Class Action Settlement Agreement

Transcription

1 Class Action Settlement Agreement 1. Parties This Class Action Settlement Agreement (this Class Action Agreement ) is entered into by and between the following Parties: Charlene Sue Cox, Trustee of Charlene Sue Cox Revocable Trust, dated ; Rose E. Hutchinson; Timothy A. Hutchinson; Leslie Hutchinson; Nicolas Hutchinson; George Burton Rex; Melissa Rae Rex; Robert Shelton; Edith Shelton; Edith Shelton as Custodian for Amy Shelton; and Wildish Standard Paving Co., an Oregon corporation ( Plaintiffs ), on the one hand, and Jones & Roth, P.C., an Oregon professional corporation ( Jones & Roth ), and Greenwich Insurance Company and XL Group (collectively, XL ), on the other hand. For purposes of this Class Action Agreement, Plaintiffs, Jones & Roth, and XL may be referred to collectively as the Parties and each separately as a Party. 2. Recitals 2.1 Berjac of Portland and Berjac of Oregon (the Berjac Entities ), through Michael and Gary Holcomb (the Holcombs ), held themselves out to be in the business of premium insurance financing. They collected money from investors in various forms (the Berjac Securities ) and purported to use it in connection with their core business, the advancement of insurance premiums to businesses not sufficiently solvent to pay the full premiums in advance. Persons and entities invested in the Berjac Entities, and were promised, among other things, a return on this investment. 2.2 Plaintiffs have filed a putative class action against Jones & Roth and others entitled Charlene Sue Cox et al. v. Holcomb Family L.P. et al., which is pending in the Circuit Court of the State of Oregon for the County of Multnomah (the State Court ) as Case No (the State Class Action ). In the State Class Action, Plaintiffs, acting for themselves and on behalf of similarly-situated putative class members, allege, among other things, that via its provision of accounting services, Jones & Roth Class Action Settlement Agreement Page 1 of 14

2 materially aided in the sales of securities by the Berjac Entities in violation of the Oregon Securities Law. 2.3 The Plaintiffs further allege that little money actually went into the insurance premium financing business, and that the Holcombs diverted the money, among other things, for their own personal use, and/or into highly speculative and unsuccessful real estate development projects. 2.4 To facilitate cash flow, the Berjac Entities established lines of credit with Umpqua Bank and Pacific Continental Bank. The Holcombs, including through related family entities, established lines of credit with Century Bank and Summit Bank. 2.5 Beginning in 2002, Jones & Roth provided accounting services to the Berjac Entities, depending on the year, in the form of reviews and compilations. Jones & Roth was sued by the Plaintiffs as a material aider under O.R.S (3). Jones & Roth is not alleged to have made any untrue or misleading statement to any investor or to have ever contacted any investor in the Berjac Entities on behalf of these entities. Jones & Roth denies the allegations alleged against it in their entirety. 2.6 For purposes of this Class Action Agreement, Plaintiffs and all similarlysituated putative class members are referred to collectively as the Settlement Class. The Parties believe that almost all of the members of the Settlement Class are also unsecured creditors in the Berjac Bankruptcy (defined below); and that almost all of the unsecured creditors in the Berjac Bankruptcy are also members of the Settlement Class. 2.7 In connection with the bankruptcy case entitled In re Berjac of Oregon, pending in the United States Bankruptcy Court for the District of Oregon (the Bankruptcy Court ) as Case No tmr7 (the Berjac Bankruptcy ), Thomas A. Huntsberger acting in his capacity as trustee of the Berjac Bankruptcy Estate ( Trustee ), has commenced against Jones & Roth, among others, the adversary proceeding entitled Huntsberger v. Umpqua Holdings Corp., et al., pending in the United States District Court for the District of Oregon (the District Court ) as Case No. 6:14- cv aa (collectively, the Adversary Proceeding ). Jones & Roth denies the allegations alleged against it in the Adversary Proceeding in their entirety. 2.8 Plaintiffs, Trustee, and Jones & Roth each participated in mediation before the Honorable Thomas M. Coffin, United States Magistrate Judge, on February 18, 2016, April 20, 2016 and May 31, Following good-faith, adversarial, and arm s-length Class Action Settlement Agreement Page 2 of 14

3 negotiations, Plaintiffs reached a compromise with Jones & Roth with respect to the State Class Action on August 12, In the same mediation, and at the same time as Plaintiffs and Jones & Roth reached a compromise with respect to the State Class Action, Trustee reached a compromise with Jones & Roth with respect to the Adversary Proceeding and the proofs of claim filed by Jones & Roth in the Berjac Bankruptcy. Those parties are contemporaneously executing a settlement agreement with respect to the Adversary Proceeding and the proofs of claim filed by Jones & Roth in the Berjac Bankruptcy (the Bankruptcy Agreement ) Based on their investigation, lawyers representing the Plaintiffs have concluded that this Class Action Agreement, separately, and in combination with the Bankruptcy Agreement, is fundamentally fair, adequate, and reasonable, and in the best interests of all members of the Settlement Class. The Class Action Agreement and the Bankruptcy Agreement each provide that the respective Agreement will be null and void if the other Agreement becomes null and void Plaintiffs and Jones & Roth now desire that this Class Action Agreement compromise the claims that Plaintiffs and the other members of the Settlement Class may have against Jones & Roth with respect to the facts alleged in the State Class Action XL and Jones & Roth are parties to a CPA Gold Claims Made Accountants & Consultants Professional Liability Insurance Policy, Policy No. CPH , Policy Period 10/15/12 to 10/15/13 (the XL Policy ) XL denied coverage under the XL Policy for the State Class Action and the Adversary Proceeding, and XL reserved its rights with respect thereto XL and Jones & Roth entered into a Defense Cost and Assignment Agreement ( Defense Cost Agreement ) and subsequently have entered into a Settlement and Policy Release Agreement Liberty Insurance Underwriters Inc. ( LIU ) and its administrator, CAMICO Insurance Services (collectively referred to as CAMICO ) provided professional liability insurance coverage to Jones & Roth under Policy No. CPLI , Policy Period 10/15/11 to 10/15/12 (the CAMICO POLICY ). Class Action Settlement Agreement Page 3 of 14

4 3. Stipulated Judgment At the same time as the parties enter into this Class Action Agreement, Jones & Roth stipulates to the entry of a $3.5 million judgment in the State Class Action. See Paragraph 9.4, below, for the terms of the Stipulated Judgment. 4. Consideration and Settlement Fund 4.1 In exchange for the promises in this Class Action Agreement, the Parties agree that Jones & Roth shall pay, or cause to be paid, monetary consideration into a settlement fund (the Settlement Fund ) in the amount of $625,000 (the Class Action Settlement Payment ), subject to the provisions of Paragraph 4.5 of this Class Action Agreement. The Class Action Settlement Payment shall be deposited, as provided herein, into the Settlement Fund by wire transfer of immediately available funds. 4.2 Subject to Paragraph 4.5, the Class Action Settlement Payment shall be deposited into the Settlement Fund within 30 days after the last to occur of the following events: (i) the State Court has entered the final judgment and claims bar injunction referred to in Paragraph 9.4 of this Class Action Agreement; (ii) the rights of any person to appeal such decisions of the State Court have been fully exhausted, either through the lapse of time or through the completion of all available appellate review; (iii) the Bankruptcy Court has entered an order approving the Bankruptcy Agreement; and (iv) a stipulated judgment against Jones & Roth has been entered in the Adversary Proceeding. 4.3 Unless all of the events described in Paragraph 4.2(i)-(iv) of this Class Action Agreement have occurred, Jones & Roth shall have no obligation to pay, or to cause to be paid, any amount into the Settlement Fund. 4.4 Any payment or distribution made from the Settlement Fund to a plaintiff or any other member of the Settlement Class shall reduce, on a dollar-for-dollar basis, the amount of that class member s claims against any non-party to this Class Action Agreement that arises from or relates to the Berjac Securities. 4.5 This Class Action Agreement and all of the provisions hereof, including Paragraph 4.1 hereof, are subject to the provisions of a separate agreement entered into contemporaneously herewith by and between Plaintiffs and Jones & Roth (the contemporaneous agreement ). Class Action Settlement Agreement Page 4 of 14

5 5. Covenant Not to Execute 5.1 Plaintiffs, on their own behalf, as well as on behalf of all members of the Settlement Class, and all successors, assignees, and agents of Plaintiffs and members of the Settlement Class, covenant and agree not to execute against Jones & Roth, and any of its subsidiaries or affiliated entities and each of their respective current and former officers, directors, employees, representatives, attorneys, assigns, heirs, predecessors and successors (the Jones & Roth Parties ) with respect to the Stipulated Judgement described in Paragraph 3, except to the extent of any professional liability insurance coverage provided to Jones & Roth by CAMICO. 5.2 Plaintiffs, on their own behalf, as well as on behalf of all members of the Settlement Class, and all successors, assignees, and agents of Plaintiffs and members of the Settlement Class, also covenant and agree not to execute against XL, and any of its subsidiaries or affiliated entities, successors, predecessors or assigns (the XL Parties ) with respect to the Stipulated Judgment described in Paragraph Plaintiffs, on their own behalf, and on behalf of all members of the Settlement Class, and all successors, assignees, and agents of Plaintiffs and members of the Settlement Class, without limitation, may execute, other than against the Jones & Roth Parties and the XL Parties, upon all amounts covered by any professional liability insurance provided to Jones & Roth by CAMICO, including upon all amounts owed by CAMICO as a consequence of its indemnity obligations arising out of any professional liability insurance provided to Jones & Roth by CAMICO. ORS Plaintiffs, on their own behalf, as well as on behalf of all members of the Settlement Class, and all successors, assignees, and agents of Plaintiffs and all members of the Settlement Class, will attempt to recover and collect the Stipulated Judgment solely and exclusively from CAMICO and/or its agents, brokers, employees, and officers. Plaintiffs, on their own behalf, and on behalf of all members of the Settlement Class, agree that all such efforts undertaken pursuant to this paragraph will be undertaken solely at their own risk and expense and that if those efforts are in any way unsuccessful, the Plaintiffs and all members of the Settlement Class will have no recourse against the Jones & Roth Parties and/or their attorneys and/or against the XL Parties. 6. Demand to Pay and Assignment of Claims 6.1 Upon entry of the Stipulated Judgment, Jones & Roth will demand that CAMICO pay the Stipulated Judgment described in Paragraph 3 along with the Stipulated Judgment provided by the Bankruptcy Agreement pro rata up to the limits Class Action Settlement Agreement Page 5 of 14

6 of CAMICO s liability as provided in the CAMICO POLICY, i.e., $5 million. (The Stipulated Judgment described in Paragraph 3 and the Stipulated Judgment provided by the Bankruptcy Agreement are each for $3.5 million. Pro rata means that if CAMICO paid the limits of its liability, it would pay $2.5 million on the Stipulated Judgment described in Paragraph 3, and $2.5 million on the Stipulated Judgment provided by the Bankruptcy Agreement.) If, within 14 days of the demand, CAMICO pays the two aforementioned Stipulated Judgments pro rata up to the limits of its liability as provided in the CAMICO POLICY ( policy limits ), then CAMICO will have no further liability to Plaintiffs or any other members of the Settlement Class. 6.2 If CAMICO does not pay or agree to pay its policy limits within 14 days of the demand as described in Paragraph 6.1, then Jones & Roth will assign to (a) Plaintiffs, on their own behalf, and on behalf of all other members of the Settlement Class, and (b) Trustee, its claims against CAMICO arising from (i) CAMICO s denial of coverage for the State Class Action and the Adversary Proceeding; (ii) CAMICO s failure to exercise due care in claims handling and settlement negotiations, including in the investigation, defense, negotiation, and litigation of the claims against Jones & Roth; and (iii) CAMICO s negligent or unreasonable failure to settle the claims against Jones & Roth within the policy limits where the opportunity to settle existed. This assignment does not include the assignment made by Jones & Roth in paragraph 8 of the Defense Cost Agreement, whereby Jones & Roth assigned to XL any and all rights, claims, demands or causes of action that Jones & Roth has against North American Professional Liability Insurance Agency, LLC ( NAPLIA ) and CAMICO, including any of their affiliates, pursuant to the CAMICO POLICY for the payment of Defense Expenses paid by XL under the Defense Cost Agreement. 7. Release of Jones & Roth Related Persons and of Contribution and Indemnity Claims 7.1 Upon delivery of the Class Action Settlement Payment in accordance with Paragraph 4 of this Class Action Agreement, Plaintiffs and all members of the Settlement Class, and each of them, including their representatives, attorneys, agents, assigns, heirs, and successors, release and forever discharge (i) the current and former officers, directors, partners, employees, and agents of Jones & Roth and (ii) the XL Parties from any and all claims, actions, suits, demands, liens, judgments, and liability whatsoever, whether known, unknown, or undiscovered, arising from or relating to (i) the purchase of Berjac Securities; (ii) the claims that were the subject matter of the State Class Action; and (iii) the facts or circumstances relating to or otherwise giving rise to the claims that were the subject matter of the State Class Action. Class Action Settlement Agreement Page 6 of 14

7 7.2 With respect to the release contained in Paragraph 7.1, above, Plaintiffs and all members of the Jones & Roth Settlement Class, and each of them, expressly waive, release, and forever discharge any and all defenses, rights, and benefits provided under Section 1542 of the California Civil Code or under any similar, comparable or equivalent statute, law, rule or common law decision of any other jurisdiction. Section 1542 of California Civil Code provides: A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor. 7.3 If Plaintiffs and/or other members of the Settlement Class settle claims arising from or relating to their purchase of the securities sold by entities which were controlled by the Holcombs, or their affiliates, including the Berjac Entities, against persons who are not parties to this Class Action Agreement, then Plaintiffs and all other such members of the Settlement Class shall obtain from those non-parties a covenant not to sue and release of any and all contribution, indemnity, or similar claims against the Jones & Roth Parties and the XL Parties. As a quid pro quo, Jones & Roth shall release contribution, indemnity, or similar claims against the non-parties who release the Plaintiffs and other members of the Settlement Class. 8. Resolution of Disputes among Investors and Counsel 8.1 Except as provided herein, following payment of the consideration as provided in Paragraph 4.1, Jones & Roth shall have no further financial responsibility to Plaintiffs or members of the Settlement Class. 8.2 The amount of any payment, allocation, distribution or disbursement from the Settlement Fund to members of the Settlement Class shall be determined exclusively by a Claims Administrator except as otherwise ordered by the State Court. 8.3 Unless otherwise ordered by the State Court, any dispute arising from and relating to the payment, allocation, distribution, or disbursement of funds from the Settlement Fund between or among members of the Settlement Class or their counsel shall be decided by the State Court. Class Action Settlement Agreement Page 7 of 14

8 9. State Settlement Class Action 9.1 Plaintiffs shall seek class certification and approval of this Class Action Agreement in the State Class Action in compliance with ORCP 32 and with other applicable law. Jones & Roth shall not oppose Plaintiffs good faith efforts to obtain class certification and approval of this Class Action Agreement. 9.2 Plaintiffs lawyers shall submit for approval by the State Court a plan for the just and orderly administration of claims and distribution of proceeds from the Settlement Fund to members of the Settlement Class. The Parties shall submit to the continuing jurisdiction of the State Court or its designee as necessary to enforce this Class Action Agreement, or to enforce any order or judgment issued by the State Court. 9.3 Attorney fees to lawyers for Plaintiffs and the other members of the Settlement Class, costs incurred in the representation, and costs associated with the State Class Action shall be paid from the Settlement Fund, as approved or determined by the State Court. 9.4 The Parties shall submit to the State Court for approval the Stipulated Judgment, referred to in Paragraph 3 of this Class Action Settlement, and a claims bar injunction (the Claims Bar ) that certifies the Settlement Class, approves this Class Action Agreement, and protects, to the greatest extent permitted by law, the Jones & Roth Parties and the XL Parties from current and future claims arising from or relating to the subject matter of the State Class Action and this Class Action Agreement, including all facts and circumstances relating to the State Class Action, including claims by Plaintiffs and all members of the Settlement Class, claims involving disputes between members of the Settlement Class, and claims by any persons, including third parties, who may hold indemnity, contribution, or similar claims. The Stipulated Judgment shall be in the amount of $3.5 million, and it shall provide the State Court with continuing jurisdiction to enforce the provisions of this Class Action Agreement, including the obligation of Jones & Roth to pay, or cause to be paid, the Class Action Settlement Payment in accordance with Paragraph 4 of this Class Action Agreement. The Stipulated Judgment shall contain provisions that will make the final judgment immediately appealable under ORS or ORS , consistent with the terms of this Class Action Agreement. The form of the Stipulated Judgment is attached to this Class Action Settlement as Exhibit A and the form of the Claims Bar is attached to this Class Action Settlement as Exhibit B. Class Action Settlement Agreement Page 8 of 14

9 9.5 The Parties agree to negotiate additional agreements and shall seek State Court approval as necessary to promptly effectuate the terms of this Class Action Agreement, including agreements on the following aspects of the State Class Action: class definition; notice to class members or other interested parties; procedure for handling opt-outs and objections; claim administration procedures; appointment of a claims administrator;, the timing and scope of the final judgment; the scope and form of a claims bar injunction; and other agreements. 9.6 Unless the Parties otherwise agree in writing, if any person raises an objection that could form a basis for an appeal of any order or judgment of the State Court certifying the Settlement Class or approving this Class Action Agreement, then the Parties agree to cooperate in good faith in an attempt either to resolve the objection or to expedite any appeal through the use of the interlocutory procedure in ORS In the event the State Court does not certify the Settlement Class or does not approve this Class Action Agreement, or in the event an appellate court reverses a judgment or order of the State Court certifying the Settlement Class or approving this Class Action Agreement, the Parties agree to act in good faith to attempt to reach agreement as to whether to seek further appellate review following a reversal, to negotiate a modified version of this Class Action Agreement, or to negotiate a new settlement agreement. If the Parties do not come to an agreement within 30 days of such an event, then this Class Action Agreement will be null and void. In addition, if for any reason the Bankruptcy Agreement becomes null and void, the Class Action Agreement will be null and void. 10. Post-Payment Matters 10.1 With respect to any Plaintiff or member of the Settlement Class who is an accounting client of Jones & Roth (any such person being referred to as a Accounting Client ), this Class Action Agreement shall have no effect upon (i) the professional responsibility that Jones & Roth separately owes to any Accounting Client as an accounting client of Jones & Roth, or (ii) the responsibility separately owed to Jones & Roth by any Accounting Client as an accounting client of Jones & Roth The amount of any payment, allocation, distribution, or disbursement from the Settlement Fund to members of the Settlement Class shall be determined by a Claims Administrator acting pursuant to the orders of the State Court. Class Action Settlement Agreement Page 9 of 14

10 11. Representations and Warranties Each Party makes the following representations and warranties: 11.1 This Class Action Agreement is freely, voluntarily, and validly executed and each Party has entered into the Class Action Agreement with the advice of counsel Each Party is relying solely upon that Party s own judgment and the judgment of that Party's lawyers in making this Class Action Agreement and has not been influenced by any representations or statements made by any other person Each Party has the legal capacity and authority to enter into this Class Action Agreement. 12. NonDisparagement and Confidentiality 12.1 The Parties agree that this Agreement must be disclosed to the State Court in public filings and made available to putative class members in the State Class Action. However, until the aforementioned filing is made with the State Court the terms of this Agreement shall be kept confidential and shall not be disclosed by the Parties except to their attorneys, accountants, insurers, taxing authorities, regulatory authorities, and to other persons as necessary to effectuate the terms of this Agreement or to comply with applicable law. This provision does not prevent a Party s lawyer, by way of example, from describing the claims and the evidence supporting the claims against another Party, as may be appropriate to obtain the State Court s approval of the Class Action Agreement, or from pleading facts, offering evidence, and making arguments in the course of executing on the Stipulated Judgment or pursuing the excess claim The Parties have agreed that Jones & Roth will issue the press release, attached as Exhibit C, at or around the time of the filing of this Agreement with the State Court The Parties and their counsel shall not discuss the terms of this Agreement publicly, in the news media, Internet media, social media, or any communication medium likely to receive public dissemination without the prior consent of the other Parties. Class Action Settlement Agreement Page 10 of 14

11 12.4 The Parties and their counsel shall not disparage or make derogatory remarks about another Party publicly, in the news media, Internet media, social media, or any communication medium likely to receive public dissemination. 13. Interpretation 13.1 This Class Action Agreement, together with the contemporaneous agreement, supersedes the compromise reached on August 12, 2016, by the Parties following the final mediation session on May 31, This Class Action Agreement, together with the contemporaneous agreement, constitutes the fully integrated and complete expression of the Parties settlement agreement and supersedes all previous agreements and negotiations. However, nothing in this Paragraph 13.2 shall preclude enforcement of any agreements made by the Parties or their representatives contemporaneously with or subsequent to this Class Action Agreement, including agreements such as those contemplated in Paragraphs 9.5 and 9.7, of this Class Action Agreement This Class Action Agreement is the product of good-faith, adversarial, and arm s-length negotiations between the Parties, and enforcement shall be interpreted in a neutral manner and not more strongly for or against any Party based upon the source of draftsmanship Any form of the word include shall not be exclusive in this Class Action Agreement. Unless context requires otherwise, the word or shall not be exclusive. The word person shall include natural persons or any legal entity. 14. Enforcement and Governing Law 14.1 After this Class Action Agreement has been approved, the State Court shall have continuing jurisdiction to enforce this Class Action Agreement This Class Action Agreement shall be construed and interpreted in accordance with the laws of the state of Oregon This Class Action Agreement is effective when executed by all Parties, whether personally or by authorized representatives (the Effective Date ) The Parties agree that the XL Parties are direct, intended third-party Class Action Settlement Agreement Page 11 of 14

12 beneficiaries of this Class Action Agreement and may enforce its terms. 15. Counterparts This Class Action Agreement shall be fully effective if signed in one or more counterparts by a Party or by a Party s representative. A duplicated, scanned or faxed signature on the signature page below shall have the same effect as an original signature. [Signatures on the following pages.] Class Action Settlement Agreement Page 12 of 14