MILBERG WEISS BERSHAD
HYNES & LERACH LLP
WILLIAM S. LERACH (68581)
KEITH F. PARK (54275)
KIRK B. HULETT (110726)
HENRY ROSEN (156963)
JAMES I. JACONETTE (179565)
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
Attorneys for Plaintiffs
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
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ROBERT MISHELOW, et al., On Behalf of Plaintiffs, vs. DSP COMMUNICATIONS, INC., et al.,
Defendants. |
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No. C-98-0765-FMS CLASS ACTION DATE: April 9, 1999 |
I, Kirk B. Hulett, declare:
1. I am a member of Milberg Weiss Bershad Hynes & Lerach LLP ("Milberg Weiss"), Lead Plaintiffs' Lead Counsel in this litigation. I have personal knowledge of the matters set forth herein based upon my active supervision and participation in all material aspects of the prosecution of this litigation.
2. I submit this declaration in support of plaintiffs' application, pursuant to Rule 23 of the Federal Rules of Civil Procedure, for approval of the Settlement herein for an award of attorneys' fees and reimbursement of expenses, and for approval of the Plan of Allocation. The Stipulation of Settlement, dated June 17, 1998, provides for payment of $3,000,000 (the "Settlement Fund") which has been deposited into escrow and is earning interest for the benefit of the class, in settlement of the claims asserted by plaintiffs and the class in this action (the "Settlement").(1)
3. This case was vigorously litigated for over a year. The Settlement was not arrived at until plaintiffs had conducted an extensive investigation, the results of which plaintiffs used to prepare and file detailed complaints against defendants. The investigation included the review and analysis of tens of thousands of pages of documents, including documents produced by defendants. Plaintiffs also interviewed numerous witnesses to develop evidence; consulted with experts in digital signal processing chips, the Japanese PDC chipset market, and materiality, loss causation and damages; and thoroughly researched the law pertinent to the claims and defenses asserted.
4. This Settlement was negotiated by experienced counsel with a firm understanding of the strengths and weaknesses of their respective claims and defenses. The Settlement confers substantial benefits on the class and eliminates the risk of continued litigation of which the outcome could not be assured. It is respectfully submitted that the Settlement should be approved as fair, reasonable and adequate, counsel should be awarded attorneys' fees and reimbursement of expenses for their efforts in creating this benefit on behalf of the class, and the Plan of Allocation should be approved.
5. The following is a summary of the principal events during the course of this litigation.
6. DSP Communications, Inc. ("DSPC" or the "Company") was founded in 1987 to create new technologies for the emerging cellular market. The company creates, markets, licenses and supports software, baseband integrated circuits and application specific integrated circuits ("ASICs") based on digital signal processing technology. The products from which DSPC derives its revenue are chipsets used in cellular phone handsets assembled and sold by Japan-based original equipment manufacturers ("OEMs") in the analog and digital wireless communication markets. Prior to and during the Class Period, the Company portrayed itself as the largest independent vendor of baseband chipsets to OEMs in the Japanese digital cellular telephone market. The Company's announced strategy was to exploit the technological advantage of its chipsets to maintain its position as a leading supplier of baseband chipsets for digital cellular telephones in Japan.
7. As of the end of 1996, approximately 95% of the Company's business was derived from sales of the Company's "B-series" PDC baseband chipsets to handset manufacturers in Japan. The B-series chipsets were the Company's most advanced PDC chipsets sold throughout 1996 and during the Class Period. DSPC's customers using the Company's B-series chipsets during the Class Period included, among others, Kenwood, Kyocera, Sanyo, Sharp, Pioneer and Kokusai. Because DSPC derived virtually all of its 1996 revenues from the sale of its B-series chipsets, the Company's success remained dependent on continued demand for that chipset.
8. However, plaintiffs alleged that during the relevant period defendants learned that order rates for the B-series chipsets had materially declined and DSPC's backlog of orders had shrunk by $10 million. Plaintiffs alleged that the declining order rate was largely due to the decision of the Company's OEM customers to redesign their current models of PDC phones which would require development and delivery of DSPC's next generation "D-series" PDC chipsets. Plaintiffs further alleged that DSPC's customers materially changed their chipset requirements because Panasonic, a competitor of DSPC, had just introduced a new, superior handset which was eroding the market for the handsets of DSPC's customers. Panasonic's new model P201 handset, manufactured with Panasonic's latest and superior chipset technology, weighed just 97 grams, nearly half the weight of handsets made with DSPC's B-series chipsets. It was the smallest and lightest handset then available and consumed significantly less current than other handsets. Accordingly to plaintiffs, Panasonic's handset acquired significant market share from DSPC's OEM customers.
9. It was alleged that this was a devastating development to DSPC because the defendants knew that DSPC would not, given design and development delays and foundry ramp-up lead times, deliver commercial quantities of its new D-series chipsets until after the end of second quarter 1997 (June 30, 1997). Accordingly, plaintiffs alleged, the Company was caught in a serious product transition gap spurred by Panasonic's introduction of the next technological advance in baseband chipsets over six months ahead of DSPC.
10. Plaintiffs alleged that, despite their knowledge of these adverse material facts, defendants embarked on a campaign to conceal the Company's product transition problems and to raise and sustain the price of DSPC's stock until they were able to sell large amounts of their personal holdings at artificially inflated prices. It was alleged that defendants conducted numerous conferences and "one-on-one" sessions with securities analysts knowing and expecting that these analysts would publish what the defendants said and told them, and confirmed increasingly profitable quarterly and year-end 1997 EPS projections for the Company. The information defendants communicated to securities analysts, plaintiffs alleged, had the desired effect: the analysts issued favorable reports regarding DSPC which caused DSPC's stock price to rise.
11. Subsequently, the individual defendants sold nearly 400,000 shares of their personal holdings; over twice the volume of previous insider sales during any similar period of time. Then, within weeks of that alleged insider selling, contrary to defendants' allegedly previously confirmed second quarter 1997 projections of $.17 per share, defendants announced that "revenues and profits in [second quarter 1997] will be materially lower than the first quarter of 1997." Defendants announced that orders for DSPC's B-series chipsets were so low that DSPC had discontinued production requests to its foundries until a specific order was placed. Consequently, DSPC's stock price collapsed by nearly 40%.
12. In May 1997, plaintiffs' counsel filed two securities class action lawsuits in Santa Clara Superior Court on behalf of purchasers of DSPC common stock between January 16, 1997 and April 16, 1997 inclusive (the "Class Period"), against DSPC and certain of its officers and directors (the "State Actions"). Plaintiffs alleged that defendants made materially false and misleading statements and omissions to induce plaintiffs and others to purchase DSPC stock in violation of Cal. Corp. Code §25400. Plaintiffs also alleged that each defendant willfully participated in the Cal. Corp. Code §25400 violations by each other defendant and was therefore liable pursuant to Cal. Corp. Code §25500.
13. Shortly after the State Actions were filed, plaintiffs' counsel organized themselves in order to efficiently and effectively prosecute this litigation and to avoid any duplication of effort, and the parties stipulated to consolidate the two State Actions for all purposes. Pursuant to an Order of the state court dated June 25, 1997, the two State Actions were consolidated for all purposes. The Order also established a Master File and Master Docket.
14. On February 25, 1998, plaintiffs' Lead Counsel filed a class action complaint in this Court (the "Federal Action"), for violations of §§10(b) and 20(a) of the Securities Exchange Act of 1934 against Defendants, alleging facts substantially similar to those detailed in the State Actions and likewise based upon the investigation of plaintiffs' Lead Counsel.
15. On April 28, 1998, pursuant to the Private Securities Litigation Reform Act ("PSLRA"), plaintiffs in the Federal Action filed a motion to be appointed Lead Plaintiffs and for appointment of Lead Plaintiffs' counsel. On June 5, 1998, the Court appointed Robert Mishelow and Ram Yariv as Lead Plaintiffs and Milberg Weiss as plaintiffs' Lead Counsel in the Federal Action.
16. Throughout the litigation, defendants asserted that they possessed absolute defenses to plaintiffs' claims, and they denied each of plaintiffs' allegations. Among other things, defendants claimed that the market was already aware of the product transition gap spurred by Panasonic's introduction of the next technological advance in digital signal processing chipsets, thus DSPC stock purchasers were not deceived. They also claimed that, in any event, DSPC's stock price was affected by market conditions and not company-specific information, and that DSPC's stock price had rebounded after the end of the Class Period such that it was at or above its average stock price during the Class Period. Defendants claimed that the Company's rapid stock price decline on the last day of the Class Period was not caused by disclosure of information which plaintiffs' alleged was previously withheld by defendants and that damages, even assuming liability, were diminimus given the fact that within weeks after the end of the Class Period DSPC's stock price had rebounded to Class Period prices. Defendants also denied that their stock sales were material, when compared to their entire DSPC stock holdings, thus negating an inference of scienter.
17. On or about June 9, 1997, defendants filed a demurrer to and motion to strike plaintiffs' complaints in the State Actions. Defendants moved to strike plaintiffs' class allegations on the basis that plaintiffs had not pleaded they purchased DSPC stock "in this state," and that Cal. Corp. Code §25400 only provides remedies for such purchasers of stock. Defendants' demurrer was founded upon that argument and defendants' claim that the plaintiffs had otherwise not pleaded the essential elements for a violation of Cal. Corp. Code §§25400/25500. Defendants' principal argument was that the complaint failed to allege that defendants both sold stock and made false statements, and that §25400 requires both acts. Defendants also argued that they could not be held liable for statements made by securities analysts. They further argued that their statements were not misleading because of risk disclosures made in the same documents plaintiffs alleged were misleading. Defendants finally argued that the complaint did not properly allege "willful" conduct. Defendants also asked the state court to apply heightened pleading standards under the PSLRA, which, according to defendants, preempted state law.
18. Plaintiffs filed their oppositions on July 7, 1997. Plaintiffs opposed defendants' "in this state" argument on the grounds that §25500 permits claims on behalf of all defrauded purchasers of the Company's stock and that §§25400 and 25500 prohibit violations which occur in this state and protect all such purchasers regardless of where the stock was purchased. Plaintiffs further argued that defendants' statements were actionable, that defendants' participation in the making of false statements under §25400 was adequately pleaded, and that the PSLRA did not preempt state law.
19. In an Order dated December 3, 1997, the state court denied defendants' motion to strike in its entirety, but dismissed plaintiffs' complaint with leave to amend.
20. After the dismissal, plaintiffs' Lead Counsel continued informal discovery in the State Actions. Plaintiffs' counsel's investigation also included the review of additional documents and interviews with several persons, relating to the claims alleged. The information derived from these interviews was important. Among other things, plaintiffs' counsel learned of the divergence between the PDC chipset specifications required by DSPC's customers and those specifications DSPC was able to provide in its "B-series" chipsets, as well as the nature and extent of the competitive threat the technology in Panasonic's phone posed to DSPC.
21. During the litigation, plaintiffs' counsel conferred on many occasions with consultants with expertise about digital signal processing chips, the Japanese market in PDC chipsets and phones, and materiality, loss causation and damages.
22. Plaintiffs' technical consultant provided valuable advice as to the digital signal processing chips sold by DSPC and its competitors. This information assisted plaintiffs' counsel in drafting the allegations in the complaints and mapping out a discovery plan for planned eventual formal discovery.
23. Plaintiffs' materiality, loss causation and damage consultant analyzed the potential recoverable damages and the materiality of the alleged false and misleading statements. This consultant also assisted in formulating the Plan of Allocation of the Settlement Fund in connection with the Settlement.
24. Using the facts garnered from this additional investigation, plaintiffs amended their allegations in the State Actions in great detail, and filed their First Amended and Consolidated Complaint for Damages in state court on January 27, 1998. It was this complaint, and the subsequently filed federal complaint which, in part, led to the Settlement herein.
25. Settlement negotiations were initiated by defendants shortly after the State Actions were filed. Those negotiations proved to be unsuccessful. The ongoing investigation of plaintiffs' Lead Counsel revealed additional facts that were pleaded in the amended complaint, which stated plaintiffs' allegations with greater particularity. At about this time, plaintiffs filed the Federal Action, in order to preserve their federal claims prior to the running of the statute of limitations.
26. After plaintiffs' amended complaints and the Federal Action were filed, based on the latest facts garnered from the investigation of plaintiffs' Lead Counsel, settlement negotiations soon restarted and ultimately proved successful. The Settlement reached represents a significant achievement in that it is a successful and efficient resolution of a complex class action. It is also a significant recovery given the ultimate damages potentially attainable through a successful trial. Indeed, although plaintiffs believed they would have prevailed had there been a trial, the disputed questions of law and fact presented by the parties placed the final outcome of the litigation in doubt.
27. Settlement negotiations took place at arm's length at all times. Neither side conceded its position with respect to the underlying merits. The settlement discussions were conducted by senior lawyers from both sides of the case, experienced in negotiating settlement of complex cases. Each side had a thorough understanding of the allegations made, the facts supporting the allegations and the facts supporting the defenses. Both plaintiffs and defendants recognized that the facts at issue were subject to contradictory interpretations and allowed for both sides to advocate varying views of potential liability and recoverable damages. As a result of these negotiations, an agreement in principle was reached to settle the case for $3.0 million.
28. Apart from the arm's-length negotiations, another factor counsel considered in assessing the merits of settlement is whether serious questions of law and fact exist, placing the ultimate outcome of the litigation in doubt. Uncertain questions of law and fact support the conclusion that the Settlement is fair, reasonable and adequate to the class.
29. Throughout the course of the litigation, defendants asserted that they possessed strong defenses to the claims alleged by plaintiffs. Plaintiffs' counsel continue to believe that plaintiffs would have prevailed had there been a trial. However, as defendants' counsel's aggressive attacks against the pleadings make obvious, defendants' counsel indisputably would have employed arguments to avoid liability had there not been a settlement.
30. In addition, as to the §10(b) claim, plaintiffs faced the burden of establishing that defendants acted with scienter. Establishing scienter has always been a significant challenge for plaintiffs. However, with the enactment of the PSLRA, sufficiently pleading scienter has become more of a hurdle.
31. In assessing the merits of the Settlement, plaintiffs' counsel considered the litigation's hotly disputed factual and legal questions. Plaintiffs' counsel understand that many of the defenses asserted by defendants had some possibility of success. This uncertainty makes evaluating the ultimate outcome problematic, especially when weighed against the tangible benefits conferred by the Settlement.
32. Plaintiffs also considered the potential recovery the class would have received if the case had gone to trial and plaintiffs prevailed on each of their claims and the jury accepted plaintiffs' methodology of computing damages compared with the significant costs and delay to be incurred during the discovery and pleading process leading up to trial. The value of the present Settlement, which represents an immediate recovery of $3.0 million, is an excellent result in view of the significant hurdles that plaintiffs faced and the considerable amount of time it would take to prosecute the litigation through trial and subsequent appeals.
33. An important factor, when considering whether to approve class action settlements, is the judgment of the parties' counsel that the settlement is fair and reasonable. Plaintiffs' Lead Counsel strongly believe that the Settlement represents the best possible resolution. As outlined above, the Settlement is fair, reasonable and adequate in all respects and should be approved by the Court.
34. All class members who wish to participate in the distribution of the Settlement Fund must submit a valid Proof of Claim form postmarked on or before May 24, 1999. As provided in the Stipulation, after deducting all appropriate taxes, administrative costs, attorneys' fees and reimbursement of expenses, the net Settlement Fund will be distributed according to a Plan of Allocation.
35. If approved, the Plan of Allocation will govern how the proceeds of the Settlement will be distributed among class members who submit appropriate Proof of Claim forms.
36. Plaintiffs' counsel, in consultation with their damages consultant, have developed a formula for recovery under the Plan of Allocation. The Plan of Allocation reflects the maximum damages, in plaintiffs' view, that could have been recovered if plaintiffs were successful in establishing liability on all claims.
37. Claims will be calculated as follows:
For shares of DSP Communications, Inc. common stock that were purchased on January 7, 1997 through April 16, 1997, and
A. sold prior to April 17, 1997, the claim per share is 32% of the difference between (i) the purchase price, and (ii) the sales price;
B. retained at the end of April 16, 1997, the claim per share is the lesser of: (i) $3.50 per share (4/17/97 price decline), or (ii) the purchase price less $7.25 per share (4/17/97 closing price).
The date of purchase or sale is the "contract" or "trade" date, as distinguished from the "settlement" date.
For Settlement Class Members who made multiple purchases or multiple sales during the Settlement Class Period, the earliest subsequent sale shall be matched with the earliest purchase and chronologically thereafter for the purposes of the claim calculations.
All profits shall be subtracted from the total of all losses to determine if a Settlement Class Member has a Claim. Only if a Settlement Class Member had a net loss, after profits from all transactions in DSPC common stock during the Settlement Class Period are subtracted from the total of losses, will such Settlement Class Member be eligible to receive a distribution from the Net Settlement Fund.
38. Plaintiffs' counsel seek an aggregate award of 25% of the Settlement proceeds established for the benefit of the Settlement Class as legal fees for services rendered on a wholly contingent basis and reimbursement of their out-of-pocket expenses reasonably incurred in the prosecution of the litigation, plus interest on the fees and expenses at the same rate as that earned on the Settlement Fund.
39. As discussed in the accompanying Memorandum in Support of Plaintiffs' Application for Attorneys' Fees and Reimbursement of Expenses ("Fee Brief"), an award of 25% of the benefits achieved for the class is well within the range of fees commonly awarded as a percentage of the recovery in cases of this type; it is a percentage at or below percentages which have been previously approved by this Court and numerous courts in this Circuit; it is warranted based on the quality of counsel's work and the substantial benefit obtained for the class; and it would further support the policy of encouraging lawyers to resolve actions without protracted litigation when such resolutions will benefit those on whose behalf the cases are brought.
40. The expertise and experience of plaintiffs' counsel is described in each of the declarations of plaintiffs' law firms and experts attached as Exhibits 1-6 to the Declaration of Keith F. Park in Support of (1) Final Approval of Settlement; (2) Award of Attorneys' Fees and Reimbursement of Expenses; and (3) Approval of Plan of Allocation of Settlement Proceeds, submitted herewith. Plaintiffs' counsel are among the most experienced and skilled practitioners in the securities litigation field. They are responsible for significant settlements, as well as legal decisions that enable effective private enforcement of our nation's securities laws.
41. Plaintiffs' counsel undertook this litigation on a wholly contingent basis. From the outset, plaintiffs' counsel understood that they were embarking on a complex, expensive and lengthy litigation with no guarantee of ever being compensated for the enormous investment of time and money that the case would require. In undertaking that responsibility, plaintiffs' counsel were obligated to assure that sufficient resources of attorneys were dedicated to the prosecution of this litigation and that funds were available to compensate staff and for the considerable out-of-pocket costs that a case such as this entails. Moreover, in committing to fully prosecute this case, plaintiffs' counsel did not work on other potentially profitable matters.
42. Because of the nature of a contingent practice where cases are predominantly "big cases" lasting several years, not only do contingent litigation firms have to pay regular overhead, they also have to advance the expenses of the litigation. With an average lag time of three to four years for these cases to conclude, the financial burden on contingent counsel is far greater than on a firm that is paid on an ongoing basis.
43. The above does not even take into consideration the possibility of no recovery. It is wrong to assume that a law firm handling complex contingent litigation always wins. Tens of thousands of hours have been expended in losing efforts. The factor labeled by the courts as "the risks of litigation" is not an empty phrase.
44. There are numerous cases where plaintiffs' counsel in contingent cases such as this, after the expenditure of many hours, have received no compensation. It is unfortunate, but true, that plaintiffs' counsel who litigate cases in good faith and receive no fees are often the most diligent members of the plaintiffs' bar. It is only the knowledge by defendants and their counsel that the leading members of the plaintiffs' securities bar are actually prepared to, and will, force a resolution on the merits and go to trial that permits meaningful settlements in actions such as this.
45. I am aware of many hard-fought lawsuits where, because of the discovery of facts unknown when the case was commenced, changes in the law during the pendency of the case or a decision of a judge or jury following a trial on the merits, excellent professional efforts of members of the plaintiffs' bar produced no fee for counsel.
46. There has, for example, been a recent trend toward dismissal of actions with prejudice at the pleading or summary judgment stage. Indeed, recent federal appellate reports are filled with opinions affirming dismissals with prejudice in securities cases. E.g., Suna v. Bailey Corp., 107 F.3d 64 (1st Cir. 1997); Chill v. General Electric Corp., 101 F.3d 263 (2d Cir. 1996); In re Syntex Corp. Sec. Litig., 95 F.3d 922 (9th Cir. 1996); Gross v. Summa Four, 93 F.3d 987 (1st Cir. 1996); Glassman v. Computervision Corp., 90 F.3d 617 (1st Cir. 1996); In re Stac Elecs. Sec. Litig., 89 F.3d 1399 (9th Cir. 1996), cert. denied, 520 U.S. 1103 (1997); Epstein v. Washington Energy Co., 83 F.3d 1136 (9th Cir. 1996); Lovelace v. Software Spectrum, 78 F.3d 1015 (5th Cir. 1996); San Leandro Emergency Medical Group Profit Sharing Plan v. Philip Morris Cos., 75 F.3d 801 (2d Cir. 1996); Acito v. IMCERA Group, 47 F.3d 47 (2d Cir. 1995); Hillson Partners Ltd. Partnership v. Adage, Inc., 42 F.3d 204 (4th Cir. 1994); Melder v. Morris, 27 F.3d 1097 (5th Cir. 1994); Shields v. Citytrust Bancorp, 25 F.3d 1124 (2d Cir. 1994); Kowal v. MCI Communications Corp., 16 F.3d 1271, 1273 (D.C. Cir. 1994); Tuchman v. DSC Communications Corp., 14 F.3d 1061 (5th Cir. 1994); Mills v. Polar Molecular Corp., 12 F.3d 1170 (2d Cir. 1993); In re VeriFone Sec. Litig., 11 F.3d 865 (9th Cir. 1993); In re Donald J. Trump Casino Sec. Litig., 7 F.3d 357 (3d Cir. 1993); Neubronner v. Milken, 6 F.3d 666 (9th Cir. 1993); Raab v. General Physics Corp., 4 F.3d 286 (4th Cir. 1993); Arazie v. Mullane, 2 F.3d 1456 (7th Cir. 1993).
47. The many recent appellate decisions affirming summary judgments and directed verdicts for defendants show that surviving a motion to dismiss is no guaranty of recovery in the 1990s. E.g., Silver v. H&R Block, 105 F.3d 394 (8th Cir. 1997); In re Worlds of Wonder Sec. Litig., 35 F.3d 1407 (9th Cir. 1994); Donohoe v. Consolidated Operating & Prod. Corp., 30 F.3d 907 (7th Cir. 1994); Sailor v. Northern States Power Co., 4 F.3d 610 (8th Cir. 1993); McGonigle v. Combs, 968 F.2d 810 (9th Cir. 1992); Moorhead v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 949 F.2d 243 (8th Cir. 1991); In re Convergent Technologies Sec. Litig., 948 F.2d 507 (9th Cir. 1991). Even plaintiffs who succeed at trial may find their judgment overturned on appeal. E.g., Anixter v. Home-Stake Prod. Co., 77 F.3d 1215 (10th Cir. 1996) (overturning plaintiffs' verdict obtained after two decades of litigation); Backman v. Polaroid Corp., 910 F.2d 10 (1st Cir. 1990) (reversing plaintiffs' verdict for securities fraud and ordering entry of judgment for defendants); Ward v. Succession of Freeman, 854 F.2d 780 (5th Cir. 1988) (reversing plaintiffs' jury verdict for securities fraud).
48. Moreover, subsequent to the passage of the PSLRA, many cases in this District have been dismissed (with or without prejudice) at the pleading stage in response to defendants' arguments that the complaints do not meet the PSLRA's heightened pleading standards. See, e.g., Goldberg v. Storm Technology, Inc., Nos. C-97-21101-JF, C-98-20186-JF (N.D. Cal. Nov. 3, 1998); In re Read-Rite Corp. Sec. Litig., No. C-98-20434 (N.D. Cal. Aug. 12, 1998; In re Yes! Entertainment Corp. Sec. Litig., No. C-97-01388 CRB (N.D. Cal. May 14, 1998); Ronconi v. Larkin, [1998 Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶90,212 (N.D. Cal. May 1, 1998); Howard Gunty Profit Sharing v. Quantum Corp., No. C 96 20711 SW (N.D. Cal. Apr. 6, 1998); Wenger v. Lumisys, Inc., 2 F. Supp. 2d 1231 (N.D. Cal. 1998); In re Fritz Cos. Sec. Litig., No. C 96-2712 MHP (N.D. Cal. Mar. 5, 1998); Head v. Netmanage, Inc., No. C 97-4385 CRB (N.D. Cal. Feb. 23, 1998); Molinari v. Symantec Corp., No. C-97-20021-JW (N.D. Cal. Feb. 17, 1998); Genna v. Digital Link Corp., No. C-96-20867 RMW (N.D. Cal. Sept. 11, 1997); Howard Gunty Profit Sharing v. Quantum Corp., No. 96-20711-SW, 1997 WL 514993 (N.D. Cal. Aug. 14, 1997); In re Oak Tech. Sec. Litig., No. C-96-20552-SW(PVT), 1997 U.S. Dist. LEXIS 18503 (N.D. Cal. Aug. 1, 1997); Zeid v. Kimberley, 973 F. Supp. 910 (N.D. Cal. 1997); Kane v. Madge Networks N.V., No. C 96-20652 RMW(PVT) (N.D. Cal. June 3, 1997); In re Silicon Graphics Sec. Litig., 970 F. Supp. 746 (N.D. Cal. 1997); Hockey v. Medhekar, [1997 Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶99,465 (N.D. Cal. Apr. 14, 1997).
49. The foregoing refutes the oft-heard rhetoric that merely filing a class action guarantees a settlement and a large fee. The truth is that the mere filing of an action does not ensure that there will be any settlement or fee. It takes hard and diligent work by skilled counsel to develop facts and theories which will persuade defendants to enter into serious settlement negotiations. If defendants believe they will prevail, experience shows that they will litigate to the end. The risk factor is real.
50. Losses such as those described above are exceedingly expensive and can often threaten the survival of a law firm. Onlookers often focus on the aggregate fees awarded but fail to take into consideration that those fees are used to cover enormous overhead expenses incurred during the course of the litigation, are taxed by federal, state and local authorities and, when reduced to a bottom line, are far less imposing to each individual involved than the aggregate fee awarded appears. Lawyers who specialize in contingent matters live in a world of uncertainty. Unlike the defense bar, contingent plaintiffs' counsel normally have no steady flow of income. Changes in the law through legislation or judicial decree can be catastrophic, frequently affecting contingent counsel's entire caseload. These are real threats.
51. Courts have repeatedly held that it is in the public interest to have experienced and able counsel enforce the securities laws and regulations pertaining to the duties of officers and directors of public companies. Vigorous private enforcement of the federal securities laws and state corporation laws can only occur if private plaintiffs can obtain parity in representation with that available to large, institutional interests. If this important public policy is to be carried out, the courts must award fees that will adequately compensate private plaintiffs' counsel, taking into account the enormous risks undertaken with a clear view of the economics of a securities class action.
52. When we undertook to act for plaintiffs in this matter, it was with the knowledge that we would spend many hours of hard work against some of the best defense lawyers in the United States with no assurance of ever obtaining any compensation for our efforts, or even for the overhead of our offices, which is an increasingly substantial consideration. We were aware that the only way we would be compensated would be to achieve a successful result.
53. Plaintiffs' counsel also set forth in their declarations the categories and amounts of all expenses incurred in this Litigation. Plaintiffs' counsel have incurred reimbursable expenses in the amount of $134,016.40 during the prosecution of the litigation. I believe the expenses were reasonably incurred, are reasonable in amount, and should be reimbursed from the Settlement proceeds.
54. The Settlement was arrived at after substantial investigation, research, discovery and arm's-length negotiation. Based on an understanding of, among other things, the facts and circumstances concerning the subject matter of the litigation, the applicable principles of law and the relative risks of continuing litigation, plaintiffs' counsel believe that this Settlement represents an very favorable result for the Settlement Class and that the proposed Plan of Allocation will fairly apportion the Net Settlement proceeds among Settlement Class Members who file valid and timely proof of claim forms and that both should be approved by the Court. Plaintiffs' counsel also respectfully request that the application by plaintiffs' counsel for attorneys' fees and reimbursement of expenses be granted.
I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct. If called as a witness, I could and would competently testify thereto. Executed this 1st day of April, 1999, at San Diego, California.
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DSPCOMM\DLM14883.dec
1. As set forth hereafter, there are pending in Santa Clara Superior Court two consolidated class actions against defendants for violation of the California Corporations Code for substantially the same class period alleged herein. The Stipulation of Settlement provides that if the Settlement is approved and becomes final, those actions in the state court shall be dismissed with prejudice.
I, the undersigned, declare:
1. That declarant is and was, at all times herein mentioned, a citizen of the United States and a resident of the County of San Diego, over the age of 18 years, and not a party to or interested in the within action; that declarant's business address is 600 West Broadway, Suite 1800, San Diego, California 92101.
2. That on April 1, 1999, declarant served the DECLARATION OF KIRK B. HULETT IN SUPPORT OF FINAL APPROVAL OF THE PROPOSED CLASS SETTLEMENT AND IN SUPPORT OF APPLICATION FOR ATTORNEYS' FEES AND REIMBURSEMENT OF EXPENSES, AND PLAN OF ALLOCATION by depositing a true copy thereof in a United States mailbox at San Diego, California in a sealed envelope with postage thereon fully prepaid and addressed to the parties listed on the attached Service List and that this document was forwarded to the following designated Internet site at:
3. That there is a regular communication by mail between the place of mailing and the places so addressed.
I declare under penalty of perjury that the foregoing is true and correct. Executed this 1st day of April, 1999, at San Diego, California.
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Source: Milberg Weiss Bershad Hynes & Lerach LLP website