Khoja v. Orexigen Therapeutics, Inc.

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8 UNITED STATES DISTRICT COURT

9 SOUTHERN DISTRICT OF CALIFORNIA

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11 KARIM KHOJA, et al., on behalf of Case No.: 15-cv-00540-JLS-AGS

himself and all others similarly situated,

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ORDER:

Plaintiffs,

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v. (1) GRANTING UNOPPOSED

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MOTION FOR FINAL APPROVAL

OREXIGEN THERAPEUTICS, INC., et

15 OF SETTLEMENT AND PLAN OF

al.,

ALLOCATION;

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Defendants.

17 (2) GRANTING MOTION FOR AN

AWARD OF ATTORNEYS’ FEES

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AND EXPENSES; AND

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(3) ENTERING JUDGMENT

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21 [ECF Nos. 149; 150]

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23 Presently before the Court are Lead Plaintiff Karim Khoja’s Unopposed Motions

24 for: (1) Final Approval of Settlement and Plan of Allocation (“Final Approval Motion”)

25 (ECF No. 149); and (2) an Award of Attorneys’ Fees and Litigation Expenses (“Fees

26 Motion”) (ECF No. 150). The Court held a Final Approval Hearing regarding both motions

27 on October 28, 2021. (ECF No. 154.) As set forth during the Hearing, because the

28 Settlement and Plan of Allocation are fair, reasonable, and adequate, the Court GRANTS

1 the Final Approval Motion. Further, because the requested attorneys’ fees, litigation

2 expenses, and incentive award, are reasonable the Court GRANTS the unopposed Fees

3 Motion.

4 BACKGROUND

5 This case began over six years ago on March 10, 2015, when the first of three initial

6 complaints in this action was filed alleging that Defendant Orexigen Therapeutics, Inc.

7 (“Orexigen”) “made materially misleading statements when it disclosed confidential

8 25[ percent] interim data from a large-scale clinical trial . . . of its weight loss drug,

9 Contrave,” on March 3, 2015. (ECF No. 149-2 (“Abadou Decl.”) ¶ 2.) The news that

10 Contrave may demonstrate cardioprotective benefits caused Orexigen’s stock to close

11 “31[ percent] higher than it did the day prior.” (Id.) A March 5, 2015 Forbes.com article,

12 however, reported that “a senior FDA official condemned [Orexigen]’s disclosure, . . .

13 causing the stock price to plummet and erasing more than $280 million in market

14 capitalization.” (Id.)

15 Several related cases were filed premised on the same facts (id. ¶ 11), and on June

16 22, 2015, the Honorable M. James Lorenz ordered the cases consolidated, appointed Karim

17 Khoja (“Lead Plaintiff” or “Plaintiff”) as lead plaintiff, and approved Kahn Swick & Foti,

18 LLP (“Lead Counsel”) as lead counsel (ECF No. 43). (Abadou Decl. ¶ 12.) On June 26,

19 2015, Judge Lorenz recused himself from the case, and this Court was reassigned. (ECF

20 No. 46.)

21 On August 20, 2015, Plaintiff filed a Consolidated Complaint (ECF No. 55), which

22 added allegations of further misleading statements made by Orexigen on March 3 and May

23 8, 2015. (Abadou Decl. ¶¶ 12–13.) Defendants Orexigen, Joseph P. Hagan, Michael A.

24 Narachi, and Preston Klassen (collectively, “Defendants”) filed a Motion to Dismiss the

25 Consolidated Complaint (ECF No. 62), which the Court granted with leave to amend (ECF

26 No. 76). (Abadou Decl. ¶ 14.) Thereafter, Plaintiff requested that the Court enter judgment

27 in Defendants’ favor so he could pursue an appeal (ECF No. 77) and subsequently appealed

28 the Court’s dismissal decision (ECF No. 80). (Abadou Decl. ¶ 14.) On March 12, 2018,

1 while the appeal was pending, Orexigen filed for Chapter 11 bankruptcy, and an automatic

2 stay halted further proceedings against Orexigen, but not the remaining defendants

3 (collectively, the “Individual Defendants”). (Id. ¶¶ 16, 36; see also id. ¶¶ 46–52.)

4 On August 13, 2018, the Ninth Circuit affirmed in part and reversed in part the

5 Court’s dismissal of the Consolidated Complaint (ECF No. 93). (Abadou Decl. ¶¶ 15, 37.)

6 The Individual Defendants filed petitions for panel rehearing and rehearing en banc (ECF

7 No. 85), but the Ninth Circuit denied the petitions (ECF No. 86). (Abadou Decl. ¶¶ 38–

8 41.) The Individual Defendants then filed a petition for writ of certiorari with the Supreme

9 Court, but the Court denied certiorari (ECF No. 108). (Abadou Decl. ¶¶ 43–45.)

10 Following an Appeal Mandate Hearing on January 7, 2019, (ECF No. 92), this Court

11 issued a briefing schedule for the Individual Defendants to file a renewed motion to dismiss

12 (ECF No. 97). (Abadou Decl. ¶ 53.) On September 23, 2019, the Court granted in part

13 and denied in part the Individual Defendants’ Renewed Motion to Dismiss (ECF Nos. 98;

14 110). (Abadou Decl. ¶ 55.) On October 17, 2019, Plaintiff filed a Consolidated Amended

15 Complaint (“CAC”) (ECF No. 111), which the Individual Defendants moved to dismiss

16 (ECF No. 114). (Abadou Decl. ¶¶ 56–57.)

17 On March 13, 2020, the parties participated in a day-long mediation facilitated by

18 Jed Melnick, Esq., of JAMS. (Id. ¶¶ 63–64.) After reaching an impasse, the parties

19 adjourned but agreed that they would resume settlement discussions after the Court ruled

20 on the Individual Defendants’ pending Partial Motion to Dismiss. (Id. ¶ 64.)

21 On May 19, 2020, after Orexigen’s Wind Down Administrator, Province, Inc.

22 (“Province”), filed a status report with the Ninth Circuit reporting that the bankruptcy stay

23 had been lifted, the Ninth Circuit extended its prior order to Orexigen, and the mandate,

24 which noted the substitution of Province for Orexigen, was spread to this Court on July 10,

25 2020 (ECF No. 134). (See Abadou Decl. ¶ 59.)

26 On November 2, 2020, the Court granted the Individual Defendants’ Partial Motion

27 to Dismiss (ECF No. 139). (Abadou Decl. ¶ 62.) Thereafter, the parties resumed

28 settlement negotiations, and, after several weeks of additional negotiations, agreed to

1 accept a mediator’s proposal of $4.8 million. (Id. ¶¶ 64–65.) On December 9, 2020, the

2 parties completed and executed a Settlement Term Sheet and filed a Notice of Settlement

3 (ECF No. 140) requesting that the Court set a date for Plaintiff to move for preliminary

4 approval of the parties’ settlement. (Abadou Decl. ¶ 66.) The Court subsequently ordered

5 Plaintiff to file a motion for preliminary approval of the settlement by February 12, 2021

6 (ECF No. 141). (Abadou Decl. ¶ 66.) Plaintiff filed an Unopposed Motion for Preliminary

7 Approval of Proposed Settlement on February 12, 2021, (ECF No. 142), and the Court

8 granted preliminary approval on April 22, 2021 (ECF No. 147). (Abadou Decl. ¶ 68.) On

9 May 18, 2021, the $4.8 million Settlement Amount was paid into an interest-bearing

10 escrow account on behalf of the Settlement Class. (Id. ¶ 69.) Plaintiff’s Final Approval

11 and Fees Motions now follow.

12 SETTLEMENT TERMS

13 The Proposed Settlement1 preliminarily approved by this Court defines the

14 Settlement Class as:

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“all Persons who purchased or otherwise acquired Orexigen

16 publicly traded securities between March 3, 2015 and May 12,

2015, inclusive,” excluding “Defendants, all directors and

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officers of Orexigen (whether current or former), each of their

18 respective immediate family members, and entities in which any

such excluded person holds a controlling interest.”

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20 (ECF No. 147 (“Prelim. App. Order”) at 4 (quoting ECF No. 142-3 ¶ 1.26).)2 The

21 Settlement provides for a $4.8 million Settlement Amount less the following deductions:

22 the reasonable costs and expenses of the Claims Administrator incurred in connection with

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1 Capitalized terms used herein have the same meaning as set forth in the Court’s

26 Preliminary Approval Order (ECF No. 147) and the Stipulation of Settlement (ECF No.

142-3) unless otherwise defined.

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2 Citations to page numbers of documents on the docket are to the page numbers

28 assigned by the CM/ECF system.

1 providing notice and administrating the settlement (not to exceed $250,000); certain taxes

2 and tax expenses; Lead Counsel’s fees (not to exceed 33 percent of the Settlement

3 Amount); and Lead Counsel’s and Lead Plaintiff’s expenses (not to exceed $185,000). (Id.

4 (citing ECF Nos. 142-3 ¶ 6.2; 142-5 at 1).) The remaining balance, i.e., the Net Settlement

5 Fund, is to be distributed to Authorized Claimants. (Id.)

6 Each Settlement Class Member who wishes to receive a portion of the Net

7 Settlement Fund must submit a Proof of Claim and Release Form by the date provided in

8 the Proposed Notice, and any Settlement Class Member who fails to submit a timely Proof

9 of Claim and Release Form will be barred from receiving payment but otherwise bound by

10 the terms of the Settlement. (Id. (citing ECF No. 142-3 ¶ 6.3(b)).) Before the deduction

11 of fees, costs, and expenses, Plaintiff’s damages expert estimates the average recovery per

12 share to be $0.19, if valid claims are submitted for all approximately 25 million shares of

13 Orexigen securities purchased during the Class Period. (Id. at 5 (citing ECF No. 142-5

14 ¶ 3).)

15 Each Authorized Claimant will receive a pro rata share of the Net Settlement Fund

16 based on a recognized loss formula, which varies for common stock, call options, and put

17 options. (Id. (citing ECF No. 142-5 ¶¶ 49–71).) In exchange, the Class Members:

18 shall have fully, finally, and forever waived, released,

relinquished, discharged, and dismissed with prejudice all

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Released Claims against all Released Defendant Parties, and

20 shall forever be barred and enjoined from commencing,

instituting, intervening in or participating in, prosecuting or

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continuing to prosecute any action or other proceeding in any

22 court of law or equity, arbitration tribunal, or administrative

forum, or other forum of any kind of character (whether brought

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directly, in a representative capacity, derivatively, or in any other

24 capacity), that asserts any of the Released Claims against any of

the Released Defendant Parties, regardless of whether such

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Settlement Class Member executed and delivers a Proof of Claim

26 and Release Form, and whether or not such Settlement Class

Member shares in the Settlement Fund.

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28 (Id. (quoting ECF No. 142-3 ¶ 5.1).)

1 MOTION FOR FINAL APPROVAL

2 I. Class Certification

3 A threshold requirement for final approval of a class action settlement is the

4 assessment of whether the class satisfies the requirements of Federal Rule of Civil

5 Procedure 23(a) and the requirements of one of the types of class actions enumerated in

6 subsection (b). Hanlon v. Chrysler Corp., 150 F.3d 1011, 1022 (9th Cir. 1998), overruled

7 on other grounds by Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011). Here, in the

8 Preliminary Approval Order, the Court found the proposed Settlement Class proper and

9 certified it for settlement purposes. (Prelim. App. Order at 5–11.) Because “[t]here have

10 been no changes with respect to factors this Court considered in preliminarily certifying

11 the Settlement Class” (Final App. Mot. at 30), the Court incorporates by reference the

12 reasons set forth in its Preliminary Approval Order and reaffirms that the requirements of

13 Rule 23(a) and (b) have been satisfied.

14 II. Adequacy of Notice

15 Before granting final approval, a court must also determine whether the class

16 received adequate notice of the settlement. Hanlon, 150 F.3d at 1025. Here, in the

17 Preliminary Approval Order, the Court approved the content of the forty-eight-page

18 Proposed Notice, the Proof of Claim and Release Form, and the proposed notification plan

19 and authorized Rust Consulting, Inc. (“Rust”) to act as the Claims Administrator in

20 connection with the Settlement. (Prelim. App. Order at 15–17.) In support of the Final

21 Approval Motion, Plaintiff attached the Declaration of Jason Rabe, a program manager for

22 Rust. (ECF No. 149-7 (“Rust Decl.”) ¶ 1.) Pursuant to the Preliminary Approval Order

23 and Proposed Settlement, Rust mailed a Notice Packet (consisting of the Notice and Proof

24 of Claim and Release Form) on or around May 12, 2021, to 4,016 mailing records of

25 common banks, brokers, and other nominees. (Rust Decl. ¶ 2; Abadou Decl. ¶ 71.) The

26 Notice requested that, within ten days of receipt, these brokers and nominees identify

27 potential Class Members by their names and addresses, forward a copy of the Notice Packet

28 to these potential Class Members, and provided Lead Counsel with written confirmation

1 of doing so. (Rust Decl. ¶ 4.) As of September 23, 2021, the date of the Rust Declaration’s

2 execution:

3 • Rust had received an additional 6,902 names and addresses of potential Class

Members from individuals at brokerage firms, banks, institutions, and other

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nominees.

5 • Rust received requests from brokers and other nominee holders for 4,920 additional

Notice Packets.

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• 1,520 Notice Packets were returned to Rust by the United States Postal Service as

7 undeliverable, but 182 new addresses were obtained.

8 • A total of 16,074 Notice Packets were mailed to potential Class Members.

9 (Id. ¶¶ 5–8.)

10 Rust also engaged in a number of additional efforts to notify potential Class

11 Members of the Settlement. On May 12, 2021, Rust established a case-specific, toll-free

12 number with an Interactive Voice Response System and live operators to respond to

13 inquiries about the Settlement. (Id. ¶ 10.) From May 12, 2021, to September 23, 2021,

14 Rust received forty-seven calls to the telephone hotline. (Id. ¶ 11.) Also on May 12, 2021,

15 Rust established a case-specific website with general information about the instant matter

16 and downloadable copies of the Notice, Proof of Claim and Release Form, Summary

17 Notice, and other settlement documents. (Id. ¶ 12.) Additionally, on May 24, 2021, in

18 accordance with the Preliminary Approval Order, Rust released the Summary Notice to be

19 published in the national edition of Investor’s Business Daily. (Id. ¶ 9.) As of October 19,

20 2021, Rust had received 3,123 Proof of Claims and Release Forms. (ECF No. 153-2

21 (“Supp. Rust Decl.” ¶ 2.)

22 Having reviewed the Rust Declaration, which provides that notice was disseminated

23 to potential Class Members in the manner ordered by the Court in its Preliminary Approval

24 Order, and the Supplemental Rust Declaration attached to Plaintiff’s reply, the Court finds

25 that the Settlement Class received adequate notice of the Settlement.

26 III. Fairness of the Settlement

27 Before granting final approval, a court must also examine whether the settlement is

28 fair, adequate, and reasonable. Fed. R. Civ. P. 23(e). The Ninth Circuit has enumerated

1 various factors that district courts should consider and balance in determining whether a

2 proposed settlement meets the fair, reasonable, and adequate standard, including: (1) the

3 strength of the plaintiff’s case; (2) the risk, expense, complexity, and likely duration of

4 further litigation; (3) the risk of maintaining class action status throughout trial; (4) the

5 amount offered in settlement; (5) the extent of discovery completed and the stage of the

6 proceedings; (6) the experience and views of counsel; (7) the presence of a governmental

7 participant; and (8) the reaction of the class members to the proposed settlement. Hanlon,

8 150 F.3d at 1026. This fairness determination is committed to the sound discretion of the

9 district court. Id. Additionally, “[w]here a settlement is the product of arms-length

10 negotiations conducted by capable and experienced counsel, the court begins its analysis

11 with a presumption that the settlement is fair and reasonable.” Garner v. State Farm Mut.

12 Auto Ins. Co., No. CV 08 1365 CW (EMC), 2010 WL 1687832, at *13 (N.D. Cal. Apr. 22,

13 2010).

14 A. Negotiation at Arm’s Length with the Assistance of an Experienced, Neutral

15 Mediator

16 As detailed by Plaintiff in his Final Approval Motion, the Settlement here was

17 reached with the assistance of an experienced, neutral mediator after “six years of hard-

18 fought litigation, extensive mediation[,] and several months of settlement negotiations.”

19 (Final App. Mot. at 15–16.) Indeed, the Court has already found, and again finds, that the

20 Settlement “was the product of serious, informed, and non-collusive negotiations” (ECF

21 No. 147 at 12) with experienced and well-respected counsel on both sides. See In re

22 Immune Response Sec. Litig., 497 F. Supp. 2d 1166, 1174 (S.D. Cal. 2007) (“Both [p]arties

23 are represented by experienced counsel and their mutual desire to adopt the terms of the

24 proposed settlement, while not conclusive, is entitled to a great deal of weight.” (citing

25 Williams v. Vukovich, 720 F.2d 909, 922–23 (6th Cir. 1983); Cotton v. Hinton, 559 F.2d

26 1326, 1330 (5th Cir. 1977))). Accordingly, the Court begins its fairness examination with

27 a presumption that the Settlement is fair and reasonable. See Garner, 2010 WL 1687832,

28 at *13.

1 B. Strength of Plaintiff’s Case and the Risk, Expense, Complexity, and Likely

2 Duration of Further Litigation

3 The potential strengths and weakness of Plaintiff’s case, and the risk, expense,

4 complexity, and likely duration of further litigation all support final approval of the

5 Settlement. In the Final Approval Motion, Plaintiff acknowledges that this action, brought

6 pursuant to the Private Securities Litigation Reform Act (“PSLRA”), “was inherently risky

7 and difficult from the outset.” (Final App. Mot. at 18 (citing Scott v. ZST Digit. Nets., Inc.,

8 Case No. CV 11-3531 GAF (JCx), 2013 WL 12126744, at *3 (C.D. Cal. Aug. 5, 2013)

9 (“[C]ases brought under [PSLRA] . . . involve a ‘heightened level of risk’ because PSLRA

10 ‘makes it more difficult for investors to successfully prosecute securities class actions.’”)).)

11 And to recover under § 10(b) of the Securities Exchange Act and Rule 10(b)-5, Plaintiff

12 would have had to prove: (1) a material misrepresentation or omission; (2) scienter; (3) a

13 connection between the misrepresentation or omission and the purchase or sale of a

14 security; (4) reliance upon the misrepresentation or omission; (5) economic loss; and

15 (6) loss calculation. Halliburton Co. v. Erica P. John Fund, Inc., 573 U.S. 258, 267 (2014)

16 (quoting Amgen Inc. v. Ct. Ret. Plans & Tr. Funds, 568 U.S. 455, 460–61 (2013)).

17 Throughout this case, Defendants have “vigorously den[ied] liability,” and notably,

18 challenged the scienter element—“one of the more difficult elements of a securities fraud

19 claim”—in their Motion to Dismiss the Consolidated Complaint (ECF No. 98), arguing

20 that they acted in good faith and did not have motive to commit fraud. (Abadou Decl.

21 ¶¶ 77, 81 (citing In re Amgen Inc. Sec. Litig., Case No. CV 7-2536 PSG (PLAx), 2016 WL

22 10571773, at *3 (C.D. Cal. Oct. 25, 2016) (“[C]ourts have recognized that a defendant’s

23 state of mind in a securities case is the most difficult element of proof and one that is rarely

24 supported by direct evidence.”)).) Although Lead Counsel maintains that Plaintiff could

25 have confidently refuted Defendants’ scienter arguments at trial, Lead Counsel also

26 recognizes that a jury—with the power to make credibility determinations—could have

27 sided with Defendants. (Id. ¶ 83.) Lead Counsel further recognizes that Plaintiff faced

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1 considerable challenges in proving loss causation and that Defendants’ allegedly

2 misleading statements inflated the price of Orexigen securities. (Id. ¶ 84.)

3 Additionally, were litigation to proceed, the parties may have engaged in another

4 round of dismissal arguments before beginning formal discovery, and given the complex

5 factual and legal issues in the case, Plaintiff opines that expert discovery would have been

6 extensive. (See Final App. Mot. at 20.) Had the parties not settled, they would have spent

7 considerable time and effort in discovery and litigating class certification and summary

8 judgment, adding “further expense to both sides as well as years of delay of any potential

9 recovery for the putative class.” (Id. at 20–21.)

10 The Final Approval Motion reassures the Court that Plaintiff—who spent “more than

11 six years [in] litigation, including undertaking a lengthy appellate process” before the Ninth

12 Circuit and Supreme Court—is fully aware of the strengths and weaknesses of this case.

13 (Id. at 21.) All in all, the outcome of this case was uncertain, and the Court agrees that

14 “[s]uch risks, when balanced against the immediate benefits of this Settlement, favor a

15 finding that the Settlement is reasonable.” (Abadou Decl. ¶ 83.) Accordingly, the Court

16 finds that these factors weigh in favor of approving the Settlement. See In re LinkedIn

17 User Priv. Litig, 309 F.R.D. 573, 587 (N.D. Cal. 2015) (“Generally, unless the settlement

18 is clearly inadequate, its acceptance and approval are preferable to a lengthy and expensive

19 litigation with uncertain results.”).

20 C. Risk of Maintaining Class Action Status Throughout Trial

21 Plaintiff’s risk of maintaining class action status throughout trial supports final

22 approval of the Settlement. In the Final Approval Motion, Plaintiff submits that the class

23 was not yet certified when the parties reached a settlement, and Defendants “undoubtedly

24 would have vigorously contested” certification of the putative class. (Final App. Mot. at

25 21.) Plaintiff also brings to light the additional complication of a potentially bifurcated

26 Class Period. (Id. at 22.) Indeed, in its Order granting in part Defendants’ Partial Motion

27 to Dismiss the CAC, the Court found that Plaintiff had not pled sufficient facts to support

28 a continuous class period and “effectively bifurcated the Class Period into two short

1 windows”—March 3–5, 2015, and May 8–12, 2015—“substantially limit[ing] recoverable

2 damages.” (Id. at 20.) Further, because Plaintiff purchased common stock in March of

3 2015 only, Defendants would likely have challenged Plaintiff’s standing to bring claims

4 on behalf of those investors who purchased stock in May 2015, and, given that the events

5 complained of occurred in 2015, finding an individual willing to serve as a named plaintiff

6 would have been a “daunting exercise” for Lead Counsel. (Id. at 22.) The Settlement,

7 however, obviates the risk that potential unrepresented Class Members “might well have

8 lost their chance to recover.” Browne v. Am. Honda Motor Co., No. CV 09–06750 MMM

9 (DTBx), 2010 WL 9499072, at *11 (C.D. Cal. July 29, 2010). Accordingly, the Court

10 finds that this factor weighs in favor of approving the Settlement.

11 D. Amount Offered in Settlement

12 The $4.8 million Settlement Amount supports final approval of the Settlement. As

13 provided in the Notice sent to potential Settlement Class Members, Plaintiff’s damages

14 expert estimates that, for the 25 million shares purchased during the Class Period, the

15 average recovery per share for Orexigen common stock will be approximately $0.19 per

16 share before deduction of attorneys’ fees, costs and expenses, and costs of providing notice

17 and administering the Settlement. (Rust Decl. at 17.) Although each Authorized

18 Claimant’s recovery will vary depending on, inter alia, when the Authorized Claimant

19 purchased or acquired Orexigen securities and when they were sold (Abadou Decl. ¶ 95),

20 the $4.8 million Settlement Amount represents approximately 25 percent of Plaintiff’s

21 expert’s estimated total potential damages (id. ¶ 77; Final App. Mot. at 8, 17). This

22 recovery is substantial considering that “the median settlement recovery for all securities

23 cases in 2020 represented just 1.7[ percent] of investor losses.” (Final App. Mot. at 17

24 (citing Janeen McIntosh & Svetlana Starykh, Recent Trends in Securities Class Action

25 Litigation: 2020 Full-Year Review, NERA Econ. Consulting (2021)). Moreover, the

26 Settlement yields immediate and certain recovery for the Class Members and is not

27 unreasonable in light of the risks, expenses, and likely duration of further litigation in a

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1 case that has already been pending for more than six years. Accordingly, the Could finds

2 that the $4.8 million Settlement Amount weighs in favor of approving the Settlement.

3 E. The Extent of Discovery Completed and Stage of the Proceedings

4 The stage of the proceedings in this case supports final approval of the Settlement.

5 As stated, the parties had been litigating this case for six years and had endured a lengthy

6 appellate process by the time the case settled. Lead Counsel, having extensively researched

7 and investigated the case and engaged in multiple rounds of dismissal proceedings,

8 “sufficiently knew and understood the merits of [Plaintiff’s] claims” before a settlement

9 was reached. (Final App. Mot. at 23–24.) Additionally, although the parties never began

10 formal discovery, they exchanged informal discovery, including documents in advance of

11 mediation, and Plaintiff engaged with experts to assess loss causation and damages. (Id.)

12 See also In re Mego Fin. Corp. Sec. Litig., 213 F.3d 454, 459 (9th Cir. 2000) (“[I]n the

13 context of class action settlements, formal discovery is not a necessary ticket to the

14 bargaining table where the parties have sufficient information to make an informed

15 decision about settlement.” (quoting Linney v. Cellular Alaska P’Ship, 151 F.3d 1234, 1239

16 (9th Cir. 1998))). The insight gained by Lead Counsel after six years of “extensive

17 investigation, substantial motion practice, hard-fought settlement negotiations[,] and

18 informal discovery” leaves little doubt that further discovery would aid in Lead Counsel’s

19 knowledge of the case and the strengths and weaknesses of Plaintiff’s claims. Accordingly,

20 the Court finds that this factor weighs in favor of approving the Settlement.

21 F. Experience and Views of Counsel

22 Lead Counsel’s experience and belief that the Settlement is fair, reasonable, and in

23 the best interests of the Settlement Class supports final approval of the Settlement. Per the

24 firm resume attached to the Final Approval Motion, and as recognized by the Court in its

25 Preliminary Approval Order, Lead Counsel has extensive experience prosecuting complex

26 securities class actions. (See Prelim. App. Order at 147 at 9; ECF No. 149-4.) Given Lead

27 Counsel’s experience with the case and expertise with securities class actions, the Court

28 presumes reasonable Lead Counsel’s recommendation to approve the Settlement. See

1 Boyd v. Bechtel Corp., 485 F. Supp. 610, 622 (N.D. Cal. 1979) (“The recommendations of

2 plaintiffs’ counsel should be given a presumption of reasonableness. Attorneys, having an

3 intimate familiarity with a lawsuit after spending years in litigation, are in the best position

4 to evaluation the action . . . .”).

5 Additionally, although the Settlement was reached prior to class certification, no

6 circumstances of collusion appear here. The Settlement Class will receive an immediate

7 monetary benefit, the Stipulation of Settlement does not contain a “clear sailing” provision,

8 and any unclaimed fees will not revert back to Defendants but will be donated to an

9 appropriate and Court-approved 501(c)(3) non-profit organization. (See Final App. Mot.

10 at 25–26.) And, as addressed supra, the Settlement was negotiated and reached at arm’s

11 length with the assistance of an experienced, neutral mediator and both Lead Counsel and

12 defense counsel are capable and experienced. Accordingly, the Court finds that Lead

13 Counsel’s experience and opinion that the Settlement is fair, weighs in favor of approving

14 the Settlement.

15 G. Reaction of the Class Members to the Settlement

16 The reaction of the Class Members to the Settlement supports final approval of the

17 Settlement. As detailed above, the Claims Administrator, Rust, mailed 16,074 Notice

18 Packets to potential Settlement Class Members and nominees and had not received any

19 requests for exclusion from the Settlement Class as of October 19, 2021. (Supp. Rust Decl.

20 ¶¶ 4–5.) Also as of October 21, 2021, Plaintiff had not received any objections to or

21 requests for exclusion from the Settlement, and the deadline to either object or to request

22 exclusion passed on October 7, 2021. (ECF No. 153-1 (“Supp. Abadou Decl.”) ¶ 7.) At

23 the Final Approval Hearing on October 28, 2021, Lead Counsel again confirmed that no

24 objections to or requests for exclusion from the Settlement had been received. Considering

25 the number of Notice Packets mailed to potential Class Members and the fact that zero

26 objections have been filed, the Court finds that the reaction of the Class Members to the

27 Settlement weighs in favor of approving the Settlement. See Nat’l Rural Telecomm. Coop.

28 v. DIRECTV, Inc., 221 F.R.D. 523, 529 (C.D. Cal. 2004) (“[T]he absence of a large number

1 of objections to a proposed class action settlement raises a strong presumption that the

2 terms of a proposed class settlement action are favorable to the class members.”).

3 H. Conclusion

4 Because all of the pertinent Harlon factors support final approval of the Settlement,

5 the Could finds that the Settlement is fair, reasonable, and adequate pursuant to Federal

6 Rule of Civil Procedure 23(e).

7 IV. Plan of Allocation

8 In addition to the terms of the Settlement itself, the Court must determine whether

9 the Plan of Allocation (“Plan”) is fair, reasonable, and adequate. “Approval of a plan of

10 allocation of settlement proceeds in a class action under [Rule] 23 is governed by the same

11 standards of review applicable to approval of settlement as a whole: the plan must be fair,

12 reasonable and adequate.” In re Oracle Sec. Litig., No. C-90-0931-VRW, 1994 WL

13 502054, at *1 (N.D. Cal. June 16, 1994) (citing Class Plaintiffs v. City of Seattle, 955 F.2d

14 1268, 1284–85 (9th Cir. 1992)). “A plan of allocation that reimburses class members based

15 on the extent of their injuries is generally reasonable.” Id.

16 Here, Plaintiff prepared the Plan “after careful consideration and analysis” and with

17 the assistance of damages expert Dr. Zachary Nye. (Final Approval Mot. at 30.) The Plan

18 provides for a recognized loss formula to apportion the Net Settlement Fund to Authorized

19 Claimants based on when they acquired and/or sold Orexigen securities during the Class

20 Period and is designed to “equitably distribute the Net Settlement Fund among Authorized

21 Claimants based on their respective alleged economic losses as a result of [Defendants’]

22 alleged misstatements and omissions, as opposed to losses caused by the market- or

23 industry-wide factors, or company-specific factors unrelated to the alleged fraud.” (ECF

24 No. 149-7 at 24.) Further, the formula “ensures that Settlement Class Members’ recoveries

25 are based upon the relative losses they sustained” and that “[a]ll Settlement Class Members

26 will receive a pro rata distribution from the Net Settlement Fund calculated in the same

27 matter.” (Abadou Decl. ¶ 94.) The Plan “is not a formulized damage study but, rather, a

28 simplified methodology designed to compare one Settlement Class Member to another

1 through their respective Class Period transactions in Orexigen securities.” (Final App.

2 Mot. at 31.)

3 Having reviewed the Plan (ECF No. 149-7 ¶¶ 48–71), the Court finds that it is fair,

4 reasonable, and adequate, for it is based on a damages theory that Plaintiff developed in

5 consultation with a damages expert and aims to equitably distribute the Net Settlement

6 Funds based on each Authorized Claimant’s losses. See Schueneman v. Arena Pharms.,

7 Inc., Case No.: 3:10-CV-01959-CAB-(BLM), 2020 WL 3129566, at *7 (S.D. Cal. June 12,

8 2020) (finding a plan of allocation, which was recommended by lead counsel “after careful

9 consideration and analysis” and prepared “with the assistance of a damages expert,” fair

10 and adequate). Further lending support to this conclusion is the fact that zero Class

11 Members have requested exclusion from or filed objections to the Settlement.

12 V. Conclusion

13 Because the Settlement and the Plan of Allocation are both fair, reasonable, and

14 adequate, the Court GRANTS the Final Approval Motion (ECF No. 149).

15 MOTION FOR ATTORNEYS’ FEES AND LITIGATION EXPENSES

16 Lead Plaintiff also moves for an order approving: (1) an award of $1,584,000 in

17 attorneys’ fees for Lead Counsel (33 percent of the $4.8 million Settlement Amount);

18 (2) an award of $100,529.65 in litigation expenses for Lead Counsel; and (3) a $9,230

19 incentive award to Lead Plaintiff. (Fees Mot. at 9.) Additionally, at the Final Approval

20 Hearing, Plaintiff orally requested that the Court approve reimbursement to Lead Counsel

21 of the reasonable costs and expenses incurred by Rust in connection with providing notice

22 and administrating the settlement in an amount not to exceed $250,000. The Court

23 addresses each request in turn.

24 I. Attorneys’ Fees

25 A. Legal Standard

26 Federal Rule of Civil Procedure 23(h) permits a court to award reasonable attorneys’

27 fees “authorized by law or by the parties’ agreement.” In the Ninth Circuit, a district court

28 has discretion to apply either a lodestar method or a percentage-of-the-fund method in

1 calculating a fee award in a common fund case. Fischel v. Equitable Life Assurance Soc’y

2 of U.S., 307 F.3d 997, 1006 (9th Cir. 2002). In this case, the Court finds that the

3 percentage-of-the-fund calculation is preferable to the lodestar approach. See Aichele v.

4 City of Los Angeles, Case No.: CV 12–10863–DMG (FFMx), 2015 WL 5286028, at *5

5 (C.D. Cal. Sept. 9, 2015) (“Many courts and commentators have recognized that the

6 percentage of the available fund analysis is the preferred approach in class action fee

7 requests because it more closely aligns the interests of the counsel and the class, i.e., class

8 counsel directly benefit from increasing the size of the class fund and working in the most

9 efficient manner.”); see also Vizcaino v. Microsoft Corp., 290 F.3d 1043, 1050 n.5 (9th

10 Cir. 2002) (“[I]t is widely recognized that the lodestar method creates incentives for

11 counsel to expend more hours than may be necessary on litigating a case so as to recover a

12 reasonable fee . . . .”).

13 When applying the percentage-of-the-fund approach, the Ninth Circuit has routinely

14 treated 25 percent as the “benchmark” a district court should award. In re Pac. Enters. Sec.

15 Litig., 47 F.3d 373, 379 (9th Cir. 1995) (citing Six (6) Mexican Workers v. Ariz. Citrus

16 Growers, 904 F.2d 1301, 1311 (9th Cir. 1990)); see also Fischel, 307 F.3d at 1006 (“We

17 have established a 25 percent ‘benchmark’ in percentage-of-the-fund cases . . . .”). The

18 district court, however, “may adjust the benchmark when special circumstances indicate a

19 higher or lower percentage would be appropriate.” In re Pac. Enters. Sec. Litig., 47 F.3d

20 at 379 (citing Six (6) Mexican Workers, 904 F.2d at 1311). “Selection of the benchmark

21 or any other rate,” whether higher or lower than 25 percent, “must be supported by findings

22 that take into account all of the circumstances of the case.” Vizcaino, 290 F.3d at 1048.

23 Relevant factors when determining the percentage ultimately awarded may include: (1) the

24 results achieved; (2) the risk of litigation; (3) the skill required and quality of work; (4) the

25 contingent nature of the fee and the financial burden carried by the plaintiffs; and (5)

26 awards made in similar cases. See id. at 1048–50. When using the percentage-of-the-fund

27 approach, district courts may also apply the lodestar method as a cross-check of the

28 reasonableness of the percentage award. See id. at 1050 (“[Although] the primary basis of

1 the fee award remains the percentage method, the lodestar may provide a useful perspective

2 on the reasonableness of a given percentage award.”); see also Aichele, 2015 WL 5286028,

3 at *2 (analyzing “comparison with counsel’s lodestar” as one of eight factors it considered

4 in determining the reasonableness of the requested percentage award).

5 B. Analysis

6 Considering the circumstances of this case, Lead Counsel’s departure from the 25

7 percent benchmark and request for 33 percent of the $4.8 million Settlement Amount in

8 attorneys’ fees, or $1,584,000, is reasonable. As highlighted by Lead Counsel in the Fees

9 Motion, several factors support Lead Counsel’s request for 33 percent of the Settlement

10 Amount. For one, Lead Counsel achieved significant results for the Settlement Class, as

11 the $4.8 million obtained represents approximately 25 percent of the estimated potential

12 damages in this action. (Fees Mot. at 13–14.) And having taken this case purely on a

13 contingency basis, Lead Counsel risked incurring significant costs and devoted a

14 substantial amount of time to this matter with no guarantee of compensation. (See id. at

15 14–15.) Counsel collectively “spent over four thousand hours researching, investigating,

16 and prosecuting this case on behalf of the putative class” and fronted “$100,529.65 in costs

17 and expenses,” again, with no guarantee of recovery. (Id. at 24.) Moreover, as discussed

18 supra, the risks of continuing this securities class action were not insignificant. (See id. at

19 14–17.)

20 Departure from the 25 percent benchmark is further warranted when considering the

21 significant skill and extensive work demanded of Lead Counsel in this case. Lead Counsel,

22 among other things, expanded the originally alleged two-day Class Period after being

23 appointed Lead Counsel and thoroughly investigating the case (see id. at 17–19);

24 successfully appealed to the Ninth Circuit (see id. at 19–20); successfully challenged

25 Defendants’ request for en banc review (see id. at 20); successfully challenged Defendants’

26 petition for writ of certiorari to the Supreme Court (see id. at 20–21); retained bankruptcy

27 counsel to protect the interests in the putative class after Orexigen filed for bankruptcy (id.

28 at 22–23); and engaged in informal discovery in advance of mediation and prepared

1 “aggressive” mediation briefs (id. at 23–24). As detailed extensively in the Fees Motion

2 and described above, Lead Counsel overcame several hurdles before the parties settled the

3 case, and settlement may not have been reached without Lead Counsel’s skill and expertise.

4 Additionally, as several courts in the Ninth Circuit—including this Court—have

5 observed, attorneys’ fee awards from settlements involving a common fund, as this

6 Settlement involves, frequently exceed the 25 percent benchmark. Ford v. ECE Ent. Inc.,

7 Case No.: 14cv677 JLS (JLB), 2015 WL 11439033, at *5 (S.D. Cal. Dec. 14, 2015) (citing

8 In re Omnivision Techs., 559 F. Supp. 2d 1036, 1047 (N.D. Cal. 2008); Pokorny v. Quixtar,

9 Inc., CASE NO. C 07–0201 SC, 2013 WL 3790896, at *4 (N.D. Cal. July 18, 2013)); e.g.,

10 Jamil v. Workforce Res., Case No.: 18-CV-27 JLS (NLS), 2020 WL 6544660, at *4 (S.D.

11 Cal. Nov. 5, 2020) (approving an attorneys’ fees award of one-third of the common fund);

12 Howell v. Advantage RN, LLC, Case No.: 17-CV-883 JLS (BLM), 2020 WL 5847565, at

13 *5 (S.D. Cal. Oct. 1, 2020) (approving an attorneys’ fees award of one-third of the common

14 fund); Ruiz v. XPO Last Mile, Inc., Case No.: 5-CV-2125 JLS (KSC), 2017 WL 6513962,

15 at *8 (S.D. Cal. Dec. 20, 2017) (approving an attorneys’ fees award of 35 percent of the

16 common fund). Indeed, “[d]istrict courts in this circuit have routinely awarded fees of one-

17 third of the common fund or higher after considering the particular facts and circumstances

18 of each case,” and the Ninth Circuit has upheld such awards. See Beaver v. Tarsadia

19 Hotels, Case No. 11-cv-01842-GPC-KSC, 2017 WL 4310707, at *10 (S.D. Cal. Sept. 28,

20 2017) (collecting cases).

21 And again, no Class Member has objected to or requested exclusion from the

22 Settlement. As this Court has recognized in other cases, the reasonableness of Lead

23 Counsel’s fee request is bolstered by the reaction of the Settlement Class and the fact that

24 not a single Class Member has objected. See Nunez v. BAE Sys. San Diego Ship Repair

25 Inc., 292 F. Supp. 3d 1018, 1056 (S.D. Cal. 2017) (citing Singer v. Becton Dickinson &

26 Co., No. 08-CV-821-IEG (BLM), 2010 WL 2196104, at *9 (S.D. Cal. June 1, 2010) (noting

27 that the 33.33 percent fee request was “especially” warranted “in light of the fact that not

28 a single class member objected to” the request)).

1 Finally, the lodestar cross-check here yields a fractional multiplier, which further

2 supports Lead Counsel’s 33 percent fee request. See, e.g., In re Regulus Therapeutics Sec.

3 Litig., Case No.: 3:17-cv-182-BTM-RBB, Case No.: 3:17-cv-267-BTM-RBB, 2020 WL

4 6381898, at *8 (S.D. Cal. Oct. 30, 2020) (“[A] multiplier less than 1.0 is below the range

5 typically awarded by courts [in common fund cases] and is presumptively reasonable.”).

6 Collectively, Counsel expended 4,185.35 hours of work in this case, which amounts to

7 $2,995,448.75 in fees. (Abadou Decl. ¶¶ 118–30.) This lodestar amount compared against

8 the $1,584,000 requested in fees results in a fractional multiplier of 0.528. (Id. ¶ 119.) The

9 lodestar cross-check therefore provides a strong indication of the reasonableness of Lead

10 Counsel’s requested percentage award.

11 Having reviewed the Fees Motion and its supporting exhibits, Lead Counsel’s

12 arguments, and the applicable law, Lead Counsel’s request for 33 percent of the $4.8

13 million Settlement Amount is reasonable under the circumstances, particularly considering

14 the substantial results achieved, the risk to Lead Counsel in taking a complex securities

15 class action on contingency, the extensive amount of work demanded of Lead Counsel, and

16 the lodestar cross-check. Accordingly, the Court approves Lead Counsel’s request for 33

17 percent of the $4.8 million Settlement Amount, or $1,584,000, in attorneys’ fees.

18 II. Litigation Expenses

19 Although the Settlement Agreement authorizes Lead Counsel to apply for

20 reimbursement of up to $185,000 in litigation expenses, Lead Counsel seeks

21 reimbursement of only $100,529.65 in expenses, plus interest at the same rate earned by

22 the Settlement Fund. (Fees Mot. at 28.) Lead Counsel’s expenses are documented in the

23 declarations attached to the Final Approval Motion (see Abadou Decl. ¶¶ 131–41; ECF

24 Nos. 149-8; 149-9), and the types of expenses that Lead Counsel seeks reimbursement for

25 include expert and consultant fees (Abadou Decl. ¶ 138); legal research costs (id. ¶ 139);

26 travel (id. ¶ 140); and miscellaneous costs related to printing and photocopying, postage,

27 transcript fees, mediation fees, court reporter fees, and court/filing fees (id. ¶ 141). As

28 these types of expenses are typically incurred by counsel in complex litigation and are

1 routinely charged to clients billed by the hour, they are recoverable. In re Omnivision

2 Techs., 559 F. Supp. 2d at 1049 (“Attorneys may recover their reasonable expenses that

3 would typically be billed to paying clients in non-contingency matters.”). Moreover, no

4 Class Member has objected to Lead Counsel’s request for reimbursement of expenses up

5 to $185,000.

6 Accordingly, because Lead Counsel’s expenses are typical and reasonable, the Court

7 approves Lead Counsel’s request for reimbursement of $100,529.65 in litigation expenses.

8 III. Incentive Award

9 Plaintiff also seeks an incentive award of $9,230 “to compensate him for his service

10 to the Settlement Class . . . and to reimburse him for the reasonable costs incurred directly

11 from his work representing the Settlement Class.” (Abadou Decl. ¶ 146; see Fees Mot. at

12 29.) Although the PSLRA limits a class representative’s recovery to an amount “equal, on

13 a per share basis, to the portion of the final judgment or settlement awarded to all other

14 members of the class,” it does not preclude an “award of reasonable costs and expenses

15 (including lost wages) directly relating to the representation of the class to any

16 representative party serving on behalf of a class.” 15 U.S.C. § 78u-4(a)(4). Incentive

17 awards, like the one Plaintiff requests, are “fairly typical” and are “intended to compensate

18 class representatives for work done on behalf of the class, to make up for financial or

19 reputational risk undertaken in bringing the action, and, sometimes, to recognize their

20 willingness to act as a private attorney general.” Rodriguez v. W. Publ’g Corp., 563 F.3d

21 948, 958–59 (9th Cir. 2009).

22 To the Final Approval Motion, Plaintiff attached his own declaration detailing the

23 role he played in this case over the six years it has been pending. (ECF No. 149-10.)

24 Among other things, Plaintiff declares that he: (1) participated in meetings and

25 correspondence with Lead Counsel (id. ¶ 6); (2) reviewed correspondence, memoranda,

26 and court filings (id.); (3) reviewed draft pleadings and briefs, including those made in the

27 appellate and bankruptcy proceedings (id. ¶ 5); and (4) prepared for and participated in

28 settlement negotiations, mediation, and discussions concerning the terms of the Settlement

1 (id. ¶¶ 5, 7). Plaintiff further declares that he has devoted approximately 48 hours to this

2 case and calculates his average hourly rate, based on his own annual compensation, to be

3 $192.30. (Id. ¶ 9.)

4 Based on the representations made by Plaintiff in his declaration and the time he

5 spent assisting the case and fulfilling his obligations as a representative of the putative

6 class, the Court finds that Plaintiff’s requested incentive award is reasonable. Further,

7 Plaintiff’s requested award appears in line with others awarded in this District. See, e.g.,

8 In re Illumina, Inc. Sec. Litig., Case No.: 3:16-cv-3044-L-MSB, 2021 WL 1017295, at *8

9 (S.D. Cal. Mar. 17, 2021) (awarding class representative $25,000 for 70 hours of work, or

10 approximately $357 per hour); Mauss v. NuVasive, Inc., Case No.: 13cv2005 JM (JLB),

11 2018 WL 6421623, at *10 (S.D. Cal. Dec. 6, 2018) (awarding class representative $7,500

12 based on 38 hours of work in the case at an estimated rate of $200 per hour); see also In re

13 Regulus Therapeutics Inc. Sec. Litig., 2020 WL 6381898, at *8 (“Incentive awards

14 typically range from $2,000 to $10,000.” (quoting Bellinghausen v. Tractor Supply Co.,

15 306 F.R.D. 245, 267 (N.D. Cal. 2015))). Additionally, the Stipulation of Settlement

16 authorizes Plaintiff to receive reimbursement directly related to his representation of the

17 Settlement Class, and no Class Member has objected to this request. Accordingly, the

18 Court approves Plaintiff’s requested incentive award of $9,230.

19 IV. Reimbursement of Claims Administration Costs

20 Lastly, Lead Counsel seeks approval of its request for reimbursement of the

21 reasonable costs and expenses incurred by Rust in connection with providing notice and

22 administering the Settlement. Lead Counsel did not specifically include this request in the

23 Fees Motion and instead made the request orally at the Final Approval Hearing. At the

24 Hearing, Lead Counsel represented that, because the claims administration is ongoing, it

25 did not yet have a final figure for the total claims administration costs.

26 As stated above, the Stipulation of Settlement authorizes a deduction of up to

27 $250,000 from the $4.8 million Settlement Amount for the reasonable costs and expenses

28 incurred by Rust in providing notice and administering the Settlement. Because the Court

1 approves the Settlement, and no Class Member has objected to the deduction of claims

2 administration costs from the Settlement Fund, the Court approves Lead Counsel’s request

3 for reimbursement of claims administration expenses up to $250,000, with any excess to

4 remain in the common fund.

5 V. Conclusion

6 Because the requested attorneys’ fees, litigation expenses, and incentive award are

7 reasonable, the Court GRANTS the Fees Motion (ECF No. 150) and awards Lead Counsel

8 $1,584,000 in attorneys’ fees and $100,529.65 in litigation expenses and awards Lead

9 Plaintiff a $9,230 incentive award. Additionally, the Court GRANTS Lead Counsel’s oral

10 request for reimbursement of claims administration expenses up to $250,000.

11 CONCLUSION

12 For the foregoing reasons, the Court hereby GRANTS Lead Plaintiff’s Final

13 Approval Motion (ECF No. 149) and Fees Motion (ECF No. 150).

14 The Court CERTIFIES the Settlement Class for purposes of the Settlement and

15 APPROVES the Settlement and the Plan of Allocation as fair, reasonable, and adequate

16 pursuant to Federal Rule of Civil Procedure 23(e). The Court ORDERS the parties to

17 undertake the obligations set forth in the Stipulation of Settlement that arise out of this

18 Order.

19 The Court AWARDS attorneys’ fees to Lead Counsel in the amount of $1,584,000

20 and litigation expenses in the amount of $100,529.65. The Court also AUTHORIZES

21 Lead Counsel to deduct up to $250,000 from the Settlement Fund for reimbursement of

22 the claims administration expenses after the total claims administration expenses are

23 known.

24 The Court further AWARDS Plaintiff an incentive award in the amount of $9,230

25 for the work he performed as the class representative.

26 ///

27 ///

28 ///

1 The Court DIRECTS the Clerk of Court to enter a separate judgment of dismissal

2 ||in accordance herewith and to close the case. Without affecting the finality of this Order,

3 || the Court maintains jurisdiction with respect to the implementation and enforcement of the

4 ||terms of the Stipulation of Settlement.

5 IT IS SO ORDERED.

6 ||Dated: November 30, 2021 . tt

7 jen Janis L. Sammartino

g United States District Judge

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