“We put a good deal of stock in the 15 product of an arms-length, non-collusive, negotiated resolution.”
How later courts described this case
- “We put a good deal of stock in the 15 product of an arms-length, non-collusive, negotiated resolution.”
Written by the judges who cited it.
The opinion
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10 UNITED STATES DISTRICT COURT
11 SOUTHERN DISTRICT OF CALIFORNIA
12
13 IN RE RYVYL INC. DERIVATIVE Case No.: 3:23-cv-1165-GPC-SBC
LITIGATION,
14
ORDER:
15
16 THIS DOCUMENT RELATES TO: ALL (1) GRANTING PROVISIONAL
APPROVAL OF DERIVATIVE
17 ACTIONS ACTION SETTLEMENT;
18
(2) CONDITIONALLY APPROVING
19 THE PROPOSED FORM AND
MANNER OF NOTICE; AND
20
21 (3) SETTING DATE FOR FINAL
SETTLEMENT HEARING
22
[ECF No. 19]
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Before the Court is the Parties’ Joint Motion for Preliminary Approval of the Parties’
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Derivative Settlement Agreement. ECF No. 19. For the reasons detailed below, the Court
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GRANTS preliminary approval of the Parties’ settlement of this derivative action and
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conditionally approves the proposed form and manner of settlement notice, with minor
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1 adjustments articulated herein. A final Settlement Hearing is set for January 9, 2026.
2 BACKGROUND
3 I. Factual Allegations
4 This is a shareholder derivative action on behalf of nominal defendant RYVYL, Inc.
5 (“RYVYL” or “the Company”) against current and former RYVYL directors and officers
6 (the “Individual Defendants,” 1 and together with RYVYL, the “Defendants”). RYVYL is
7 a financial technology company “centered on disrupting the payments industry by offering
8 multiple blockchain encoded payment processing solutions for individuals and
9 businesses.” ECF No. 1, at 2-3. Plaintiffs allege that the Individual Defendants failed to
10 implement adequate internal controls to prevent materially false and misleading financial
11 information from being published by RYVYL. ECF No. 19-1, at 10. Plaintiffs further
12 allege that controlling RYVYL shareholders participated in a scheme to cause RYVYL to
13 overpay for repurchases of its own stock while the stock price was artificially inflated due
14 to the alleged false and misleading statements, resulting in alleged violations of §§ 10(b),
15 14(a), and 20 of the Exchange Act and violations of state law, including breach of the
16 fiduciary duties owed to RYVYL. ECF No. 19-1, at 8-9.
17 II. Procedural Background
18 On February 1, 2023, a putative class action lawsuit titled Cullen v. RYVYL Inc. fka
19 GreenBox POS, Inc., et al., Case No. 3:23-cv-00185-GPC-AGS (the “Securities Class
20 Action”), was filed in this Court against several defendants, including RYVYL and certain
21 of its current and former directors and officers, alleging substantially similar facts as those
22 alleged in this derivative litigation. ECF No. 19-1, at 9. The parties in the Securities Class
23 Action have executed a stipulation and agreement of settlement, and the Court has granted
24 preliminary approval of the class action settlement. Id. A final fairness hearing on the class
25 action settlement is scheduled for December 19, 2025. Id.
26
27
1 The Individual Defendants are Ben Errez, Fredi Nisan, Benjamin Chung, Genevieve Baer, William
28
1 On June 22, 2023, the first of two shareholder derivative actions—Christy Hertel,
2 derivatively on behalf of RYVYL Inc., f/k/a GreenBox POS v. Ben Errez et al., Case No.
3 3:23-CV-01165-GPC-SBC—was filed in this Court against RYVYL’s current and former
4 officers and directors. ECF No. 19-1, at 9-10. On August 4, 2023, the second shareholder
5 derivative action—Marcus Gazaway, derivatively on behalf of RYVYL Inc., f/k/a GreenBox
6 POS v. Ben Errez et al., Case No. 3:23-CV-01425-LAB-BLM—was filed in this Court
7 against the same Defendants. Id. at 10. Both derivative actions make the same allegations
8 against Defendants and seek damages and contribution from Defendants, as well as actions
9 to reform and improve corporate governance and internal procedures to ensure compliance
10 with applicable laws. Id. at 11. The Defendants deny all allegations of wrongdoing or
11 liability asserted in the shareholder derivative actions. Id.
12 On March 18, 2024, the Parties to these two derivative actions (“the Derivative
13 Lawsuits”) jointly moved to consolidate their cases. ECF No. 10. On April 2, 2024, the
14 Court granted the Parties’ joint motion and consolidated the Derivative Lawsuits under the
15 caption In re RYVYL Inc. Derivative Litigation, case number 3:23-cv-01165-GPC-SBC.
16 ECF No. 11. The Court subsequently appointed The Brown Law Firm, P.C., as lead counsel
17 for Plaintiffs in the Derivative Lawsuits. ECF No. 15.
18 A complaint substantially similar to those filed in these Derivative Lawsuits was
19 filed in Nevada on May 1, 2024. ECF No. 19-1, at 11.
20 On May 8, 2025, all parties reached an agreement in principle to fully resolve and
21 settle all claims alleged in the Derivative Lawsuits, subject to approval by this Court. Id.
22 All parties executed a Stipulation of Settlement on September 30, 2025, ECF No. 18, and
23 moved for the Court’s preliminary approval of the settlement on October 7, 2025. ECF No.
24 19.
25 III. Settlement Agreement
26 The summarized key terms of the Stipulation and Agreement of Settlement (the
27 “Stipulation”), ECF. No. 18, are as follows:
28 A. Terms
1 RYVYL will adopt the corporate governance reforms set forth in Exhibit A of the
2 Stipulation, ECF No. 18-1, and keep them in place for at least three years. ECF No. 18, at
3 15. These reforms include, but are not limited to:
4 1. Establishing a Risk & Disclosure Committee;
5 2. Expanding the Board of Directors to add an additional independent
6 director;
7 3. Improving RYVYL’s Related Party Transactions Policy;
8 4. Expanding and documenting the duties of the Company’s new Vice
9 President, Legal;
10 5. Enhancing RYVYL’s internal controls and compliance function, the
11 Board’s oversight of stock repurchases, and RYVYL’s whistleblower
12 policy;
13 6. Improving the charters for the Audit Committee, Nominating
14 Committee, and Compensation Committee; and
15 7. Providing for improved employee training in risk assessment and
16 compliance.
17 See ECF No. 18-1, at 2-4; ECF No. 19-1, at 12-13.
18 B. Releases
19 Per the Stipulation, the Released Claims shall be finally and fully compromised,
20 settled, and released, and the Derivative Lawsuits shall be dismissed with prejudice as
21 against all Released Persons. ECF No. 18, at 8-9.
22 The “Released Claims” include all claims or causes of action including, but not
23 limited to:
24 [A]ny claims for damages, injunctive relief, interest, attorneys’
fees, expert, or consulting fees, and any and all other costs,
25
expenses, sums of money, or liabilities whatsoever, against any
26 of the Released Persons that: (i) were asserted or could have been
asserted derivatively in the Derivative Lawsuits; (ii) would have
27
been barred by res judicata had the Derivative Lawsuits been
28 fully litigated to final judgment; (iii) that have been, could have
1 boer epnr,o ocre ecdoiunlgd ionr tohteh feurwtuirsee b aeg, aaisnssetr taendy d oefr itvhaet iRveellye ainse adn yP efrosrounms
2
that concern, are based upon, involve, or arise out of, or relate to
3 any of the subject matters, allegations, transactions, facts, events,
occurrences, disclosures, representations, statements, omissions
4
alleged, acts, failures to act, alleged mismanagement,
5 misconduct, concealment, alleged misrepresentations, alleged
violations of local, state or federal law, sale of stock, or other
6
matters involved, set forth, or referred to, or could have been
7 alleged in or encompassed by, the complaints in the Derivative
Lawsuits; or (iv) arise out of, relate to, or concern the defense,
8
settlement, or resolution of the Derivative Lawsuits or the
9 Released Claims.
10 ECF No. 18, at 12-13.
11 The Released Claims do not include claims to enforce the terms of the Stipulation
12 nor exclusively direct claims absent RYVYL stockholders may have in an individual
13 capacity against Defendants. Id. at 13.
14 The Released Persons include Defendants’ Counsel and each of the Defendants and
15 their respective past, present, or future heirs, trusts, trustees, estates, beneficiaries, and
16 other entities with whom they have legally binding relationships of duties. Id. at 13.
17 Defendants also release all claims arising out of the commencement, litigation, or
18 settlement of the Derivate Lawsuits as against Plaintiffs, Plaintiffs’ Counsel, and any past,
19 present, or future entities with whom they have legally binding relationships or duties. Id.
20 at 9-10, 20-21.
21 C. Attorneys’ Fees and Expenses
22 RYVYL shall pay to Plaintiffs’ counsel, collectively, a total value of $200,000 in
23 attorneys’ fees and costs, which is comprised of $25,000 in cash and Settlement Shares
24 worth $175,000 (the “Fee and Expense Amount”). ECF No. 18, at 16-17.
25 Plaintiffs’ Counsel may also apply to the Court for service awards of up to five
26 hundred dollars ($500.00) for each of the Plaintiffs to be paid from the Fee and Expense
27 Amount in recognition of Plaintiffs’ participation and effort in the prosecution of the
28 Derivative Lawsuits. ECF No. 18, at 19-20. Defendants will not object to the application
1 for the Service Awards as Defendants will not pay any amount of the Service Awards. Id.
2 at 20.
3 D. Notice
4 Per the stipulation, within ten (10) days of the Court’s entry of its Preliminary
5 Approval Order, RYVYL will: “(1) post a copy of or link to the Notice and the Stipulation
6 (and exhibits thereto) on the Investor2 page of the Company’s website; (2) file with or
7 furnish to the SEC the Notice and Stipulation (and exhibits thereto) as exhibits to a Form
8 8-K; and (3) issue a press release describing the foregoing Form 8-K and the exhibits
9 thereto (the Notice and Stipulation) on GlobeNewswire.” ECF No. 18, at 16.
10 The Notice and press release will link to the Investor Relations page on RYVYL’s
11 website, where the Notice and the Stipulation will be viewable through the date of the
12 Settlement Hearing. Id. RYVYL will bear all costs and expenses of providing notice of the
13 Settlement. Id.
14 LEGAL STANDARD
15 A derivative action may be settled only with the court’s approval. Fed. R. Civ. P.
16 23.1(c). “In determining whether to approve the settlement of a derivative action, courts
17 look to cases and standards under Rule 23(e) of the Federal Rules of Civil Procedure for
18 guidance by analogy.” In re CPI Aerostructures S’holder Derivative Litig., No. 20-cv-
19 2092, 2023 WL 2969279, at *3 (E.D.N.Y. Feb. 14, 2023); see also In re OSI Sys., Inc.
20 Derivative Litig., No. CV-14-2910-MWF, 2017 WL 5634607, at *1 (C.D. Cal. Jan. 24,
21 2017) (When reviewing a derivative action settlement for approval, “[t]he Court takes as
22 instructive case law governing preliminary approval of class action settlements under Rule
23 23(e)”).
24 “Rule 23 requires courts to employ a two-step process in evaluating a class action or
25 derivative action settlement.” In re Wells Fargo & Co. Sharehold Derivative Litig., No.
26
27
2 Elsewhere in the Stipulation, the Parties refer to the “Investor Relations” page of RYVYL’s website
28
1 16-CV-05541-JST, 2019 WL 13020734, at *4 (N.D. Cal. May 14, 2019). First, the court
2 “must make a preliminary determination that the settlement is ‘fair, reasonable, and
3 adequate’” under Rule 23(e)(2). Id. (quoting Fed. R. Civ. P. 23(e)(2)). “Second, if the court
4 preliminarily approves a derivative action settlement, notice ‘must be given to shareholders
5 or members in the manner that the court orders.’” Id. at *4 (quoting Fed. R. Civ. P. 23.1(c)).
6 The court then holds a hearing to “make a final determination whether the settlement is
7 ‘fair, reasonable, and adequate.’” Id. (quoting Fed. R. Civ. P. 23(e)(2)).
8 In the context of a derivative action, courts evaluate fairness, reasonableness, and
9 adequacy by considering a range of factors, such as “the strength of the plaintiffs’ case; the
10 risk, expense, complexity, and likely duration of further litigation . . . the amount offered
11 in settlement; the extent of discovery completed and the stage of the proceedings; [and] the
12 experience and views of counsel[.]” Id. (internal quotation marks and citation omitted).
13 When evaluating the adequacy of nonmonetary settlement provisions like corporate
14 governance reforms, courts examine whether a company is already undertaking the
15 provisions independently of the settlement. If the reforms proposed in the settlement were
16 already implemented or going to be implemented by the company, then courts are more
17 doubtful of the value of the settlement. See In re Lyft, Inc. Derivative Litig., No. 20-CV-
18 09257-HSG, 2024 WL 4505474, at *4 (N.D. Cal. Oct. 16, 2024) (“[T]he Court is skeptical
19 that the reforms presented here are a benefit of the settlement rather than [the company’s]
20 own independent actions.”) (emphasis in original); In re Pinterest Derivative Litig., No. C
21 20-08331-WHA, 2022 WL 2079712, at *3 (N.D. Cal. June 9, 2022) (critical of the fact that
22 “a fair number of the reforms were already in place as a result of the corporation’s own
23 actions addressing the [underlying action’s allegations]”).
24 Overall, the principal factor that courts consider is “the extent of the benefit to be
25 derived from the proposed settlement by the corporation, the real party in interest.” In re
26 Pinterest Derivative Litig., No. C 20-08331-WHA, 2022 WL 484961, *3 (N.D. Cal. Feb.
27 16, 2022) (quoting In re Apple Computer, Inc. Derivative Litig., No. C 06-4128 JF (HRL),
28 2008 WL 4820784, at *2 (N.D. Cal. Nov. 5, 2008)). Further, courts scrutinize whether the
1 proposed settlement is “the product of fraud or overreaching by, or collusion between, the
2 negotiating parties.” In re Hewlett-Packard, No. 3:12-CV-06003-CRB, 2015 WL 1153864,
3 at *3 (quoting In re NVIDIA Corp. Derivative Litig., No. C–06–06110–SBA, 2008 WL
4 5382544, at *2 (N.D. Cal. Dec. 22, 2008)). See also Lloyd v. Gupta, No. 15-CV-04183-
5 MEJ, 2016 WL 3951652, at *4 (N.D. Cal. July 22, 2016) (noting that courts consider
6 whether “the settlement is the result of arm’s-length negotiations in which plaintiffs’
7 counsel has effectively represented the interest of the shareholder class” (internal quotation
8 marks and citation omitted)).
9 At the preliminary approval stage, the Court need not definitively decide whether
10 the proposed settlement survives scrutiny under these standards; instead, it need only
11 determine whether the settlement falls “within the range of possible approval.” In re
12 Tableware Antitrust Litig., 484 F. Supp. 2d 1078, 1080 (N.D. Cal. 2007) (internal quotation
13 marks and citation omitted); see also In re Wells Fargo & Co. Sharehold Derivative Litig.,
14 2019 WL 13020734, at *4.
15 DISCUSSION
16 I. Proposed Settlement
17 The Court will first assess whether the terms of the Stipulation are fair, reasonable,
18 and adequate.
19 A. Benefits to RYVYL
20 The Parties assert that the proposed settlement will benefit RYVYL because the
21 corporate governance reforms, listed in Exhibit A of the Stipulation, ECF No. 18-1, will
22 improve the strength of RYVYL’s internal controls and overall governance, “which will
23 provide real, substantial, and long-lasting benefits for RYVYL and its shareholders.” ECF
24 No. 19-1, at 16.
25 “[A] corporation may receive a ‘substantial benefit’ from a derivative suit, justifying
26 an award of counsel fees, regardless of whether the benefit is pecuniary in nature.” Mills v.
27 Elec. Auto-Lite Co., 396 U.S. 375, 395 (1970); see also In re Ceradyne, Inc., No. SACV
28 06-919-JVS (PJWx), 2009 WL 10671494, at *2 (C.D. Cal. June 9, 2009) (“Non-pecuniary
1 benefits to the corporation have been deemed adequate consideration for the settlement of
2 derivative suits . . . [and] can be particularly valuable when the relief is intended to prevent
3 future harm” (internal quotation marks and citations omitted)). “Courts have recognized
4 that corporate governance reforms . . . provide valuable benefits to public companies.” In
5 re NVIDIA Corp. Derivative Litig., 2008 WL 5382544, at *3 (quoting Cohn v. Nelson, 375
6 F. Supp. 2d 844, 853 (E.D. Mo. 2005)).
7 Specifically, courts have held that corporate governance reforms that directly
8 address alleged corporate misconduct are beneficial to companies in derivative action
9 settlement approvals. See Moore v. Verb Tech. Co., Inc., No. CV 19-8393-GW-MAAx,
10 2021 WL 11732976, at *4 (C.D. Cal. Mar. 1, 2021) (finding that “corporate governance
11 measures that specifically address the allegations in the derivative action” substantially
12 benefit the company by helping prevent it from making additional misleading statements
13 about its business); In re Taronis Techs., Inc. S'holder Derivative Litig., No. CV-19-04547-
14 PHX-GMS, 2021 WL 842137 (D. Ariz. Mar. 5, 2021) (finding that corporate governance
15 changes conferred sufficient benefit to company because they addressed compliance with
16 public reporting requirements that the company had allegedly not complied with).
17 The Court agrees with the Parties that the corporate governance reforms listed in
18 Exhibit A of the Stipulation benefit RYVYL. Though non-pecuniary, the reforms benefit
19 RYVYL specifically because they directly address the alleged deficiencies listed in
20 Plaintiffs’ Derivative Lawsuits. For example, the reforms require the establishment of a
21 Risk & Disclosure Committee, provide for an updated and expanded Insider Trading
22 Policy, ensure related party transactions are fair and fully disclosed by improving and
23 clarifying the Related Party Transactions Policy, and expand objective oversight by the
24 Board of Directors by adding an independent director and broadening the Board’s oversight
25 of stock repurchases. ECF No. 19-1, at 15; see generally ECF No. 18-1. These directly
26 tackle the Derivative Lawsuits’ allegations that the Individual Defendants (1) caused
27 RVVYL to make a series of false statements to the investing public and (2) caused RYVYL
28 to overpay for repurchases of its own stock while the price was artificially inflated due to
1 the alleged false statements. Id.
2 The reforms further mandate that RYVYL establish and maintain training programs
3 that include “coverage of risk assessment and compliance, RYVYL’s Code of Ethics,
4 Related Party Transactions Policy, Clawback Policy . . . Whistleblower Policy . . . and all
5 other manuals or policies established by RYVYL concerning legal or ethical standards of
6 conduct.” ECF No. 18-1, at 11. These trainings will be mandatory for all directors, officers,
7 and employees and will occur on an annual basis. Id. at 10. The Court finds that this
8 proposed training program is substantial, directly addresses the alleged corporate
9 misconduct, and would provide a considerable benefit to RYVYL.
10 The reforms’ benefits are bolstered by the fact that RYVYL will implement and
11 maintain the reforms for three years following the effective date of the settlement. ECF No.
12 19-1, at 15. This is meant to be a “sufficient time for the Reforms to become embedded in
13 the Company’s policies, practices, and corporate culture.” ECF No. 19-1, at 12 n.5. The
14 Court agrees that the multi-year implementation period would be beneficial to the
15 company. See Chenoy v. Lyft, Inc., No. 20-CV-09257-HSG, 2025 WL 948065, at *5 (N.D.
16 Cal. Mar. 28, 2025) (“Because the Settlement Agreement fixes these reforms in place for
17 a three-year period, the reforms may well engender some lasting trust in [the company’s]
18 safety and corporate governance, yielding financial benefits for [the company]”).
19 The Court does note that among the listed reforms is the “expan[sion] and
20 document[ation] of the duties” of a new Vice President Legal. ECF No. 19-1, at 7. The VP
21 Legal has already been hired by RYVYL, and the Reforms note that the VP Legal may
22 already be tasked with several of the responsibilities outlined therein. See ECF No. 18-2,
23 at 6. Thus, this particular element of the Reforms would not persuade the court of the value
24 of the settlement. See, e.g., In re Pinterest Derivative Litig., No. C 20-08331-WHA, 2022
25 WL 2079712, at *3 (N.D. Cal. June 9, 2022) (critical of the fact that “a fair number of the
26 reforms were already in place as a result of the corporation’s own actions addressing the
27 [underlying action’s allegations]”). However, additional Reforms are sufficiently novel
28 and beneficial to RYVYL that, overall, the Court finds that the Settlement is in the best
1 interest of RYVYL.
2 B. Non-Collusive, Arm’s-Length Negotiations
3 The Parties assert that the settlement is fair because it “was negotiated between
4 experienced and competent counsel possessing a firm understanding of the strengths and
5 weaknesses of the claims and defenses in the Derivative Lawsuits, is the product of
6 significant give-and-take by the Parties, and was reached after extensive negotiations
7 between the Parties and their respective counsel.” ECF No. 19-1, at 18.
8 Courts must ensure that a settlement agreement “is not the product of fraud or
9 overreaching by, or collusion between, the negotiating parties.” Officers for Just. v. Civ.
10 Serv. Comm’n of City & Cnty. of San Francisco, 688 F.2d 615, 625 (9th Cir. 1982). An
11 agreement reached in good faith after well-informed, arms-length negotiation is “entitled
12 to a presumption of fairness.” In re Am. Apparel, Inc. S’holder Litig., No. CV 10–06352
13 MMM (JCGX), 2014 WL 10212865, at *8 (C.D. Cal. July 28, 2014); see also Rodriguez
14 v. W. Publ’g Corp., 563 F.3d 948, 965 (9th Cir. 2009) (“We put a good deal of stock in the
15 product of an arms-length, non-collusive, negotiated resolution.”)
16 The Court finds the Parties’ settlement negotiation process to be fair. Parties were
17 represented by counsel who understood the strengths and weaknesses of the claims and
18 defenses in the Derivative Matters. ECF No. 19-1, at 18. Indeed, Plaintiffs’ counsel
19 conducted extensive investigation and analysis of the underlying facts, including, among
20 other things, (1) reviewing and analyzing all RYVYL press releases, public statements, and
21 SEC filings; (2) reviewing and analyzing securities analysts’ reports about RYVYL; (3)
22 reviewing and analyzing the pleadings in the Securities Class Action; (4) researching the
23 applicable law with respect to the claims alleged and the potential defenses; (5) researching
24 RYVYL’s corporate governance structure; and (6) preparing multiple versions of
25 comprehensive written settlement demands. ECF No. 18, at 7. The settlement negotiations
26 also occurred over the course of several months. ECF No. 18, at 6.
27 The Court also finds the Parties’ negotiations to be non-collusive. Plaintiffs’ and
28 Defendants’ counsel negotiated over a prolonged period, and only after the Parties reached
1 an agreement in principle on the material terms of the settlement did the Parties engage in
2 separate arm’s-length negotiations regarding attorneys’ fees. ECF No. 18, at 6, ECF No.
3 19-1, at 18. This favors a finding of no collusion. See Moore v. Verb Tech. Co., Inc., 2021
4 WL 11732976, at *5 (finding “no signs of collusion” because “[t]he parties did not begin
5 to negotiate the attorneys’ fees and expenses to be paid to Plaintiff's Counsel until after
6 they reached an agreement on the [corporate governance reforms].”).
7 C. Risks and Costs of Further Litigation
8 The Parties assert that the settlement eliminates the risks and costs of ongoing
9 litigation and allows RYVYL to dedicate its time and resources to strengthening the
10 Company’s internal controls and operations. ECF No. 19-1, at 17-18.
11 “To determine whether the proposed settlement is fair, reasonable, and adequate, the
12 Court must balance the continuing risks of litigation (including the strengths and
13 weaknesses of the Plaintiffs’ case), with the benefits afforded . . . and the immediacy and
14 certainty of a substantial recovery.” Velazquez v. Int’l Marine & Indus. Applicators, LLC,
15 No. 16CV494-MMA (NLS), 2018 WL 828199, at *4 (S.D. Cal. Feb. 9, 2018). Further,
16 “[c]ourts agree that derivative actions are particularly complex and ‘rarely successful.’”
17 Arnaud van der Gracht de Rommerswael on Behalf of Puma Biotechnology, Inc. v.
18 Auerbach, No. SACV1800236AGJCGX, 2019 WL 7753447, at *4 (C.D. Cal. Jan. 7, 2019)
19 (quoting In re Pac. Enters. Sec. Litig., 47 F.3d 373, 378 (9th Cir. 1995)). “The doctrine of
20 demand futility, the business judgment rule, and the generally uncertain prospect of
21 establishing a breach of fiduciary duties combine to make shareholder derivative suits an
22 infamously uphill battle for plaintiffs.” In re Fab Universal Corp. S’holder Derivative
23 Litig., 148 F. Supp. 3d 277, 281–82 (S.D.N.Y. 2015).
24 Regardless of their merit, Plaintiffs’ claims would be difficult and costly to sustain
25 if this litigation were to proceed. “From the outset, Plaintiffs faced risks that the Derivative
26 Lawsuits might not have withstood challenges at the pleading stage, especially given Rule
27 23.1’s heightened standards for pleading demand futility and demand refusal.” ECF No.
28 19-1, at 16. Further, the Parties agree that, if Plaintiffs succeeded at the pleading stage, they
1 “would have faced the high costs associated with lengthy and complex litigation, including
2 voluminous discovery and depositions.” Id. at 17; see also Auerbach, 2019 WL 7753447,
3 at *4 (approving derivative action settlement in part by noting the potential cost of
4 discovery where biotech drug company was sued over allegedly false and misleading
5 statements about drug product’s safety and efficacy). These high risks and costs contrast
6 with the settlement’s certainty and immediacy. In short, “[a] number of risks are posed by
7 continued litigation, while settlement assures broad corporate reform.” In re Fab Universal
8 Corp. S’holder Derivative Litig., 148 F. Supp. 3d at 282.
9 Given the settlement’s benefits to RYVYL, the Parties’ non-collusive negotiation,
10 and the uncertainty and potentially high cost of further litigation, the Court finds the
11 settlement to be sufficiently fair, reasonable, and adequate, and preliminarily approves it
12 at this stage.
13 II. Proposed Form and Method of Notice to Shareholders
14 The Parties assert that the proposed form and method of notice of settlement to
15 RYVYL shareholders should be approved because it apprises current RYVYL
16 shareholders of the pendency and settlement of the Derivative Lawsuits and gives them an
17 opportunity to object to the settlement. ECF No. 19-1, at 19-21. The Parties also argue that
18 their proposed manner of notice has been broadly accepted by courts in this Circuit in
19 addressing shareholder derivative actions. Id. at 20-21.
20 Notice of a proposed settlement must be given to shareholders in the manner that the
21 Court orders. Fed. R. Civ. P. 23.1(c). Notice to shareholders “must be ‘reasonably
22 calculated, under all the circumstances, to apprise interested parties of the pendency of the
23 action and afford them an opportunity to present their objections.’” Lloyd, 2016 WL
24 3951652, at *6 (quoting Mullane v. Cent. Hanover Bank & Tr. Co., 339 U.S. 306, 314
25 (1950)). In determining whether the proposed notice method is adequate, “the Court
26 considers whether such notice would be sufficient to reach the majority of interested
27 stockholders.” Bushansky v. Armacost, No. 12–CV–01597–JST, 2014 WL 2905143, at *6
28 (N.D. Cal. June 25, 2014) (citing 7C Wright & Miller’s Federal Practice & Procedure
1 § 1839 (3d. ed.)).
2 Further, “courts evaluate whether the notice is the best notice practicable under the
3 circumstances and comports with due process requirements.” In re Galena Biopharma, Inc.
4 Derivative Litig., No. 3:14-CV-382-SI, 2016 WL 10843665, at *1 (D. Or. Jan. 28, 2016)
5 (internal quotation marks and citation omitted). What constitutes the best notice that is
6 practicable under the circumstances is measured by a standard of “reasonableness.” Low v.
7 Trump Univ., LLC, 881 F.3d 1111, 1117 (9th Cir. 2018). The best type of notice “depends
8 upon the information available to the parties about [the persons to be noticed].” Hilsley v.
9 Ocean Spray Cranberries, Inc., No. 17CV2335-GPC(MDD), 2019 WL 718807, at *1 (S.D.
10 Cal. Feb. 5, 2019) (quoting Bruno v. Quten Research Inst., LLC., No. SACV
11 1100173DOXEX, 2012 WL 12886843, at *3 (C.D. Cal. July 16, 2012)). In the context of
12 class actions, recent amendments to Rule 23(c)(2) clarify that the “best notice” practicable
13 under the circumstances may include “electronic means, or other appropriate means,”
14 depending on the type of class and its composition. Fed. R. Civ. P. 23(c)(2), committee
15 note (2018 amendment).
16 A. Form of Notice
17 The Court finds that the form of the proposed Notice of Pendency and Proposed
18 Settlement of Stockholder Derivative Lawsuits (the “Notice”), attached as Exhibit C to the
19 Stipulation, ECF No. 18-3, is adequate. The proposed Notice describes the purpose of the
20 notice, the history of the Parties’ negotiations and present litigation, the amount of
21 attorneys’ fees and expenses, and the reasons for and benefits of the settlement. See
22 generally ECF No. 18-3. It also directs readers to RYVYL’s website to review the full
23 Stipulation and its exhibits. ECF No. 18-3, at 4.
24 The proposed Notice will also include the date of the final Settlement Hearing and
25 describes RYVYL shareholders’ right to attend this hearing and object to the settlement
26 and the request for attorneys’ fees and expenses and service awards, along with the process
27 for making timely objections. Id. at 5-6. Shareholders must object in writing and include
28 in their written objection certain identifying information. Id. The shareholders must file
1 any objection with the Court no later than twenty-one calendar days prior to the Settlement
2 Hearing. Id. at 5. The shareholders must also send their objection to Plaintiffs’ Counsel and
3 Defendants’ Counsel. Id. at 5-7.
4 The Court finds that the Notice adequately apprises RYVYL shareholders of the
5 pending status of this litigation, describes the Stipulation’s terms and conditions, and
6 explains the objection process.
7 However, due to the Parties’ request that the final settlement hearing occur within
8 60 days, to ensure that shareholders have a meaningful opportunity to object, the Court will
9 extend shareholders’ time to object until fourteen (14) days prior to the Settlement Hearing.
10 The Parties are ORDERED to adjust the Notice to reflect this change.
11 B. Method of Notice
12 The Court now considers the proposed method of notice. Per the Stipulation, within
13 ten days of preliminary approval of the settlement, RYVYL will (1) post a copy of or link
14 to the Notice, ECF No. 18-3, and the Stipulation and Agreement of Settlement (with its
15 exhibits) (the “Stipulation”), ECF No. 18, on the Investor Relations page of RYVYL’s
16 website; (2) file the Notice and Stipulation (with its exhibits) with the U.S. Securities and
17 Exchange Commission (the “SEC”) as exhibits to a Form 8-K, and (3) issue a press release
18 describing the Form 8-K, the Notice, and the Stipulation on GlobeNewswire. ECF No. 19-
19 1, at 20. The notice and press release will both include a link to the Investor Relations page
20 on RYVYL’s website where the Notice and Stipulation will be posted and available. Id.
21 RYVYL will be solely responsible for paying all the costs of disseminating the notices of
22 the settlement. ECF No. 18, at 16.
23 These three notice methods will likely inform a majority of RYVYL’s shareholders.
24 Further, courts have approved similar settlement notice procedures in other derivative
25 action cases. See In re ImmunityBio, Inc. S’holder Derivative Litig., No. 3:24-CV-02014-
26 GPC-VET, 2025 WL 2147066, at *3 (S.D. Cal. July 29, 2025) (approving notice procedure
27 of providing notice on defendant company’s website, in Investors Business Daily, and to
28 the SEC as part of an 8-K); In re Hewlett-Packard Co. S’holder Derivative Litig., 716 F.
1 App'x 603, 608 (9th Cir. 2017) (approving notice procedure of posting notice on defendant
2 company’s website, in Investor’s Business Daily, and in major newspapers and filing notice
3 with the SEC as part of an 8-K); In re Rambus Inc. Derivative Litig., 2009 WL 166689, at
4 *2 (N.D. Cal. Jan. 20, 2009) (approving notice procedure of posting notice on defendant
5 company’s website and in Business Wire and filing notice with the SEC as part of an 8-K).
6 Thus, under recent Rule 23(c) amendments, which permit more cost-efficient notice
7 methods including “electronic means, or other appropriate means,” the Court finds the
8 Parties’ proposed methods of notice adequate.
9 However, as above, the Court again revises the Parties’ proposed timeline to ensure
10 that shareholders have a meaningful opportunity to object. The Court will shorten the
11 Parties’ time to provide Notice from within ten (10) days to within seven (7) days of this
12 Order.
13 III. Shareholders’ Counsel’s Fees and Service Awards
14 RYVYL has agreed to pay Plaintiffs’ Counsel a total value of $200,000, which is
15 comprised of $25,000 in cash and $175,000 in Settlement Shares (together, the “Fee and
16 Expense Amount”). ECF No. 18, at 16-17. The Parties have also agreed that Plaintiffs’
17 Counsel may apply to the Court for service awards of up to five hundred dollars ($500.00)
18 for each Plaintiff to be paid from the Fee and Expense Amount in recognition of Plaintiffs’
19 participation and effort in the prosecution of the Derivative Lawsuits. Id. at 19-20.
20 A. Shareholders’ Counsel’s Fees
21 Plaintiffs may be awarded attorneys’ fees in derivative suits if the resolution of the
22 claim confers a “substantial benefit” on the corporation. See Mills v. Elec. Auto-Lite Co.,
23 396 U.S. 375, 393-95 (1970). “Courts have consistently approved attorneys’ fees and
24 expenses in shareholder actions where the plaintiffs’ efforts resulted in corporate
25 governance reforms but no monetary relief.” In re Taronis Techs., Inc. S'holder Derivative
26 Litig., No. CV-19-04547-PHX-GMS, 2021 WL 842137, at *3 (D. Ariz. Mar. 5, 2021)
27 (citing In re Rambus Inc. Derivative Litig., No. C 06-3513 JF (HRL), 2009 WL 166689, at
28 *3 (N.D. Cal. Jan. 20, 2009)).
1 In determining the appropriate measure of attorney’s fees, the court must exercise
2 its discretion to achieve a “reasonable result.” In re Bluetooth Headset Prods. Liab. Litig.,
3 654 F.3d 935, 942 (9th Cir. 2011). The lodestar method of awarding attorneys’ fees “is
4 especially appropriate in class actions ‘where the relief sought—and obtained—is . . .
5 primarily injunctive.’” Kim v. Allison, 8 F.4th 1170, 1181 (9th Cir. 2021) (alteration in
6 original) (quoting In re Bluetooth Headset Prods. Liab., 654 F.3d 935, 941 (9th Cir. 2011));
7 see also Osher v. SCA Realty I, Inc., 945 F. Supp. 298, 307 (D.D.C. 1996) (“Courts
8 generally regard the lodestar method, which uses the number of hours reasonably
9 expended, as the best approach in cases where the nature of the settlement evades the
10 precise evaluation needed for the percentage of recovery method.” (internal quotation
11 marks and citation omitted)). The lodestar amount is determined by multiplying the number
12 of hours reasonably spent on the litigation by a reasonable hourly rate. McCown v. City of
13 Fontana, 565 F.3d 1097, 1102 (9th Cir. 2009).
14 Here, Plaintiffs’ Counsel has not provided the Court with any information regarding
15 the hours spent on this litigation, nor their hourly rate. Thus, the Court is unable to assess
16 how the agreed upon Fee and Expense Amount—$200,000—compares to the lodestar
17 amount. However, “the Court need not—and does not—decide the issue of attorneys' fees
18 now. Preliminary approval of the settlement is not an endorsement or pre-approval of any
19 future fee request, which will be considered at the final fairness hearing.” In re Lyft, Inc.
20 Derivative Litig., No. 20-CV-09257-HSG, 2024 WL 4505474, at *7 (N.D. Cal. Oct. 16,
21 2024). For now, the Court finds that the proposed attorneys’ fees do not bar its preliminary
22 approval of the settlement.
23 B. Shareholders’ Service Awards
24 The court now considers the proposed service awards, also known as incentive
25 awards. “Incentive awards are payments to class representatives for their service to the
26 class in bringing the lawsuit.” Radcliffe v. Experian Info. Sols. Inc., 715 F.3d 1157, 1163
27 (9th Cir. 2013). These awards generally do not render a settlement inequitable. See Staton
28 v. Boeing Co., 327 F.3d 938, 977 (9th Cir. 2003). In the class action setting, incentive
1 awards are “fairly typical” and “are intended to compensate class representatives for work
2 done on behalf of the class, to make up for financial or reputational risk undertaken in
3 bringing the action.” Rodriguez v. W. Pub. Corp., 563 F.3d 948, 958-59 (9th Cir. 2009).
4 Derivative plaintiffs may likewise merit compensation “for work done on behalf of the
5 [shareholders].” In re Wells Fargo & Co. Sharehold Derivative Litig., No. 16-CV-05541-
6 JST, 2019 WL 13020734, at *8 (N.D. Cal. May 14, 2019) (quoting Rodriguez v. W. Publ'g
7 Corp., 563 F.3d 948, 958-59 (9th Cir. 2009)).
8 Here, each Plaintiff filed a separate derivative action which was then consolidated
9 into the present litigation. ECF No. 19-1, at 11. As such, the shareholder Plaintiffs have
10 expended their energies to advance the present litigation and can be compensated for their
11 service with the proposed service awards. Further, the proposed amount of $500 appears
12 reasonable because it falls within the range of service awards that courts have preliminarily
13 approved in other derivative action settlements. See, e.g., In re Immunitybio, Inc. S'holder
14 Derivative Litig., No. 3:24-CV-02014-GPC-VET, 2025 WL 2147066, at *11 (S.D. Cal.
15 July 29, 2025) (granting motion for preliminary approval of derivative settlement
16 agreement containing $2,500 proposed service award); Moore v. Verb Tech. Co., Inc., No.
17 CV 19-8393-GW-MAAx, 2021 WL 11732976, at *3 (C.D. Cal. Mar. 1, 2021) (granting
18 motion for preliminary approval of derivative settlement agreement containing $1,000
19 proposed service award).
20 As with attorneys' fees, the Court does not need to decide the issue of service awards
21 at this preliminary approval stage. See In re Lyft, Inc. Derivative Litig., 2024 WL 4505474,
22 at *6. Nevertheless, because the incentive awards are not per se unreasonable, the Court
23 concludes that the current service award provision should not bar preliminary approval of
24 the settlement.
25 IV. Schedule of Events
26 The Court will set the final settlement date to be January 9, 2026. The schedule will
27 be as follows. The Court urges the Parties to note that it has slightly revised the timeline
28 proposed by the Parties to ensure that shareholders have an adequate time to object to the
1 Settlement.
2 - The Parties shall issue Notice as described in this order and the stipulation by
3 November 21, 2025, and shall file an affidavit or declaration to the Court regarding
4 the filing, publishing, and posting of Notice by December 4, 2025.
5 - The Parties shall file a Joint Motion for final approval of the settlement by
6 December 12, 2025.
7 - The deadline for shareholders to object is therefore December 26, 2025. This would
8 provide shareholders five weeks to object (assuming they are provided notice within
9 seven days after the preliminary approval hearing). This length of time has been
10 deemed sufficient time to object by the Ninth Circuit. In re Hewlett-Packard Co.
11 S’holder Derivative Litig., 716 F. App’x at 609 (noting that it has approved windows
12 of time to object as short as 31 days) (citing Torrisi v. Tucson Elec. Power Co., 8
13 F.3d 1370, 1375 (9th Cir. 1993)). The Parties shall file responses to any objections
14 to the Settlement or in further support of final approval by January 2, 2026.
15 CONCLUSION
16 IT IS HEREBY ORDERED as follows:
17 1. The Court does hereby preliminarily approve, subject to further consideration
18 at the Settlement Hearing described below, the Stipulation and the terms of the Settlement
19 set forth therein.
20 2. The Court preliminarily approves, subject to further consideration at the
21 Settlement Hearing described below, the Settlement as set forth in the Stipulation as being
22 fair, reasonable, and adequate.
23 3. A hearing (the “Settlement Hearing”) shall be held on January 9, 2026, at
24 1:30 p.m., in Courtroom 12A at the United States District Court for the Southern District
25 of California to determine: (i) whether the terms of the Stipulation should be approved as
26 fair, reasonable, and adequate; (ii) whether the Notice fully satisfied the requirements of
27 Rule 23.1 of the Federal Rules of Civil Procedure and the requirements of due process; (iii)
28 whether all Released Claims against the Released Persons should be fully and finally
1 released; (iv) whether the agreed-to Fee and Expense Amount should be approved; (v)
2 whether the Settlement Shares should be exempted from registration pursuant to Section
3 3(a)(10) of the Securities Act of 1933; (vi) whether Service Awards payable from the Fee
4 and Expense Amount to the Plaintiffs should be approved; and (vi) such other matters as
5 the Court may deem appropriate.
6 4. With the modification regarding the due date for shareholders’ objections, the
7 Court finds that the form, substance, and dissemination of information regarding the
8 proposed Settlement in the manner set out in this Preliminary Approval Order constitutes
9 the best notice practicable under the circumstances and fully complies with Rule 23.1 of
10 the Federal Rules of Civil Procedure and due process. The Parties are ORDERED to
11 modify the Notice of Pendency and Proposed Settlement to reflect that shareholders have
12 until fourteen (14), not twenty-one (21), days prior to the Settlement Hearing to object.
13 5. No later than seven (7) days after the entry of this Preliminary Approval Order
14 (the “Notice Date”), RYVYL shall: (i) post the Notice and the Stipulation (and exhibits
15 thereto) on the Investor Relations page of RYVYL’s website,
16 https://investors.RYVYL.com/, and maintain the documents there until after the Settlement
17 Hearing; (ii) publish the press release on GlobeNewswire with a link to the Company’s
18 Investor Relations webpage where the Notice and Stipulation (and exhibits thereto) will be
19 posted and available; and (iii) file with the U.S. Securities and Exchange Commission (the
20 “SEC”) the Notice and Stipulation (and exhibits thereto) as exhibits to a Current Report on
21 Form 8-K.
22 6. All costs incurred in the filing, posting, and publication of the Notice of the
23 Settlement shall be paid by RYVYL, and RYVYL shall undertake all administrative
24 responsibility for the filing, posting, and publication of the Notice of Settlement.
25 7. Within twenty (20) days after the entry of this Preliminary Approval Order,
26 Defendants’ Counsel shall file with the Court an appropriate affidavit or declaration with
27 respect to filing, publishing, and posting the notice of the Settlement.
28
1 8. All Current RYVYL Stockholders shall be subject to and bound by the
2 provisions of the Stipulation and the releases contained therein, and by all orders,
3 determinations, and judgments in the Derivative Lawsuits concerning the Settlement,
4 whether favorable or unfavorable to Current RYVYL Stockholders.
5 9. Pending final determination of whether the Settlement should be approved,
6 Plaintiffs and RYVYL stockholders shall not commence, institute, or prosecute against any
7 of the Released Persons any action or proceeding in any court or tribunal asserting any of
8 the Released Claims.
9 10. Any stockholder of RYVYL common stock may appear and show cause, if
10 he, she, or it has any reason why the Settlement embodied in the Stipulation should not be
11 approved as fair, reasonable, and adequate, or why a judgment should or should not be
12 entered hereon, or the Fee and Expense Amount or Service Awards should not be awarded.
13 However, no RYVYL stockholder shall be heard or entitled to contest the approval of the
14 Settlement, or, if approved, the Judgment to be entered thereon, unless that RYVYL
15 stockholder has caused to be filed, and served on counsel as noted below: (i) a written
16 notice of objection with the case name and number (In re RYVYL Inc. Derivative Litigation,
17 Lead Case No. 3:23-CV-01165-GPC-SBC (S.D. Cal.); (ii) the Person’s name, legal
18 address, and telephone number; (iii) notice of whether such Person intends to appear at the
19 Settlement Hearing and the reasons such Person desires to appear and be heard, and
20 whether such Person is represented by counsel and if so, contact information for counsel;
21 (iv) competent evidence that such Person held shares of RYVYL common stock as of the
22 date of the Stipulation and continues to hold such stock as of the date the objection is made,
23 including the date(s) such shares were acquired; (v) a statement of objections to any matters
24 before the Court, the grounds therefor, as well as all documents or writings such Person
25 desires the Court to consider; and (vi) the identities of any witnesses such Person plans on
26 calling at the Settlement Hearing, along with a summary description of their expected
27 testimony.
28
1 11. At least fourteen (14) days prior to the Settlement Hearing set for January 9,
2 2026, any such person must file the written objection(s) and corresponding materials with
3 the Clerk of the Court, United States District Court for the Southern District of California,
4 United States Courthouse, 333 W. Broadway, Courtroom 12A, San Diego, California
5 92101, and serve such materials by that date, on each of the following Parties’ counsel:
6
Lead Counsel for Plaintiffs
7 THE BROWN LAW FIRM, P.C.
8 Timothy Brown
767 Third Avenue, Suite 2501
9 New York, NY 10017
10 tbrown@thebrownlawfirm.net
11
Counsel for Defendants:
12
MINTZ, LEVIN, COHN, FERRIS, GLOVSKY AND POPEO, P.C.
13 Sean T. Prosser
3580 Carmel Mountain Road, Suite 300
14
San Diego, CA 92130
15 Telephone: (858) 314-2152
stprosser@mintz.com
16
17
12. Only stockholders who have filed with the Court and sent to the Parties’
18
counsel valid and timely written notices of objection and notices of appearance will be
19
entitled to be heard at the hearing unless the Court orders otherwise.
20
13. Any person or entity who fails to appear or object in the manner provided
21
herein shall be deemed to have waived such objection and shall forever be foreclosed from
22
making any objection to the fairness, reasonableness, or adequacy of the Settlement and to
23
the Fee and Expense Amount and Service Awards, unless otherwise ordered by the Court,
24
but shall be forever bound by the Judgment to be entered and the releases to be given as
25
set forth in the Stipulation.
26
14. The Parties shall file and serve a motion for final approval of the Settlement
27
at least twenty-eight (28) days prior to the Settlement Hearing. If there is any objection to
28
1 ||the Settlement, the deadline for filings in response to the objection(s) is seven (7) days
2 || prior to the Settlement Hearing.
3 15. All proceedings in this Action are stayed until further order of the Court,
4 ||except as may be necessary to implement the Settlement or comply with the terms of the
5 || Stipulation.
6 16. This Court may, for good cause, extend any of the deadlines set forth in this
7 || Preliminary Approval Order without further notice to RY VYL stockholders.
8 17. Neither the Stipulation, nor any of its terms or provisions, nor entry of the
9 ||Judgment, nor any document or exhibit referred or attached to the Stipulation, nor any
10 action taken to carry out the Stipulation, is, may be construed as, or may be used as
11 |}evidence of the validity of any of the claims released herein or an admission by or against
12 || the Individual Defendants of any fault, wrongdoing, or concession of liability whatsoever.
13 18. The Court may, in its discretion, change the date and/or time of the Settlement
14 || Hearing without further notice to Current RYVYL Stockholders and reserves the right to
15 the Settlement Hearing telephonically or by videoconference without further notice to
16 |Current RYVYL Stockholders. Any Current RYVYL Stockholder (or his, her or its
17 ||counsel) who wishes to appear at the Settlement Hearing should consult the Court’s
18 calendar and/or the Investor Relations page of RY VYL’s website for any change in the
19 || date, time, or format of the Settlement Hearing.
20 19. The Court retains jurisdiction to consider all further applications arising out
21 || of or connected with the proposed Settlement.
22 IT IS SO ORDERED.
23 || Dated: November 14, 2025 (2 apho Cs A )
24 Hon. Gonzalo P. Curiel
5 United States District Judge
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