THE HONORABLE ROBERT S. LASNIK 0 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE In re AMAZON.COM, INC. SECURITIES LITIGATION This Document Relates To: ALL ACTIONS. Master File No. C-0-0-L CLASS ACTION JOINT MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT NOTE ON MOTION CALENDAR: MARCH 0, 00 0 JOINT MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT (C-0-0-L 0 B Street, Suite 00 San Diego, CA 0 Telephone: /-0 Fax: /-
I. INTRODUCTION After over three years of hard fought litigation, the parties have reached an agreement to settle this litigation on the terms set forth in the Stipulation of Settlement dated as of March, 00 ( Stipulation which is being filed concurrently herewith. The settlement provides for the payment of $,00,000.00 in cash. The settlement is the result of extensive arm s-length negotiations 0 between the parties occurring over an eighteen-month period with the substantial assistance of the Honorable Nicholas H. Politan (Ret.. The parties now ask this Court to enter an order: (a granting preliminary approval of the proposed settlement; (b approving the parties proposed form and method for giving notice of the pendency of this action and the settlement to the Class; (c directing that the notice be given to Class Members as approved by the Court; and (d scheduling a hearing at which the Court considers: (i the parties request for final approval of the settlement and entry of the proposed Final Judgment and Order of Dismissal with Prejudice; (ii the Plan of Allocation of settlement proceeds; and (iii plaintiffs counsel s application for an award of attorneys fees and reimbursement of expenses. II. HISTORY OF THE LITIGATION On and after March, 00, several actions were filed in the United States District Court for the Western District of Washington (the Court as securities class actions on behalf of persons who 0 All capitalized terms not otherwise defined herein shall have the same meaning as set forth in the Stipulation. The settlement is on behalf of the Class defined as: all Persons (other than those Persons who timely and validly request exclusion from the Class who purchased Amazon Publicly Traded Securities on the open market during the period October, to October, 00. Excluded from the Class are Defendants and Dismissed Defendants, members of the immediate families of the Defendants and Dismissed Defendants, any entity in which any Defendant or Dismissed Defendant has or had a controlling interest, present or former directors and officers of Amazon, and the legal representatives, heirs, successors, or assigns of any such Defendant or Dismissed Defendant. The Released Claims in the settlement do not include any claims under the Securities Act of asserted in Argent Classic Convertible Arbitrage Fund L.P. v. Amazon.com, Inc., et al., No. C-0-00-L, pending in the United States District Court for the Western District of Washington. Moreover, the Settled Defendants Claims in the settlement do not include any claims arising out of or related to Argent Classic Convertible Arbitrage Fund L.P. v. Amazon.com, Inc., et al., No. C-0-00-L, pending in the United States District Court for the Western District of Washington. CLASS ACTION SETTLEMENT (C-0-0-L - - 0 B Street, Suite 00 San Diego, CA 0 Telephone: /-0 Fax: /-
0 0 purchased the publicly traded securities of Amazon.com, Inc. ( Amazon alleging claims under the Securities Exchange Act of (the Exchange Act. By Order dated June, 00, these actions were consolidated for all purposes as In re Amazon.com, Inc. Securities Litigation, Master File No. C-0-0-L (collectively, the Litigation. On June, 00, the Court also appointed Moussa Peykar, Edward Ingeneri, Lena Govberg (she later withdrew as lead plaintiff, Richard A. Yahr and Emil Panait as Lead Plaintiffs under D(a((B of the Exchange Act and approved Lead Plaintiffs selection of Lead Counsel pursuant to D(a((B(v of the Exchange Act. On October, 00, Lead Plaintiffs filed a comprehensive Consolidated Complaint for Violation of the Securities Exchange Act of. Defendants moved to dismiss the consolidated complaint on January, 00, on the grounds that Lead Plaintiffs had not satisfied the heightened pleading standards of the Private Securities Litigation Reform Act of ( PSLRA. On January, 00, the Court granted Defendants motions in part and denied them in part. In response to the Court s orders on Defendants motions to dismiss, and based on Lead Plaintiffs continued investigation, on August, 00 Lead Plaintiffs filed a First Amended Complaint for Violation of the Securities Exchange Act of (the Complaint. The Complaint alleges violations of 0(b and 0(a of the Exchange Act and Rule 0b- promulgated thereunder. The Complaint is brought on behalf of a class of all persons who purchased Amazon publicly traded securities during the period October, through October, 00. The Defendants are Amazon and three current or former officers of the company (Jeffrey P. Bezos, Warren C. Jenson and Joseph Galli, Jr.. On September, 00, Defendants filed a motion to dismiss the Complaint which was fully briefed and being prepared for oral argument at the time an agreement-in-principle was reached to settle the Litigation following extensive settlement negotiations. The parties extensive settlement discussions took place over the course of nearly months. In 00, the parties agreed to participate in formal mediation before the Honorable Layn Phillips CLASS ACTION SETTLEMENT (C-0-0-L - - 0 B Street, Suite 00 San Diego, CA 0 Telephone: /-0 Fax: /-
0 0 (Ret.. The parties mediated face-to-face before Judge Phillips on June 0, 00. The parties were unable to reach agreement before Judge Phillips. After Lead Plaintiffs filed the Complaint, the parties agreed to mediation before the Honorable Nicholas Politan (Ret.. The parties mediated faceto-face with Judge Politan for two consecutive days in New York on July and, 00, and again on August, 00 in San Francisco, with counsel for all parties, including representatives from Amazon's insurance carriers, present. While the parties made substantial progress at these mediations it was only after continued negotiations that the parties reached an agreement-inprinciple to settle the Litigation. On January, 00, the parties executed a Memorandum of Understanding. Ultimately, the Stipulation was drafted and executed, the terms of which were extensively debated and negotiated. The settlement provides the Defendants will pay or cause to be paid into an escrow account, cash in the amount of $,00,000 which will earn interest for the benefit of the Class. Twenty-Five Million Seven Hundred Thousand Dollars ($,00,000 will be paid into an interest bearing account within thirty (0 business days following the Court s issuance of the Order Preliminarily Approving Settlement and Providing for Notice ( Notice Order. Any amount not paid by the Due Date will bear interest at the rate of % per annum, until the monies are paid. In all events, the entire $. million will be paid no later than days prior to the Settlement Hearing. The remaining One Million Eight Hundred Thousand Dollars ($,00,000 will be paid no later than months after issuance of the Notice Order and will bear interest at the rate of % beginning on the Due Date until paid. III. THE PROPOSED SETTLEMENT WARRANTS PRELIMINARY APPROVAL As a matter of public policy, settlement is a strongly favored method for resolving disputes. See Util. Reform Project v. Bonneville Power Admin., F.d, (th Cir.. This is especially true in complex class actions such as this. Officers for Justice v. Civil Serv. Comm n, F.d, (th Cir.. CLASS ACTION SETTLEMENT (C-0-0-L - - 0 B Street, Suite 00 San Diego, CA 0 Telephone: /-0 Fax: /-
0 0 Rule (e of the Federal Rules of Civil Procedure requires judicial approval for the compromise of claims brought on a class basis. At the final approval hearing, the Court will have before it extensive papers 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. At this juncture, however, the parties request only that the Court grant preliminary approval of the settlement. In determining whether preliminary approval is warranted, the sole issue before the Court is whether the proposed settlement is within the range of what might be found fair, reasonable and adequate, so that notice of the proposed settlement should be given to Class Members and a hearing scheduled to consider final settlement approval. See Manual for Complex Litigation, Fourth., at (Federal Judicial Center 00 ( First, the [court] reviews the proposal preliminarily to determine whether it is sufficient to warrant public notice and a hearing. If so, the final decision on approval is made after the hearing.. The parties are now requesting the Court to take the first step in this process and grant preliminary approval of the proposed settlement. The proposed settlement clearly satisfies the standard for approval. Lead Counsel believe the settlement provides an immediate cash benefit to the Class, providing the sum of $. million for distribution to eligible Class Members. Given the complexities of this Litigation and the substantial risks of continued litigation, Lead Counsel believe the settlement represents a good resolution of this Litigation and eliminates the risk that the Class might not otherwise recover if litigation were to continue. Moreover, reference to factors considered by courts in granting final approval of class action settlements lend support to the proposition that the settlement is well within the range of possible approval. First, the terms of the proposed settlement are the product of extensive arm s-length negotiations between the parties over the course of months and included mediations. The negotiations were at all times hard-fought and at arm s length. During these negotiations, Lead Counsel zealously advanced Lead Plaintiffs position and were fully prepared to continue to litigate CLASS ACTION SETTLEMENT (C-0-0-L - - 0 B Street, Suite 00 San Diego, CA 0 Telephone: /-0 Fax: /-
0 0 rather than accept a settlement that was not in the best interest of the Class. Similarly, Defendants, through their counsel, zealously advanced their position that the remaining claims in the Litigation were subject to dismissal, that Lead Plaintiffs would have insurmountable proof problems on liability and damages, and that Defendants likewise were fully prepared to continue to litigate rather than settle the Litigation for an unreasonably high amount. Lead Plaintiffs, through their counsel, having carefully considered and evaluated, inter alia, the relevant legal authorities and evidence to support the claims asserted against Defendants, the likelihood of prevailing on these claims, the risk, expense and duration of continued litigation and the likely appeals and subsequent proceedings necessary if plaintiffs did prevail against Defendants at trial, have concluded that the settlement is clearly fair, reasonable and adequate and in the best interest of the Class. Lead Counsel have significant experience in securities and other complex class action litigation and have negotiated numerous other substantial class action settlements throughout the country. It is well established that significant weight should be attributed to the belief of experienced counsel that settlement is in the best interest of the class. See In re First Capital Holdings Corp. Fin. Prods. Sec. Litig., MDL Docket No. 0, U.S. Dist. LEXIS, at * (C.D. Cal. June 0, (finding belief of counsel that the proposed settlement represented the most beneficial result for class compelling factor in approving settlement; In re Wash. Pub. Power Supply Sys. Sec. Litig., 0 F. Supp., (D. Ariz., aff d sub nom. Class Plaintiffs v. Seattle, F.d (th Cir.. Although Lead Plaintiffs believe that their claims have substantial merit, Lead Counsel recognize the significant risks and expense necessary to prosecute plaintiffs claims against Defendants through the pending motion to dismiss, summary judgment, trial and subsequent appeals, as well as the inherent difficulties and delays complex litigation like this entails. Moreover, Lead Counsel are mindful of the many problems of proof under and possible defenses to the securities law violations alleged. The proposed settlement provides a good recovery for the Class while eliminating the risk, expense and uncertainty of continued litigation. An evaluation of the benefits of settlement must be tempered by a recognition that any compromise involves concessions on the part CLASS ACTION SETTLEMENT (C-0-0-L - - 0 B Street, Suite 00 San Diego, CA 0 Telephone: /-0 Fax: /-
0 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, F.d at (citation omitted. As the Fifth Circuit noted in Cotton v. Hinton, F.d (th Cir. : 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... Id. at 0 (citation omitted. While the parties believe the settlement merits final approval, the Court need not make that determination at this time. The Court is 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 (e, to consider any expressed views by Class Members of the fairness of the settlement, the Plan of Allocation, and plaintiffs counsel s request for an award of fees and expenses. James Wm. Moore, Moore s Federal Practice.[], at - to - (d ed. 00. IV. THE PROPOSED NOTICE PROGRAM IS APPROPRIATE The proposed preliminary approval order will require the Claims Administrator to notify 0 Class Members of the settlement by mailing a copy of the Notice of Pendency and Proposed Settlement of Class Action ( Notice by first class mail to all Class Members who can be identified with reasonable effort. In addition, a summary notice will be published in the national edition of Investor s Business Daily and the international edition of The Wall Street Journal. The proposed method of giving notice is appropriate because it is reasonably calculated to reach the members of the class. Mendoza v. United States, F.d, (th Cir. 0. The Notice advises Class Members of the essential terms of the settlement, sets forth the procedure and deadline for submitting objections and requests for exclusion to the settlement, and provides specifics on the date, time and place of the final approval hearing. The Notice also contains information regarding counsel s fee and expense application and the proposed plan for allocating the settlement proceeds among Class Members. Thus, the Notice provides the necessary information for Class Members to make an informed decision regarding the proposed settlement. Plaintiffs counsel CLASS ACTION SETTLEMENT (C-0-0-L - - 0 B Street, Suite 00 San Diego, CA 0 Telephone: /-0 Fax: /-
believe the Notice will fairly apprise Class Members of their rights with respect to the settlement and therefore is the best notice practicable under the circumstances and should be approved by the Court. See Torrisi v. Tucson Elec. Power Co., F.d 0, (th Cir.. V. SCHEDULE OF EVENTS In connection with preliminary approval of the settlement, the Court must set a final approval hearing date, dates for mailing and publication of the Notice and Summary Notice and deadlines for objecting to the settlement, opting out of the Class, and filing papers in support of the settlement. The parties propose the following schedule: Notice mailed to Class April, 00 ( Notice Date 0 0 VI. approval. Summary Notice published On or before April, 00 Deadline for objecting to settlement, Plan of Allocation or attorneys fees and expenses and for opting out of the Class Deadline for filing papers in support of the settlement, Plan of Allocation of settlement proceeds and request for an award of attorneys fees and expenses May, 00 calendar days before Final Approval Hearing Final Approval Hearing Week of June 0, 00 CONCLUSION For the reasons set forth above, the proposed settlement warrants this Court s preliminary DATED: March 0, 00 HAGENS BERMAN SOBOL SHAPIRO LLP STEVE W. BERMAN, WSBA # ERIN K. FLORY, WSBA # KARL P. BARTH, WSBA #0 0 Fifth Avenue, Suite 00 Seattle, WA 0 Telephone: 0/- 0/-0 (fax Liaison Counsel CLASS ACTION SETTLEMENT (C-0-0-L - - 0 B Street, Suite 00 San Diego, CA 0 Telephone: /-0 Fax: /-
0 0 MILBERG WEISS BERSHAD & SCHULMAN LLP LORI G. FELDMAN, WSBA #0 /s/ Lori G. Feldman LORI G. FELDMAN 00 Fourth Avenue, Suite 0 Seattle, WA Telephone: 0/-00 email: lfeldman@milbergweiss.com LERACH COUGHLIN STOIA GELLER RUDMAN & ROBBINS LLP WILLIAM S. LERACH MICHAEL J. DOWD THEODORE J. PINTAR DOUGLAS R. BRITTON JEFFREY D. LIGHT DAVID A. THORPE 0 B Street, Suite 00 San Diego, CA 0 Telephone: /-0 LERACH COUGHLIN STOIA GELLER RUDMAN & ROBBINS LLP JONATHAN E. BEHAR 0 Wilshire Blvd., Suite 0 Los Angeles, CA 00 Telephone: 0/-00 0/- (fax LERACH COUGHLIN STOIA GELLER RUDMAN & ROBBINS LLP PAUL J. GELLER S. Federal Highway, Suite 00 Boca Raton, FL Telephone: /0-000 /0- (fax Lead Counsel for Plaintiffs WEISS & LURIE JOSEPH H. WEISS Fifth Avenue, Suite 00 New York, NY 0 Telephone: /-0 CLASS ACTION SETTLEMENT (C-0-0-L - - 0 B Street, Suite 00 San Diego, CA 0 Telephone: /-0 Fax: /-
0 0 S:\Settlement\Amazon.set\BRF-PA BRIEF-000.doc WECHSLER HARWOOD LLP ROBERT I. HARWOOD THOMAS J. HARRISON Madison Avenue, th Floor New York, NY 00 Telephone: /-00 Executive Committee Members GIBSON, DUNN & CRUTCHER LLP JONATHAN C. DICKEY /s/ Jonathan C. Dickey JONATHAN C. DICKEY Page Mill Road Palo Alto, CA 0 Telephone: 0/-00 0/- (fax Counsel for Defendants CLASS ACTION SETTLEMENT (C-0-0-L - - 0 B Street, Suite 00 San Diego, CA 0 Telephone: /-0 Fax: /-