United States District Court, S.D. California
IN RE ILLUMINA, INC. SECURITIES LITIGATION
ORDER CONDITIONALLY GRANTING PLAINTIFFS'
UNOPPOSED MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION
SETTLEMENT [DOC. 95]
M. James Lorenz, United States District Judge
before the Court is a motion for preliminary approval of
class action settlement and directing dissemination of notice
filed by Lead Plaintiff Natissisa Enterprises Ltd.
(“Natissisa”) and Plaintiffs Anton Agoshkov,
Braden Van Der Wall, and Steven Romanoff (hereinafter
referred together as “Plaintiffs”). Doc. 95. This
motion is unopposed. Notwithstanding, after reviewing the
proposed settlement, the Court hereby conditionally
GRANTS the instant motion.
a securities class action brought on behalf of all persons
who purchased or otherwise acquired Illumina, Inc.
(“Illumina”) common stock during the period
between July 26, 2016 and October 10, 2016. Plaintiffs'
Amended Complaint claimed that Illumina and Defendants
Francis A. deSouza and Marc A. Stapley (together,
“individual defendants”) (all together
“Defendants”) violated federal securities laws by
providing investors misleading material information
concerning Illumina's revenue and sales for the third
quarter of the 2016 fiscal year. See Doc. 28.
Specifically, it is alleged Defendants failed to disclose
that Illumina lacked adequate internal controls over
financial reporting; and, on October 10, 2016, Illumina
revealed, in a press release, that its third quarter revenue
($607 million) was significantly lower than Defendants'
previous forecast of $625 million to $630 million.
Id. After the press release, Illumina's stock
price fell from $184.85 per share on October 10, 2016 to
$138.99 per share on October 11, 2016. Id.
December 16, 2016, plaintiffs Yi Fan Chen and Frontline
Global Trading Pte. filed a class action complaint in this
Court against Defendants, alleging violations of the Security
Exchange Act of 1943 (“SEA”). See Doc.
1. On January 10, 2017, plaintiff James McLeod filed a
second, substantially similar class action complaint against
Defendants in this Court for the same violations. See
McLeod v. Illumina Inc., et al., No. 3:17-cv-0053.
Subsequently, the district court consolidated both class
actions and appointed Natissisa as lead plaintiff and Levi
& Korsinsky, LLP, as lead counsel pursuant to the Private
Securities Litigation Reform Act of 1995, 15 U.S.C. §
78u-4. See Doc. 19. On May 30, 2017, Natissisa filed
the Amended Complaint alleging Defendants committed fraud
under Section 10(b) of the SEA and SEC Rule 10b-5 as: (1)
Illumina failed to truthfully disclose that the demand for
one of its premier products was decreasing, (2)
Illumina's earning projections were misleading, and (3)
control liability had attached. See Doc. 28.
moved to dismiss the Amended Complaint, and the Court granted
in part and denied in part the motion on certain allegations.
See Docs. 32, 39. The parties began discovery after
the Honorable Karen S. Crawford, United States Magistrate
Judge, held a case management conference and issued a
scheduled order. Docs. 54, 55. On September 12, 2018,
Natissisa moved to amend the Amended Complaint to include
Anton Agoshkov as an additional named plaintiff. See
Doc. 62. On September 14, 2018, Natissisa and Anton Agoshkov
moved for class certification. See Doc. 63. On
October 4, 2018, plaintiffs, Braden Van Der Wall and Steven
Romanoff filed a Complaint against the Defendants. See
Van Der Wall et ano. v. Illumina, Inc., et al., No.
3:18-cv-2307. Upon joint motion of the parties, the Court
granted a stay in the Van Der Wall action pending
the resolution of the class certification motion.
Id. at Doc. 26.
December 14, 2018, the parties filed a joint request to
extend scheduling order deadlines in order to provide the
parties more time to complete discovery and participate in
private mediation. Doc. 83. The Court granted the joint
motion on December 18, 2018. Doc. 84. On January 8, 2019, the
Court denied Natissisa's motion to amend without
prejudice. Doc. 85. Around January 30, 2019, the parties
scheduled a mediation for April 18, 2019. Doc. 95-1 at 11.
The parties participated in mediation on April 18, 2019 and
tentatively agreed to a settlement after a full day of
negotiations. Id. at 11-12. On April 25, 2019, the
Court granted the parties' joint motion to stay
resolution of the class certification motion due to the
settlement. Doc. 93. On May 29, 2019, the Court granted the
joint motion to hold the Court's ruling on class
certification in abeyance in order to (1) allow the parties
to finalize necessary settlement paperwork and (2) Plaintiff
to file a motion for preliminary approval of the settlement.
See Doc. 94. On June 11, 2019, filed the instant
parties define the Settlement Class as “[A]ll persons
or entities who purchased or otherwise acquired a legal or
beneficial ownership interest in Illumina's common stock
between July 26, 2016 through October 10, 2016,
inclusive.” Doc. 95-1 at 12. The parties exclude the
following from the Settlement Class:
“(i) [A]ny putative Settlement Class Members who
exclude themselves by filing a timely and valid request for
exclusion in accordance with the requirements set forth in
the Notice; (ii) Defendants and their family members; (iii)
any entity in which Defendants have or had controlling
interest; and (iv) the legal representatives, agents,
executors, successors, or assigns of any of the foregoing
excluded persons or entities, in their capacities as
parties' Stipulation and Agreement of Settlement (the
“Agreement”) requires Illumina to cause
“Defendants' insurers to pay the Settlement Amount
[$13, 850, 000.00] into the Escrow Account[.]” Doc.
95-2 at 14, 18. The Settlement Amount includes
“[A]ll Lead Counsel's attorneys' fees and
Litigation Expenses that may be awarded by the Court, and all
Notice and Administration Costs and Taxes, and is the total,
full and final amount of all payments to be paid by, or on
behalf of, Defendants . . . for the benefit of the Settlement
Class in this Consolidated Action[.]” Id. at
Counsel intends to apply for an attorneys' fees award in
an amount not to exceed twenty-five (25%) of the total
Settlement Fund amount (approximately $3, 462, 500),
incentive awards payable to Plaintiffs, and for reimbursement
of reasonable litigation expenses incurred during this case
(not to exceed $180, 000). Doc. 95-1 at 14.
Agreement defines “Settlement Fund” as “the
Settlement Amount plus any and all income and gains earned
thereon less any losses incurred thereon, after it is
deposited into the Escrow Account.” Doc. 95-1 at 14.
Notably, the Agreement absolves Defendants and the Released
Parties of any responsibility for the Settlement
Fund, including any loss of the principal, upon deposit of
the Settlement Amount. Id. at 19.
parties stipulated that the Agreement would (1) fully and
finally dispose of the Consolidated Action; (2) fully and
finally release any and all Released Claims as against all
Released Parties; and (3) release all of the Settled
Defendants' Claims against the Plaintiff Released
Parties. Doc. 95-2 at 19. Once Final Judgment is entered,
Plaintiffs and the Settlement Class members will be deemed to
have released all Released claims against the Released
Parties and forever enjoined from commencing any of the
Released Claims against any of the Released Parties, whether
in the United States or elsewhere. Ibid. “ [T
]he parties acknowledge and agree that the releases granted
herein are intended to release all claims that have been or
could have been asserted by Natissisa in the Consolidated
Action[.]” Id. at 20.
Cy Pres Doctrine
Agreement makes clear that “no portion of the
Settlement Fund will be returned to Illumina” even
after all conditions of the Settlement are satisfied and the
Effective Date has occurred. Doc. 95-2 at 24. The Agreement
calls for any portion of the Net Settlement Fund remaining
following distribution, granted the amount limits the
effectiveness of a redistribution to the Settlement Class, to
be donated to “a nonsectarian charitable
organization(s) certified as tax-exempt under United States
Internal Revenue Code Section 501(c)(3)[.]”
ten (10) days of the filing of this order, Illumina must
provide the Claims Administrator, JND Legal Administration,
lists of record holders of Illumina common stock during the
Class Period. Doc. 95-2 at 29. Illumina's provision of
these lists comes at no cost to the Settlement Fund, Lead
Counsel or the Claims Administrator. Ibid. However,
Illumina limits its duty as it only must provide the lists
“to the extent such lists are maintained by its stock
transfer agent and reasonably available to Illumina upon
request.” Id. at 29-30.
the lists are provided, the Claims Administrator will mail
notice [doc. 95-2 at Exh. A-2] to the Settlement Class
members if their records have been maintained by or on behalf
of Illumina. Doc. 95-2 at 30. The Claims Administrator will
also publish Summary Notice [doc. 95-2 at Exh. A-3].
Ibid. A copy of the Agreement can be obtained at
must serve notice of the Settlement as required under the
Class Action Fairness Act (“CAFA”), 28 U.S.C.
§ 1715(b), within the time period statutorily set forth
and certify that CAFA Notice has been served with Lead
Counsel within three (3) business days after service. Doc.
95-2 at 21.
Plan of Allocation
Recognized Loss will be assigned to each Settlement Class
member that submits a valid claim (an “Authorized
Claimant”). See Doc. 95-2 at 70. An Authorized
Claimant's Recognized Loss will depend upon the number of
Illumina shares purchased or acquired during the Class Period
and held at the close of trading on October 10,
2016. Ibid. The Plan of Allocation as set forth in
the long-form Notice of Proposed Settlement reads as follows:
each share of Common Stock purchased, an Authorized
Claimant's Recognized Loss is equal to:
• If the share was purchased during the Class Period and
held through January 9, 2017, then the Recognized Loss is
equal to the price paid for the share minus $134.01 (which is
the mean trading price of Illumina's Common Stock during
the 90-day period following the Class Period);
• If the share was purchased during the Class Period and
sold between October 11, 2016 and January 9, 2017, then the
Recognized Loss is equal to the price paid for the share
minus the greater of (i) $134.01 or (ii) the price at which
you sold the share.
• If the share was purchased during the Class Period and
sold on or before October 10, 2016, then the Recognized Loss
is $0. This is because the share was not harmed in accordance
with Plaintiffs' theory of liability and, therefore,
there are no recoverable damages. See Doc. 95-2 at
will not be the amount of your payment. See Do c . 9
5 -2 a t 71. Af ter the deadli n e for all Authorized
Claimants to send in their Proof of Claim forms, the payment
you get will be a proportion of the Net Settlement Fund equal
to your Recognized Loss divided by the total of each
Authorized Claimant's Recognized Losses. Ibid.
Your payment will be made in cash. Ibid.
Plan of Allocation also includes the following provisions:
Authorized Claimant will have a Recognized Loss only in
connection with damaged shares. Thus, any transaction that
resulted in a profit or gain will not be included in an
Authorized Claimant's overall Recognized Loss;
There shall be no Recognized Loss attributed to any Illumina
securities other than Common Stock or to any shares of ...