United States District Court, N.D. California
ORDER GRANTING PRELIMINARY APPROVAL OF
MARIA-ELENA JAMES United States Magistrate Judge
Elizabeth Lloyd (“Plaintiff”) brought this action
on behalf of herself and derivatively on behalf of Nominal
Defendant 9Global, Inc. (“9Global” or
the “Company”). She now asks the Court to grant
preliminary approval of the parties' proposed settlement
pursuant to Federal Rule of Civil Procedure
(“Rule”) 23.1. Mot., Dkt. No. 44. In doing so,
Plaintiff asks the Court to allow notice of the proposed
settlement to be directed to the two non-party 9Global
shareholders and to set a date for a final approval hearing.
Id. The Court held a hearing on this matter on July
21, 2016. Dkt. No. 51. Having considered Plaintiff's
Motion, the relevant legal authority, and the record in this
case, the Court GRANTS PRELIMINARY APPROVAL of the
parties' settlement as set forth below.
has owned shares of 9Global common stock since February 2008.
Compl. ¶ 8. She also worked as an employee of 9Global
and served as a member of its Board of Directors from
February 2008 until August 12, 2015, when she resigned from
both positions. Id.
filed this case the same day, asserting both direct and
derivative claims against the Chief Executive Officer of
9Global (Defendant Vipul Gupta), certain of his relatives,
and another corporate entity owned by Gupta, Defendant
60MonthLoans, Inc. (collectively, the “Gupta
Defendants, ” and together with 9Global,
“Defendants”). See Compl. Some of the
direct claims also named 9Global as a Defendant. Id.
Altogether, Plaintiff asserts 21 claims, with ten (10)
derivative claims on behalf of 9Global (Counts 12 -21)
Claims”). Id. The Complaint alleges, among
other things, that Gupta caused 9Global to fail to pay
Plaintiff's agreed-upon wages and to repay loans made by
Plaintiff to 9Global; misled Plaintiff about the
9Global's financial position; redirected monies from
9Global to, and for the benefit of, himself, his wife, and
his other family members; used 9Global resources to set up a
competing business; and committed securities fraud by
purchasing Plaintiffs 9Global stock while misrepresenting the
Company's financial position. See Id . As stated
by Plaintiff, “[t]he core of [the] Derivative Claims is
the alleged improper use of 9Global assets by Defendant Vipul
Gupta for the benefit of himself and his family.” Mot.
September 14, 2015, Defendants removed this action based on
federal question jurisdiction. Not. of Removal, Dkt. No. 1.
On December 1, 2015, 9Global filed counterclaims (the
“Counterclaims”) against Plaintiff Countercls.,
Dkt. No. 17. The four Counterclaims against Plaintiff are
for: (1) Breach of Fiduciary Duty; (2) Corporate Waste; (3)
Conversion and/or Embezzlement; and (4) Accounting.
Id. The Counterclaims allege, among other things,
that Plaintiff redirected monies from 9Global for her own
benefit. Id. Plaintiff denies liability as to
9Global's Counterclaims. Mot. at 3; see also
Answer to Countercls., Dkt. No. 20.
February 2, 2016, Plaintiff filed a motion for partial
summary judgment derivatively on behalf of 9Global on Counts
15 (Unjust Enrichment) and 17 (Conversion) against Defendant
Nandita Gupta (Dkt. No. 33), but Plaintiff subsequently
withdrew that motion without prejudice in light of the
parties' agreement to settle this action (Dkt. No. 42).
parties attended mediation before the Honorable James Larson
(Ret.) on April 28, 2016, and while the mediation did not
immediately produce a settlement, the parties continued to
engage in extensive, arm's-length settlement
negotiations. Mot. at 4. On May 25, 2016, the parties agreed
to a Memorandum of Understanding setting forth the material
terms of an agreement-in-principle to settle Plaintiffs
claims, as well as 9Global's Counterclaims. Id
filed this Motion for Preliminary Approval on June 16, 2016
(Dkt. No. 44), and the Gupta Defendants filed a statement of
non-opposition on June 28, 2016 (Dkt. No. 47). Counsel for
Plaintiff, 9Global, and the Gupta Defendants appeared at the
hearing on Plaintiffs Motion. Plaintiffs counsel clarified
that 9Global is a closely-held company, with Plaintiff and
Vipul Gupta currently holding the vast majority of the
Company's shares; the other shareholders evidently
account for only approximately six percent of 9Global's
contends the Settlement provides substantial benefits to
9Global and its shareholders. Mot. at 2. The terms of the
Settlement Agreement are as follows:
exchange for the settlement of the Derivative Claims (Counts
12- 21), 1. Vipul Gupta will pay $200, 000 to ONE LLP
(“9Global's Counsel”), due no later than
seven (7) days after final Court approval of this Settlement
Agreement. Upon the Effective Date, defined in Section VI of
the Settlement Agreement, 9Global's Counsel shall release
the $200, 000 payment to 9Global. Settlement Agreement
(“Settl. Agmt.”), Sec. II.1.a.i.1 &
II.1.a.ii, Dkt. No. 45-1 (Ex. A to Seyedin-Noor Decl., Dkt.
Vipul Gupta further agrees that the loans payable to him by
9Global, which total over $700, 000, will be reduced by $200,
000. Id., Sec. II.1.a.i.2.
Additionally, “[g]oing forward, 9Global will provide to
all shareholders of record, on a quarterly basis, written
reports that will summarize the Company's: (1) balance
sheets; (2) profits and/or losses; and (3) significant
activities for that quarter.” Id., Sec.
also has agreed to settle her Individual Claims against
Defendants, including 9Global. The Settlement Agreement
requires the following compensation to Plaintiff in
settlement of her direct claims (Counts 1-11 and 21):
Vipul Gupta will purchase all 1, 690 shares of 9Global stock
presently owned by Plaintiff for $50, 000 in cash.
Id., Sec. II.1.b.i.
9Global, Vipul Gupta, and Nandita Gupta will be jointly and
severally liable to pay Plaintiff $745, 000 in cash,
allocated as follows:
a. $150, 000 in settlement of Plaintiff's claims
regarding her un-repaid loans to the Company (Counts 7-8)
(id., Sec. II.1.b.ii.1);
b. $120, 000 in settlement of Plaintiff's claims
regarding unpaid wages (Counts 4-5) (id., Sec.
c. $475, 000 to settle the remainder of Plaintiff's
Individual Claims and related legal fees and costs