The opinion of the court was delivered by: Ronald M. Whyte United States District Judge
And Related Cases ORDER OVERRULING OBJECTIONS TO FINAL SETTLEMENT AND APPROVING SETTLEMENT [Re Docket Nos. 1411, 1418, 1419, 1426]
Lead Plaintiff, the New York State Common Retirement Fund ("Lead Plaintiff") and defendants McKesson Corporation ("McKesson") and McKesson Information Solutions, Inc. ("HBOC")*fn1 have reached an agreement to settle the present class action suit against McKesson, HBOC, and the "Individual Released Defendants" (Mark Pulido, Richard Hawkins, Heidi Yodowitz, Charles McCall, Jay Gilbertson, Albert Bergonzi, Michael Smeraski, and Jay Lapine). The court has previously given preliminary approval to this partial settlement. See Order Overruling Objections to 2d Revised Proposed Final J. & Order of Dismissal & Preliminarily Approving Settlement, Dkt. # 1381. Lead Plaintiff moves for an order directing entry of (1) the [Proposed] Final Judgment and Order of Dismissal ("Proposed Judgment"), and (2) the [Proposed] Order Approving Plan of Allocation ("Proposed Allocation"). For the reasons set forth below, Lead Plaintiff's motion is granted.
In an order issued on September 8, 2005, this court gave preliminary approval to a proposed settlement agreement in long-running securities class action. In that order, the court overruled Bear Stearns's objections to the proposed settlement.
On October 14, 2005, the claims administrator previously approved by this court mailed to 28,239 potential class members copies of the settlement notice and claim form (both also previously approved by this court.) See Joint Decl. of David R. Stickney & M. Richard Komins in Supp. of Final Approval of Class Action Settlement, the Plan of Allocation, & and Award of Att'ys' Fees & Reimbursement of Expenses ("SKD"), Ex. 2 ¶¶ 2-6. The claims administrator also published a summary of the terms of the settlement in the Wall Street Journal and disseminated the terms over the electronic PR Newswire. Id. ¶¶ 13-14. On November 25, 2005, the claims administrator sent potential class members a supplemental notice to (1) clarify that persons who acquired HBOC common stock before the start of the class period that they exchanged for McKesson stock after the two companies merged were not included in the settlement class and (2) correct an alleged typographical error in the original notice regarding the amount per share recoverable for a certain time period. Id. ¶ 7; Notice of Mot., Mot. & Mem. in Supp. of Mot. for Approval of Class Action ("LPM") at 13.
Within the time allowed, twelve individuals (or groups of individuals with the same mailing address) requested that they be excluded from the proposed settlement. See SKD Exs. 2 ¶ 15, 2-F. Three former employees of the Settling Defendants have objected to the proposed settlement: Larry Greco, Carlton Carden, and J. David Roberts. See Decl. of Thomas V. Christopher in Supp. of Final Approval of Stipulation of Settlement & Opp'n to Objections ("TCD"), Exs. 1-3. Bear Stearns has continued to object to the proposed settlement. See Def. Bear, Stearns & Co. Inc.'s Mem. of Points & Authorities in Supp. of Objections to Final Approval of Class Action Settlement ("BSO").
On December 8, 2005, Bear Stearns filed in the New York Supreme Court a complaint seeking, inter alia, declaratory relief "that McKesson's entry into the settlement constituted a breach of the Engagement Agreement," damages, and an injunction prohibiting "McKesson from consummating the Settlement or taking any act in furtherance of the Settlement, including funding the Settlement, unless the Settlement contains an unconditional and irrevocable release of all claims against Bear Stearns by Lead Plaintiff and the putative class." Compl. at 29, Bear, Stearns & Co. Inc. v. McKesson Corp., Index No. 604304/05. The parties have reported that the New York court denied Bear Stearns' application for a preliminary injunction, see, e.g., Letter from Jonathan M. Hoff, Jan. 18, 2006, though that action is still pending, see BSO at 15 n.7.
A. Objections of Greco, Carlton, and Roberts
None of the individuals objecting to the settlement complains that the proposed settlement is unreasonable or inadequate as to the members of the settlement class. Rather, each wishes to be included in the settlement class and participate in the recovery. (This in itself is some evidence that the settlement is fair and reasonable-people are fighting to be included in the settlement.)
The operative complaint, Lead Plaintiff's Third Amended and Consolidated Class Action Complaint ("TAC"), excluded "any person who was an officer or a director of HBOC, McKesson or McKesson HBOC" from the class. TAC ¶ 34. The Settling Parties have agreed to define "Officer of HBOC or McKesson" as "any person employed by HBOC or McKesson who held a position at or above the level of assistant vice president." Proposed Judgment ¶ 2. Greco complains that his position of "vice president of pricing and business development in McKesson's pharmaceutical division" was neither an elected position nor one with "significant decision-making" responsibilities. TCD, Ex. A. Greco claims his "'vice president' title was for 'selling appearances.'" Id. Likewise, Carden states that his "'desk title' of vice president of product development for the 20 person Computer Telephony Group" should not exclude him from the class. Id., Ex. C.
The Settling Parties disagree whether Carden and Greco are included in the settlement class. However, the Settling Parties agree that the settlement should be approved without regard to whether Carden and Greco are included in the settlement class. Lead Plaintiff asserts that Greco and Carden are not included and that they are free to assert their claims against McKesson and HBOC. See LPM at 21-22. The Settling Defendants emphatically state that Carden and Greco are included in the settlement class, see Mem. of Points & Authorities of Defs. McKesson HBOC, Inc. & HBOC & Co. in Supp. of Final Approval of Stipulation of Settlement & Opp'n to Objections ("MKM") at 12-14. The Settling Defendants' interpretation would foreclose future claims against them by Greco and Carden.
Greco's and Carden's objections to approval of the settlement are overruled. A class action cannot in all cases settle all claims of all potential parties. Excluding corporate officers from the plaintiff class in a securities fraud case is reasonable. Otherwise, the defenses atypical of the class members as a whole the defendant corporation may have against its own officers may defeat class certification. See Fed.R.Civ.P. 23(a)(3). If Greco and Carden are indeed excluded from the settlement class, the proposed settlement will not impair their ability to file their own suits against the Settling Defendants; if Greco and Carden are included in the settling class, they have no standing to object to the settlement.
Roberts complains that the stock options which the Settling Defendants granted him during his employment with them do not entitle him to recover under the proposed settlement. TCD, Ex. 2 at 1-2. The Settling Defendants take no position on whether Roberts is included in the settlement class, MKM at 14, presumably because there is no good-faith argument they can make for his inclusion. As Lead Plaintiff points out, Roberts's options were neither publicly-traded securities nor did Roberts pay an artificially-inflated price for them. LPM at 24. As with Greco and Carden, if Roberts is excluded from the settlement class, the proposed settlement will not ...