United States District Court, N.D. Texas, Dallas Division
THE ERICA P. JOHN FUND, INC., et al., on Behalf of Itself and All Others Similarly Situated, Plaintiffs,
HALLIBURTON COMPANY and DAVID J. LESAR, Defendants. Amount
MEMORANDUM OPINION AND ORDER
BARBARA M. G. LYNN JUDGE
February 21, 2017, the Erica P. John Fund, Inc.
(“EPJF”), Lead Plaintiff in this securities class
action case, filed a Stipulation of Settlement, (ECF No.
794), and a Motion for Preliminary Approval of Class Action
Settlement, (ECF No. 795). The Court granted preliminary
approval. (ECF No. 805).
then filed the Motion for Final Approval of Class Action
Settlement and Plan of Allocation. (ECF No. 818). Class
Counsel-Boies Schiller Flexner LLP (“BSF”), Kahn
Swick & Foti, LLC (“KSF”), and Lawrence
“Larry” Vincent-filed the Motion for Award of
Attorneys' Fees and Reimbursement of Litigation Expenses.
(ECF No. 820). Several other firms have also moved for fees
and expenses, namely Federman & Sherwood, (ECF No. 812),
Kilgore & Kilgore, PLLC (ECF No. 815), and Robbins Geller
Rudman & Dowd LLP, (ECF No. 817). Robbins Geller Rudman
& Dowd has since withdrawn its request for fees and
instead seeks only expenses. (ECF No. 823).
31, 2017, the Court held a final fairness hearing regarding
the Motion for Final Approval and heard argument on the fee
and expense motions. For the reasons stated below and on the
record, the Motion for Final Approval of Class Action
Settlement and Plan of Allocation is
GRANTED; Class Counsel's Motion for
Award of Attorneys' Fees and Reimbursement of Litigation
Expenses is GRANTED; Federman &
Sherwood's Motion for Attorney Fees and Reimbursement of
Expenses is GRANTED IN PART and
DENIED IN PART; Kilgore & Kilgore's
Motion for Award of Attorneys' Fees and Expenses is
GRANTED IN PART and DENIED IN
PART; and Robbins Geller Rudman & Dowd's
Motion for Award of Expenses is GRANTED.
Factual and Procedural Background
Background of the Case
P. John Fund, Inc. (EPJ Fund), is the lead plaintiff in a
putative class action against Halliburton and one of its
executives (collectively Halliburton) alleging violations of
section 10(b) of the Securities Exchange Act of 1934, and
Securities and Exchange Commission Rule 10b-5. According to
EPJ Fund, between June 3, 1999, and December 7, 2001,
Halliburton made a series of misrepresentations regarding its
potential liability in asbestos litigation, its expected
revenue from certain construction contracts, and the
anticipated benefits of its merger with another company-all
in an attempt to inflate the price of its stock. Halliburton
subsequently made a number of corrective disclosures, which,
EPJ Fund contends, caused the company's stock price to
drop and investors to lose money.
Halliburton Co. v. Erica P. John Fund, Inc., 134
S.Ct. 2398, 2405-08 (2014) (Halliburton I). Numerous
complaints alleging misrepresentations by Halliburton were
filed in 2002 and consolidated into this action. (ECF No.
22). Four lead plaintiffs were appointed, including the
Archdiocese of Milwaukee Supporting Fund, Inc.
(“AMSF”), the precursor in name to EPJF.
(Id. at 22). Schiffrin & Barroway, LLP
(“S&B”) was appointed as lead counsel, and
Federman & Sherwood (“F&S”) and The
Emerson Firm were appointed co-liaison counsel.
10, 2004, all lead plaintiffs except for AMSF moved for
preliminary approval of settlement, asserting that all claims
had been settled for $6 million. (ECF No. 94). AMSF opposed
the settlement, arguing that it had not been included in
settlement discussions and that the proposed figure was
insufficient. AMSF further moved to have S&B removed as
lead counsel. Following a final fairness hearing, the Court
denied approval and held that there was insufficient proof
that the proposed settlement was fair, reasonable, and
adequate. (ECF No. 133 at 16). On October 7, 2004, Kilgore
& Kilgore, PLLC (“K&K”) was appointed
local counsel for AMSF. (ECF No. 149). On May 3, 2005,
S&B was removed as lead counsel. (ECF No. 195). AMSF
became the sole remaining lead plaintiff in the action, and
at its request and with the Court's approval,
Scott䧊, LLP and Lerach Coughlin Stoia Geller Rudman
& Robbins LLP were appointed co-lead counsel.
February of 2007, Scott䧊 and Lerach Coughlin Stoia
Geller Rudman & Robbins were relieved of their duties as
lead counsel and were replaced by BSF. (ECF No. 308). AMSF
subsequently changed its name to the “Erica P. John
Fund, Inc.” (ECF No. 472). At the class certification
stage, the case was subject to multiple appeals, and the
Supreme Court granted certiorari twice to resolve various
issues. See Halliburton I, 563 U.S. 804 (2011);
Halliburton Co. v. Erica P. John Fund,
Inc., 134 S.Ct. 2398 (2014) (Halliburton II).
The following excerpt from Halliburton II provides a
concise summary of the procedural history and legal issues
raised during this stage:
EPJ Fund moved to certify a class comprising all investors
who purchased Halliburton common stock during the class
period. . . . [E]xcept for one difficulty, the court would
have also concluded that the class satisfied the requirement
of Rule 23(b)(3) that “the questions of law or fact
common to class members predominate over any questions
affecting only individual members.” The difficulty was
that Circuit precedent required securities fraud plaintiffs
to prove “loss causation”-a causal connection
between the defendants' alleged misrepresentations and
the plaintiffs' economic losses-in order to invoke
Basic's presumption of reliance and obtain class
certification. Because EPJ Fund had not demonstrated such a
connection for any of Halliburton's alleged
misrepresentations, the District Court refused to certify the
proposed class. The United States Court of Appeals for the
Fifth Circuit affirmed the denial of class certification on
the same ground. Archdiocese of Milwaukee Supporting
Fund, Inc. v. Halliburton Co., 597 F.3d 330 (2010).
We granted certiorari and vacated the judgment, finding
nothing in “Basic or its logic” to justify the
Fifth Circuit's requirement that securities fraud
plaintiffs prove loss causation at the class certification
stage in order to invoke Basic's presumption of reliance.
Erica P. John Fund, Inc. v. Halliburton Co., 563
U.S. __ __, __, 131 S.Ct. 2179, 2185-2186, 180 L.Ed.2d 24
(2011) (Halliburton I). “Loss causation,
” we explained, “addresses a matter different
from whether an investor relied on a misrepresentation,
presumptively or otherwise, when buying or selling a
stock.” We remanded the case for the lower courts to
consider “any further arguments against class
certification” that Halliburton had preserved.
On remand, Halliburton argued that class certification was
inappropriate because the evidence it had earlier introduced
to disprove loss causation also showed that none of its
alleged misrepresentations had actually affected its stock
price. . . . The District Court declined to consider
Halliburton's argument, holding that the Basic
presumption applied and certifying the class under Rule
The Fifth Circuit affirmed. 718 F.3d 423 (2013). The court
found that Halliburton had preserved its price impact
argument, but to no avail. Id., at 435- 436. While
acknowledging that “Halliburton's price impact
evidence could be used at the trial on the merits to refute
the presumption of reliance, ” id., at 433,
the court held that Halliburton could not use such evidence
for that purpose at the class certification *2407 stage,
id., at 435. “[P]rice impact evidence, ”
the court explained, “does not bear on the question of
common question predominance [under Rule 23(b)(3)], and is
thus appropriately considered only on the merits after the
class has been certified.” Ibid. We once again
granted certiorari, this time to resolve a conflict among the
Circuits over whether securities fraud defendants may attempt
to rebut the Basic presumption at the class certification
stage with evidence of a lack of price impact.
Halliburton II, 134 S.Ct. at 2405-08. In
Halliburton II, the Supreme Court held that
Halliburton could introduce evidence of a lack of price
impact at the class certification stage to show the absence
of predominance. Id. at 2414-17. The Supreme Court
again vacated the judgment of the Fifth Circuit and remanded
the case to this Court for further proceedings. Id.
at 2417. After briefing and oral argument addressing
Halliburton II, this Court certified the class. (ECF
No. 601). After Defendants took another appeal to the Fifth
Circuit, EPJF filed the Stipulation of Settlement. (ECF No.
Summary of the Settlement
Stipulation of Settlement is between EPJF, on behalf of
itself and each of the class members, and Defendants
Halliburton Company and David Lesar. (ECF No. 794).
Plaintiffs are agreeing to release all claims based on the
purchase or acquisition of common stock during the Class
Period, which is defined as between August 16, 1999, and
December 7, 2001, inclusive. The Parties agreed to settle the
case for $100, 000, 000.00 subject to the Court's
approval. The Stipulation of Settlement does not include
claims stemming from purchases of stock between December 8,
2001, and July 22, 2002, which are part of the
Magruder putative class action. See Magruder v.
Halliburton Co., No. 3:05-cv-1156-M (N.D. Tex.). These
claims are expressly not released.
Motion for Final Approval of Class Action Settlement
Rule 23(e), a court must review any “settlement,
voluntary dismissal, or compromise” of the
“claims, issues, or defenses of a certified
class.” Fed.R.Civ.P. 23(e). Rule 23(e) establishes
certain procedures in considering a proposed settlement, each
of which will be considered in turn:
(1) The court must direct notice in a reasonable manner to
all class members who would be bound by the proposal.
(2) If the proposal would bind class members, the court may
approve it only after a hearing and on finding that it is
fair, reasonable, and adequate.
(3) The parties seeking approval must file a statement
identifying any agreement made in connection with the
(4) If the class action was previously certified under Rule
23(b)(3), the court may refuse to approve a settlement unless
it affords a new opportunity to request exclusion to
individual class members who had an earlier opportunity to
request exclusion but did not do so.
(5) Any class member may object to the proposal if it
requires court approval under this subdivision (e); the
objection may be withdrawn only with the court's
Notice Must Be Directed in a Reasonable Manner to All Class
of the settlement was reasonable, provided ample due process,
satisfied the requirements for settlement notices set out in
the Private Securities Litigation Act
(“PSLA”).Notice was disseminated through the
procedures provided in the Court's Preliminary Approval
Order. (ECF No. 805). In the Motion for Final Approval, Class
Counsel stated that by April 14, 2017, 42, 194 copies of the
notice had been mailed to potential class members identified
through Halliburton's transfer agent records and their
nominees, and as of June 28, 2017, an additional 67, 008
copies had been sent. (ECF No. 818 at 21). Notice was
published in Investor's Business Daily and
disseminated on PR Newswire. (Id.) The Claims
Administrator maintained a toll-free phone number and a
website providing additional information; as of April 27,
2017, the Claims Administrator had received 56 calls and 174
hits on the website. (Id.) In terms of timing, the
class members had 87 days between the initial mailing of the
notice on April 14, 2017, and the deadline to request
exclusion from the class, which was on July 16, 2017. See
DeJulius v. New Eng. Health Care Emps. Pension Fund, 429
F.3d 935, 946 (10th Cir. 2005) (notice program upheld as
providing sufficient due process even though 70.7% of the
class members received fewer than thirty-two days'
notice); Silber v. Mabon, 18 F.3d 1449, 1452, 1454
(9th Cir. 1994) (due process requirement and Rule 23
satisfied when settlement notices were sent out forty days
before the opt-out deadline). Furthermore, the fairness
hearing was scheduled more than 75 days after the notice
date. See Schwartz v. TXU Corp., 2005 WL 3148350, at
*11 (N.D. Tex. Nov. 8, 2005) (stating that a gap of 62 days
between when notice was first sent out and the fairness
hearing was adequate). Except for the lead plaintiff in
Magruder, the Court received no objections to the
settlement, and only one objection to the fees sought.
The Proposed Settlement Must be Fair, Reasonable, and
evaluate the Reed factors to determine whether a
proposed class action settlement is fair, reasonable, and
adequate. See Reed v. General Motors Corp., 703 F.2d
170 (5th Cir. 1983). The Reed factors are: (1)
evidence that the settlement was obtained by fraud or
collusion; (2) the complexity, expense, and likely duration
of the litigation; (3) the stage of the litigation and
available discovery; (4) the probability of plaintiffs
prevailing on the merits; (5) the range of possible recovery
and certainty of damages; and (6) the opinions of class
counsel, class representatives, and absent class members.
Newby v. Enron Corp., 394 F.3d 296, 301 (5th Cir.
2004). In light of the Reed factors, the proposed
settlement is fair, reasonable, and adequate.
Evidence that the Settlement Was Obtained by Fraud or
in the record indicates that the current settlement was the
result of secret negotiations or improper collusion. No
parties (other than the lead plaintiff in Magruder)
have objected, and those objections do not assert any fraud
or collusion. Furthermore, the settlement was obtained
through formal mediation before former U.S. District Judge
Layn R. Phillips, which strongly suggests that the settlement
was not the result of improper dealings. See In re
Bluetooth Headset Products Liability Litig., 654 F.3d
935, 948 (9th Cir. 2011) (noting that the “presence of
a neutral mediator” is a factor “weighing in
favor of a finding of non-collusiveness”).
The Complexity, Expense, and Likely Duration of the
been heard twice by the Supreme Court and multiple times by
the Fifth Circuit, and having lasted more than fifteen years,
this case is indisputably complex and of lengthy duration.
Stage of the Litigation and Available Discovery
litigation was set for trial, subject to the last appeal. The
parties have produced over 1.3 million documents and have
taken 28 fact depositions. The appendices to the
cross-motions for summary judgment exceeded 9, 400 pages.
presumption of fairness, adequacy, and reasonableness may
attach to a class settlement reached in arm's-length
negotiations between experienced, capable counsel after
meaningful discovery.” In re Heartland Payment
Sys., Inc., 851 F.Supp.2d 1040, 1063 (S.D. Tex. 2012)
(internal quotation marks omitted). Here, the parties have
engaged in substantial and meaningful discovery, and thus the
parties were fully aware of the complete facts and the
strengths and weaknesses of their respective positions.
The Probability of Plaintiffs Prevailing on the
Merits EPJF succeeded in certifying the class on the
December 7, 2001, disclosure and had a not insignificant
probability of prevailing on the merits. However, there
remained a substantial risk for all parties in proceeding to
Range of Possible Recovery and Certainty of Damages
Motion for Final Approval, EPJF states that the “$100,
000, 000 all cash recovery constitutes approximately 11.8% of
the maximum recoverable damages for the Class (approximately
$848 million, as determined in consultation with Lead
Plaintiff's damages expert).” (ECF No. 818 at 14).
However, EPJF also points out that Defendants had strong
arguments that the alleged misrepresentations were not wholly
actionable, which would have limited “the maximum
recoverable damages to as low as $233 million according to
Lead Plaintiff's damages expert.” (Id. at 14-15).
Under this lower recovery, the $100 million settlement would
constitute 42.9% of the maximum recoverable damages for the
focus of this factor is whether the settlement falls within
the range of reasonableness. The Court is not to try the case
via the fairness hearing because “the very purpose of
the compromise is to avoid the delay and expense of such a
trial.” Reed, 703 F.2d at 172. In ascertaining
whether a settlement falls “within the range of
possible approval, ” courts will compare the settlement
amount to the relief the class could expect to recover at
trial, i.e., the strength of the plaintiff's case.
See, e.g., In re Nat'l Football League
Platers' Concussion Injury Litig., 961 F.Supp.2d
708, 714 (E.D. Pa. 2014) (“To determine whether a
settlement falls ‘within the range of possible
approval, ' a court must ‘consider plaintiffs'
expected recovery balanced against the value of the
settlement offer.'”). “The fact that a
proposed settlement may only amount to a fraction of the
potential recovery does not, in and of itself, mean that the
proposed settlement is grossly inadequate and should be
disapproved.” Parker v. Anderson, 667 F.2d
1204, 1210 n.6 (5th Cir. 1982) (citing City of Detroit v.
Grinnell Corp., 495 F.2d 448, 455 (2d Cir. 1974)).
the recovery is 11.8% to 42.9% of the maximum possible
recovery, depending on the conservativeness of the figures
set forth by EPJF. As final approval is frequently given to
settlements even when “the settlement amount is a very
small fraction of the damages amount projected by the
Plaintiffs, ” this recovery is reasonable in light of
the possible damages. See In re Enron Corp.
Sec., Derivative, & ERISA Litig., 228 F.R.D. 451,
566 (S.D. Tex. 2005). Even the “low” estimate,
11.8%, is a fairly sizeable recovery compared to other
approved securities class action settlements. See,
e.g., In re Initial Public Offering Sec.
Litig., 671 F.Supp.2d 467, 483 (S.D.N.Y. 2009)
(approving a settlement representing two percent of
aggregated expected recovery). Furthermore, the amount to be
recovered is more than fifteen times what the Court rejected
in 2004, when it found a $6 million settlement not fair,
reasonable, or adequate.
Opinions of Class Counsel, Class Representatives, and Absent
Counsel and Lead Plaintiff all agree to the settlement.
See also Cotton v. Hinton, 559 F.2d 1326, 1330 (5th
Cir. 1977) (“[T]he trial judge, absent fraud,
collusion, or the like, should be hesitant to substitute its
own judgment for that of counsel.”). After notice to
the class was given, the only person objecting to the
Settlement is Magruder, who is not a member of the class.
“Receipt of few or no objections can be viewed as
indicative of the adequacy of the settlement.” In
re Enron Corp., 228 F.R.D. at 567 (internal quotation
The Parties Seeking Approval Must File a Statement
Identifying Any Agreement Made in Connection with the
23(e) requires “[t]he parties seeking approval [to]
file a statement identifying any agreement made in connection
with the proposal.” Fed.R.Civ.P. 23(e)(3). This
requirement does not only concern disclosure of the basic
settlement terms; “[i]t aims instead at related
undertakings that, although seemingly separate, may have
influenced the terms of the settlement by trading away
possible advantages for the class in return for advantages
for others.” Id. Committee Notes (2003).
“The spirit of [Rule 23(e)(3)] is to compel
identification of any agreement or understanding, ”
written or oral, “that might have affected the
interests of class members by altering what they may be
receiving or foregoing.” Slipchenko v. Brunel
Energy, Inc., 2015 WL 338358, at *6 (S.D. Tex. Jan. 23,
2015) (quoting Manual for Complex Litigation (Fourth) §
parties have satisfied this requirement by filing the
Stipulation of Settlement, which publicly discloses the terms
of the agreement between EPJF and Defendants made in
connection with the settlement. The Stipulation also
describes a “supplemental confidential agreement”
between the parties, which “gives Halliburton the
right, but not the obligation, to terminate the settlement in
the event that a certain portion of the Class delivers timely
and valid requests for exclusion from the Class.” (ECF
No. 794 at 36-37).
An Additional Opt-Out Opportunity
23(e)(4) provides that “[i]f the class action was
previously certified under Rule 23(b)(3), the court may
refuse to approve a settlement unless it affords a new
opportunity to request exclusion to individual class members
who had an earlier opportunity to request exclusion but did
not do so.” Rule 23(e)(4) “comes into play when
the opt-out opportunity expired before the members received
notice of a proposed settlement.” Slipchenko,
2015 WL 338358, at *7. This factor is inapplicable here. The
members of the class received notice of the Settlement well
before the opt-out opportunity expired.