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In re RH, Inc. Securities Litigation

United States District Court, N.D. California, Oakland Division

October 25, 2019

IN RE RH, INC. SECURITIES LITIGATION

          BERNSTEIN LITOWITZ BERGER & GROSSMANN LLP JONATHAN D. USLANER, GERALD H. SILK, AVI JOSEFSON, JOHN C. BROWNE (Pro Hoc Vice) Counsel for Lead Plaintiffs Public School Teachers' Pension & Retirement Fund of Chicago and Arkansas Teacher Retirement System, and Lead Counsel for the Class

          MORRISON & FOERSTER LLP, JORDAN ETH, MARK R.S. FOSTER, AMANDA TRELEAVEN, SU-HAN WANG Counsel for Defendants RH, Gary Friedman, and Karen Boone

          [PROPOSED] ORDER AND JUDGMENT APPROVING CLASS ACTION SETTLEMENT, PLAN OF ALLOCATION, ATTORNEYS' FEES AND EXPENSES

          The Honorable Yvonne Gonzalez Rogers United States District Judge

         WHEREAS, a class action is pending in this Court entitled In re RH, Inc. Securities Litigation, Case No. 4:17-00554-YGR (the “Action”);

         WHEREAS, in an Order dated October 11, 2018, this Court certified the Action to proceed as a class action on behalf of all persons and entities who purchased or otherwise acquired the common stock of RH during the period from March 26, 2015 through June 8, 2016, inclusive (the “Class Period”)[1];

         WHEREAS, (a) Lead Plaintiffs Public School Teachers' Pension & Retirement Fund of Chicago and Arkansas Teacher Retirement System (“Lead Plaintiffs”), on behalf of themselves and the Class, and (b) defendants RH (“RH” or the “Company”), and Gary Friedman and Karen Boone (collectively, the “Individual Defendants” and, together with RH, “Defendants, ” and together with Lead Plaintiffs, the “Parties”) have entered into a Stipulation and Agreement of Settlement dated May 6, 2019 (the “Stipulation”), which provides for a complete dismissal with prejudice of the claims asserted against Defendants in the Action on the terms and conditions set forth in the Stipulation, subject to the approval of this Court (the “Settlement”);

         WHEREAS, unless otherwise defined in this Judgment, the capitalized terms herein shall have the same meaning as they have in the Stipulation, which is attached hereto as Exhibit 2;

         WHEREAS, by Order dated June 21, 2019 (the “Preliminary Approval Order”), this Court: (a) found, pursuant to Rule 23(e)(1)(B) of the Federal Rules of Civil Procedure, that it would likely be able to approve the Settlement as fair, reasonable, and accurate under Rule 23(e)(2); (b) ordered that notice of the proposed Settlement be provided to potential Class Members; (c) provided Class Members with the opportunity either to exclude themselves from the Class or to object to the proposed Settlement, Plan of Allocation, and/or motion for attorneys' fees and expenses; and (d) scheduled a hearing regarding final approval of the Settlement;

         WHEREAS, due and adequate notice has been given to the Class and no objections to approval of the Settlement, the Plan of Allocation, or Lead Counsel's motion for attorneys' fees and Litigation Expenses have been received;

         WHEREAS, the Court conducted a hearing on October 22, 2019 (the “Settlement Hearing”) to consider, among other things, (a) whether the terms and conditions of the Settlement are fair, reasonable, and adequate to the Class, and should therefore be approved; (b) whether a judgment should be entered dismissing the Action with prejudice as against the Defendants; (c) whether the Plan of Allocation should be approved as fair and reasonable; and (d) whether Lead Counsel's motion for attorneys' fees and Litigation Expenses should be approved;

         WHEREAS, the Court having reviewed and considered the Stipulation, all papers filed and proceedings held herein in connection with the Settlement, all oral and written comments received regarding the Settlement, and the record in the Action, and good cause appearing therefor;

         IT IS HEREBY ORDERED, ADJUDGED, AND DECREED:

         1. Jurisdiction - The Court has jurisdiction over the subject matter of the Action, and all matters relating to the Settlement, as well as personal jurisdiction over all of the Parties and each of the Class Members.

         2. Incorporation of Settlement Documents - This Judgment incorporates and makes a part hereof: (a) the Stipulation filed with the Court on May 6, 2019; and (b) the Notice and the Summary Notice, both of which were filed with the Court on September 17, 2019.

         3. Notice - The Court finds that the dissemination of the Notice and the publication of the Summary Notice: (a) were implemented in accordance with the Preliminary Approval Order; (b) constituted the best notice practicable under the circumstances; (c) constituted notice that was reasonably calculated, under the circumstances, to apprise Class Members of (i) the pendency of the Action; (ii) the effect of the proposed Settlement (including the Releases to be provided thereunder); (iii) the terms of the proposed Plan of Allocation of the Net Settlement Fund; (iv) Lead Counsel's motion for attorneys' fees and reimbursement of Litigation Expenses; (v) their right to object to any aspect of the Settlement, the Plan of Allocation, and/or Lead Counsel's motion for attorneys' fees and reimbursement of Litigation Expenses; (vi) their right to exclude themselves from the Class; and (vii) their right to appear at the Settlement Hearing; (d) constituted due, adequate, and sufficient notice to all persons and entities entitled to receive notice of the proposed Settlement; and (e) satisfied the requirements of Rule 23 of the Federal Rules of Civil Procedure, the United States Constitution (including the Due Process Clause), the Private Securities Litigation Reform Act of 1995, 15 U.S.C. § 78u-4, as amended, and all other applicable law and rules.

         4. Final Settlement Approval and Dismissal of Claims - Pursuant to, and in accordance with, Rule 23(e)(2) of the Federal Rules of Civil Procedure, this Court hereby fully and finally approves the Settlement set forth in the Stipulation in all respects (including, without limitation: the amount of the Settlement; the Releases provided for therein; and the dismissal with prejudice of the claims asserted against Defendants in the Action), and finds that the Settlement is, in all respects, fair, reasonable, and adequate to the Class. Specifically, the Court finds that (a) Lead Plaintiffs and Lead Counsel have adequately represented the Class; (b) the Settlement was negotiated by the Parties at arm's length; (c) the relief provided for the Class under the Settlement is adequate, taking into account the costs, risks, and delay of trial and appeal, the proposed means of distributing the Settlement Fund to the Class; and the proposed attorneys' fee award; and (d) the Settlement treats members of the Class equitably relative to each other. The Parties are directed to implement, perform, and consummate the Settlement in accordance with the terms and provisions contained in the Stipulation.

         5. The Action and all of the claims asserted against Defendants in the Action by Lead Plaintiffs and the other Class Members are hereby dismissed with prejudice. The Parties shall bear their own costs and expenses, except as otherwise expressly provided in the Stipulation.

         6. Binding Effect - The terms of the Stipulation and of this Judgment shall be forever binding on Defendants, Lead Plaintiffs, and all other Class Members (regardless of whether or not any individual Class Member submits a Claim Form or seeks or obtains a distribution from the Net Settlement Fund), as well as their respective successors and assigns. The persons and entities listed on Exhibit 1 hereto are excluded from the Class pursuant to request and are not bound by the terms of the Stipulation or this Judgment.

         7. Releases

         (a) Upon the Effective Date, Lead Plaintiffs and each of the other Class Members, on behalf of themselves and their respective spouses, heirs, executors, beneficiaries, administrators, predecessors, successors, and assigns, in their capacities as such, and any Person(s) claiming (now or in the future) through or on behalf of any of them directly or indirectly, regardless of whether such Lead Plaintiff or Class Member ever seeks or obtains by any means (including, without limitation, by submitting a Claim Form to the Claims Administrator) any distribution from the Net Settlement Fund: (i) shall have fully, finally, and forever compromised, settled, released, relinquished, waived, dismissed, and discharged each and all of the Released Plaintiffs' Claims (including Unknown Claims) against each and all of the Defendants' Releasees, and shall have covenanted not to sue any of the Defendants' Releasees with respect to any of the Released Plaintiffs' Claims (including any Unknown Claims) except to enforce the releases and other terms and conditions contained in the Stipulation or this Judgment; and (ii) shall be forever permanently barred, enjoined, and restrained from bringing, commencing, instituting, asserting, maintaining, enforcing, prosecuting, or otherwise pursuing, either directly or in any other capacity, any of the Released Plaintiffs' Claims (including any Unknown Claims) against any of the Defendants' Releasees in the Action or in any other action or proceeding, in any state, federal, or foreign court of law or equity, arbitration tribunal, administrative forum, or other forum of any kind.

         (b) Upon the Effective Date, Defendants, on behalf of themselves, and their respective spouses, heirs, executors, beneficiaries, administrators, predecessors, successors, and assigns, in their capacities as such, and any Person(s) claiming (now or in the future) through or on behalf of any of them directly or indirectly, (i) shall have fully, finally, and forever compromised, settled, released, relinquished, waived, dismissed, and discharged each and all of the Released Defendants' Claims against each and all of Lead Plaintiffs and the other Plaintiffs' Releasees, and shall have covenanted not to sue any of the Plaintiffs' Releasees with respect to any of the Released Defendants' Claims (including any Unknown Claims) except to enforce the releases and other terms and conditions contained in the Stipulation or this Judgment; and (ii) shall be forever permanently barred, enjoined, and restrained from bringing, commencing, instituting, asserting, maintaining, enforcing, prosecuting, or otherwise pursuing, either directly or in any other capacity, any of the Released Defendants' Claims (including any Unknown Claims) against any of the Plaintiffs' Releasees in any action or proceeding, in any state, federal, or foreign court of law or equity, arbitration tribunal, administrative forum, or other forum of any kind. This Release shall not apply to any person or entity listed on Exhibit 1 hereto.

         (c) For purposes of this Judgment:

1. “Defendants' Releasees” means, collectively, each and all of (i) the Defendants, each Individual Defendant's Immediate Family Members, any entity in which any Defendant or Individual Defendant's Immediate Family Members has, or had during the Class Period, a controlling interest (directly or indirectly), and any estate or trust of which any Individual Defendant is a settlor or which is for the benefit of any Individual Defendant and/or his or her Immediate Family Members; and (ii) for each and every Person listed in part (i), their respective past, present, and future heirs, executors, administrators, predecessors, successors, assigns, employees, agents, affiliates, analysts, assignees, attorneys, auditors, co-insurers, commercial bank lenders, consultants, controlling shareholders, directors, divisions, financial advisors, general or limited partners, general or limited partnerships, insurers, investment advisors, investment bankers, investment banks, joint ventures and joint venturers, managers, managing directors, marital communities, members, officers, parents, personal or legal representatives, principals, reinsurers, shareholders, subsidiaries (foreign or domestic), trustees, underwriters, and other retained professionals, in their respective capacities as such.
2. “Plaintiffs' Releasees” means (i) Lead Plaintiffs, all other plaintiffs in the Action, and all other Class Members, and their respective Immediate Family Members; and (ii) for each and every Person listed in part (i), their respective past, present, and future heirs, executors, administrators, predecessors, successors, assigns, employees, agents, affiliates, analysts, assignees, attorneys, auditors, co-insurers, commercial bank lenders, consultants, controlling shareholders, directors, divisions, financial advisors, general or limited partners, general or limited partnerships, insurers, investment advisors, investment bankers, investment banks, joint ventures and joint venturers, managers, managing directors, marital communities, members, officers, parents, personal or legal representatives, principals, reinsurers, shareholders, subsidiaries (foreign or domestic), trustees, underwriters, and other retained professionals, in their respective capacities as such.
3. “Released Defendants' Claims” means all claims, rights, liabilities, and causes of action of every nature and description, whether known claims or Unknown Claims, whether arising under federal, state, common, or foreign law, that arise out of or relate in any way to the institution, prosecution, or settlement of the claims asserted in the Action against Defendants. Released Defendants' Claims do not include: (i) any claims relating to the enforcement of the Settlement; or (ii) any claims against any person or entity who or which submitted a request for exclusion from the Class that was accepted by the Court.
4. “Released Plaintiffs' Claims” means all claims, rights, liabilities, and causes of action of every nature and description, whether known claims or Unknown Claims, contingent or absolute, mature or not mature, discoverable or undiscoverable, liquidated or unliquidated, accrued or not accrued, including those that are concealed or hidden, regardless of legal or equitable theory and whether arising under federal, state, common, or foreign law, that Lead Plaintiffs or any other member(s) of the Class: (i) asserted in the Action, or (ii) could have asserted in any forum, that arise out of, are based upon, or relate to, directly or indirectly, in whole or in part, (A) the allegations, transactions, facts, matters or occurrences, representations or omissions involved, set forth, or referred to in the Action and that relate to the purchase, sale, acquisition, or retention of RH common stock during the Class Period; or (B) Defendants' and/or their attorneys' defense or settlement of the Action and/or the claims alleged therein. Released Plaintiffs' Claims do not include: (i) any claims asserted on behalf of the Company in In re RH Shareholder Derivative Litig., Lead Case No. 4:18-cv-02452-YGR (N.D. Cal.); Magnani v. Friedman, et al., Case No. 3:18-cv-02452-YGR (N.D. Cal.); or Izmirliyan v. Friedman, et al., Case No. 4:18-cv-3930-YGR (N.D. Cal.), or any cases consolidated into any of the foregoing actions; (ii) any claims relating to the enforcement of the Settlement; and (iii) any claims of any person or entity who or which submitted a request for exclusion that was accepted by the Court.
5. “Unknown Claims” means, collectively, any and all Released Plaintiffs' Claims that Lead Plaintiffs or any other Class Member does not know or suspect to exist in his, her, or its favor at the time of the release of such claims, and any Released Defendants' Claims that any Defendant does not know or suspect to exist in his, her, or its favor at the time of the release of such claims, which, if known by him, her or it, might have affected his, her, or its decision(s) with respect to this Settlement, including the decision to agree to all the various releases set forth in the Stipulation, or that might have affected his, her, or its decision not to object to the Settlement, or not to exclude himself, herself, or itself from the Class. Unknown Claims include, without limitation, those claims in which some or all of the facts composing the claim may be unsuspected or undisclosed, concealed, or hidden. With respect to any and all Released Claims, the Parties stipulate and agree that, upon the Effective Date of the Settlement, Lead Plaintiffs and Defendants shall expressly waive, and each of the other Class Members shall be deemed to have waived, and by operation of this Judgment, shall have expressly waived, any and all provisions, rights, and benefits conferred by any law of any state or territory of the United States, or principle of common law or foreign law, which is similar, comparable, or equivalent to California Civil Code §1542, which provides:
A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party. Lead Plaintiffs and Defendants acknowledge, and each of the other Class Members shall be deemed by operation of law to have acknowledged, that the foregoing waiver was separately bargained for and a key element of the Settlement.

         8. Notwithstanding paragraphs 7(a)-(b) above, nothing in this Judgment shall bar any action by any of the Parties to enforce or effectuate the terms of the Stipulation or this Judgment.

         9. Plan of Allocation - The Court finds and concludes that the formula for the calculation of the claims of Claimants as set forth in the Plan of Allocation mailed to Class Members provides a fair and reasonable basis upon which to allocate the proceeds of the Net Settlement Fund among Class Members with due consideration having been given to administrative convenience and necessity. The Court hereby finds and concludes that the Plan of Allocation is, in all respects, fair and reasonable to the Class. Accordingly, the Court hereby approves the Plan of Allocation proposed by Lead Plaintiffs as set forth in the Notice.

         10. Attorneys' Fees and Expenses - Lead Counsel is hereby awarded attorneys' fees in the amount of 15% of the Settlement Fund (including interest earned at the same rate as the Settlement Fund). Lead Counsel is also hereby awarded $797, 049.35 for payment of its litigation expenses. These attorneys' fees and expenses shall be paid from the Settlement Fund, and the Court finds these sums to be fair and reasonable. In addition, Lead Plaintiff Public School Teachers' Pension & Retirement Fund of Chicago and Lead Plaintiff Arkansas Teacher Retirement System are hereby awarded $5, 960.00 and $1, 892.28, respectively, from the Settlement Fund as reimbursement for their reasonable costs and expenses directly related to their representation of the Class. The Court has reviewed and considered the Retainer Agreement, which it finds to be reasonable. Lead Counsel is instructed to maintain copies of the Retainer Agreement in the event that it is necessary for any further proceeding.

         11. Rule 11 Findings - The Court finds and concludes that the Parties and their respective counsel have complied in all respects with the requirements of Rule 11 of the Federal Rules of Civil Procedure in connection with the institution, prosecution, defense, and settlement of the Action.

         12. No Admissions - This Judgment, the Term Sheet, the Stipulation (whether or not consummated), including the exhibits thereto and the Plan of Allocation contained therein (or any other plan of allocation that may be approved by the Court), the negotiations leading to the execution of the Term Sheet and the Stipulation, or any proceedings taken pursuant to or in connection with the Term Sheet, the Stipulation and/or approval of the Settlement (including any arguments proffered in connection therewith) shall not be deemed to be, and may not be argued to be or offered or received:

(a) against any of the Defendants' Releasees as evidence of, or construed as, or deemed to be evidence of, any presumption, concession, or admission by any of the Defendants' Releasees with respect to the truth of any fact alleged by Lead Plaintiffs or the validity of any claim that was or could have been asserted or the deficiency of any defense that has been or could have been asserted in this Action or in any other litigation, or of any liability, negligence, fault, misrepresentation, or omission with respect to any statement or written document approved or made by any of the Defendants or Defendants' Releasees, or other wrongdoing of any kind of any of the Defendants' Releasees, nor in any way referred to for any other reason as against any of the Defendants' Releasees, in any arbitration proceeding or other civil, criminal, administrative, or other action or proceeding, other than such proceedings as may be necessary to effectuate the provisions of the Stipulation;
(b) against any of the Plaintiffs' Releasees, as evidence of, or construed as, or deemed to be evidence of, any presumption, concession, or admission by any of the Plaintiffs' Releasees that any of their claims are without merit, that any of the Defendants' Releasees had meritorious defenses, or that damages recoverable under the Complaint would not have exceeded the Settlement Amount or with respect to any liability, negligence, fault, or wrongdoing of any kind, nor in any way referred to for any other reason as against any of the Plaintiffs' Releasees, in any arbitration proceeding or other civil, criminal, administrative, or other action or proceeding, other than such proceedings as may be necessary to effectuate the provisions of the Stipulation; or
(c) against any of the Releasees as evidence of, or construed as evidence of, any presumption, concession, or admission by any of them that the Settlement Amount represents the amount which could be or would have been recovered after trial of the Action; provided, however, that the Parties and the Releasees and their respective counsel may refer to this Judgment and the Stipulation to effectuate the protections from liability granted hereunder and thereunder or otherwise to enforce the terms of the Settlement.

         13. Retention of Jurisdiction - Without affecting the finality of this Judgment in any way, this Court retains continuing and exclusive jurisdiction for one year from the date of this Judgment over: (a) the Parties for purposes of the administration, interpretation, implementation, and enforcement of the Settlement, including the interpretation and enforcement of all injunctions set forth herein; (b) the disposition of the Settlement Fund; (c) any motion to approve the Class Distribution Order; and (d) the Class Members for all matters relating to the Action.

         14. Any appeal from the portions of this Judgment regarding approval of the Plan of Allocation and the motion of Lead Counsel for an award of attorneys' fees and reimbursement of Litigation Expenses shall in no way affect or delay the finality of this Judgment as to its approval of the Settlement and shall not affect or delay the Effective Date of the Settlement.

         15. Modification of the Agreement of Settlement - Without further approval from the Court, Lead Plaintiffs and Defendants are hereby authorized to agree to and adopt such amendments or modifications of the Stipulation or any exhibits attached thereto to effectuate the Settlement that: (a) are not materially inconsistent with this Judgment; and (b) do not materially limit the rights of Class Members in connection with the Settlement. Without further order of the Court, Lead Plaintiffs and Defendants may agree to reasonable extensions of time to carry out any provisions of the Settlement.

         16. Termination of Settlement - If the Settlement is terminated as provided in the Stipulation or the Effective Date of the Settlement otherwise fails to occur, this Judgment shall be vacated, rendered null and void, and be of no further force and effect, except as otherwise provided by the Stipulation, and this Judgment shall be without prejudice to the rights of Lead Plaintiffs, the other Class Members, and Defendants, and the Parties shall revert to their respective positions in the Action as of March 21, 2019, as provided in the Stipulation.

         17. Entry of Final Judgment - There is no just reason to delay the entry of this Judgment as a final judgment in this Action. Accordingly, the Clerk of the Court is expressly directed to immediately enter this final judgment in this Action.

         SO ORDERED

         STIPULATION AND AGREEMENT OF SETTLEMENT

         This Stipulation and Agreement of Settlement, dated as of May 6, 2019 (the “Stipulation”), is entered into by and between (a) Lead Plaintiffs Public School Teachers' Pension & Retirement Fund of Chicago and Arkansas Teacher Retirement System (“Lead Plaintiffs”) on behalf of themselves and the Class (defined below); and (b) defendants RH (“RH” or the “Company”), and Gary Friedman and Karen Boone (collectively, the “Individual Defendants” and, together with RH, “Defendants”), and embodies the terms and conditions of the settlement of the above-captioned action (the “Action”). Subject to the approval of the Court and the terms and conditions expressly provided herein, this Stipulation is intended to fully, finally, and forever compromise, settle, release, resolve, waive, discharge, and dismiss with prejudice the Action and all Released Plaintiffs' Claims (defined below) against Defendants and the other Defendants' Releasees (defined below) and all Released Defendants' Claims (also defined below) against Lead Plaintiffs and the other Plaintiffs' Releasees (also defined below).

         WHEREAS:

         A. On February 2, 2017, a class action complaint, styled City of Miami General Employees' & Sanitation Employees' Retirement Trust v. RH, Inc., et al., Civil Action No. 17-cv-00554-YGR, was filed in the United States District Court for the Northern District of California (the “Court”) asserting violations of federal securities laws against RH and the Individual Defendants. (ECF No. 1.) In accordance with the Private Securities Litigation Reform Act of 1995, 15 U.S.C. § 78u-4, as amended (the “PSLRA”), notice to the public was issued stating the deadline by which putative class members could move the Court for appointment as lead plaintiff. A related securities class action complaint, Errichiello v. RH, No. 3:17-cv-01425-WHO (“Errichiello”), was filed in the Court on March 16, 2017.

         B. Public School Teachers' Pension & Retirement Fund of Chicago and Arkansas Teacher Retirement System moved for appointment as Lead Plaintiffs on April 3, 2017, as did several other groups of competing movants. (ECF Nos. 7-26.) On April 13, 2017, the Court entered an Order designating Errichiello as a related case. (ECF No. 30.) On April 26, 2017, the Court entered an Order which provided that the case be recaptioned as In re RH, Inc. Securities Litigation, Case No. 4:17-00554-YGR; ordered that Errichiello be consolidated into the Action and that any subsequently filed, removed, or transferred actions related to the claims asserted in the Action be consolidated; appointed Public School Teachers' Pension & Retirement Fund of Chicago and Arkansas Teacher Retirement System as Lead Plaintiffs for the Action; and approved Lead Plaintiffs' selection of Bernstein Litowitz Berger & Grossmann LLP as Lead Counsel for the class. (ECF No. 39.)

         C. On June 12, 2017, Lead Plaintiffs filed and served the Consolidated Class Action Complaint for Violation of the Federal Securities Laws (ECF No. 45) (the “Complaint”) asserting claims against all Defendants under Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder, and against the Individual Defendants under Section 20(a) of the Exchange Act. The Complaint alleges that, during the Class Period, Defendants made materially false and misleading statements about the launch of RH's new product line, RH Modern, and the Company's inventory levels. The Complaint further alleges that the price of RH common stock was artificially inflated as a result of Defendants' allegedly false and misleading statements, and declined when the truth was revealed.

         D. On August 2, 2017, Defendants filed and served a motion to dismiss the Complaint (ECF No. 50) and a request that the Court consider documents incorporated by reference in the Complaint and take judicial notice of other documents submitted to the Court (ECF No. 51). On September 11, 2017, Lead Plaintiffs filed and served memoranda of law in opposition to Defendants' motion to dismiss and request for judicial notice. (ECF Nos. 53-54.) On October 6, 2017, Defendants filed and served reply papers in support of their motion and request for judicial notice and made a supplemental request for judicial notice. (ECF Nos. 56-58.) On October 13, 2017, Lead Plaintiffs filed objections to reply evidence accompanying Defendants' reply papers. (ECF No. 59.)

         E. The Court held oral argument on the motion to dismiss and related requests for judicial notice on October 31, 2017. (ECF Nos. 60, 63.) On February 26, 2018, the Court entered an Order which denied Defendants' motion to dismiss. (ECF No. 68.)

         F. Discovery in the Action commenced in March 2018. Lead Plaintiffs prepared and served initial disclosures, requests for production of documents, and interrogatories on Defendants, exchanged numerous letters with Defendants concerning discovery issues, and served dozens of document subpoenas on third parties. Defendants and third parties produced a total of over 10 million pages of documents to Lead Plaintiffs, and Lead Plaintiffs produced over 12, 000 pages of documents to Defendants in response to their requests. Fifteen depositions were taken in the Action, which included depositions of representatives of both Lead Plaintiffs and of Defendants' expert witness taken in connection with the motion for class certification, and twelve depositions of fact witnesses.

         G. On June 22, 2018, Lead Plaintiffs filed their motion for class certification, which was accompanied by a report from Lead Plaintiffs' expert, Dr. Steven Feinstein, which opined that RH common stock traded in an efficient market during the Class Period and that per-share damages could be measured for all Class Members using a common methodology. (ECF Nos. 94-95.) On August 14, 2018, Defendants filed their opposition to the class certification motion, which included an expert report challenging Dr. Feinstein's conclusion regarding the common damages methodology. (ECF No. 101.) Lead Plaintiffs filed reply papers in further support of their motion on September 11, 2018. (ECF Nos. 103-104.)

         H. While discovery and briefing of Lead Plaintiffs' class certification motion was ongoing, the Parties agreed to private mediation before former United States District Judge Layn R. Phillips. On August 6, 2018, the Parties (defined below) exchanged detailed mediation statements with numerous exhibits that were also submitted to Judge Phillips. A full-day, in-person mediation session with Judge Phillips was held on August 24, 2018. At the mediation session, the Parties engaged in vigorous settlement negotiations with the assistance of Judge Phillips but were not able to reach an agreement.

         I. On October 1, 2018, the Court held oral argument on Lead Plaintiffs' motion for class certification. (ECF Nos. 108, 110.) On October 11, 2018, the Court granted the motion, certifying the proposed Class, appointing Lead Plaintiffs as Class Representatives, and appointing Bernstein Litowitz Berger & Grossmann LLP as Class Counsel. (ECF No. 111.)

         J. On October 25, 2018, Defendants filed a petition to appeal the Court's order certifying the Class to the Court of Appeals for the Ninth Circuit pursuant to Rule 23(f) of the Federal Rules of Civil Procedure. (ECF No. 112.) The Court of Appeals denied that petition on January 24, 2019. (ECF No. 121.)

         K. Following certification of the Class, the Parties' discovery efforts continued. The Parties also continued to discuss the possible resolution of the Action through settlement. A second mediation with Judge Phillips was scheduled for March 1, 2019. In advance of that session, the Parties submitted and exchanged supplemental mediation statements on February 15, 2019. After a full-day, in-person mediation session on March 1, 2019, the Parties came near to a resolution. Judge Phillips issued a mediator's proposal on March 3, 2019, and the Parties continued their negotiations in the weeks immediately following the mediation.

         L. On March 21, 2019, the Parties executed a Term Sheet setting forth their agreement in principle to settle the Action in return for Defendants causing payment of $50, 000, 000.00 in cash from Defendants' D&O carriers for the benefit of the Class, subject to certain terms and conditions and the execution of a customary “long form” stipulation and agreement of settlement and related papers.

         M. This Stipulation (together with the exhibits hereto) reflects the final and binding agreement between the Parties.

         N. Based upon their investigation, prosecution, and mediation of the case, Lead Plaintiffs and Lead Counsel have concluded that the terms and conditions of this Stipulation are fair, reasonable, and adequate to Lead Plaintiffs and the other members of the Class, and in their best interests. Based on Lead Plaintiffs' direct oversight of the prosecution of this matter and with the advice of their counsel, Lead Plaintiffs have agreed to settle and release the Released Plaintiffs' Claims pursuant to the terms and provisions of this Stipulation, after considering, among other things: (a) the substantial financial benefit that Lead Plaintiffs and the other members of the Class will receive under the proposed Settlement; and (b) the significant risks and costs of continued litigation and trial.

         O. This Stipulation constitutes a compromise of all matters that are in dispute between the Parties. Defendants are entering into this Stipulation solely to eliminate the uncertainty, burden, and expense of further protracted litigation. Each of the Defendants denies any wrongdoing, and this Stipulation shall in no event be construed or deemed to be evidence of or an admission or concession on the part of any of the Defendants with respect to any claim or allegation of any fault, liability, wrongdoing, or damage whatsoever, or any infirmity in the defenses that Defendants have, or could have, asserted. Defendants expressly deny that Lead Plaintiffs have asserted any valid claims as to any of the Defendants, and expressly deny any and all allegations of fault, liability, wrongdoing, or damages whatsoever. Similarly, this Stipulation shall in no event be construed or deemed to be evidence of or an admission or concession on the part of Lead Plaintiffs of any infirmity in any of the claims asserted in the Action, or an admission or concession that any of the Defendants' defenses to liability had any merit.

         NOW THEREFORE, it is hereby STIPULATED AND AGREED, by and among Lead Plaintiffs (individually and on behalf of all other members of the Class) and Defendants, by and through their respective undersigned attorneys and subject to the approval of the Court pursuant to Rule 23(e) of the Federal Rules of Civil Procedure, that, in consideration of the benefits flowing to the Parties from the Settlement, all Released Plaintiffs' Claims as against the Defendants' Releasees and all Released Defendants' Claims as against the Plaintiffs' Releasees shall be finally and fully compromised, settled, and released, and the Action shall be dismissed with prejudice as to the Defendants, upon and subject to the terms and conditions set forth below.

         DEFINITIONS

         1. As used in this Stipulation and any exhibits attached hereto and made a part hereof, the following capitalized terms shall have the following meanings:

         (a) “Action” means the securities class action in this Court styled In re RH, Inc. Securities Litigation, Case No. 4:17-00554-YGR.

         (b) “Alternate Judgment” means a form of final judgment that may be entered by the Court herein but in a form other than the form of Judgment provided for in this Stipulation.

         (c) “Authorized Claimant” means a Class Member who submits a Claim to the Claims Administrator that is approved by the Court for payment from the Net Settlement Fund.

         (d) “Claim” means a paper claim submitted on a Claim Form, or an electronic claim, in either instance that ...


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