BERNSTEIN LIEBHARD & LIFSHITZ, LLP
MEL E. LIFSHITZ
10 East 40th Street
New York, NY 10016
Telephone: 212/779-1414

Co-Lead Counsel for Plaintiffs
 

This statement is made on the grounds that the proposed settlement of the claims in this securities class action for the sum of $4,300,000 in cash (plus accrued interest) is fair, just, reasonable and adequate, and should be preliminarily approved by the Court such that notice of the settlement may be sent to the Class. A proposed schedule of events leading to a final approval hearing (the "Settlement Hearing") is set forth at the end of this memorandum.

I. INTRODUCTION

The parties in this action submit this memorandum in support of the parties' Stipulation of Settlement (the "Settlement"), filed contemporaneously herewith. Pursuant to the Settlement, the parties request that the Court enter an order: (1) preliminarily approving the terms of the Settlement; (2) certifying a Settlement Class and approving the Settlement Class Period for the purposes of settlement only; (3) approving the form and method for providing notice of the Settlement to the Settlement Class; and (4) scheduling a Settlement Hearing at which the request for final approval of the proposed Settlement and for entry of the Final Judgment will be considered. A prepared Order is submitted herewith.

II. FACTUAL BACKGROUND AND TERMS OF THE SETTLEMENT

This is a securities class action brought under §10b of the Securities Exchange Act of 1934 ("Exchange Act") on behalf of all persons who purchased Indus International, Inc. ("Indus" or the "Company") common stock between October 28, 1999 and January 27, 2000 (the "Class Period"). Plaintiffs allege that Indus and certain of its officers and directors made material misstatements and omissions about its third quarter 1999 financial results.

After a thorough investigation of the facts and circumstances surrounding the allegations in the complaint, plaintiffs have reached a Settlement with all defendants which consists of the payment of $4,300,000 by or on behalf of the defendants in exchange for the dismissal of the litigation with prejudice and releases from plaintiffs and Members of the Class. Plaintiffs' counsel has concluded, after analysis of the factual and legal issues raised in the litigation, that it is in the best interest of the Class to settle on the terms proposed.

III. THE PROPOSED SETTLEMENT WARRANTS PRELIMINARY APPROVAL

At the Settlement Hearing, the Court will have before it more extensive pleadings submitted in support of the proposed Settlement and will be asked to make a determination as to whether the Settlement is fair, reasonable and adequate under all of the circumstances surrounding the litigation. At this juncture, however, the parties request only that the Court grant preliminary approval of the Settlement so that notice of the Settlement may be sent to the Class.

The procedure for review of a proposed class action settlement is well established:

District court review of a class action settlement proposal is a two-step process. The first step is a preliminary, pre-notification hearing to determine whether the proposed settlement is "within the range of possible approval." This hearing is not a fairness hearing; its purpose, rather, is to ascertain whether there is any reason to notify the class members of the proposed settlement and to proceed with a fairness hearing. Manual for Complex Litigation, §1.46, at 53-55 (West 1977). If the district court finds a settlement proposal "within the range of possible approval," it then proceeds to the second step in the review process, the fairness hearing. Class members are notified of the proposed settlement and of the fairness hearing at which they and all interested parties have an opportunity to be heard. The goal of the fairness hearing is

"to adduce all information necessary to enable the judge intelligently to rule on whether the proposed settlement is 'fair, reasonable, and adequate.'"

Manual for Complex Litigation at 57. On the basis of all information available to him, the trial judge must decide whether or not to approve the proposed settlement.

The parties are now requesting that this Court take the first step in that process. To grant preliminary approval, the Court need only conclude that the Settlement with the defendants on the agreed upon terms is "within the range of possible approval" to preliminarily approve the Settlement for the purposes of providing notice and holding a future fairness hearing.⁽²⁾

Indeed, courts specifically have held that the granting of permission to send out a notice of settlement and hearing thereon, "is not tantamount to a finding that the settlement is fair and reasonable. It is at most a determination that there is what might be termed 'probable cause' to submit the proposal to class members and hold a full-scale hearing as to its fairness." In re Traffic Executive Ass'n Eastern Railroads, 627 F.2d 631, 634 (2d Cir. 1980) (citing Manual for Complex Litigation §1.46, at 55 n.10 (1977)); Armstrong, 616 F.2d at 314 n.13; American Employers' Ins. Co. v. King Resources Co., 556 F.2d 471, 474 (10th Cir. 1977).

The parties submit that this Court can clearly make such a determination of "probable cause." The proposed Settlement is a beneficial result for the Class, providing the sum of $4,300,000 in cash to be distributed after final approval of the Settlement. Given the complexities of this dispute, and the uncertainties inherent in such complex litigation, the proposed Settlement eliminates the risk that the Class might not otherwise recover any monies.

While somewhat premature at this point, reference to the factors considered by courts in granting final approval of class action settlements lends support to the parties' belief that the proposed Settlement is well "within the range of possible approval." Armstrong, 616 F.2d at 310.

First, the proposed Settlement is the product of extensive arm's-length negotiations by counsel with significant experience in securities and other complex class action litigation. The Settlement was hammered out between experienced counsel at a stage of the litigation when the facts and issues were developed and is the product of significant give and take by the settling parties.

Second, an evaluation of the costs and benefits of settlement must be tempered by a recognition that any compromise involves concessions on the part of all of the settling parties. Indeed, "the very essence of a settlement is compromise, 'a yielding of absolutes and an abandoning of highest hopes.'" Officers for Justice v. Civil Serv. Comm'n, 688 F.2d 615, 624 (9th Cir. 1982) (citation omitted). As the Fifth Circuit noted in Cotton v. Hinton, 559 F.2d 1326 (5th Cir. 1977):

The trial court should not make a proponent of a proposed settlement "justify each term of settlement against a hypothetical or speculative measure of what concessions might have been gained ...."

Further, given that liability was a vigorously contested issue, the fact that potential damages could be higher than the Settlement amount is largely irrelevant here in light of the risk of not prevailing on liability issues. In the seminal case of Detroit v. Grinnell Corp., 495 F.2d 448 (2d Cir. 1974), an objector contended that the settlement was improper as a matter of law because the benefits were only a fraction of the recovery sought. The court rejected this contention:

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.

* * *

In fact there is no reason, at least in theory, why a satisfactory settlement could not amount to a hundredth of even a thousandth part of a single percent of the potential recovery.

Third, significant weight should be attributed to the belief of experienced counsel that the settlement is in the best interest of the class. Lake v. First Nationwide Bank, 900 F. Supp. 726, 732 (E.D. Pa. 1995).⁽³⁾ Counsel here fully support the Settlement and it is Co-Lead Counsel's informed opinion that, given the uncertainty and substantial expense of continuing the litigation through trial and any appeals thereafter, the Settlement is fair, reasonable and adequate and in the best interests of the Class.

While Co-Lead Counsel firmly believe the Settlement merits final approval, the Court need not make that determination at this time. The Court is only being asked to permit notice of the terms of the Settlement to be sent to the Class and schedule a hearing, pursuant to Federal Rule of Civil Procedure 23(e), to consider any views expressed by Class Members on the fairness of the Settlement, the Plan of Allocation, and plaintiffs' counsel's request for an award of fees and expenses. 5 James Wm. Moore, Moore's Federal Practice ¶23.83[1], at 23-336 (3d ed. 1999).

IV. CERTIFICATION OF THE SETTLEMENT CLASS IS PROPER AND NECESSARY

For settlement purposes only, the parties request the Court to certify a settlement class (the "Settlement Class") consisting of:

All Persons who purchased or acquired the common stock of Indus during the period beginning October 28, 1999 through and including January 27, 2000. Excluded from the Class are Defendants, members of the immediate families of the individual defendants, any entity in which any Defendant has or had a controlling interest, directors and officers of Indus, and the legal representatives, heirs, successors, or assigns of any such excluded Person or entity.

Class certification is appropriate when the four prerequisites of Rule 23(a) are met and the requirements of one of the subdivisions of Rule 23(b) are satisfied.

Rule 23(a)(1) requires that the class be so numerous that joinder of all members is impracticable. The numerosity requirement is easily satisfied here. Indus had approximately 32.3 million shares outstanding at the beginning of the Class Period and over 19.4 million shares were traded during the Class Period. The proposed Class of investors who purchased Indus stock contains hundreds if not thousands of persons.

Rule 23(a)(2) requires that there be "questions of law or fact common to the class." This case presents several common issues of law and fact, including whether defendants (a) violated §10 of the Exchange Act; (b) misrepresented and/or omitted material facts; (c) pursued an unlawful scheme and course of business; and (d) inflated the market price of Indus's stock and the extent and measure of damage sustained by the Class. Where, as here, the allegations of wrongdoing involve a common course of conduct, the Class Members' claims will clearly involve common questions of law and fact. In re American Continental Corp./Lincoln Sav. & Loan Sec. Litig., 140 F.R.D. 425, 441 (D. Ariz. 1992).

Rule 23(a)(3) requires that plaintiffs' claims be typical of the class' claims. Here, plaintiffs' claims are typical since (i) they have suffered the same injuries; (ii) as a result of the same course of conduct by defendants as to all Class Members; and (iii) because their claims are based on the same legal issues.

Rule 23(a)(4) requires that the plaintiffs fairly and adequately protect the interests of the class. This requirement is comprised of two factors: (1) that the class representatives' attorneys are qualified, experienced and generally able to conduct the litigation; and (2) that the suit is not collusive and plaintiffs' interests are not antagonistic to those of the other members of the class. Plaintiffs here have retained counsel who have already been appointed Co-Lead Counsel by the Court, and who are qualified, experienced and able to conduct the litigation. Plaintiffs' Co-Lead Counsel have extensive experience in securities class action litigation and have successfully prosecuted class actions throughout the country. In addition, there is no antagonism between the plaintiffs and the Class. Plaintiffs and all Class Members have suffered losses due to their purchase of Indus common stock during the Class Period.

If the prerequisites of Rule 23(a) are met, a class action must also satisfy one of the subdivisions of Rule 23(b). Here, plaintiffs satisfy the requirements of Rule 23(b)(3), which provides:

(b) Class Actions Maintainable. An action may be maintained as a class action if the prerequisites of subdivision (a) are satisfied, and in addition:

* * *

(3) the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy.

A class action is also superior to other methods of adjudication. The class action device is particularly appropriate for addressing claims of violations of the securities laws. As in this case, such claims typically involve a large number of investors who are geographically dispersed, and whose relatively small claims make it prohibitively expensive to seek recovery through individual litigation.

In addition, the four factors specified in Rule 23(b)(3) favor class certification. First, there is no indication that Members of the Class would prefer to individually control the prosecution of their claims. If some do, pursuant to Rule 23(c), they have the opportunity to opt out or be represented by counsel of their own choice.

Second, plaintiffs are unaware of any other litigation concerning the controversy seeking class recovery.

Third, it is clearly desirable to concentrate the litigation in one forum. Inconsistent adjudications will be avoided, thus promoting fairness and efficient use of the judicial system.

Fourth, this case presents no unusual difficulties in management of the class action or notice to the Class. Plaintiffs' Co-Lead Counsel and the courts have handled numerous similar actions. In fact, settlement sets up a very efficient and workable means of administering claims to resolve this action.

In the settlement context, class certification criteria are easily met because the class is unified by a common interest in a reasonable recovery. Amchem Prods. v. Windsor, 521 U.S. 591 (1997). Although class action requirements must be met when certifying a settlement class, the settlement must be taken into account. Id. In fact, courts have viewed the creation of a settlement class as nothing more than a tentative assumption indulged in by the court to facilitate the amicable resolution of the litigation. See In re Beef Industry Antitrust Litig., 607 F.2d 167, 177 (5th Cir. 1979).

V. PROPOSED SCHEDULE OF EVENTS

Plaintiffs propose the following schedule of events leading to the Settlement Hearing:

Notice Mailed to Class                   10 days (the "Notice Date") after Order
                                                       Preliminarily Approving Settlement is signed

Summary Notice Published             10 days from Notice Date

Last Day for Class Members          30 days from Notice Date
to Opt-Out or Object to the
Settlement

Date by Which to File Papers          7 days prior to Hearing Date
in Support of Settlement,
Plan of Allocation and
Request for Attorneys' Fees
and Reimbursement of Expenses

Settlement Hearing                          45 days from Notice Date

Deadline for Filing Proof of             90 days after Notice Date
Claim by Class Members
 

VI. CONCLUSION

For all of the foregoing reasons, plaintiffs respectfully submit that the proposed Settlement be preliminarily approved by the Court allowing notification to be sent to Class Members of the terms of the Settlement and the date of the Settlement Hearing. If the Court has any questions regarding the relief requested, the parties would be pleased to appear and respond.
 

DATED: October 6, 2000

Respectfully submitted,  MILBERG WEISS BERSHAD HYNES & LERACH LLP WILLIAM S. LERACH 600 West Broadway, Suite 1800 San Diego, CA 92101 Telephone: 619/231-1058 MILBERG WEISS BERSHAD HYNES & LERACH LLP PATRICK J. COUGHLIN CHRISTOPHER P. SEEFER       _________________________ PATRICK J. COUGHLIN 100 Pine Street, Suite 2600 San Francisco, CA 94111 Telephone: 415/288-4545 BERNSTEIN LIEBHARD & LIFSHITZ, LLP MEL E. LIFSHITZ 10 East 40th Street New York, NY 10016 Telephone: 212/779-1414 Co-Lead Counsel for Plaintiffs

DATED: _________________

WILSON SONSINI GOODRICH & ROSATI BORIS FELDMAN DAVID PRIEBE REBECCA A. MITCHELLS JOHN L. WOLLMAN       ___________________________ DAVID PRIEBE 650 Page Mill Road Palo Alto, CA 94304-1050 Telephone: 650/493-9300 Attorneys for Defendants Indus International, Inc., Joan P. Platt, Anna Ng-Borden and Philip C. Mezey

DATED: ___________________

FARELLA, BRAUN & MARTEL DOUGLAS R. YOUNG CLAUDIA A. LEWIS WILLIAM P. KEANE       ___________________________ CLAUDIA A. LEWIS 235 Montgomery Street Russ Building, 30th Floor San Francisco, CA 94104 Telephone: 415/954-4400 Attorneys for Defendant William Grabske

K:\CASES\Indus.set\CBF80064.stm

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 Francisco, over the age of 18 years, and not a party to or interested in the within action; that declarant's business address is 100 Pine Street, 26th Floor, San Francisco, California 94111.

2. That on October 6, 2000, declarant served the JOINT STATEMENT IN SUPPORT OF PRELIMINARY APPROVAL OF SETTLEMENT by depositing a true copy thereof in a United States mailbox at San Francisco, 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:

http://securities.milberg.com

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 6th day of October, 2000, at San Francisco, California.
 

______________________________
DEBORAH R. DASH

1. Although Armstrong refers to a preliminary approval "hearing," the practice by the overwhelming majority of district courts in the Ninth Circuit is to decide preliminary approval issues on the papers submitted, most frequently on the stipulation of settlement and its exhibits alone.

2. As the Manual for Complex Litigation explains:

If the preliminary evaluation of the proposed settlement does not disclose grounds to doubt its fairness or other obvious deficiencies, such as unduly preferential treatment of class representatives or of segments of the class, or excessive compensation for attorneys, and appears to fall within the range of possible approval, the court should direct that notice under Rule 23(e) be given to the class members of a formal fairness hearing, at which arguments and evidence may be presented in support of and in opposition to the settlement.

3. See also Isby v. Bayh, 75 F.3d 1191, 1200 (7th Cir. 1996); Williams v. Vukovich, 720 F.2d 909, 922-23 (6th Cir. 1983) (court should defer to judgment of experienced counsel); Cotton, 559 F.2d at 1330 (court "should be hesitant to substitute its own judgment for that of counsel"); In re Michael Milken & Assocs. Sec. Litig., 150 F.R.D. 57, 66 (S.D.N.Y. 1993) (finding that views of experienced counsel are "'entitled to great weight'") (citation omitted).