united states district court for the eastern district...
TRANSCRIPT
UNITED STATES DISTRICT COURTFOR THE EASTERN DISTRICT OF TEXA S
TEXARKANA DIVISION
LANE McNAMARA, et al., §
Plaintiffs, §
§ No. 5-97-CV-159V . §
BRE-X MINERALS LTD ., et al., §
Defendants . §
MOTION FOR FINAL APPROVAL OFPROPOSED SETTLEMENT BETWEEN
PLAINTIFFS AND BRESEA RESOURCES LTD.
Damon YoungYoung, Pickett & Lee4122 Texas BoulevardTexarkana, Texas 75503
R. Paul YetterYetter & Warden, L .L.P .909 Fannin, Suite 3600Houston, Texas 77010
H. Lee GodfreySusman Godfrey L .L.P .1000 Louisiana, Suite 5100Houston , Texas 77002
Attorney-in-Charge Lead Counsel for Plaintiffs
TABLE OF CONTENTS
Page
Table of Authoritie s
Table of Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . x
I. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
II. Preliminary Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
III . History of the Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
IV . Overview of the Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
V. Final Certification of the Settlement Class Is Appropriate . . . . . . . . . . . . . . . . . . . . . . . . 6
A. The Class Satisfies the Requirements of Rule 23(a) . . . . . . . . . . . . . . . . . . . . . . . 7
1 . The Settlement Class is sufficiently numerous . . . . . . . . . . . . . . . . . . . . . 8
2. Common questions of law or fact exist . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3 . Plaintiffs' claims are typical of those of the Settlement Class . . . . . . . . . 1 1
4. The adequacy requirement is met . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
B . The Requirements of Rule 23 (b)(3) Are Also Satisfied . . . . . . . . . . . . . . . . . . . 22
1 . Common questions of law or fact predominate . . . . . . . . . . . . . . . . . . . . 22
2. A class action is the superior me ans to adjudicate plaintiffs ' claims . . . . 38
3. The manageability requirement of Rule 23 is met . . . . . . . . . . . . . . . . . . 3 9
VI. The Se ttlement Should Be Approved as Fair , Adequate and Reasonable . . . . . . . . . . . . 3 9
A . The Fifth Circuit Favors Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 9
B . The Fifth Circuit Presumes the Fai rness of Settlements Proposal byCompetent and Expe rienced Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1
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C . The Fifth Circuit's Six-Pronged Test Of Fairness . . . . . . . . . . . . . . . . . . . . . . . . 41
1 . There is no fraud or collusion behind the Settlement . . . . . . . . . . . . . . . 42
2 . Stage of the proceedings at which sett lement was achieve dand the amount of discovery completed . . . . . . . . . . . . . . . . . . . . . . . . . . 43
3 . Probability of success on the merits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
4 . Range of possible recovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 5
5 . Complexity, expense, and likely duration of this litigation . . . . . . . . . . . 4 8
6 . Opinion of Lead Counsel and Settlement Class Members . . . . . . . . . . . 4 8
VII. The Notice Program Meets the Requirements of Due Process and Rule 23 . . . . . . . . . . 49
VIII . Plaintiffs' Request for an Award of Past and Future Litigation Expens eShould Be Approved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
IX. The Plan of Allocation Adequately Compensates the Class . . . . . . . . . . . . . . . . . . . . . . 52
X. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
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TABLE OF AUTHORITIE S
Cases Page
Abell v. Potomac Ins. Co . ,858 F .2d 1104 (5th Cir . 1988) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Affiliated Ute Citizens v. United States ,406 U.S . 128 (1972 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36, 37, 3 8
Ahearn v. Fibreboard Corp . ,162 F .R.D . 505 (E.D . Tex. 1995) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Amchem Prod., Inc. v. Windsor,521 U.S. 591 (1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6, 7, 39
Anderson v. Transglobe Energy Corp . ,35 F. Supp. 2d 1363 (M.D. Fla. 1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Ashe v. Board of Elections ,124 F .R.D. 45 (E.D .N.Y. 1989) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Basic, Inc . v . Levinson,485 U .S. 224 (1988) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,29,45
Bateman Eichler , Hill Richards, Inc. v . Berner ,472 U.S. 299 (1985) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1
Beecher v. Able ,575 F . 2d 1010 (2d Cir . 1978) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Berger v. Compaq Computer Corp. ,
257 F .3d 475 (5th Cir. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2
Berger v. Compaq Computer Corp. ,279 F.3d 313 (5th Cir. 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2
Boeing Co . v . Van Gemert ,444 U.S . 472 (1980) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 0
Califano v . Yamasaki,442 U.S . 682 (1979) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 9
-iii-
Cammer v. Bloom,711 F . Supp . 1264 (D .N .J . 1989) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24, 25, 27, 31, 3 2
Castano v . American Tobacco Co. ,84 F.3d 734 (5th Cir . 1996) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
City of Detroit v. Grinnell Co . ,495 F.2d 448 (2d Cir . 1974) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Class Plaintiffs v . Seattle ,955 F . 2d 1268 (9th Cir . 1992) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 3
Cotton v . Hinton ,559 F.2d 1326 (5th Cir . 1977) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39, 40
Dolgow v. Anderson ,43 F .R.D. 47 (E.D .N.Y. 1968) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1
Dura-Bilt Corp . v. Chase Manhattan Corp. ,89 F .R.D . 87 (S.D.N.Y. 1981) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,22
Durrett v. John Deere Co. ,150 F.R.D . 555 (N.D . Tex. 1993) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 1
Ernst & Ernst v. Hoch/elder,425 U.S. 185 (1976) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 5
Feinberg v. Hibernia Corp . ,1992 WL 176119 (E.D . La. 1992) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0
Finkel v. Docutel/Olivetti Corp. ,817 F.2d 356 (5th Cir . 1987) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Fisher Bros. v. Cambridge-Lee Indus ., Inc . ,630 F. Supp. 482 (E.D . Pa . 1985) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Florida Trailer & Equip . Co. v. Deal,284 F.2d 567 (5th Cir . 1960) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39, 44
Gibb v. Delta Drilling Co . ,104 F.R.D. 59 (N.D. Tex . 1984) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 9
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Gonzalez v . Cassidy ,474 F.2d 67 (5th Cir . 1973) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 9
Green v. Wolf Corp . ,406 F . 2d 291 (2d Cir. 1968) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Hayes v. Gross ,982 F.2d 104 (3d Cir. 1992) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30, 32
Herbst v . International Tel. & Tel. Corp. ,495 F.2d 1308 (2d Cir . 1974) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 8
Horton v. Goose Creek Ind. Sch. Dist. ,690 F.2d 470 (5th Cir. 1982) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2
Hurley v. FDIC,719 F . Supp . 27 (D. Mass . 1989) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
In re Alexander Grant & Co. Litig. ,110 F .R.D . 528 (S.D . Fla . 1986) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
In re AmeriFirst Sec. Litig. ,139 F .R.D. 423 (S.D. Fla. 1991) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9, 30, 32, 33
In re Baldwin- United Corp. Litig. ,122 F .R.D. 424 (S.D.N.Y. 1986) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0
In re Corrugated Container Antitrust Litig. ,643 F .2d 195 (5th Cir. 1981) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,44
In re First RepublicBank Sec. Litig. ,1989 WL 108795 (W.D . Tex. 1989) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 1
In re Gaming Lottery Sec. Litig. ,58 F . Supp. 2d 62 (S.D.N.Y. 1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 5
In re Gaming Lottery Sec . Litig. ,2001 WL 204219 (S.D.N.Y. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,3 5
In re Gulf Oil/Cities Serv. Tender Offer Litig. ,112 F .R.D. 383 (S.D .N.Y. 1986) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 8
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In re GulfOil/Cities Se rv. Tender Offer Litig. ,142 F.R .D. 588 (S .D.N.Y 1992) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
In re Harrah's Sec. Litig. ,1998 U.S. Dist . LEXIS 18774 (E .D. La. 1998) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
In re Lease Oil Antitrust Litig. ,186 F.R.D . 403 (S .D. Tex. 1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 42, 5 1
In re Newbridge Networks Sec . Litig. ,926 F. Supp . 1163 (D .D.C. 1996) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,3 5
In re Nissan Motor Corp . Antitrust Litig. ,552 F . 2d 1088 (5th Cir . 1977) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
In re Prudential Ins . Co. ofAm. Sales Practice Litig. ,148 F.3d 283 (3d Cir . 1998) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
In re Prudential-Bache Energy Income P'ships Sec . Litig. ,1994 WL 150742 (E.D . La. 1994) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1
In re Resource America Sec. Litig. ,202 F.R.D . 177 (E.D . Pa. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3
In re 2the Mart.com Sec. Litig. ,2000 U.S. Dist . LEXIS 10821 (C.D. Cal . 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1
Jenkins v . McKeithen ,395 U .S. 411 (1969) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 5
Korn v. Franchard Corp. ,456 F .2d 1206 (2d Cir . 1972) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Krangel v. Golden Rule Resources, Ltd. ,194 F .R.D. 501 (E.D . Pa. 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 5
Krogman v. Sterritt,202 F .R.D. 467 (N.D . Tex. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Ligon v. Frito-Lay, Inc. ,82 F .R.D. 42 (N .D . Tex. 1979) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 1
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Longden v. Sunderman ,123 F.R.D. 547 (N .D . Tex . 1988) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,1 1
Maher v. Zapata Corp. ,714 F.2d 436 (5th Cir . 1983) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Manchaca v. Chater ,927 F. Supp . 962 (E.D . Tex. 1996) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
McNary v. American Sav. & Loan Ass'n,76 F .R.D . 644 (N.D. Tex . 1977) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1
Mills v. Elec. Auto-Lite Co. ,396 U .S . 375 (1970) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Moskowitz v. Lopp ,128 F.R.D. 624 (E.D . Pa. 1989) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Mullen v. Treasure Chest Casino, LLC,186 F.3d 620 (5th Cir. 1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6, 8
Nathenson v. Zonagen, Inc . ,267 F.3d 400 (5th Cir. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Newman v. Stein ,464 F.2d 689 (2d Cir . 1972) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Parker v. Anderson,667 F .2d 1204 (5th Cir. 1982) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42, 46
Pearson v. Ecological Sci . Corp. ,522 F.2d 171 (5th Cir. 1975) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Pettway v . American Cast Iron Pipe Co . ,576 F.2d 1157 (5th Cir. 1978) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1
Phillips v. Joint Legislative Comm . on Performance & Expenditure Rev . ,637 F.2d 1014 (5th Cir. 1981) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1
Reed v. Gen. Motors Corp. ,703 F .2d 170 (5th Cir. 1983) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1
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Republic Nat'l Bank v. Denton & Anderson Co. ,68 F.R.D . 208 (N.D . Tex. 1975) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Rubinstein v. Republic Nat'l Life Ins . Co. ,74 F.R.D. 337(N.D .Tex. 1976) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Ruiz v. McKaskle ,724 F.2d 1149 (5th Cir. 1984) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 9
Salinas v. Roadway Express, Inc. ,802 F.2d 787 (5th Cir. 1986) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Scheuer v. Rhodes,416 U .S. 232 (1974) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Shaw v. Toshiba America Information Sys., Inc. ,91 F . Supp. 2d 942 (E .D. Tex. 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6, 5 1
Shipes v. Trinity Indus. ,987 F .2d 311 (5th Cir. 1993) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1
Simpson v . Specialty Retail Concepts ,823 F . Supp . 353 (M.D.N.C. 1993) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Smith v. Ayres ,845 F .2d 1360 (5th Cir . 1988) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36, 37
Sosna v. Iowa ,419 U.S . 393 (1975) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 9
Sprague v. Ticonic Nat'l Bank,307 U.S . 161 (1939) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1
Tapken v. Brown ,1992 WL 178984 (S.D. Fla . 1992) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30, 32
Trustees v. Greenough ,105 U.S . 527 (1881) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
United States v . Texas Educ. Agency,679 F.2d 1104 (5th Cir . 1982) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
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Van Bronkhorst v. Safeco Corp. ,529 F.2d 943 (9th Cir . 1976) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
White v. NFL,822 F . Supp . 1389 (D . Minn . 1993) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Williams v. First Nat'l Bank,216 U.S. 582 (1910) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 9
Young v . Katz ,447 F .2d 431 (5th Cir. 1971) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Zeidman v. J. Ray McDermott & Co, Inc. ,651 F .2d 10301 (5th Cir . 1981) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Other
17 C.F .R . § 210.01 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
17 C.F .R . § 229. 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
15 U .S.C. § 78u-4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
1 Newberg on Class Actions § 3 .05 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
-ix-
TABLE OF EXHIBITS
Tab
Third Declaration of Autry W. Ross . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . AExh. I - Amended Settlement Agreement Made as of May 1, 200 2
Affidavit of Larry B . Robinson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . BExh. A - June 26, 2002 Order as to Bre-X Truste eExh. B - June 12, 2002 Order as to BreseaExh. C - June 21, 2002 Order as to Ontario Class ActionExh. D - June 11 , 2002 Order as to Bre-X regulato ry approvalExh. E - June 11, 2002 Orders as to Sasamat regulatory approval
Declaration of Jeffrey J . Leitzinger, Ph.D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CExh. 1 - ResumeExh. 2 - Top 100 NASDAQ FirmsExh. 3 - U.S. Press CoverageExh. 4 - Statistical Tests for Random Walk (NASDAQ)Exh. 5 - Bre-X Weekly Share Turnover (Canadian Exchanges)Exh. 6 - Bresea Weekly Share TurnoverExh. 7 - Event Study Analysis for Bre-X on the ASE and for Bresea on the MEExh. 8 - Event Study Analysis for Bre-X on the TSE and for Bresea on the MEExh. 9 - Statistical Tests for Random Walk (Canadian Exchanges )
Excerpts from Deposition of Marc Andrew Lieberman (August 30, 2001) . . . . . . . . . . . . . . . . D
Excerpts from Transcript of November 29, 2001 Hearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E
Excerpts from Deposition of Professor Geoffrey Hazard (November 1, 2001 . . . . . . . . . . . . . . F
Excerpts from Deposition of Jack W. Ward (August 2, 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . G
Excerpts from Deposition of Carole Braden (August 3, 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . H
Excerpts from Deposition of Jean A . Messmer (August 24, 2001) . . . . . . . . . . . . . . . . . . . . . . . . I
Excerpts from Deposition of Jean Messmer (August 1 , 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . J
Excerpts from the Deposition of Mark Scheuerm an (August 25, 2001) . . . . . . . . . . . . . . . . . . . K
Excerpts from the Deposition of Mark Scheuerm an (August 3 , 2002 ) . . . . . . . . . . . . . . . . . . . . L
Resume of Susm an Godfrey L.L.P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . M
-x-
Resume of Yetter & Warden, L .L.P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N
Declaration of Professor Ronald M . Giammarino . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0Exh. I - Resume
Declaration of Michael A. Marek , CFA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . pExh. A - Resum e
Motion by Bresea Resources Ltd . for discharge of Interim Receiver, with suppo rtingAffidavit by Roy Zana tta , filed August 21, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Q
Declaration of Jean Messmer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RExh. 1 - Second Supplemental Log of Non-Confidential Document sExh. 2 - Plaintiffs' Second Amended Post-Litigation Privilege Lo g
Declaration of Carole Braden . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SExh. 1 - Second Supplemental Log of Non-Confidential Document sExh. 2 - Plaintiffs' Second Amended Post-Litigation Privilege Lo g
Declaration of Marc A . Lieberman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TExh. 1 - Second Supplemental Log of Non-Confidential DocumentsExh. 2 - Plaintiffs ' Second Amended Post-Litigation Privilege Log
Declaration of Jack Ward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . UExh. 1 - Second Supplemental Log of Non -Confidential DocumentsExh. 2 - Plaintiffs ' Second Amended Post-Litigation Privilege Log
Declaration of Mark Scheuerm an . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VExh. 1 - Second Supplemental Log of Non-Confidential Document sExh. 2 - Plaintiffs ' Second Amended Post-Litigation P rivilege Log
Declaration of Carol K. Sylvester . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . WExh. A - Notice of Pendency of Class ActionExh. B - Proof of Claim Form for Bresea SharesExh. C - Proof of Claim Form for Bre-X SharesExh. D - Letter to Potential Class MembersExh. E - Letter to Potential Class Member sExh. F - Letter to Nominees and Brokerage HousesExh. G - Summary Notice Published in Wall Street Journal (August 1, 2002)Exh. H - Summary Notice Published in Wall Street Journal (August 2, 2002)
Declaration of John C . Coffee, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X
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UNITED STATES DISTRICT COURTFOR THE EASTERN DISTRICT OF TEXAS
TEXARKANA DIVISION
LANE McNAMARA, et al., §
Plaintiffs, §
§ No. 5-97-CV-159v . §
BRE-X MINERALS LTD ., et al., §
Defendants . §
MOTION FOR FINAL APPROVAL OFPROPOSED SETTLEMENT BETWEEN
PLAINTIFFS AND BRESEA RESOURCES LTD.
Plaintiffs and defendant Bresea Resources Ltd ., now named Sasamat Capital Corp . ,
("Bresea") respectfully move for final approval of their proposed settlement dated May 2002 (th e
"Settlement"). The Settlement represents a fair and reasonable recovery against Bresea, satisfies the
applicable requirements for approval by this Court, and has the support of affected investors .
I. Introduction
This Settlement is in the best interests of the proposed class .
The Bre-X scandal came to light more than five years ago -- long before Enron ,
Arthur Andersen, Sunbeam, Adelphi, WorldCom, and the rest . The fraud resulted in billion-dollar
losses to investors in the United States, Canada, and elsewhere . Share purchaser suits ensued, on
both sides of the border, followed by extensive litigation on a variety of threshold issues .
This case has moved steadily forward . Defendants have challenged every possibl e
issue, including venue, personal jurisdiction, subject matter jurisdiction, and now certification .
Plaintiffs' I Ob-5 claims have withstood intense legal challenges, and at some point the case will b e
tried on the merits against all nonsettling defendants . Merits discovery has yet to begin .
The Settlement is the first step towards investor compensation and ultimate resolutio n
of this controversy. Even if a small step, the Settlement is an important one . Nonsettling defendants
recognize this, as reflected by their feverish opposition . Likewise, investors recognize its merit .
After being debated and publicized for well over a year, and following notice in the Wall Street
Journal and by mail, the Settlement has not been opposed by a single investor.
Approving the Settlement will set no new standards in federal certification law, an d
it will not break any new l Ob-5 ground, despite defendants' rhetoric . Nor, regrettably, will it provide
full or even substantial redress to Bre-X and Bresea share purchasers . It merely would be anothe r
step forward in addressing the injuries inflicted in the now-infamous Bre-X gold scam .
Plaintiffs respectfully request final approval of the Se tt lement by the Court .
II. Preliminary Statemen t
In November 2001, plaintiffs and Bresea jointly moved the Court for preliminar y
approval of a previous settlement agreement that resolved investor claims asserted against Bresea
in both the U .S . and Canada (the "2001 Settlement") . (Dkt. #674) After oral argument and briefing
by the parties, the Court denied preliminary approval of the 2001 Settlement, focusing on tw o
portions of the proposed class period . (Dkt. #753)
After additional negotiations, plaintiffs and Bresea agreed, by means of a new
agreement, to modify the earlier proposed settlement in certain respects, including revising the
definition of the proposed settlement class in conformity with the Court's January 15, 2002 Order .
As set forth in the May 2002 Settlement Agreement, the revised proposed settlement class (th e
"Settlement Class") is defined as follows :
All persons who purchased or otherwise acquired Bre-X Minerals Ltd .common shares and/or Bresea Resources Ltd . common shares between
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January 17, 1994 and March 26, 1997 (inclusive), and who suffered a loss asa consequence of dealing in shares of Bre-X and/or Bresea ; excluding all non-U.S . residents who purchased their Bre-X and/or Bresea shares on a Canadianstock exchange ; and further excluding defendants in this action ; members oftheir immediate families; any subsidiary, affiliate, or employee of suchdefendant; any entity in which any such excluded person has or had acontrolling interest; and the legal representatives, heirs, successors, andassigns of any such excluded person .
The Se tt lement was submi tted to the Court for preliminary approval on May 17, 2002 .
(Dkt. #787) By its order dated July 3, 2002, the Court granted preliminary approval of the
Settlement, finding that it adequately addresses the Court's original concerns . (Dkt . #818) Plaintiffs
and Bresea thereafter provided notice to affected members of the Settlement Class . Having received
no objections from investors, plaintiffs and Bresea now ask the Court to grant final approval to the
Settlement, including certification of the proposed Settlement Class .
The Settlement has been executed by all parties, both in the U . S . and in Canada, with
claims against Bresea arising from the Bre-X scandal, namely : the Lead Plaintiffs and propose d
Class Representatives, through Lead Counsel in this action ; class counsel in an action brought in th e
Ontario Superior Court of Justice on behalf of Canadian purchasers of Bre-X common stock, known
as Carom, et al. v. Bre XMinerals Ltd., et al., Class Action No. 97-GD-39574 (the "Ontario Class
Action") ; class counsel in an action brought in the Ontario Superior Court of Justice on behalf o f
Canadian purchasers of Bresea common stock , known as Stein, et al. v. Bresea Resources Ltd., e t
al., Class Action No. 32615 (the "Ontario Bresea Action"); an action brought by Canadian Bre-X
and Bresea share purchasers in the Court of Queen's Bench of Alberta (the "Alberta Court"), know n
as Chow, et al. v. Bre-X Minerals Ltd., et al., Action No . 9701-14434 (the "Alberta Action") ;
Deloitte & Touche Inc ., in its capacity as Trustee of Bre-X Minerals Ltd . (the "Bre-X Trustee") ; and
Bresea itself.
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The terms of the Settlement are the result of prolonged and intense negotiations . As
the Court has observed, the discussions that ultimately led to the Settlement resulted from "strenuous
long-term negotiations between Plaintiffs and Bresea ." (Dkt . 4818 at 12) Those negotiations began
two years ago, resulting in a conditional agreement in October 2000 that was amended in January
2001 . Following further negotiations, the parties finalized the terms of a settlement in August 2001,
followed by final documentation and execution of the 2001 Settlement in October 2001 . After denial
of preliminary approval of the 2001 Settlement, the parties engaged in further negotiations, which
resulted in the current Settlement Agreement . See Third Declaration of Autry W . Ross, attached as
Exhibit A, at ¶ 4 .
The Settlement has been designed to effect the greatest recovery realistically possible
from Bresea for the Settlement Class while taking into account Bresea's limited financial resource s
and the risks of litigation . The Settlement was negotiated by Lead Counsel, who possess a firm
understanding of the strengths and weaknesses of plaintiffs' case, as well as of the financial position
of Bresea and its ability -- or inability -- to pay more than the consideration required by the terms of
the Settlement . Given Lead Counsel's evaluation of these factors and others, it is their considered
opinion that the Settlement represents a fair, reasonable, and adequate recovery from Bresea for the
Settlement Class and warrants approval by this Court .
III. History of the Case
The Court is familiar with the history of this litigation . Thus, while relevant portions
of the litigation's long history are discussed below, in the interest of judicial economy a wholesale
recitation of the case history is not included.
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IV. Overview of the Settlement
Measured in the context of Bresea's limited financial resources, this $7 million
Settlement confers significant benefits to members of the Settlement Class .
First, the Settlement provides that Bresea will pay $4 .59 million cash in settlement
of claims asserted by Bre-X share purchasers in this Action and actions pending in Canada . The
payment to Bre-X members of the Settlement Class is reduced by certain deductions, including a n
award of past and/or future expenses incurred by Lead Counsel in the amount of $382,666 ; an award
of fees and expenses incurred by Canadian shareholder counsel in the amount of $896,533 ; and a
reserve of $500,000 in the unlikely event that an award of costs is made in defendants' favor in either
this action or the Ontario Class Action .
Second, Bresea also will pay a separate $ 1 .31 million cash to the Bre-X Trustee in
exchange for the eight million Bresea shares held by Bre-X. The funds paid to the Bre-X Trustee
will likewise be available for distribution to Bre-X class members in their capacity as creditors of
the estate at the conclusion of the Bre-X bankruptcy proceeding, provided the funds are not expende d
for purposes of bankruptcy administration , including pursuing overseas insider suits . Provided that
the Bre-X Trustee obtains a declaration from the Alberta Bankruptcy Court that Bre-X share
purchasers are undisputed creditors of Bre-X, claims against insider defendants John Felderhof,
Jeannette Walsh, the Estate of David Walsh, and Stephen McAnulty will be pooled for purposes o f
future sharing among this action, the Ontario Class Action, and the Bre-X Trustee .
Third, the Settlement benefits U .S . Bresea Class Members who will part icipate in an
estimated $1 .1 million equity pool consisting of 10% of the outstanding shares of Bresea (the
"Pool") . Pursuant to the terms of the Bresea Arrangement, the Pool is subject to sharing with certai n
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other claim ants against Bresea, including class members who opt out of the Ontario Class Action ,
any person who opts out of this Action, and, subject to Alberta Court approval , persons in the U.S .
who purchased their Bre-X/Bresea shares after March 26, 1997 .
Completion of the Settlement is conditioned on the approval by those courts wit h
jurisdiction over the claims of Bre-X and Bresea share purchasers, including this Court, the Alberta
Court (which has jurisdiction over both the Bre-X bankruptcy proceeding and the Bresea
receivership proceeding), and the Ontario Court of Justice (which has jurisdiction over the Ontario
Class Action) . The Settlement is also conditioned on the approval of certain Canadian securities
regulators. As set forth in the Affidavit of Larry B . Robinson (attached as Exhibit B), all of these
approvals have been obtained, save final approval from this Court .
V. Final Certification of the Settlement Class Is Appropriate
In its July 3 Order, this Court preliminarily certified the proposed Settlement Clas s
under Fed . R. Civ . P. 23 . (Dkt. #818 at 11) Plaintiffs now move for final approval and certification
of the Settlement Class .
Provided that all of the requirements of Fed. R. Civ . P. 23 are met, it is appropriate
to certify a class for purposes of a se ttlement . Amchem Prod., Inc . v. Windsor, 521 U.S. 591 (1997) ;
Shaw v . Toshiba Am . Info. Sys., Inc., 91 F . Supp. 2d 942, 952 (E .D. Tex 2000). The decisio n
whether to certify a settlement class is left to the sound judgment of the district court, whic h
"maintains great discretion in cert ifying and managing a class action ." Mullen v. Treasure Chest
Casino, LLC, 186 F .3d 620 , 624 (5th Cir. 1999 ) . It is well-established that cou rts have adopted a
liberal construction of Rule 23 in shareholder suits seeking class action certification . See, e.g., Korn
v. Franchard Corp., 456 F.2d 1206, 1209 (2d Cir . 1972) (in determining class ce rt ification, cou rts
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must be "mindful of the admonition of liberality towards demands for class suit status in securitie s
litigation")
Of course, a district court "must first find that a class satisfies the requirements o f
Rule 23, regardless whether it is certifying the class for trial or for settlement ." In re Lease Oi l
Antitrust Litig., 186 F.R.D. 403, 418 (S .D. Tex. 1999) . See also Amchem, 521 U.S. at 621 ("The
safeguards provided by the Rule 23(a) and (b) class-qualifying criteria, we emphasize, are not
impractical impediments -- shorn of utility -- in the settlement class context."). Additionally, "a
district court [determining whether to certify a class for settlement purposes only] need not inquire
whether the case, if tried, would present intractable management problems . . . for the proposal is that
there be no trial ." Id. at 620 . Finally, noting certain concerns peculiar to settlement classes, bot h
the Supreme Court and other courts have stressed the importance of ascertaining that the class i s
being adequately represented . See id ; In re Prudential Ins. Co. of Am. Sales Practice Litig., 148
F.3d 283, 308 (3d Cir . 1998) .
In order to be certified , a class must satisfy the four requirements of Rule 23(a) and
fit within one of the categories of class actions set forth in Rule 23(b) . The Settlement Class meet s
these standards and accordingly should be certified for purposes of the Settlement .
A. The Class Satisfies the Requirements of Rule 23(a )
The general c ri te ria for certification of a class under Fed. R. Civ. P . 23(a) are
numerosity, commonality, typicality, and adequacy . The party seeking certification bears the burden
of proof of demonstrating that all four requirements of Rule 23(a) are satisfied . Castano v . American
Tobacco Co., 84 F.3d 734, 740 (5th Cir. 1996) .
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1. The Settlement Class is sufficiently numerous
Rule 23(a)(1) requires that the class be "so numerous that joinder of all [class ]
members is impracticable ."
In class action suits involving nationally traded securities, the numerosity requiremen t
is "generally assumed to have been met ." Zeidman v. J. Ray McDermott & Co., Inc., 651 F.2d 1030,
1039 (5th Cir . 1981) . The precise number and identity of class members need not be shown fo r
certification of the class ; good faith and common sense estimates suffice . See, e.g., Moskowitz v.
Lopp, 128 F.R.D. 624, 628 (E .D. Pa. 1989) ; Ashe v. Board ofElections, 124 F.R.D. 45,47 (E .D .N.Y.
1989). The oft-cited benchmark is that a class action is presumptively appropriate when the
members of the class exceed forty persons . See, e.g., Mullen, 186 F.3d at 624 (certifying a class of
between 100 and 150 members) ; see also 1 Newberg on Class Actions § 3.05, at 3-25 (citing the 40-
person benchmark) .
The numerosity requirement is not based on numbers alone , but also upon whethe r
joinder of all class members is practicable in view of the size of the class, judicial economy, the ease
of identifying its members, and the practicality of making service on them if joined. See, e .g . ,
Mullen, 186 F .3d at 624-25 (observing that geographical dispersion of the class may make joinde r
impracticable ) ; Republic Nat ' l Bank v . Denton & Anderson Co ., 68 F.R.D. 208 , 213 (N.D. Tex.
1975) (forty class members who reside in eleven states sufficient) .
The numerosity requirement is easily met here. During the Sett lement Class Period ,
Bre-X and Bresea common stock were publicly-traded securities . Before Bre-X began trading on
the NASDAQ , there were in excess of 200 million shares of Bre-X stock outst anding . See
Declaration of Jeffrey J . Leitzinger, attached as Exhibit C, at ¶ 25 . Similarly, during the pe riod in
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which Bresea traded on the Montreal Exchange, over 50 million Bresea shares were outstanding .
Id. at 1 4 1 .
Bre-X and Bresea shares were actively traded . During the Settlement Class Period ,
the average weekly trading volume for Bre-X common stock ranged from over 390,000 shares whe n
Bre-X traded on the Alberta Stock Exchange to 11 .8 million shares when Bre-X traded on th e
Toronto Stock Exchange and NASDAQ . Id. at ¶¶ 25, 41 . Average weekly trading volume for
Bresea shares , which traded only on the Montreal Exchange , was 1 .1 million shares . Id. at ¶ 41 .
Thus, while the exact number of members of the Settlement Class may not be known ,
it is clear that, given the extensive volume of Bre-X and Bresea shares traded, their number is s o
large as to make joinder impracticable .
2. Common questions of law or fact exis t
Plaintiffs' claims need not all be identical to meet the commonality requirement o f
Rule 23(a)(2) . Instead, "a court will normally find commonality where a question of law refers t o
standardized conduct by defendants towards members of the proposed class ." In re AmeriFirst Sec.
Litig., 139 F.R.D. 423, 428 (S.D . Fla. 1991) .
Plaintiffs allege that members of the Settlement Class purchased Bre-X and/or Brese a
stock at artificially inflated prices during the period when Bresea made material omissions and
disseminated false and misleading statements. The artificial price inflation affected all class
members. It follows that numerous issues of law and fact are common to all members of the
proposed Settlement Class, as against Bresea, such as :
• whether the federal securities laws were violated by Bresea's acts andomissions ;
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• whether Bresea had a duty, but failed, to disclose material information to theinvesting public concerning the business, resources, properties, financialcondition, value, and prospects of Bre-X/Bresea;
• whether documents, press releases, and other statements disseminated to theinvesting public by Bresea during the Settlement Class Period misrepresentedmaterial facts about Bre-X/Bresea ;
• whether statements made on behalf of Bresea to the investing public duringthe Settlement Class Period misrepresented or omitted to disclose materialfacts about Bre-X/Bresea ;
• whether the market prices of Bre-X and Bresea common stock during theSettlement Class Period were artificially inflated due to the materialomissions and misrepresentations of Bresea; and
• to what extent the members of the Settlement Class sustained damages andthe proper measure of damages .
See Am. Compl . (Dkt . #437) at ¶ 97 .
Securities cases containing such common questions repeatedly have been found t o
satisfy the commonality requirement . See, e.g., Feinberg v. Hibernia Corp., 1992 WL 176119, at
* 5 (E .D. La . 1992) (commonality requirement satisfied in secu rities class action where "main focus"
of suit was "whether defendants' alleged misrepresentations and omissions artificially inflated th e
market," the resolution of which "will affect all or a significant number of class members") ; Longden
v. Sunderman, 123 F .R.D. 547, 553 (N.D. Tex . 1988) ("The class action device is approp riate in
securities fraud cases involving similar or identical misrepresentations, even if they are issued at
different times .") ; In re Baldwin-United Corp. Litig., 122 F .R.D. 424, 426 (S.D.N.Y. 1986) ("The
nub of plaintiffs' claims is that material information was withheld from the entire putative class . . .
either by written or oral communication. Essentially, this is a course of conduct case, which as ple d
satisfies the commonality requirement of Rule 23") ; Dura-Bilt Corp. v . Chase Manhattan Corp., 89
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F.R.D. 87, 93 (S .D.N .Y. 1981) ("existence, materiality, and character of the alleged
misrepresentations and omissions" constitute common questions) .
3. Plaintiffs' claims are typical of those of the Settlement Clas s
Under Rule 23(a)(3), typicality exists when the plaintiffs' claims arise "from the sam e
event or course of conduct that gives rise to claims of other class members and the claims are base d
on the same legal theory ." Longden v. Sunderman, 123 F .R.D. at 556 ; Durrett v. John Deere Co . ,
150 F.R.D. 555, 558 (N .D. Tex. 1993) . The test for typicality, like commonality, is not demanding .
Shipes v . Trinity Indus., 987 F.2d 311, 316 (5th Cir. 1993) .
It is the nature of the claims that determines whether the class representatives' claim s
are typical, "not the specific facts from which the claims arose or [the] relief sought ." In re Firs t
RepublicBank Sec. Litig., 1989 WL 108795, at *I I (W.D . Tex. 1989) . Thus, the requirement i s
satisfied even if factual differences exist between the claims of the class representatives and the clas s
members . Id. Nor must the class representatives ' claims and the claims of other class members al l
be "identical ." Phillips v . Joint Legislative Comm. on Performance & Expenditure Rev., 637 F.2d
1014, 1024 (5th Cir . 1981) ; Ligon v. Frito-Lay, Inc., 82 F .R.D. 42, 47 (N.D. Tex. 1979) .
The typicality requirement is satisfied here . Plaintiffs stand in the same position as
other members of the Settlement Class, as they each purchased shares of Bre-X and/or Brese a
common stock during the Settlement Class Period. Accordingly, the proof that plaintiffs offer, an d
the legal theo ries they advance, are basic to the claims of all members of the Settlement Class, and
their claims are typical of those of the Settlement Class .
-11-
4. The adequacy requirement is me t
The adequacy requirement of Rule 23(a)(4) mandates a two-fold inquiry : first ,
whether the class representative has the willingness and ability to take an active role in and contro l
the litigation in order to protect the interest of the absentees ; and second, whether the clas s
representative 's counsel will act with the requisite zeal and competence . Horton v. Goose Creek Ind.
Sch. Dist., 690 F.2d 470, 484 (5th Cir . 1982) . Rule 23(a)(4) mandates that the class representative s
not have interests that are antagonistic to the class, a requirement that is met where "all clas s
members are united in assert ing a common right , such as achieving the maximum possible recovery
for the class ." In re Corrugated Container Antitrust Litig., 643 F .2d 195, 208 (5th Cir . 1981) .
a. The proposed Settlement Class Representatives are adequate
To satisfy the adequacy requirement of Rule 23, the Fifth Circuit has held that clas s
representatives in securities fraud class actions must be "willing" and "able" to actively control the
case and protect the interests of absentee investors . Berger v. Compaq Computer Corp., 257 F .3d
475, 482-83 (5th Cir . 2001). To fulfill this role, class representatives must possess a sufficient
understanding of the facts and theories of their claims , but they are not required to be "legal
scholars." Id. at 483 . On rehearing, the Fifth Circuit has emphasized that this standard does no t
constitute an "additional requirement" under its traditional adequacy analysis, and that putative clas s
representatives were not required to possess a level of understanding of the issues beyond those sam e
traditional standards . Berger v . Compaq Computer Corp., 279 F.3d 313 (5th Cir . 2002) .
The proposed representatives for the Settlement Class -- Marc Lieberman, Carole
Braden, Jack Ward, Jean Messmer, and Mark Scheuerman -- are undoubtedly familiar to the Cour t
as a result of their roles with respect to the proposed merits classes . Mr. Lieberman, Mrs . Braden ,
and Mr. Ward are proposed representatives of the NASDAQ Class; Ms. Messmer and Mr .
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Scheuerman are proposed representatives of the Canadian Exchange Class . In addition, Ms .
Messmer and Mr . Scheuerman are Lead Plaintiffs in this case, and Mr . Lieberman has moved the
Court to be substituted in place of his father, the late Dr. Melvyn Lieberman, as a Lead Plaintiff .
In connection with plaintiffs ' request to ce rt ify the NASDAQ Class, Ms . Messmer,
Mrs. Braden, and Messrs . Lieberman, Ward, and Scheuerman have been deposed and been the
subject of testimony by defendants' certification expert Geoffrey C. Hazard, Jr . and plaintiffs' expert
John C. Coffee, Jr . Mr. Lieberman and Professor Coffee provided live testimony at the evidentiary
hearing in November 2001 concerning plaintiffs' NASDAQ Class certification motion . Finally, with
respect to plaintiffs' request to certify the Canadian Exchange Class, Ms . Messmer and Mr.
Scheuerman were deposed by defense counsel a second time in August 2002 .
The testimony of the proposed representatives of the Settlement Class, coupled wit h
the conclusions of defense expert Hazard and plaintiffs' expert Coffee, conclusively establishes th e
adequacy of each to act as Settlement Class Representatives .
i . Marc Lieberman
Marc Lieberman is well qualified to serve as a class representative. He is a busines s
lawyer from California, with a special expertise in bankruptcy and insolvency issues . Exh. D at 17 ,
66. As an attorney, he often acts as general counsel for his clients, and in that capacity, he ha s
experience in managing attorneys on behalf of his clients. Exh. E at 55 .
Referenced excerpts from the depositions of Marc Lieberman, Jack Ward , Carole Braden, JeanMessmer, and Mark Scheuerman taken in connection with plaintiffs ' NASDAQ Class ce rt ificationmotion are attached as Exhibits D , G, H, I, and K , respectively . Referenced excerpts from thesecond depositions of Jean Messmer and Mark Scheuerman taken in August 2002 in connection withplaintiffs' Canadian Exchange Class ce rt ification motion are attached as Exhibits J and L .Referenced excerpts from the deposition of Professor Hazard (also taken in connection withplaintiffs ' NASDAQ Class certification motion) are a ttached as Exhibit F, and referenced excerptsfrom the NASDAQ Class certification hearing are a ttached as Exhibit E .
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Mr. Lieberman understands his responsibility for managing and supervising Lea d
Counsel, which he has described as taking "an active role in understanding the strategies and lega l
theories that are advanced by my counsel." Exh. E at 89. Mr. Lieberman has demonstrated hi s
ability to supervise counsel by, in his capacity as a proposed NASDAQ class representative,
negotiating (along with Ms . Braden and Mr . Ward) a fee arrangement with Lead Counsel which,
based on a tiered-approach to potential recoveries, provides an incentive to Lead Counsel to "go
beyond the easy case" and to accept the "risk of going to trial ." Exh. E at 94 .
Certification experts for both plaintiffs and defendants concur that Mr . Lieberman
possesses the attributes of an ideal PSLRA class representative . According to Professor Hazard, Mr .
Lieberman is "competent"; "an intelligent man"; a "strong individual"; "a guy that can pick things
up" ; and not surprisingly, a "well-qualified person" to be a class representative . Exh. F at 53, 54-55 ,
168, 190 . Professor Coffee agrees, noting that Mr . Lieberman is "deeply committed" to the cas e
based on the obligation he feels to his father, and that the service already rendered by Mr . Lieberman
is "vastly greater," in Professor Coffee's experience, than that provided by many institutiona l
investors in other cases . Exh. E at 150-51 .
ii. Jack Ward
Jack Ward is a real estate attorney from Georgia. Exh. G at 12-13 . He has a smal l
law firm that represents sixty or so bank and mortgage company clients . Id. at 13, 19-22 . In his 24
years of law practice , he also has had substantial courtroom experience . Id. at 133-34 . Before his
career as a lawyer , he was a successful businessman . Id. at 20-21 .
Mr. Ward intends to prosecute the case actively and to work closely with his lawyers .
Id. at 68 . He understands his duties as a class representative to include monitoring the case and
counsel, keeping up with the case, making required appearances, and consulting with other clas s
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members , as necessary . Id. at 144-45 . He also is familiar with the operative pleadings of this case ,
including the Amended Complaint (Dkt . #437) and the Court's Order denying certain defense
motions to dismiss (Dkt. #477) . Id. at 29, 86 .
The parties' certification experts agree that Mr. Ward is qualified to act as a clas s
representative . Professor Hazard believes that Mr . Ward is a "sufficient" class representative who ,
as part of a group with Mr. Lieberman and Mrs . Braden, is "within the limits of reasonable ." Exh.
F at 188, 190-91 . For his part, Professor Coffee says that, as an attorney, Mr . Ward understands "th e
business of how a client can control an attorney" and seems "a sophisticated lawyer with knowledg e
of financial transactions ." Exh. E at 154-55 .
iii. Carole Braden
Carole Braden is a part-time private duty nurse from Hope, Arkansas . Exh. H at 9-10 .
She is willing and able to serve as a class representative and "is willing to do whatever it takes to
help out in this ." Id at 49 , 141 . In this regard, she has reviewed a number of pleadings , including
defense motions to dismiss, various complaints filed by the plaintiffs, and the Court's orders on th e
motions to dismiss . Id. at 52-54. She is aware of defendants and their role in the Bre-X scheme ,
including J.P. Morgan, Nesbitt, Barrick, Kilborn, David and Jeanette Walsh, John Felderhof,
Rolando Francisco, and Bresea. Id. at 89-90. As the Court will recall, Mrs . Braden has routinely
attended hearings held in this matter .
Both Professor Coffee and Professor Hazard see benefit in the fact that Mrs . Braden
matches the character of the typical class member. Although Mrs. Braden is "an ordinary person, "
Professor Hazard believes she will contribute to a "broader representation in terms of personalities
and so on" in the class representative group . Exh. F at 188-89. As part of a class representative
group with Messrs . Lieberman and Ward, she is "within the limits of reasonable ." Id. at 191 .
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Professor Coffee concurs on the grounds that someone who "matches the character of the typical
class member" gives greater public confidence that Congress' intention of creating a system "i n
which we substituted clients for attorneys" has been achieved. Exh. E at 155-56 .
iv. Jean Messmer
An active Lead Plaintiff in this case since 1997, Jean Messmer is well qualified to
serve as a representative for the Settlement Class . She is a funding coordinator for an estate plannin g
law firm in Mississippi . Exh. I at 10-12. In that capacity, she has significant exposure to various
financial issues, including those related to stocks, bonds, real estate, insurance, and related matters .
Id. at 12. She previously has been employed as an executive assistant to the CEO of a New Orleans-
based diversified holding company . Id. at 10-11 .
Ms. Messmer has read "every one" of the pleadings provided to her by counsel ,
reviews litigation updates provided by counsel, and visits the Bre-X litigation web site on a regular
basis . Id. at 21-22, 28, 30, 89-90, 100 . She has a comprehensive understanding of both the
procedural posture of the case, as well as the substance of plaintiffs' allegations . Thus, for example,
having carefully analyzed the issue of whether any conflict exists among the proposed classes in thi s
action, she has concluded (along with the other representatives) that no conflict exists because al l
classes are interested in maximizing their recovery from defendants that have ample resources to pay
any judgment. Exh. J at 16-18 .
Ms. Messmer has closely tracked settlement negotiations with Bresea and othe r
defendants . Exh. I at 32-35 , 211-21, 227-33 . She has a thorough understanding of the terms of the
Settlement, including the likely compensation to Settlement Class Members, the amount of expense s
sought by Lead Counsel, an d the reasons for the Court' s ruling on the 2001 Settlement . Exh. J at
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38, 42-45 . She has a strong interest in the successful outcome of this case , having lost some $60,000
on her investments in Bre-X and Bresea stock . Exh. I at 113 .
To Professor Hazard, Ms. Messmer "struck me as an intelligent woman." Exh. F at
169. "I think in terms of personality, intelligence , ability to focus, she would be within normal
limits, certainly ; put it that way ." Id. With her as part of the Lead Plaintiff group, including Mar c
Lieberman, Professor Hazard concluded, "I think it's ce rtainly a respectable group ." Id. at 171 .
v. Mark Scheuerman
By virtue of his education and employment, Mark Scheuerman is well qualified t o
serve as a class representative . He has bachelors and masters of science degrees from Texas A&M
University, where he also took courses in finance, accounting, and business management . Exh. K
at 10-11 . Currently, he is an industrial plant manager for the Texas Department of Criminal Justic e
in Rosharon, near Houston . Id. at 9 .
Mr. Scheuerman has reviewed key pleadings in the case, including the Court's March
30, 2001 order (Dkt . #477), and also receives updates from counsel concerning developments in th e
litigation. Exh. K at 167, 176 . He is very familiar with the terms of the Settlement, including th e
amount and nature of consideration to be paid to Bre-X and Bresea share purchasers . Exh. L at 38-
42 . Mr. Scheuerman (along with Ms . Messmer) also negotiated a favorable fee arrangement with
Lead Counsel in connection with the proposed Canadian Exchange Class . Id. at 29-32 .
He is strongly motivated to act as a willing and able class representative . He wants
to recoup his financial loss, and he also wants to make sure that culpable parties do not "get away"
with their actions . Exh. K at 61, 100 . In his role as a Lead Plaintiff, he understands that he has been
responsible for supervising his attorneys, monitoring the litigation, and representing members of th e
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proposed classes . Professor Hazard concluded that it would be "appropriate" to include Mr .
Scheuerman as part of the Lead Plaintiff group . Exh. F at 171 .
vi. These are proper Settlement Class Representatives
None of the proposed representatives has an interest that is antagonistic to th e
Settlement Class . In their past briefing, defendants have argued that the representatives of the
Settlement Class are conflicted by virtue of their concurrent representation of the NASDAQ Class
and Canadian Exchange Class . This argument overlooks the fact that all of the representatives have
the same incentive "to make the maximum recovery" on behalf of the Settlement Class, which the
Court has noted . (Dkt. # 818 at 14) In their recent depositions, both Ms . Messmer and Mr .
Scheuerman confirmed that no conflict exists, on the basis of their roles as representatives of the
Canadian Exchange Class and the roles of Mrs . Braden and Messrs . Lieberman and Ward as
representatives of the NASDAQ Class, because all share the goal of a "maximum recovery ." Exh .
J at 16-17 ; Exh. L at 13 .
Because of their demonstrated ability and willingness to supervise and monitor the
activities of Lead Counsel, as well as their knowledge of facts and issues of this case, each of the five
proposed representatives of the Settlement Class is adequate within the meaning of Rule 23(a)(4) .
As observed by Professor Coffee, "whether evaluated in terms of education, motivation, or economic
issues, the proposed representatives are clearly above average ." See Declaration of John C . Coffee,
Jr., attached as Exhibit X, at ¶ 10 .
b. Lead Counsel is adequate
In addition to considering the adequacy of the proposed class representatives, a court
must also consider the adequacy of class counsel . Compaq, 257 F.3d at 479 . As applied to class
counsel, the adequacy requirement of Rule 23 mandates an inquiry into their "zeal and competence . "
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Id. Using slightly different words, other courts have reiterated the same standard for plaintiffs '
counsel . See, e.g., Sosna v. Iowa, 419 U.S. 393, 403 ( 1975) ; Gonzalez v . Cassidy, 474 F.2d 67, 7 2
(5th Cir. 1973) ; Gibb v . Delta Drilling Co ., 104 F.R.D. 59, 74-75 (N.D. Tex . 1984) .
Here, plaintiffs seek appointment of Lee Godfrey and his firm Susman Godfre y
L.L.P., and Paul Yetter and his firm Yetter & Warden, L.L.P ., as counsel for the Settlement Class .
On October 27, 1997, the Court appointed both as Lead Counsel . (Dkt. #28)
i . Competence of Lead Counse l
In support of their appointment as class counsel for the Settlement Class, both
Susman Godfrey and Yetter & Warden have submitted firm resumes and other information attesting
to their qualifications to serve as class counsel . See Exhs. M & N. Based on these submissions, it
is evident that both firms are well-qualified to serve as class counsel in a complex, multi-defendant
securities fraud class action such as this case .
Susman Godfrey is a firm dedicated exclusively to litigation since its founding more
than twenty years ago . Its named partner Lee Godfrey is well known for his skill and competence .
With 56 lawyers in offices in Houston, Dallas, Seattle, and Los Angeles, the firm is "highly respecte d
and well-known" as one of the top litigation boutiques in the country . Exh. F at 148 (Prof. Hazard) .
The firm has compiled a proven record of success : it has won verdicts with a cumulative dolla r
amount over $2 billion; and it has settled more than 75 lawsuits with million-dollar-plus payments
to its clients, representing total recoveries of over $2 .2 billion. Moreover, it has an acknowledge d
expertise in complex securities litigation, having handled dozens of shareholder class actions an d
derivative suits . See Exh. M .
Yetter & Warden was co-founded by Paul Yetter, a former partner of Baker Bott s
L.L.P ., a well-regarded "big deal firm ." Exh. F at 148 (Prof. Hazard) . While at Baker Botts, he was
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a key trial lawyer on several of that firm 's largest cases . Since its founding in 1997, Yetter &
Warden has established a solid record of success in commercial litigation, including having secure d
twelve settlements in excess of $1 million, representing total recoveries of over $500 million . The
ten-lawyer firm specializes in securities, antitrust, intellectual property, and other complex busines s
litigation for both plaintiffs and defendants . Exh. N .
The Court has noted the competence of Lead Counsel in pursuing investor claims in
this action. When granting preliminary approval of the Settlement, the Court stated that "counse l
on all sides" have demonstrated their "knowledge of the facts and law relevant to this case ." (Dkt .
#818) The evidence described above confirms the Court' s conclusion .
H. Zeal of Lead Counsel
The performance of Lead Counsel in this case demonstrates their zeal to protect th e
interests of plaintiffs and absent class members.
Defendants to date have filed at least 42 substantive motions raising virtually every
pretrial issue that could arise in federal securities litigation . Defendants have :
• challenged the Court' s subject matter jurisdiction under Rule 12(b)(1) ;
• challenged personal jurisdiction under Rule 12(b)(2) ;
• challenged venue under Rule 12(b)(3);
• demanded dismissal for failure to state a valid claim under Rule 12(b)(6) ;
• demanded dismissal on grounds of international comity ;
• demanded dismissal on grounds offorum non conveniens;
• demanded dismissal or stay in lieu of Canadian proceedings ;
• contested the pleading particularity of plaintiffs' pleadings under Rule 9 ;
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• objected to providing Rule 26 initial disclosures prior to a ruling on thedismissal motions ; and
objected to providing Rule 26 disclosures as required by the terms of LocalRules as in effect when this suit was filed .
For each defense motion, Lead Counsel responded in a timely, efficient, and vigorous
manner . Their dedication has resulted in success for plaintiffs on most aspects of the dismissal
motions, against formidable adversaries . In short, the record in this case amply reflects th e
commitment and zeal of Lead Counsel to safeguard the interests of their clients and absentees .
Lead Counsel also have been diligent in keeping investors informed about th e
progress of the litigation. In mid 1997, counsel established a toll-free number (888-308-9480) fo r
investors to call for periodic updates on the litigation . In early 1998, counsel established a dedicate d
e-mail address (brexclass@yetterwarden. com) for investors to request additional information abou t
the case . Counsel also created a litigation web site in 1998 (www . brexclass . com), as a source fo r
investors interested in obtaining information about plaintiffs' claims and the Court's rulings .
Defendants' certification expert has confirmed that maintaining a litigation web site is "a plus" ; a
dedicated email address for investors is "a positive" ; and a toll-free information line "woul d
facilitate" communications between counsel and investors . Exh. F at 154, 157-58 .
In view of the hard-fought nature of this case, there is no doubt that Lead Counse l
have demonstrated the required zeal in prosecuting the claims of the proposed class . The Court has
observed as much, noting that investor claims have been pursued in this action "with vigor an d
determination ." (Dkt. #818 at 12) 2
2 In connection with certification of the proposed NASDAQ Class , nonsett ling defendants attackedLead Counsel ' s adequacy on the basis of certain alleged "improprieties ." Responses to theseallegations were fully briefed both at the time of the NASDAQ Class certi fication hearing and morerecently in connection with plaintiffs' Canadian Exchange certification motion . Rather than
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B. The Requirements of Rule 23 (b)(3) Also Are Satisfied
In addition to the prerequisites of subdivision (a), Rule 23 requires satisfaction of a t
least one of the three alternatives under subdivision (b)(3) . Rule 23(b)(3) provides that an actio n
may be maintained as a class action if the prerequisites of subdivision (a) are satisfied, an d
the court finds that the questions of law common to the members ofthe class predominate over any questions affecting only individualmembers and that a class action is superior to other available methodsfor the fair and efficient adjudication of the controversy .
As discussed below, the requirements of Rule 23(b)(3) are met here .
1 . Common questions of law or fact predominat e
In determining whether common questions predominate, a court's inquiry is directe d
primarily toward the issue of liability . In re Alexander Grant & Co. Litig., 110 F.R.D. 528, 534
(S.D. Fla. 1986) . If the liability issue is common to the class , common questions are held to
predominate over individual questions . Dura-Bilt, 89 F.R . D. at 93 ; Green v. Wolf Corp., 406 F .2d
291, 301 (2d Cir . 1968) .
a. Liability issues predominate
Here, Bresea's liability turns upon issues which are common to members of th e
Settlement Class . Plaintiffs have alleged that Bresea (and other defendants) engaged in a course o f
conduct designed to artificially inflate Bre-X and Bresea common stock prices, to the injury of al l
Settlement Class members . Proof of Bresea's conduct in satisfaction of these requirements
establishes predominant commonality .
As such there are no significant, much less predominant, individual issues in this case .
This includes an y issue as to reliance .
repeating those arguments here, plaintiffs incorporate that briefing here by reference . See Dkt . #724at 19-44; #772 at 53-82; #817 at 11-12 .
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b. Reliance issues are common to all plaintiff s
In Basic, Inc. v. Levinson, 485 U.S . 224 ( 1988), the Supreme Court answered two
important questions concerning the role of reliance in securities fraud class actions :
• How does a class of plaintiffs in a Section 10(b) securities case provereliance, a historically personal and individual issue, when they did not readthe false statements that drove the market price ?
• How do these plaintiffs, on the uniquely individual issue of reliance, satisfythe Rule 23(b)(3) requirement that common questions of fact predominate ?
The Court found that a rebu ttable presumption of reliance based on the fraud -on-the-market doctrine
solved both issues . Specifically, the Supreme Court stated, "where materially misleading statements
have been disseminated into an impersonal, well-developed market for securities, the reliance o f
individual plaintiffs on the integrity of the market price may be presumed ." Id. at 247.
We should not lose sight of the Court's rationale when it approved this presumption :
Requiring proof of individualized reliance from each member of theproposed plaintiff class effectively would have prevented respondentsfrom proceeding with a class action, since individual issues thenwould have overwhelmed the common ones .
Id. at 242 . In substance , a class need not produce testimony from each class member that he or she
read and relied on the false press releases, prospectuses, accounting certifications, or financials mad e
by defendants with the professional advice and support of others . A relation between the market
price and information about the issuer will show that the market "read" and "relied" on th e
information for the shareholder, who purchased in the market and thus constructively relied on the
information digested by the market and reflected in the stock's price .
What is a "well-developed, efficient, and information-hungry market"? Id. at 249
n.29. In determining the existence of an efficient market, courts typically look to factors such as th e
existence of significant trading volume ; the presence of a significant number of analysts who follo w
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the stock; whether news and other information were readily available ; and whether empirical facts
show a cause-and-effect relationship between unexpected corporate events or financial releases and
an immediate response in the stock price, among other non-exclusive factors . See, e .g., Krogman
v. Sterritt, 202 F .R.D. 467, 474 (N.D. Tex. 2001) ; Cammer v. Bloom, 711 F. Supp. 1264, 1285-87
(D.N.J. 1989) . These judicially-crafted factors establish that Bre-X and Bresea stock was trade d
efficiently, both on U.S . and Canadian exchanges .
The Settlement Class includes purchasers of Bre-X/Bresea stock who acquired their
shares on the following exchanges and during the following time periods :
purchasers of Bre-X stock who acquired their shares on the NASDAQExchange during the period August 19, 1996 through March 26, 1997 ;
U.S . purchasers of Bre-X stock who acquired their shares on one of threeCanadian exchanges, the Alberta Stock Exchange ("ASE"), Toronto StockExchange ("TSE"), and Montreal Exchange ("ME"), during the periodJanuary 17, 1994 through March 26, 1997 ; and
U.S . purchasers of Bresea stock who acquired their shares on the MontrealExchange during the period January 17, 1994 through March 26, 1997 .
Under applicable case law, and for the reasons set forth in the Leitzinger Declaratio n
and the Declaration of Professor Ronald M. Giammarino (attached as Exhibit 0), Bre-X and Brese a
shares traded efficiently on each of these markets, and purchasers of those shares are therefor e
entitled to the presumption of the fraud-on-the-market doctrine .
c. Bre-X shares were traded efficiently on the NASDAQ exchange
i. Average weekly trading volume
According to Dr . Leitzinger, 354.5 million shares were traded on the NASDAQ and
TSE during the time period Bre-X traded on NASDAQ, and over 2 .3 million shares traded on an
average trading day . Exh. C at ¶ 13 . As measured in terms of weekly turnover, no fewer tha n
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approximately 3 .8% of Bre-X's shares changed hands weekly, as measured as a percentage of th e
public "float" -- those shares held by non-insiders . In terms of Bre-X's total outstanding shares, no
fewer than approximately 2 .3% of Bre-X ' s shares traded on a weekly basis . Id. at ¶ 27 .
These results for Bre-X share trading exceed the 2% benchmark required to obtain
a "strong presumption" of market efficiency . Cammer, 711 F. Supp. at 1286 . 3
H. Number of analysts
During the period Bre-X traded on NASDAQ, numerous secu rities analysts closely
followed and made public forecasts of Bre-X's financial prospects . This included U .S.-based
analysts from J.P. Morgan and Lehman Bros ., along with Canadian-based analysts from CIBC Worl d
Markets, Inc . ; Loewen, Ondaatje, McCutcheon Ltd . ; Nesbitt Burns, Inc . ; and Yorktown Securities .
Exh. C at 118 .
iii . Number of market makers
Several of the largest American investment firms were active "market makers" fo r
Bre-X common shares , including Smith Barney, Inc., Bear Stearns & Company, and Merrill Lynch .
At all points while Bre-X traded on NASDAQ, there was a minimum of fourteen market makers, and
as many as twenty-one. Exh . C at ¶¶ 12, 16 .
Nonsettling defendants have criticized these comparisons on two grounds, neither of which ispersuasive. Defendants first argued that plaintiffs may have "double-counted" certain NASDAQtrades . The calculations cited above, however, give defendants the full benefit of their argument,even though their contention is methodologically unsound and unsupported by evidence or expertopinion . As shown above, those results nevertheless exceed the 2% benchmark associated with a"strong presumption" of market efficiency . Second, these defendants attacked the inclusion of TSEdata in some analyses . As Dr. Leitzinger has explained, however, that inclusion is entirelyappropriate because market information does not stop at the exchange doors or national borders, andinformation generated as a result of trades on either the NASDAQ or TSE becomes available to bothexchanges . Exh. C at ¶¶ 28-29 .
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iv. Responsiveness of stock price to unanticipated new s
The price of Bre-X common shares reacted quickly to news regarding the financial
prospects of Bre-X . According to Dr . Leitzinger, the most obvious example was the reaction of th e
market to the public statements on March 26,1997 made by Bre-X and Freeport McMoRan that gold
reserves at the Busang project were likely overstated, whereupon Bre-X's stock declined 83% in a
single day . Exh. Cat ¶ 35 .
v. Capitalization
At the time it began trading on the NASDAQ, Bre-X had a market capitalization o f
$3 .9 billion. It was the twenty-seventh largest company traded on the NASDAQ, falling within the
top 0 .5% of all companies listed on the NASDAQ . In terms of relative market capitalization, Bre-X
was larger than such American companies as Novell, Northwest Airlines, Apple Computer,
Netscape, and Starbucks . Bre-X was by far the largest company trading on the NASDAQ whose
primary business was gold exploration and development . Exh. C at ¶ 14 .
vi. "Random walk"
A further indication of market efficiency is the absence of a correlation between a
coming period 's price change and a previous period ' s price change . With an informationall y
efficient market, future prices cannot be forecasted based on current information since that
information is already fully incorporated in the current price of a stock . Tests which measure thi s
phenomenon, including the "random walk" test, highlight market inefficiency where an investor ca n
use past prices in combination with unassimilated information to predict future prices .
Here, Dr. Leitzinger performed the random walk test on Bre-X's stock prices on th e
NASDAQ . He found the pattern prices to be consistent with market efficiency. Exh. C at IT 32-34.
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Other courts have relied upon similar tests which measure the extent of autocorrelation between
stock prices . See, e .g., In re Gaming Lottery Sec . Litig., 2001 WL 204219, at * 17 (S .D.N.Y. 2001) .
vii . Bid-ask spread
A large "bid-ask" spread indicates trading activity is affected "to an unusual extent
by individualized information across buyers and sellers of the stock," and it "may mean that publicly
available information about the stock is not finding its way into its trading activity ." Exh. C at ¶ 30 .
Here, Bre-X's bid-ask spread on the NASDAQ averaged a relatively low 24 cents . Id. at ¶ 31 . In
contrast, during the first twenty days of January 1997, for example, over half of all NASDAQ stocks
had a spread of 25 cents or more . Id.
viii . Additional factors
Dr. Leitzinger has provided relevant information beyond the Cammer factors. Prior
to Bre-X's listing on the NASDAQ, U .S. institutions owned almost 14 .8 million Bre-X common
shares . By December 1996, U .S. institutions held almost 27 million Bre-X shares, nearly twice as
much, representing 21% of total publicly-held shares . Exh. C at ¶ 24. As to this trading by
institutional investors, Dr . Leitzinger concludes, "Because these institutions control large blocks of
shares, public information flows that affected Bre-X's future financial prospects would be
assimilated quickly." Id.
ix. Conclusion of NASDAQ market efficiency factors
Courts confronted with much less favorable indicia have found market efficiency .
For example, in Simpson v. Specialty Retail Concepts, 823 F. Supp. 353, 355 (M.D .N.C. 1993), the
company had only 1 .87 million shares outstanding ; about 600 shareholders ; a weekly trading volume
of less than 14,000 shares ( .75% of its outstanding shares) ; only three analysts reporting on it ; and
but six firms acting as market makers for it . Yet on summary judgment, the court refused to resolve
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market efficiency as a matter of law, stating that "there is enough evidence in the record to support
a jury's finding that the market for SRC stock at the relevant time was efficient ." Id.
d. Bre-X and Bresea shares were traded efficiently on Canadianexchanges
As was the trading of Bre-X shares on the NASDAQ, the markets for both Bre-X and
Bresea common stock were efficient on the C anadian Exchanges -- the TSE, ASE, and ME .
i . Characteristics of the exchange s
As an initial matter, the ASE, ME, and TSE each possesses characteristics commonl y
associated with an efficient exchange . According to Professor Giammarino, a professor on th e
Faculty of Commerce and Business Administration at the University of British Columbia, the TSE ,
ME, and ASE were equipped with trading and information structures which allowed information to
be efficiently used in setting security p rices . Exh. 0 at ¶ 33 .
During the relevant period, the ASE was a progressive, modern exchange . Its listings
included many blue chip Canadian companies, such as Air Canada, Alberta Energy Corporation, an d
the country's four largest chartered banks . In addition, the total value of shares traded on the AS E
rose each year that Bre-X was listed on that exch ange . Id. at ¶ 16.4 The ME, whose origins date t o
1874, also experienced increasing total traded share value in the years 1994 through 1996 . Its
listings featured many of Canada's best known corporations, including Bombardier, Northern
Telecom, and Seagrams . Id. at ¶ 22. Finally, the TSE (founded in 1878) is one the largest exch anges
in the world and lists most of the traded companies in Canada . Id. at ¶¶ 27-28.
The ASE merged with the Vancouver Stock Exchange in 1999, to form what is now called the TSXVenture Exchange . This exchange, like the ASE, is based in Calgary and lists companies that areactive primarily in the mining, oil and gas, manufacturing, technology, and financial services sectors .
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As modern, technologically sophisticated exchanges, the ASE, ME, and TSE eac h
possessed a number of characteristics that supported the efficient use of published information ,
which in turn promoted the efficient setting of security prices :
Each exchange possessed strict reporting requirements, including thesubmission of annual and interim financial reports, notification of dividendsand distributions, and notification of material change of affairs . Thesereporting requirements enhanced the information dissemination and tradingopportunities needed for prices to reflect published information efficiently .Exh. 0 at ¶¶ 9-10 .
• Each exchange had a "Market Surveillance Department," which wasresponsible for investigating unusual price or volume trading . Trading haltscould be imposed to allow for disclosure of significant developments . Id. at¶ 11 .
• Each exchange employed modern technologies enabling rapid disseminationof relevant market information, thereby promoting efficient p ricing. Thesetechnologies included computer-to-computer broadcast of trade and quotationinformation and real-time pricing data . Id. at ¶¶ 17-18, 23-24, 29-30 .
• Each exchange established minimum requirements for all listed firms,including specified levels of net income , publicly tradeable shares, andnumber of public shareholders . Id. at 1119, 26, 31 .
• All exchanges implemented trading arrangements , either in the form of floorattorneys, specialists , or registered traders, to promote market liquidity andorder . Id. at ¶¶ 20, 26, 32 .
For these reasons, investors on the ASE, ME, and TSE had access to published
information and the ability to trade on that information . As a result, each exchange was a "well-
developed, efficient, and information-hungry" market, within the meaning of Basic.
In addition to the efficiency of these Canadian exchanges as a general matter, the
markets for the stocks of Bre-X and Bresea were traded efficiently on the exchanges as well . As set
forth below, Dr. Leitzinger has analyzed those factors applicable to a determination of whether a n
efficient market exists for a particular security .
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ii . Shares outstanding
For the period January 17, 1994 through April 22, 1996, during which Bre-X trade d
on the ASE, over 15 million shares of Bre-X were outstanding . Exh. C at ¶ 41 . During the perio d
April 23, 1996 through March 26, 1997, during which Bre-X traded on both the TSE and ME, ove r
215 million shares of Bre-X were outstanding . Id. With respect to Bresea, over 50 million share s
were outstanding during the Settlement Class Period . Id.
This magnitude of outstanding shares ensured the existence of a ready market fo r
buyers and sellers of Bre-X and Bresea stock . Courts have held far fewer outstanding shares to be
indicative of market efficiency. See, e.g., In re Amerifirst Sec. Litig., 139 F .R.D. at 431 (eleven
million shares ) ; Hurley v. FDIC, 719 F. Supp. 27, 34 (D. Mass. 1989) (five million shares) .
iii. Trading volume
From January 17, 1994 through April 22, 1996, the average weekly trading volume
of Bre-X stock on the ASE was over 390,000 shares . Exh. C at ¶ 41 . From April 23, 1996 through
March 26, 1997, during which there was a ten-for-one split, the average weekly trading volume o f
Bre-X stock traded on the TSE was over 9 million shares . Id. For the period September 3, 199 6
through March 26, 1997, the average weekly volume of Bre-X stock traded on the ME was ove r
400,000 shares . Id. Finally, for Bresea, the average weekly volume on the ME for the Settlement
Class Period was 1 .1 million shares . Id.
Courts have found market efficiency for stocks with markedly less average weekl y
trading volume. See, e.g., Hayes v. Gross, 982 F .2d 104, 107 (3d Cir . 1992) (38,000 shares) ;
Tapken v. Brown , 1992 WL 178984 , * 18 (S .D. Fla. 1992) (255,449 shares) .
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iv. Weekly turnover rat e
The average weekly turnover rate for the time period Bre-X traded on the ASE was
2 .6% of Bre-X' s total outstanding shares and 4.8% of its "float," or those shares publicly held by
non-insiders. Exh. C at ¶ 41 . For the time period that Bre-X traded on TSE, the weekly turnove r
rate was 4 .4% of Bre-X's outstanding shares and 8 .2% of its float . Id. For the combination of the
TSE and ME during the time period September 3, 1996 through March 26, 1997, the weekly
turnover rate was 4 .5% of Bre-X's outstanding shares and 8 .4% of its float . Id. As for Bresea, the
weekly turnover rate on the ME was 2.2% of its outstanding shares and 3 .3% of its float. Id.
Courts have held that an average weekly trading volume of two percent justifies a
"strong" presumption that the market for particular shares was efficient . See Cammer, 711 F. Supp .
at 1286 (citing Bromberg & Lowenfels, 4 Securities Fraud & Commodities Fraud 586 (Aug . 1988)) ;
In re 2the Mart.com Sec. Litig., 2000 U.S. Dist . LEXIS 10821, *22 (C .D. Cal . 2000). Thus, trading
volume on the ASE, TSE, and ME, for both Bre-X and Bresea shares, was such as to warrant a
strong presumption of market efficiency during the Settlement Class Period .
v. Market capitalization
Market capitalization is an important indication of market efficiency for a number o f
reasons, including its role in increasing incentives for market participants to seek out and posses s
relevant information. Exh. C at ¶ 43 .
During the time period Bre-X traded on the TSE, it had an average marke t
capitalization of over $3 .5 billion. Exh. C at ¶ 44 . While trading concurrently on the ME and TSE ,
Bre-X had an average market capitalization of over $3 .4 billion . Id. On average, Bre-X ranked 27th
in capitalization among the firms that were listed on the NASDAQ during the period August 19 ,
1996 through March 26,1997, which includes much of the time period Bre-X also traded on the TS E
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and ME. Id. Previously, while Bre-X traded on the ASE, it had a lesser but still signific ant market
capitalization, averaging $369 million . Id. at ¶ 44 n .32 . As for Bresea, it had a substantial average
market capitalization of $232 million during the Settlement Class Period . Id.
Courts have found similar evidence of financial strength to be proof of marke t
efficiency . See, e.g., Tapken, 1992 WL at *57 (offer of $110 million of senior subordinated notes) .
vi. Public information
During the period January 17, 1994 through March 26, 1997, during which Bre-
X/Bresea traded on both Canadian exchanges and NASDAQ, over 100 research reports about Bre-
X/Bresea stock were prepared by no fewer than twenty investment professionals, including
defendants J .P. Morgan and Nesbitt Burns. Exh. C at ¶ 37. In addition, Bre-X and Bresea
themselves provided extensive information to the public concerning their operations, both through
press releases (at least 73 press releases for Bre-X and nine-for Bresea during the Settlement Class
Period) and through a web site maintained at www. bre-x. com. Id. at ¶ 3 8 .
Courts have concluded that market efficiency existed in light of similar or lesse r
levels of public information. See, e.g., Hayes, 982 F.2d at 107 (five market analysts disseminate d
reports to the public) ; Cammer, 711 F. Supp . at 1283 n.30 (fifteen research reports and numerous
press releases) ; In re Amerifirst Sec. Litig., 139 F.R.D. at 431 (six analyst reports) .
vii. Relationship between material information and marketprice
The stock prices of both Bre-X and Bresea responded to new information . For
example, on October 17, 1995, Bre-X announced that Busang had the potential of becoming one o f
the world' s great ore bodies, followed by an announcement by a company official on the next day
that he was comfortable with gold estimates of 30 million ounces for Busang . Over a three-day
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period ending on October 19, Bre-X stock rose significantly, from $1 .76 to $3 .57, an increase of 103
percent . Bresea's stock showed similar movement, moving from $1 .83 to $3 .29, an increase of 80
percent . Exh. C at ¶ 45 . Other examples of the relationship between material information and Bre-
X's and Bresea's stock prices are set forth in the Leitzinger Declaration . Id. at Exhs . 7 & 8 .
Similar responses to significant new information have been found to be a factor i n
findings of market efficiency. See, e.g., In re AmeriFirst Sec. Litig., 139 F.R.D. at 431 (finding
evidence of market efficiency where stock price moved higher after public disclosure of a positive
assessment of company's finances and then moved lower on news of poor earnings) ; In re Resource
America Sec. Litig., 202 F .R.D. 177, 189 (E.D. Pa. 2001) (finding market efficiency where stock
price fell on publication of analyst report criticizing accounting practices). '
viii . "Random walk"
As discussed above, stock prices that display "random walks" are widely regarded
as evidence of an efficient underlying market . Applying the Dickey-Fuller test, a commonly
accepted method of testing whether shares follow a random walk, Dr . Leitzinger examined the
pattern over time in prices and associated daily returns for Bre-X stock as traded on the ASE, TSE,
and ME and for Bresea stock as traded on the ME . The results of his study were consistent with the
In past briefing, nonsettling defendants have cited Nathenson v. Zonagen, Inc., 267 F.3d 400 (5thCir . 2001), for the proposition that plaintiffs at the class certification stage must provide a definitivestatement-by-statement analysis of all misleading statements at issue to determine whether each hadan effect on the price of the stock in question . Defendants' argument is erroneous, as it goes to themerits of the case, not questions proper to class certification . In Nathenson, defendants challengedon a motion to dismiss plaintiffs' failure to plead the l Ob-5 element of materiality, which the FifthCircuit held was more properly analyzed as an attack on the element of reliance . Here, nonsettlingdefendants made no such argument when urging their motions to dismiss . Moreover, plaintiffs havealleged that Bresea's misrepresentations affected the market price of Bre-X and Bresea stock . SeeAm . Compl . ¶¶ 102, 115, 119, 123-24, 133, 154-55 .
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presence of a random walk, a conclusion that supports that the Canadian exchanges provide d
efficient markets for Bre-X and Bresea stock . Exh. C at ¶¶ 49-50 .
ix. Correlation of stock prices between market s
Stock prices for Bre-X and Bresea exhibited a high degree of correlation when trade d
simultaneously on different exchanges. For example, when trading on the TSE and ME, Bre-X stoc k
prices were correlated by a coefficient of 0 .99. Likewise, prices for Bre-X stock on the TSE an d
NASDAQ were correlated by a coefficient of 0 .98, and prices for Bresea stock on the ME and Bre-X
stock on the ASE/TSE were correlated by a coefficient of 0 .87. Price correlation among Bre-X and
Bresea stock while trading simultaneously on Canadian exchanges indicates market efficiency as t o
all of the exchanges in question . Id. at ¶¶ 51-53 .
e. Certification of share purchasers on foreign exchanges
Given the close proximity of Canadian markets to the U .S., class certification in
American courts of purchasers of securities traded on Canadian stock exchanges is established .
Three recent cases are representative .
First , in In re Newbridge Networks Sec. Litig., 926 F. Supp. 1163 (D .D.C. 1996), the
court certified a class of purchasers of stock ofNewbridge, whose stock traded on the NASDAQ and
TSE. In that case, plaintiffs made allegations similar to those made here -- that Newbridge, a
Canadian corporation, and three of its officers violated Sections 10(b) and 20(a) of the Exchange Ac t
and Rule 1 Ob-5 by making materially false and misleading statements which artificially inflated th e
price of its common stock. When plaintiffs moved for certification, defendants objected, arguin g
that because plaintiffs did not identify the exchange from which their shares were obtained, plaintiff s
could not claim the fraud-on-the-market presumption of reliance . The court rejected the argument,
finding that plaintiffs adequately had pleaded the existence of an efficient market by alleging bot h
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a substantial trading volume for Newbridge and the presence of securities analysts who issue d
reports on the company . Id at 1176 .
Second , in Krangel v. Golden Rule Resources Ltd., 194 F.R.D. 501 (E.D. Pa. 2000) ,
purchasers of the common stock of Golden Rule filed a class action against it and its directors an d
officers for alleged violations of Section 10(b) of the Exchange Act and Rule I Ob-5 . Golden Rule,
whose stock traded solely on the TSE, was a company engaged in the exploration and developmen t
of precious metal properties in the U .S ., Canada, and elsewhere . In reviewing a proposed settlement
in the action, the court held that the class had been certified properly and upheld the settlement
proposal . Id. at 509 .
Third , inln re Gaming Lottery Sec. Litig., 58 F . Supp. 2d 62 (S .D.N.Y. 1999), a clas s
was certified of U .S . and Canadian purchasers of stock of Gaming Lottery Corp ., which was traded
on both the TSE and NASDAQ . In assessing its subject matter jurisdiction, the court noted that th e
price of the stock on the TSE and NASDAQ "unsurprisingly" moved in tandem, a fact that the court
attributed to the "efficiencies of market pricing" and "the ever-present possibility of arbitrage ." Id.
at 75 . Likewise, price movements in Bre-X stock on Canadian exchanges moved in tandem wit h
their NASDAQ counterpart, as did price movements in Bresea stock as compared to Bre-X stock,
which strongly indicate market efficiency with respect to both stocks . '
These cases demonstrate that application of the fraud-on-the-market doctrine to
Canadian exchanges has ample legal precedent. In keeping with this precedent, the allegations of
See also In re Gaming Lottery Sec. Litig., 2001 WL 204219 at * 19 (court granted class plaintiffs'motion for summary judgment against insider defendants, finding that reliance requirement underRule lOb-5 satisfied by expert opinion that the stock traded efficiently on the TSE) ; Anderson v.
Transglobe Energy Corp., 35 F. Supp. 2d 1363, 1369 (M .D. Fla. 1999) (where stock traded onNASDAQ, TSE, and ASE, investor adequately pleaded fraud-on-the-market doctrine) .
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plaintiffs' Complaint, coupled with their evidentiary showing here, establish solid support to find
that Bre-X and Bresea traded efficiently on Canadian exchanges .
f. All plaintiffs presumptively relied on Bresea's omission s
There is a separate and independent reason why reliance is a common issue to all Bre-
X and Bresea share purchasers .
The Supreme Court has held that, in securities fraud cases, proof of reliance is not
required where a plaintiffs ' allegations are primarily grounded on a failure to disclose . Affiliated Ute
Citizens v. United States, 406 U.S . 128, 152-53 (1972) . Following Affiliated Ute, the Fifth Circui t
has recognized that where the gravamen of the fraud is a failure to disclose, as opposed to a
fraudulent misrepresentation, a plaintiff is entitled to a rebuttable presumption of reliance . Smith v.
Ayres, 845 F .2d 1360, 1363 (5th Cir. 1988 ) . In the words of the Fifth Circuit , the presumption o f
reliance "responds to the reality that a person cannot rely upon what he is not told ." Id.
Non-disclosure cases usually involve claims that a defendant has failed to disclos e
information related to material facts about which the defendant had a duty to the plaintiff to disclose .
See, e.g., Abell v . Potomac Ins . Co., 858 F .2d 1104, 1119 (5th Cir . 1988). As a result, fraudulent
omission cases arise under the first and third subsections of Rule I Ob-5, which make it illegal to do
either of two things :
(1) to employ any device, scheme, or artifice to defraud [or ]
***
(3) to engage in any act, practice, or course of business whichoperates or would operate as a fraud or deceit upon any person, inconnection with the purchase or sale of any security .
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Courts have recognized that the duty under these two sub-sections not to engage in a fraudulent
"scheme" or "course of conduct" is entirely consistent with a securities fraud violation premised on
an omission, as opposed to an affirmative statement of some sort . Smith, 845 F.2d at 1363 . '
Plaintiffs' claims against Bresea arise primarily from Bresea's omissions, which
constituted a fraudulent scheme or course of conduct in violation of Rule lOb-5 . As a result,
plaintiffs are entitled to the presumption of reliance set forth in Affiliated Ute .
During the Settlement Class Period, Bresea had a duty to both its shareholders an d
Bre-X shareholders (in its role as a control person of Bre-X ) promptly to disseminate truthful
information that would be material to investors , in compliance with the integrated disclosure
provisions of the SEC , as embodied in SEC Regulation S-X (17 C .F.R. § 210 .01 et seq.) and S-K
(17 C .F.R. § 229 .10 et seq. ) and other SEC regulations . This included accurate and truthful
information with respect to Bresea' s operations and performance , so that the market prices of
Bresea ' s common stock would be based on truthful, complete , and accurate information. Am .
Compl . ¶ 585 .
Despite its knowledge of conditions at Bus ang , Bresea concealed from investors the
indisputable fact that core samples had been fraudulently adulterated with gold from other sources .
Consequently, as set forth in the Amended Complaint , Bresea breached its obligation to investors
by, among other things , engaging and part icipating in a course fraudulent course of conduct t o
In contrast, a claim based on the second sub-section of Rule lOb-5almost always rests on amisrepresentation . It prohibits the making of "any untrue statement of a material fact" or the"omission to state a material fact necessary in order to make the statements made, in light of thecircumstances under which they were not made, not misleading ." Non-disclosure under sub-sectiontwo is relevant only because it renders statements already made either false or misleading . Becausea claim under sub-section two traces back to an affirmative statement , reliance is an essentialelement a plaintiff must prove .
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conceal adverse mate rial information about its business , resources , properties, business practices,
finances , financial condition, performance , operations, value , and future prospects. Id. at ¶ 586.
Bresea also engaged in transactions, businesses , practices , and a course of business which operated
as a fraud and deceit upon purchasers of its stock during the Se tt lement Class Period . Id.
The Affiliated Ute presumption of reliance is available in class actions alleging, as
here, failures to disclose material information . In Finkel v. Docutel/Olivetti Corp., 817 F .2d 356,
363-64 (5th Cir . 1987), for example, the court found that the failure to disclose that a minority
shareholder had forced an issuer to take worthless inventory constituted a "scheme to defraud" or
"course of business operating as a fraud," in violation of the first and third sub-sections of Rule 1 Ob-
5 .
Here, Bresea's failure to disclose its knowledge to investors that its assets were
worthless makes plaintiffs' case against Bresea principally one of non-disclosure . Indeed, the failure
to disclose such a "super-material" fact relating to a defendant's core business (i .e ., that the gold
discovery was bogus), is in Professor Coffee's estimation, perhaps the "best example" of when "it
is reasonable to assume that an undisclosed fact is so material that investors must have relied upon
it ." Exh. X at ¶ 27. For this independent reason, plaintiffs are entitled to a presumption of reliance .
Under the Affiliated Ute doctrine, reliance is therefore presumed, thus ensuring that common issues
predominate in plaintiffs' case against Bresea .
2. A class action is the superior means to adjudicate plaintiffs ' claims
This action lies within the mainstream of class actions alleging violations of the
securities laws which satisfy the superiority requirement of Rule 23(b)(3) . See, e .g., Herbst v .
International Tel. & Tel. Corp., 495 F .2d 1308 (2d Cir . 1974) ; In re Gulf Oil/Cities Serv. Tender
Offer Litig., 112 F .R.D. 383 (S.D.N.Y. 1986) . Indeed, the class action device is not only superio r
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to other procedures for adjudicating the claims presented by this action, it is the only practica l
method for obtaining the fair and efficient disposition of these claims . The alternative to this class
action would be thousands of individual, virtually identical actions . This is precisely "the evil that
Rule 23 was designed to prevent ." Califano v . Yamasaki, 442 U . S. 682 , 690 (1979) .
3. The manageability requirement of Rule 23 is me t
The Supreme Court has held that, in analyzing a proposed settlement class, a distric t
court need not inquire whether the case would present " intractable problems of t rial management,"
because no trial will be held. Amchem, 521 U.S . at 591 . Other aspects of the m anagement of
plaintiffs ' case against Bresea now concern only the settlement process , which should not be
different from settlements in numerous other securities class actions.
Thus, all applicable Rule 23 requirements for ce rtification of the proposed Settlement
Class are fulfilled .
VI. The Settlement Should Be Approved as Fair, Adequate, and Reasonabl e
A. The Fifth Circuit Favors Settlement
As this Court well knows, the standard for reviewing a proposed settlement of a clas s
action is whether it is "fair, adequate and reasonable" and has been entered into without collusio n
between the parties . Cotton v. Hinton, 559 F.2d 1326, 1330 (5th Cir. 1977) ; Ruiz v. McKaskle, 72 4
F.2d 1 149, 1152 (5th Cir . 1984) . In applying this standard, a court must determine whether, in ligh t
of the claims and defenses asserted by the parties, the proposed compromise represents a "reasonabl e
evaluation of the risks of litigation." Florida Trailer & Equip. Co. v. Deal, 284 F.2d 567, 571 (5th
Cir. 1960) .
It has long been settled that compromises of disputed claims are favored by the courts .
Williams v. First Nat' l Bank, 216 U.S . 582, 595 (1910) . The Fifth Circuit emphasizes that, as a
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result of their favored status, settlements "will be upheld whenever possible because they are a
means of amicably resolving doubts and preventing lawsuits ." Miller, 559 F .2d at 428 (cites
omitted) ; Pearson v. Ecological Sci. Corp., 522 F.2d 171, 176 (5th Cir. 1975) .
Settlements of class actions are "particularly favored" and are not to be lightl y
rejected . Maher v. Zapata Corp., 714 F.2d 436, 455 (5th Cir. 1983) ; see also Cotton, 559 F .2d at
1331 . In the case of class actions, the Fifth Circuit has explained that "there is an overriding public
interest in favor of settlement," because such suits "have a well deserved reputation as being most
complex." Maher, 714 F.2d at 455 ; accord Van Bronkhorst v. Safeco Corp., 529 F.2d 943, 950 (9th
Cir. 1976) . Thus, in deciding whether to approve a settlement, a trial judge is not to decide the
merits of the action or substitute a different view of the merits for that of the parties or counsel .
Maher, 714 F.2d at 455 .
In weighing the benefits obtained by the agreement of settlement against benefits
dependent on the likelihood of recovery on the merits, a court is not expected to balance the scales
perfectly. The trial court
should not make a proponent of a proposed settlement justify eachterm of settlement against a hypothetical or speculative measure ofwhat concession might have been gained ; inherent in compromise isa yielding of absolutes and an abandoning of highest hopes .
Cotton, 559 F .2d at 1330 (cites omitted) . The very object of a compromise "is to avoid the
determination of sharply contested and dubious issues ." Young v. Katz, 447 F.2d 431, 433 (5th Cir.
1971) .
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B. The Fifth Circuit Presumes the Fairness of Settlements Proposal by Competentand Experienced Counse l
Where, as here, experienced counsel have negotiated a settlement at arm's length, a
strong initial presumption is created that the compromise is fair and reasonable . United States v.
Texas Educ . Agency, 679 F.2d 1104, 1108 (5th Cir . 1982) . The Fifth Circuit recognizes that courts
must rely to a large degree on the judgment of competent counsel, since such counsel are the
"linchpin" of an adequate settlement . Reed v. Gen. Motors Corp., 703 F.2d 170,175 (5th Cir . 1983) .
Thus, if experienced counsel determine that a settlement is in the best interest of the class, "the
attorney's views must be accorded great weight ." Pettway v. American Cast Iron Pipe Co., 576 F.2d
1157, 1216 (5th Cir . 1978) .
When examined under the applicable criteria, the Settlement is a fair and reasonable
result for the Settlement Class . It is Lead Counsel's considered judgment that there is a serious
question as to whether a more favorable result against Bresea could or would be attained after tria l
and appeals, particularly considering Bresea's current financial status, new management intent on
spending its limited cash assets, lack of insurance coverage, and large expected defense costs . The
Settlement achieves a timely and not insignificant recovery for members of the Settlement Class and
is unquestionably superior to the risk of recovering less or nothing at all after a lengthy trial and
appeal .
C. The Fifth Circuit 's Six-Pronged Test of Fairness
Once satisfied that counsel adequately represented the class and has bargained for the
proposed settlement in good faith, the "only question" for a court to determine "is whether the
settlement, taken as a whole, is so unfair on its face as to preclude judicial approval ." McNary v .
American Sav. & Loan Ass'n, 76 F.R.D. 644, 649 (N.D. Tex. 1977) . To assist the trial court i n
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reaching this determination, the Fifth Circuit has established a six-pronged objective test to be
applied to a proposed settlement :
1 . the assurance that there is no fraud or collusion behind the settlement ;
2 . the stage of the proceedings and the amount of discovery completed;
3 . the probability of plaintiffs' success on the merits ;
4. the range of possible recovery;
5 . the complexity, expense, and likely duration of the litigation ; and
6 . the opinions of class counsel, class representatives, and absent classmembers .
In re Lease Oil Antitrust Litig., 186 F .R.D. at 431 ; Parker v. Anderson, 667 F.2d 1204, 1209 (5th
Cir. 1982) ; Salinas v. Roadway Express, Inc., 802 F.2d 787, 789 (5th Cir. 1986) .
1. There is no fraud or collusion behind the Settlemen t
There is no hint of fraud or collusion with respect to the Settlement . Both the length
of time required to negotiate the settlement and the layers of approval required by the affected court s
and regulatory bodies militate against any such insinuation .
The negotiations were hard-fought and protracted, extending over a two-year period .
As the Court observed , "the se tt lement reached was one resulting from strenuous long-term
negotiations between Plaintiffs and Bresea . . . and it was arrived at after much negotiation as i s
evidenced by the time it took the parties to reach an agreement ." (Dkt . #818 at 12) In addition, the
Settlement already has been subject to considerable scrutiny, including three Canadian court
proceedings and three Canadian securities regulators . Given the difficult nature of the negotiations ,
it is not surprising that nothing in any of these reviews suggests any improprieties among the parties .
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The Settlement was achieved only through tenacious and vigorous arm's-length
negotiations and, as shown by the result, the interests of Settlement Class Members were well served .
2. Stage of the proceedings at which settlement was achieve dand the amount of discovery complete d
Both the knowledge of plaintiffs' counsel and the proceedings themselves reached
a stage where an intelligent evaluation of the case and propriety of the Settlement could be made .
Lead Counsel conducted an extensive investigation relating to the events an d
transactions underlying plaintiffs' claims against Bresea . Prior to executing both the 2001
Settlement and this Settlement, Lead Counsel carefully investigated the events and transactions
underlying plaintiffs' claims and did as much pretrial discovery on the merits as was feasible, and
permitted by the Court . This included analysis of tens of thousands of pages of documents produced
by the Bre-X Trustee, Bresea, and certain other defendants . In addition, Lead Counsel responded
to dozens of defense motions raising virtually every pretrial issue that could arise in securities
litigation, requiring Lead Counsel to be fully briefed on all legal issues even potentially applicable
to Bresea . Exh. A at ¶ 5 .
The decision by the proposed Class Representatives to enter the Settlement was made
with knowledge of the facts and circumstances underlying their claims and, based on the advice of
Lead Counsel, of the strengths and weaknesses of those claims, as well as of the financial condition
and new management of Bresea. In determining to settle the action with respect to Bresea, plaintiffs
have taken into account most importantly the likelihood (or unlikelihood) of being able to collect
any greater amount from Bresea by continued litigation .
Thus, the parties reached an agreement to settle only after they had a "full
understanding of the legal and factual issues surrounding this case ." Manchaca v. Chater, 927 F .
-43-
Supp. 962, 967 (E.D. Tex. 1996) . Nothing less, nor more, is required . Indeed, courts have held that
a great amount of formal discovery is not a "necessary ticket to the bargaining table ." In re
Corrugated Container Antitrust Litig ., 643 F .2d at 211 .
Having completed a thorough investigation by Lead Counsel to properly evaluate th e
Settlement Class's claims against Bresea, the proposed Class Representatives have managed to settle
those claims on a favorable basis without further discovery, trial, and the possibility of post-trial
motions and appeals . They and Lead Counsel are satisfied that the Settlement is an advantageous
resolution of claims asserted against Bresea .
3. Probability of success on the merit s
Plaintiffs believe that they have a strong likelihood of success on the merits at a trial,
if one is necessary, of their claims against Bresea .
Plaintiffs must acknowledge, however, that such confidence often proves misplaced .
"Stockholder litigation is notably difficult and unpredictable and in these circumstances the court s
have displayed a healthy skepticism in the face of optimistic forecasts or large demands ." Rubinstein
v. Republic Nat'l Life Ins. Co ., 74 F.R.D. 337,347 (N.D. Tex. 1976). Due to the inherent uncertainty
in litigation, justification for a proposed settlement requires merely that plaintiff establish "it is
prudent to eliminate the risks of litigation to achieve specific certainty though admittedly it might
be considerably less than were the case fought to the bitter end ." Florida Trailer, 284 F .2d at 573 .
Plaintiffs already have succeeded in overcoming substantial legal hurdles raised by
Bresea, including challenges to personal jurisdiction and under the PSLRA . Even so, risks remain
in the way of success on the merits . For example, to succeed on their claims against Bresea under
section 10(b) of the Exchange Act, plaintiffs would have to establish at trial : (i) a misrepresentation
or omission of a material fact by, or attributable to, Bresea ; (ii) in connection with the purchase or
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sale of a security; (iii) Bresea's scienter ; (iv) plaintiffs' reliance; (v) causation ; and (vi) damages .
See, e.g., Basic, 485 U.S. at 241-43 ; Ernst & Ernst v. Hoch/elder, 425 U.S . 185, 191 n.7 (1976) . Of
course, at trial plaintiffs would not be entitled to favorable inferences from and the acceptance as true
of well-pleaded facts, as was the case on the Rule 12(b)(6) motions to dismiss . See, e.g., Scheuer
v. Rhodes, 416 U .S. 232, 236 (1974) ; Jenkins v. McKeithen, 395 U.S. 411, 421-22 (1969) .
Regardless, the primary risk to plaintiffs' success against Bresea does not concer n
whether they can prove their case at trial . Rather, the fundamental risk here is that in preparing their
case and conducting a trial on their claims, plaintiffs would cause Bresea to deplete its already
limited assets in defense of the action. Moreover, during the time between now and trial, Bresea's
new management could persuade the Alberta court to release the company's funds, now under the
control of the Bresea Receiver, and the money could be spent promptly or on projects the wisdom
of which might be disputed. In other words, the cash that Bresea now has could be gone very soon .
Thus, to the extent that probability of success connotes an actual recovery of funds --
which it surely does -- and not just the possibility of a moral, but uncollectible, victory at trial, this
factor weighs heavily in favor of approval of the Settlement .
4. Range of possible recovery
As in most securities fraud cases, if this matter proceeds to trial plaintiffs would face
numerous hurdles in establishing class damages recoverable from Bresea .
For example, Bresea executives already have argued that the revelation of the salting
at Busang was as much a surprise to them as anyone, and thus any losses sustained by investors were
not the result of fraud. Also, if plaintiffs were unable to establish joint and several liability, Bresea
could argue that the damages attributable to its misconduct are modest as compared to other, more
culpable defendants -- such as J .P. Morgan, Kilborn, Nesbitt, and Barrick, which had resources an d
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expertise far beyond that of Bresea employees . This possibility is real here, because of the multitude
of defendants and varying roles each played in the overall scheme .
Even so, a detailed analysis of the range of possible damage awards is not helpful i n
determining whether the Settlement should be approved. This is because, notwithstanding the exact
figure or the range of possible damages, Bresea simply is unlikely to pay materially more than what
it has agreed to pay under the Settlement . Thus, even though the amount being paid in the
Settlement is likely only a small percentage of the total damages that plaintiffs can prove at a trial,
it is reasonable under the circumstances . "[I]n any case there is a range of reasonableness with
respect to a sett lement ." Newman v. Stein, 464 F . 2d 689 , 693 (2d Cir . 1972) .
The fact that a proposed settlement may only amount to a fraction ofthe potential recovery does not, in and of itself, mean that theproposed settlement is grossly inadequate and should bedisapproved . . . .
In fact there is no reason, at least in theory, why a satisfactorysettlement could not amount to a hundredth or even a thousandth partof a single percent of the potential recovery .
Parker, 667 F .2d at 1210 .
The $7 million of cash/stock consideration that Bresea will pay in the Settlement --
$4.59 million cash to Bre-X share purchasers ; $1 .31 million cash to the Bre-X Trustee ; and $1 . 1
million in stock to Bresea share purchasers -- is fair and reasonable, given that most of Bresea' s
assets would be dissipated in defense costs or could be squandered by Bresea's new management .
Bresea currently has approximately $17 million in total net assets . Exh. A at ¶ 14 .
Based on estimates of the costs of defending the various shareholder suits pending here and in
Canada, and allowances for administrative expenses already approved by the Alberta Court, abou t
half of Bresea' s total net assets could be whi tt led away over just the next two years . Thus, if
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plaintiffs prevailed at a trial and on any appeals concluded within the next two years, Bresea's total
assets at that time might be no more than $8 .6 million . Id. at ¶ 15. Even if viewed simply in terms
of Bresea's current total assets (i .e ., $17 million), the proposed settlement represents 27% of
Bresea's assets . Professor Coffee, a long-time observer of class action settlements, is unaware of
any settlement involving a public company in which a greater portion of its assets have been
contributed to a class action settlement. Exh. X at ¶ 28 . Finally, the equity pool to be distributed
to Bresea share purchasers, valued at $1 .1 million, also represents a fair and reasonable recovery to
Bresea shareholders, given Bresea's limited financial resources !
Moreover, without the Settlement, investors face the certainty that Bresea will attempt
to terminate its Interim Receiver and take direct control of Bresea's remaining cash assets,
potentially resulting in depletion of any recovery if Bresea suffers investment or operating losses .
In fact, currently pending before the Alberta Court and scheduled for oral hearing on September 16,
2002 is a motion by Bresea's new board to dismiss the Interim Receiver and take direct control of
Bresea's assets . See Exhibit Q (attached) . Therefore, in the absence of this Settlement, investors
face the risk of a diminished recovery .
Under these circumstances, the Settlement recovery is eminently within the range of
reasonableness .
8 The consideration available to both Bre-X and Bresea share purchasers under the Se ttlement isroughly equal -- approximately $ . 04 per average damaged share of each respective stock . SeeDeclaration of Michael A . Marek , attached as Exhibit P, at IT 5-10 .
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5. Complexity , expense, and likely duration of this litigation
Filed on June 16, 1997, this case has been pending for over five years . It involves
complex questions of fact and law, has been extensively litigated, and has required significan t
commitment of time and resources by both plaintiffs and defendants. As the case moves forward ,
it unquestionably will be costlier still, with merits discovery to be completed, including numerous
depositions, and substantial additional expense for experts .
Bresea has limited assets. The risk of continuing to litigate against Bresea is the rea l
chance that there will be nothing left to satisfy even the most modest judgment obtained at a trial ,
much less a judgment materially more favorable than the proposed Settlement . Thus, when viewed
specifically as to Bresea, the complexity, expense, and likely duration of further litigation weigh s
heavily in favor of approving the Settlement and securing the definite recovery it provides .
6. Opinion of Lead Counsel and Settlement Class Members
As noted above, experienced plaintiffs' counsel, operating at arm's length, hav e
concluded that the Settlement is fair, reasonable, and adequate . Here, Lead Counsel have acquired
a thorough understanding of the action through independent investigation, informal and forma l
discovery, and the negotiation process, and they submit that the Settlement is appropriate and shoul d
be approved . The view of plaintiffs ' counsel, while not conclusive, is "entitled to signific ant
weight ." Fisher Bros. v. Cambridge-Lee Indus., Inc ., 630 F . Supp. 482,488 (E .D. Pa. 1985) ; Ahearn
v. Fibreboard Corp., 162 F.R.D. 505, 528 (E .D. Tex. 1995) .
Furthermore, members of the Settlement Class support the Settlement. Although
more than 6800 individual notices of the Settlement were mailed to potential class members, an d
nationwide notice in the Wall Street Journal was made, no objections have been received to date
from any Sett lement Class Member . The lack of objections strongly favors the Se ttlement . City of
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Detroit v. Grinnell Co., 495 F.2d 448, 463 (2d Cir . 1974). Ms . Messmer, Mrs. Braden , and Messrs .
Lieberman, Ward, and Scheuerman, in their capacities as representatives for the Settlement Class ,
have attested to their approval and support of the Settlement . Ms. Messmer's and Mr. Scheuerman' s
approval and support is also rendered in their capacities as Lead Plaintiffs . See Exhs . R, S, T, U &
V.
VII. The Notice Program Meets the Requirements of Due Process and Rule 2 3
In regards to a proposed settlement, putative class members must receive the "bes t
notice practicable under the circumst ances ." Fed. R. Civ . P. 23(c)(2) . The notice must "contain an
adequate description of the proceedings written in objective, neutral terms that, insofar as possible ,
may be understood by the average absentee class member," and it must "contain information that a
reasonable person would consider to be material in making an informed, intelligent decision o f
whether to opt out or remain a member of the class and be bound by the final judgment ." In re
Nissan Motor Corp. Antitrust Litig., 552 F.2d 1088, 1103, 1105 (5th Cir . 1977) . The notice mus t
contain certain information specified by the PSLRA, such as a statement of potential outcome and
attorney fees sought . See 15 U.S.C . § 78u-4(a)(7) .
An extensive notice program, by mail and by means of national publication, has bee n
completed at the direction of Lead Counsel and in conformity with the Court's order granting
preliminary approval of the Settlement. (Dkt. #818 at 14-16 ; #819) As set forth in the Declaration
of Carole Sylvester (attached as Exhibit W), the notice program concerning the Settlement was
effectuated as follows :
• An estimated 5913 envelopes containing individual notices and Bre-X proofof claim forms were mailed to Bre-X investors and/or their brokers . Exh. Wat 16.
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An estimated 954 envelopes contained individual notices and Bresea proofof claim forms were mailed to Bresea investors and/or their brokers . Id.
A summary form of notice was published in the August 1, 2002 and August2, 2002 editions of the Wall Street Journal . Id. at ¶ 7 .
The Court previously approved the form and manner of notice, specifically findin g
that the notice provided "potential class members with the information necessary to make an
informed decision on whether to opt out of the class ." (Dkt . #818 at 16) Thus, the form and manner
of notice has satisfied the mandates of Rule 23(c)(2). 9
VIII . Plaintiffs ' Request for an Award of Past and Future Litigation ExpensesShould Be Approve d
Courts have long recognized that attorneys who represent a class and achieve a benefi t
for class members are entitled to be compensated for their services, and that where a class plaintiff
successfully recovers a fund the costs of litigation should be spread among the fund's beneficiaries .
Under this "equitable" or "common fund" doctrine, established more than a centur y
ago in Trustees v . Greenough, 105 U.S. 527 (1881 ), attorneys who obtain a recovery for a class i n
the form of a common fund are entitled to an award of fees and expenses from that fund a s
compensation for their work . See, e.g., Boeing Co. v. Van Gemert, 444 U.S. 472 (1980) ; Mills v.
Two minor incidents in the notice program should be brought to the attention of the Court . First,pursuant to the Court's order setting a schedule for the Settlement (Dkt . #819), notice packagesconcerning the Settlement were mailed to potential class members on July 25, 2002 . On July 29,2002, Lead Counsel brought to the attention of Gilardi & Company, the California firm thatcoordinated the notices, that some class members may have received incorrect proof of claim forms .As a consequence, on August 2, 2002, new notice packages (including both individual notices andappropriate proofs of claim forms) were re-mailed to all class members, at no additional cost . Exh .W at ¶ 3 . This administrative error did not compromise the overall effectiveness of the noticeprogram. Individual notices (which contained information concerning the terms of the Settlement,deadlines for objections and opt-out requests, and the date of the final fairness hearing) were timelymailed in compliance with the Court's order; only proof of claim forms (which are not due untilOctober 24, 2002) were slightly delayed . Second, the summary notice appearing in the Wall StreetJournal on August 1, 2002 did not contain the full caption of the case . In response, the summarynotice was re-published in its entirety the following day, again at no additional cost . Id. at ¶ 7 .
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Elec. Auto-Lite Co ., 396 U.S . 375 (1970) ; Sprague v. Ticonic Nat'l Bank, 307 U.S. 161 (1939). In
addition to providing just compensation, awards of attorney fees from a common fund also serve t o
encourage skilled counsel to represent those who seek redress for damages inflicted on entire classe s
of persons and to discourage future misconduct of a similar nature . See, e .g., Dolgow v. Anderson ,
43 F.R.D. 472, 481-84 (E.D.N.Y . 1968). As the Supreme Cou rt itself has emphasized, p rivate
securities actions provide a "most effective weapon in the enforcement of the securities laws" and
are "a necessary supplement to [SEC] action ." Bateman Eichler, Hill Richards, Inc . v. Berner, 472
U .S . 299, 310 (1985) .
To provide the largest benefit for the Settlement Class, Lead Counsel decided t o
forego any request for attorney fees out the proceeds of the Settlement . Instead, Lead Counsel have
submitted a request for an award of $382,666 for past and future litigation costs and expenses, to b e
paid from the $4.59 million cash payment from Bresea to Bre-X investors under the Settlement .
Lead Counsel does not seek any fee or expense award based on the equity pool established to satisf y
the claims of Bresea share purchasers .
The requested expense award represents only 8 .3% of the cash consideration to be
paid by Bresea to Bre-X share purchasers under the Settlement . This requested expenses award i s
dramatically lower than awards made in similar cases . As the court noted in Shaw, 91 F. Supp . 2d
at 972,
[B]ased on the opinions of other courts and the available studies ofclass action attorney's fee awards (such as the NERA study), thiscourt concludes that attorney's fees in the range from twenty-fivepercent (25%) to [33 1/3%] have been routinely awarded in classactions .
See also In re Prudential-Bache Energy Income P'ships Sec . Litig., 1994 WL 150742, at * 1 (E .D .
La. 1994) (awarding 25% fee in securities case) ; In re Lease Oil Antitrust Litig., 186 F.R.D. at 403
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(awarding 25% of more than $190 million antitrust settlement) ; In re Harrah 's Sec. Litig., 1998 WL
832574, *7 (E .D . La . 1998) (awarding 26% fee in securities case) .
While Lead Counsel anticipates that the requested expense award largely would b e
used to fund future costs of this case, the award in fact represents only about one-third of the $1 .1 8
million in expenses already incurred to date by plaintiffs ' counsel . Based on expenses paid by Lea d
Counsel from a common litigation fund, these costs include the following : expert services ,
investigation services, shareholder communications, document coding, outside duplicating ,
deposition serv ices , and travel expenses . Exh. A at ¶ 19 .
Given that this litigation has been pending for over five years, expenses of thi s
magnitude are entirely reasonable . See also, Coffee Decl . at IT 30-33 (historically, awards o f
expenses and fees in securities class actions exceed 30%) . In addition, Settlement Class Member s
were informed in the notice of Lead Counsel's application for an award of expenses, and n o
opposition was made . The requested expenses accordingly should be awarded .1 °
IX. Plan of Allocation Adequately Compensates the Clas s
Plaintiffs request that the Plan of Allocation of the Settlement proceeds be approve d
as fair and equitable . It provides a fair method to divide the Settlement among members of the
Settlement Class . In general, the Plan of Allocation provides that members of the Settlement Clas s
who file valid proof of claim forms, postmarked on or before October 24, 2002, evidencing a los s
10 As set forth in the notice distributed to members of the Settlement Class, the Settlement alsoprovides for fees and expenses for Canadian counsel in the amount of $896,533 . Even adding thatsum to the expense award sought by Lead Counsel, the total attorney fees and expenses total about25% of the cash payments in Settlement. The Court has previously observed that these aggregatefees and expenses "do not exceed a reasonable portion of the total settlement ." (Dkt. #818 at 13)
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in their transactions in either Bre-X stock or Bresea stock, are entitled to recovery . The Plan of
Allocation is fair and equitable to members of the Settlement Class and deserves approval .
Under the proposed Plan of Allocation, Settlement Class Members are required t o
submit an appropriate proof of claim form which sets forth all purchases and sales of Bre-X/Bresea
stock during the Settlement Class Period (January 17, 1994 through March 26, 1997) . They are
asked to set forth each date on which they purchased and sold their stock, the gross price paid for the
stock, and the net proceeds received from any sales, as well as their position in Bre-X/Bresea stock
at the end of the Settlement Class Period . As described in the notice sent to Settlement Clas s
Members, the Plan of Allocation provides that they will receive a pro rata distribution from th e
Settlement proceeds, based on their net damages .
Members of the Settlement Class who do not submit acceptable proofs of claim wil l
not share in the proceeds . Settlement Class Members who do not either file a request for exclusion ,
or submit an acceptable proof of claim, will nevertheless be bound by the judgment and th e
Settlement .
Distributions of stock from the equity pool to Bresea share purchasers will be mad e
as soon as practicable . Distributions from the cash consideration paid to Bre-X share purchasers wil l
occur when, in the best judgment of Lead Counsel, the cost savings for administrative expense s
related to the distribution of Settlement proceeds can be maximized, subject of course to Cour t
approval .
Assessment of a plan of allocation of settlement proceeds in a class action under Rul e
23 is governed by the same standards of review applicable to the settlement as a whole -- the plan
must be fair , reasonable, and adequate . See Class Plaintiffs v. Seattle , 955 F . 2d 1268 , 1284 (9th Cir.
1992) . District courts enjoy "broad supervisory powers over the administration of class-actio n
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settlements to allocate the proceeds among the claiming class members . . . equitably." Beecher v.
Able, 575 F.2d 1010, 1016 (2d Cir . 1978) . Accord In re Chicken AntitrustLitig., 669 F.2d 228, 238
(5th Cir . 1982) . An allocation formula need only have a reasonable, rational basis, particularly if
recommended by "experienced and competent" class counsel . White v. NFL, 822 F. Supp. 1389,
1420-24 (D. Minn. 1993), aff'd, 41 F.2d 402 (8th Cir . 1994) ; In re Gulf Oil/Cities Serv. Tender Offer
Litig., 142 F.R.D. 588, 596 (S.D.N.Y 1992) .
Here, the objective of the Plan of Allocation is to provide an equitable basis upon
which to distribute the Settlement funds among eligible members of the Settlement Class . It wil l
result in a fair distribution of the available proceeds among those Settlement Class Members who
submit valid claims . Moreover, the information required is easily obtainable and is verifiable by the
claims administrator . The Plan of Allocation is, therefore, a fair and equitable method of allocating
the proceeds of this Settlement among Class Members .
For the foregoing reasons , Lead Counsel respectfully request that the Court approve
the Plan of Allocation as submitted.
X. Conclusion
The presence of skilled counsel for all parties, the risks of further litigation, this
defendant's limited resources, the significant benefits achieved by plaintiffs' counsel, and the
arm's-length negotiations justify approval of the Settlement. Moreover, the Settlement Class fully
meets the applicable requirements of the Federal Rules and due process . Accordingly, plaintiffs
respectfully request that the Settlement be approved in its entirety as fair, reasonable, and adequate .
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Dated: September 11 . 2002 Respectfully submitted .
Damon Young
State Bar No . 22 176700
John M . Picket t
Young. Pickett & Lee
4122 Texas Boulevard
Texarkana . Texas 75504
(903) 794-130 3
-Attorney-in-Charge for Plaintiffs
Charles Edward Miller
State Bar No . 14062000
.A . Paul Mille r
State Bar No . 1405606 0
Miller . James . Miller & Horsnhv
1012 Oliv eTexarkana . Texas 75501
(903) 794-271 1
Of Counsel :
Michael C . SpencerU . Seth O ttensoserMilberg Weiss Bershad Hynes & Lerach LLP
One Pennsylvania Plaza
New York . New York 101 19
(212) 594-5300
Steven J . TollMatthew J . IdeCohen . Milstein Hausfeld & Toll
1 l 10 New York Avenue . N . W .
West Tower . Suite 500
Washington D .C . 2000 5
(202) 408-4600
R . Paul YetterState Bar No . 221 54200Autr% W . Ros s)'titer & Warden . LLP909 Fannin . Suite 3600Houston . Texas 77010(713) 632-8000
nLt, 6-1rd *,t, ~ /H Lee Godfrey
State Bar No . 0805400
L harles R . Eskridge . II
State Bar No . 06666350
James T . Southwick
State Bar do 24001 521
Susman Godfrey LL P
1000 Louisiana. Suite 5 100
Houston. Texas 77002(713) 651-9366
Lead Counsel for Plaintiffs
.Mark C . GardyJames S . NotisAbbey Gardv, LLP212 East 39th Stree tNew York . New York 10016("1") 889-370 0
Jeffrey G . SmithAdam Gonnell i
P . L .L .C . \Volf Haldenstein Adler Freeman & Herz . LLP
270 Madison Avenu e
New York . New York 10016(212) 545-4600
Certificate of Servic e
I hereby certify that on this loth day of September . 2002 . a copy of the foregoing wasserved on the following lead counsel for defendants at their offices or at the offices of their local
counsel in Texarkana . Texas . by hand -delivers or overnight mail .
Linda L . Addiso nFulbnght & Jaworski . L .L .P
1301 \,1cKinnev. Suite 5100
Houston . Texas -701()-',09 5
Counsel for Defendant Bresea Resources Ltd .
John R . ulerc v
vlercv, Carter . Tidwell & Elliott . L .L .P
I 30 Gallena Oaks Dr .Texarkana. Texas 7550 3
Counsel for Defendant John B . Felderho f
D Stuart Vleiklejohn
Sullivan & Cromwell
1 25 Broad Stree t
New York . Ne,,% York 1000 4
Counsel for Defendant Rolando C . Francisc o
Johnny P Arnold
1-tt)5 College D r
Texarkana. Texas -5503-153 1
Counsel for Defendant Paul Kavanagh
David J . Beck
Beck, Redden & Secrest . L.L .P .
1221 McKinney . Suite 4500
Houston, Texas 77010-2010
Counsel for Defendants Kilbor n
Engineering Pacific Ltd . and
P.T. Kilborn Pakar Rekavas a
Mark D. Wegener
Howrev, Simon . Arnold & White
1229 Pennsylvania Ave. NW
Washington, DC . 20004
Counsel for Barrick Gold Corporation
14998 .1
Gary D . GrimesGnmes & Cravto rS Woodmont Crossing St .
Texarkana. Texas ,55()_
Counsel for Defendant Hugh C . Lyons
Lav rence J Portnov
Dais Polk & Ward,,%ell
-1511 Lexington .Avenue
Nest York . New York 1001
Counsel for Defendan tJ .P . Morgan Securities . Inc .
Daniel R . Murdock
Winston & Strawn200 Park AvenueNew York . New York 10166-419 3Counsel for Defendant Nesbitt Burns Inc .
w` k.Autry Ross
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