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HCL Partners Limited Partnership v. Leap Wireless International

October 14, 2010

HCL PARTNERS LIMITED PARTNERSHIP, ON BEHALF OF ITSELF AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFF,
v.
LEAP WIRELESS INTERNATIONAL, INC., S. DOUGLAS HUTCHESON, GRANT A. BURTON AND AMIN I. KHALIFA, DEFENDANTS.
KENT CARMICHAEL, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFF,
v.
LEAP WIRELESS INTERNATIONAL, INC. S. DOUGLAS HUTCHESON, MARK H. RACHESKY, AMIN I. KHALIFA AND DEAN M. LUVISA, DEFENDANTS.



The opinion of the court was delivered by: Hon. Michael M. Anello United States District Judge

CLASS ACTION

ORDER AND FINAL JUDGMENT [Doc. No. 131]

Currently before the Court is Lead Plaintiff's Motion for Final Approval of Settlement and the Plan of Allocation of Settlement Proceeds. [Doc. No. 131.] On October 4, 2010, the Court held a hearing on the motion. No objections to the settlement were made. For the reasons stated herein, the Court GRANTS final approval of the settlement and plan of allocation of settlement proceeds.

Background

This action arises from alleged misconduct by Defendant Leap Wireless ("Leap") and certain individual officers and directors of Leap. In April 2003, Leap filed for bankruptcy under Chapter 11, reorganized, and emerged in August 2004. On November 9, 2007, Leap announced that it would be restating its financial statements for fiscal years 2004-2006 and the first two quarters of 2007. The present action was triggered by Leap's restatement of its financial results, including the Company's reported net profits, and the price decline of Leap's common stock that occurred after the restatement was disclosed to investors.

On November 27, 2007, four class actions were filed against defendants in this Court, alleging violations of the federal securities laws. Two of the actions were voluntarily dismissed. On May 22, 2008, the Court consolidated the two present actions and appointed New Jersey Carpenters Pension and Benefit Funds as Lead Plaintiff ("Plaintiff"), Schoengold Sporn Laitman & Lometti, P.C. as Lead Counsel, and Glancy Binkow as Liason Counsel. On April 30, 2010, the Court substituted Cohen Milstein Sellers & Toll PLLC as Lead Counsel.

On July 7, 2008, Plaintiff filed the Consolidated Class Action Complaint. On August 28, 2008, Defendants filed a motion to dismiss. This Court granted the motion to dismiss, but granted Plaintiff leave to amend.

On March 10, 2009, Lead Plaintiff filed the operative Second Amended Consolidated Complaint. Defendants collectively filed a motion to dismiss a second time. Following the briefing of the second motion to dismiss, and prior to the motion's scheduled hearing date, the parties engaged in extensive settlement negotiations, and ultimately agreed to a resolution of this action. Over several weeks, the parties discussed and negotiated several drafts of the stipulation of settlement, which was presented to the Court for preliminary approval. On March 24, 2010, the Court granted preliminary approval of the settlement.

The Settlement

The settlement provides for a significant monetary benefit to the class. Approximately 7,500 claims were filed with the settlement administrator, without any requests for exclusion or objections to the settlement. The plan of allocation, written by Plaintiff's expert consultant, equitably distributes the proceeds of the settlement by taking into account the timing of class members' purchases, acquisitions and sales of Leap's common stock during and after the class period. Lastly, the plan accounted for attorneys' fees in an amount equal to 25% of the gross settlement fund, plus reimbursement of attorneys' out-of-pocket expenses.

Legal Standard

The Ninth Circuit has a "strong judicial policy that favors settlements" in complex class actions. In re Pacific Enterprises Security Litigation, 47 F.3d 373, 378 (9th Cir. 1995); In re NVIDIA Corp. Derivative Litigation, 2009 U.S. Dist. LEXIS 24973 (N.D. Cal.). A settlement should be approved by the Court if it is fundamentally "fair, adequate and reasonable."

Fed.R.Civ.P 23(e); Torrisi v. Tucson Elec. Power Co., 8 F.3d 1370, 1375 (9th Cir. 1993).

This determination requires a balancing of several factors which may include, among others, some or all of the following: the strength of plaintiff's case; the risk, expense, complexity, and likely duration of further litigation; the risk of maintaining class action status throughout the trial; the amount offered in settlement; the extent of discovery completed, and the stage of the proceedings; the experience and views of counsel; the presence of a governmental participant; and the reaction of the class members to the proposed settlement.

Torrisi, 8 F.3d at ...


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