aug. 10, 2016).

13 Jones v. WSB Holdings, Inc., No. CAL-1231262 (Md. Cir. Ct. Nov. 12, 2013).

14 Federal securities class actions that allege violations of Rule 10b-5, Section 11, and/or Section 12 have historically dominated federal securities class action dockets and are often referred to as “standard” cases.

15 Robert Patton, “Recent Trends in US Securities Class Actions against Non-US Companies,” NERA Working Paper, 24 October 2012.

16 Kane Wu, “U.S.-Listed China Firms Hurry Homeward,” The Wall Street Journal, 17 November 2015.

17 Andrew Bolger, “Warning signs appear after bumper IPO year,” Financial Times, 26 December 2014.

18 “U.S. Tech IPO Market Sucked Less In 2017, But Still Managed To Disappoint,” VentureBeat, 18 December 2017.

19 “Why Section 11 Class Actions Are Proliferating In Calif.,” Law360, 27 April 2015.

20 Examples of such forum selection include those used by Blue Apron Holdings (see Blue Apron Holdings, Inc. SEC Form 8-K, filed 5 July 2017), MongoDB (see MongoDB, Inc. SEC Form 8-K, filed 25 October 2017), Restoration Robotics (See Restoration Robotics Inc. SEC Form 8-K, filed 17 October 2017), Roku (see Roku, Inc. SEC Form S-1/A, filed 18 September 2017), and Snap (see Snap, Inc. SEC Form S-1, filed 2 February 2017).

21 Cyan, Inc. v. Beaver County Employees Retirement Fund, Supreme Court No. 15-1439.

22 In 2016, several pharmaceutical companies were caught up in a long-running US Department of Justice (DOJ) probe into alleged generic drug price collusion (see Andrew Bolger, “U.S. Charges in Generic-Drug Probe to Be Filed by Year-End,” Bloomberg Markets, 3 November 2016). In September 2016, a leading poultry distributor sued several poultry producers, alleging price fixing of broiler chickens (see Eric Kroh, “Poultry Producers Hit With Chicken Price Antitrust Suit,” Law360, 3 September 2016).

23 13% of firms in the Third Circuit are in the Pharmaceutical Preparations industry (SIC code 2834), compared with 8% of publicly traded firms. These are mostly incorporated in New Jersey.

24 In re: Walgreen Co. Stockholder Litigation, No. 15-3799 (7th Cir. Aug. 10, 2016).

25 In 2016, several pharmaceutical companies were targeted in a long-running DOJ probe and a leading poultry distributor sued several poultry producers, alleging price fixing. See endnote 22 for details and sources.

26 This case was filed after the SEC filed a complaint, more than four years after the end of the proposed class period. The plaintiffs in the class action stated that the SEC complaint first revealed the alleged fraud.

27 Outcomes of the motions for summary judgment are available from NERA but not shown in this report.

28 Active cases equals the sum of pending cases at the beginning of 2017 plus those filed during the year.

29 In 2016, 84% of dismissed merger-objection cases were dismissed within one year of filing. Prior to 2016, a period completely before the Trulia decision, about 66% of such cases were dismissed within a year of filing.

30 In addition to merger objections and standard securities class actions, our database includes a small number of “other” cases (see Figure 3).

31 Nearly 90% of cases filed before 2012 have been resolved, providing evidence of longer-term trends about dismissal and settlement rates. Data since then is inconclusive given pending litigation.

32 We only consider pending litigation filed after the passage of the PSLRA in 1995.

33 The D.C. Circuit was excluded, as it generally has few securities class action filings.

34 Each of the metrics in the Time to Resolution subsection excludes IPO laddering cases and merger-objection cases.

35 In fact, in January 2018, Petrobras agreed to settle its securities class action for $2.95 billion. That settlement has not yet been finalized as of the date of this report.

36 Over the last decade, aggregate NERA-defined Investor Losses peaked at about $1.2 trillion at the end of 2012.

37 The axes are in logarithmic scale, and the two largest settlements are excluded from this figure.

38 The number of cases voluntarily dismissed within one year of filing nearly tripled.

39 Commentary regarding a 2017 ruling in the Southern District of New York indicated that “[p]laintiffs in [Cheung v. Bristol-Myers Squibb] had originally filed their lawsuits in a federal district court, but after the federal district court issued a ruling that was unfavorable for the plaintiffs, the plaintiffs voluntarily dismissed their lawsuits without prejudice and then refiled them in Delaware state court.” See “Getting Your Company’s Case Removed to Federal Court When Sued in Your ‘Home’ State,” The Legal Intelligencer, 21 December 2017. The case referred to is Cheung v. Bristol-Myers Squibb, Case No. 17cv6223 (DLC), (S.D.N.Y. Oct. 12, 2017).


About NERA

NERA Economic Consulting (www.nera.com) is a global firm of experts dedicated to applying economic, finance, and quantitative principles to complex business and legal challenges. For over half a century, NERA’s economists have been creating strategies, studies, reports, expert testimony, and policy recommendations for government authorities and the world’s leading law firms and corporations. We bring academic rigor, objectivity, and real world industry experience to bear on issues arising from competition, regulation, public policy, strategy, finance, and litigation.

NERA’s clients value our ability to apply and communicate state-of-the-art approaches clearly and convincingly, our commitment to deliver unbiased findings, and our reputation for quality and independence. Our clients rely on the integrity and skills of our unparalleled team of economists and other experts backed by the resources and reliability of one of the world’s largest economic consultancies. With its main office in New York City, NERA serves clients from more than 25 offices across North America, Europe, and Asia Pacific.

Contacts For further information, please contact:

Dr. David TabakManaging Director

New York City: +1 212 345 2176

[email protected]

Stefan Boettrich Senior Consultant

New York City: +1 212 345 1968

[email protected]

Svetlana StarykhSenior Consultant

White Plains, NY: +1 914 448 4123

[email protected]

The opinions expressed herein do not necessarily represent the views of

NERA Economic Consulting or any other NERA consultant.

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