Case:-cv-00-WHO Document Filed/0/ Page of 0 Lionel Z. Glancy (#0) Michael Goldberg (#) Robert V. Prongay (#0) GLANCY BINKOW & GOLDBERG LLP Century Park East, Suite 00 Los Angeles, California 00 Telephone: (0) -0 Facsimile: (0) -0 E-mail: info@glancylaw.com Liaison Counsel for Lead Plaintiff and the Class Marc I. Gross Jeremy A. Lieberman POMERANTZ LLP 00 Third Avenue, th Floor New York, New York 00 Telephone: () -00 Facsimile: () - migross@pomlaw.com jalieberman@pomlaw.com Lead Counsel for Lead Plaintiff and the Class Patrick V. Dahlstrom Leigh Handelman Smollar POMERANTZ LLP Ten South La Salle Street, Suite 0 Chicago, Illinois 00 Telephone: () - Facsimile: () - pdahlstrom@pomlaw.com lsmollar@pomlaw.com TRICIA M. BARTELT, Individually and on Behalf of All Others Similarly Situated, v. UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA Plaintiff, AFFYMAX, INC., JOHN A. ORWIN, HERBERT C. CROSS, ANNE-MARIE DULIEGE, JEFFREY H. KNAPP Defendants. SAN FRANCISCO DIVISION No. :-cv-00-who Date: December 0, Time: : p.m. Room: Courtroom, th Floor Judge: Hon. William H. Orrick NOTICE OF MOTION AND MOTION FOR AN ORDER GRANTING FINAL APPROVAL OF CLASS ACTION SETTLEMENT AND DIRECTING DISSEMINATION OF NOTICE TO THE CLASS; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT THEREOF Case No. :-cv-00-who
Case:-cv-00-WHO Document Filed/0/ Page of 0 NOTICE OF MOTION AND MOTION PLEASE TAKE NOTICE that, pursuant to an Order of the Court issued on August, ( Preliminary Approval Order ), on December 0, at : p.m., or as soon thereafter as counsel may be heard, at the United States Court, Northern District of California, Courtroom, th Floor, 0 Golden Gate Avenue, San Francisco, California 0, before the Honorable William H. Orrick, Lead Plaintiff Tommy Jay Carter ( Lead Plaintiff ) will move for an order approving the settlement of this Action and dismissing it with prejudice. This motion is supported by the Declaration of Leigh Handelman Smollar in Support of Lead Plaintiff s Motion and supporting exhibits ( Smollar Decl. ), filed herewith; the Affidavit Of Justin R. Hughes Regarding (A) Mailing Of The Notice And Proof Of Claim; and (B) Report On Requests For Exclusion Received To Date this Notice of Motion( Hughes Aff. ), filed herewith; the Declaration of Lead Plaintiff, Tommy Jay Carter, filed with the Court on November 0,, Dkt. No. -; the Motion and Memorandum of Law in Support of Attorneys Fees and Reimbursement of Expenses and exhibits in support thereof, filed with the Court on November 0,, Dkt. No. 0 through -; the accompanying Memorandum of Points and Authorities in Support thereof; the Stipulation and the exhibits filed therewith; and all other pleadings and papers filed in this action. Civ. P. (e). STATEMENT OF ISSUES TO BE DECIDED. Whether the notice program satisfied due process and complied with Fed. R.. Whether the Plan of Allocation is fair, reasonable, and adequate.. Whether the Court should certify the Class and whether the Lead Plaintiff and his counsel have adequately represented the Class.. Whether the Settlement, on the terms and conditions provided for in the Stipulation, should be finally approved by the Court as fair, reasonable, and adequate.. Whether the Court should permanently enjoin the assertion of any claims that arise from or relate to the subject matter of the Action. ii Case No. :-cv-00-who
Case:-cv-00-WHO Document Filed/0/ Page of. Whether the application for attorneys fees and expenses submitted by Class Counsel should be approved.. Whether the application for a reimbursement award submitted by Class Plaintiff should be approved. 0 iii Case No. :-cv-00-who
Case:-cv-00-WHO Document Filed/0/ Page of 0 TABLE OF CONTENTS NOTICE OF MOTION AND MOTION... ii STATEMENT OF ISSUES TO BE DECIDED... ii TABLE OF CONTENTS... iv TABLE OF AUTHORITIES... vi MEMORANDUM OF POINTS AND AUTHORITIES... I. INTRODUCTION... II. BACKGROUND.. A. Procedural History... B. Preliminary Approval and Notice... III. APPLICABLE STANDARDS FOR FINAL APPROVAL OF CLASS ACTION SETTLEMENTS.. IV. THE COURT SHOULD GRANT FINAL APPROVAL OF THE SETTLEMENT AND CERTIFY THE SETTLEMENT CLASS A. The Settlement is Fair, Reasonable and Adequate... The Overall Strength of Plaintiffs Case, Including the Risk, Expense, Complexity, and Likely Duration of Further Litigation, Supports Final Approval of the Settlement.. The Risks of Continued Litigation Weigh Heavily in Favor of Settlement..0 a. August, Statements. b. November, Statements... c. February Statements.. The Amount Offered to Settle the Action Represents a Significant Portion of Provable Damages... The Amount of Discovery Completed and the Stage of the Proceedings Support Approval of the Settlement. Experienced Counsel Concur that the Settlement, Which Was Negotiated in Good Faith and at Arm s Length, Is Fair, Reasonable, and Adequate.... iv Case No. :-cv-00-who
Case:-cv-00-WHO Document Filed/0/ Page of 0. The Absence of a Governmental Participant.... The Reaction of the Class Members Supports Approval of the Settlement.. B. Final Certification of the Class Should Be Granted... The Class Meets the Requirements of Rule (a).... The Class Meets the Requirements of Rule (b)()... C. The Proposed Plan of Allocation is Fair, Reasonable and Adequate and Should be Approved... D. The Notice Program Satisfied Due Process and Complied with Fed. R. Civ. P. (E).... The Dissemination Plan Satisfies Due Process.. The Contents of the Notice Satisfy Due Process. E. Counsel s Attorneys Fees and Litigation Expenses and Lead Plaintiff s Compensation Award Should Be Approved... V. CONCLUSION... v Case No. :-cv-00-who
Case:-cv-00-WHO Document Filed/0/ Page of TABLE OF AUTHORITIES 0 Cases Accord Staton v. Boeing Co., F.d (th Cir. 0)... Amchem Prods. v. Windsor, U.S. ()... Boyd v. Bechtel Corp., F. Supp. 0 (N.D. Cal. )... Class Plaintiffs v. City of Seattle, F.d (th Cir. )... Colesberry v. Ruiz Food Products, Inc., No. CV F 0-, 0 U.S. Dist. LEXIS 0, 0 WL (E.D. Cal. Jun. 0, 0)... Eisen v. Carlisle & Jacquelin, U.S. ()..., Ellis v. Naval Air Rework Facility, F.R.D. (N.D.Cal. 0)... Franks v. Kroger Co., F.d (th Cir. )... Hanlon v. Chrysler Corp., 0 F.d 0 (th Cir. )..., Hughes v. Microsoft Corp., No. C-C, C-0C, 0 WL 0 (W.D. Wash. Mar., 0)... In re Apple Inc. Sec. Litig., No. :0-CV-0-JF HRL, WL (N.D. Cal. May, )... In re Cardizem CD Antitrust Litig., F.R.D. 0 (E.D. Mich. 0)... In re Cendant Corp. Litig., F.d (d Cir. 0)... In re Gulf Oil/Cities Serv. Tender Offer Litig., F.R.D. (S.D.N.Y. )... In re Heritage Bond Litig., No. 0-ML- DT, 0 WL 0 (C.D. Cal. June 0, 0)... 0, In re Indep. Energy Holdings PLC, 00 Civ. (SAS), 0 WL (S.D.N.Y. Sept., 0)... In Re Mego Fin. Corp., F.d ( th Cir. 00)... 0, In re Mfrs. Life Ins. Co. Premium Litig., MDL 0, WL (S.D. Cal. Dec., )... 0, In re NASDAQ Market-Makers Antitrust Litig., Civ. (RWS), 00 WL (S.D.N.Y. Jan., 00)... In re Omnivision Techs., Inc., F. Supp. d 0 (N.D. Cal. 0)... passim vi Case No. :-cv-00-who
Case:-cv-00-WHO Document Filed/0/ Page of 0 In re Oracle Sec. Litig., No. C-0-0 VRW, WL 0 (N.D. Cal. Jun., )... In re Pac. Enters. Sec. Litig., F.d (th Cir. )... In re Painewebber Ltd. P ships. Litig., F.R.D. 0 (S.D.N.Y. )... In re Prudential Ins. Co. Am. Sales Practice Litig. Agent Actions, F.d (d Cir. )... In re Sumitomo Copper Litig., F.R.D. (S.D.N.Y. )... In re Syncor ERISA Litig., F.d 0 (th Cir. 0)..., In re Warfarin Sodium Antitrust Litig., F.d (d Cir. 0)... In re Washington Public Power Supply System Sec. Lit., F.d ( th Cir. )... 0 Linney v. Cellular Alaska P ship, F.d (th Cir. )..., Marshall v. Holiday Magic, Inc., 0 F.d (th Cir. )... McPhail v. First Command Fin. Planning, Inc., No. 0--IEG, 0 WL (S.D. Cal. Mar. 0, 0)... Mendoza v. United States, F.d (th Cir. 0)... Molski v. Gleich, F.d (th Cir. 0)... Nat l Rural Telecomms. Coop. v. DirecTV, Inc., F.R.D. (C.D. Cal. 0)..., Nobles v. MBNA Corp., No. C 0--CRB, 0 WL (N.D. Cal. June, 0)... Officers for Justice v. Civil Serv. Comm n of City and County of San Francisco, F.d (th Cir. )...,, Riker v, Gibbons, No. :0-cv-00-LRH-VPC, 0 WL 0 (D. Nev. Oct., 0)... Rodriguez v. West Publ'g Corp., Case No. CV-0- R(MCx), 0 U.S. Dist. LEXIS (C.D. Cal. Aug. 0, 0)... Torrisi v. Tucson Elec. Power Co., F.d 0 (th Cir. )...,, Util. Reform Project v. Bonneville Power Admin., F.d (th Cir. )... Van Bronkhorst v. Safeco Corp., F.d (th Cir. )... Vizcaino v. Microsoft Corp., 0 F.d 0 ( th Cir. 0)... 0 vii Case No. :-cv-00-who
Case:-cv-00-WHO Document Filed/0/ Page of White v. NFL, F. Supp. (D. Minn. )... Rules Fed. R. Civ. P. (a)..., Fed. R. Civ. P. (b)()... Fed. R. Civ. P. (e)...,, Other MANUAL FOR COMPLEX LITIGATION (Third) 0. ()... A. Conte & H.B. Newberg, Newberg on Class Actions : (th ed. 0)..., 0 viii Case No. :-cv-00-who
Case:-cv-00-WHO Document Filed/0/ Page of 0 MEMORANDUM OF POINTS AND AUTHORITIES I. INTRODUCTION Pursuant to Rule (e) of the Federal Rules of Civil Procedure, Lead Plaintiff Tommy Jay Carter, LLC ( Lead Plaintiff ) respectfully requests that this Court grant final approval of the proposed settlement (the Settlement ) reached in this action ( Action ) between Lead Plaintiff, on behalf of the Class, and Defendants Affymax Inc. ( Affymax, or the Company ), John A. Orwin, Herbert C. Cross, Anne-Marie Duliege and Jeffrey H. Knapp (collectively Defendants ). After extensive settlement negotiations, Lead Plaintiff and Defendants entered into a stipulation setting forth the terms of the settlement of the claims asserted in the Action (the Stipulation of Settlement or Settlement ). Under the terms of the Settlement, a settlement fund was created for the benefit of the class which consisted of $. million in cash (the Settlement Fund ). Pursuant to Section. of the Stipulation, the Settlement Fund has been delivered to the Escrow Agent. On August,, the Court signed an Order of Preliminarily Approval (the Order ), Dkt. No., and set a hearing date for final approval of December 0,. Pursuant to the Order, beginning on September 0,, approximately, Notice Packets setting forth the terms of the Settlement were mailed to potential Class Members and shareholders of record. The approved summary notice was published over BusinessWire and GlobeNewsWire on four occasions from September, to November, and all of the relevant settlement papers, including the Notice and Proof of Claim form, have been available online at www.affymaxshareholdersettlement.com. The Claims Administrator has also established and maintained a telephone hotline to accommodate potential Class Members All capitalized terms not defined herein shall have the meaning ascribed to them in the Stipulation of Settlement. Case No. :-cv-00-who
Case:-cv-00-WHO Document Filed/0/ Page0 of 0 with questions about the Settlement. To date, only one Class Members has objected to the Settlement, and two Class Members have excluded themselves. As discussed more fully below, this Settlement, which provides a meaningful recovery in the face of extraordinary risks of litigation, is fair, reasonable, adequate, and meets all of the relevant criteria for approval. Moreover, the fairness and adequacy of the Settlement is evidenced by the fact that in response to a nationally published summary notice, and the notices mailed directly to potential members of the Class and shareholders of record, which advised these Class Members and shareholders of record of the Settlement and of their right to object to the Settlement and/or Lead Plaintiff s counsel s fee request, only one objection has been filed despite more than,000 notices disseminated to potential Class Members. This fact is significant since the Class Members and shareholders of record likely include thousands of individuals and sophisticated financial institutions which have counsel available to advise, represent and assist them in expressing opposition to the request made herein if they so choose. Accordingly, Lead Plaintiff respectfully submits that the Settlement and Plan of Allocation should be approved by this Court, the Settlement Class certified, Final Judgment entered, and that the Court award Lead Counsel s attorneys fees and expenses and Lead Plaintiff s reimbursement in the form attached hereto as Exhibit A. II. BACKGROUND Lead Plaintiff brings this action on behalf of all persons who purchased or otherwise acquired Affymax common stock during the period between August, and February,, inclusive (the Class Period ). Lead Plaintiff s Consolidated Amended Class Action Complaint for Violation of Federal Securities Laws (the Complaint ) alleges that Defendants made materially false and/or misleading statements and omitted to disclose material Lead Counsel contends that the objector has no standing and that regardless, the objections are unfounded. Lead Counsel will address these objections separately. Case No. :-cv-00-who
Case:-cv-00-WHO Document Filed/0/ Page of 0 information to investors concerning the safety of OMONTYS, Affymax s leading drug which is used for the treatment of anemia in adult patients on dialysis with Chronic Kidney Disease. The Complaint alleged that Affymax was heavily reliant upon its contract with Fresenius Medical Care ( FMC ), the largest dialysis provider in the United States and Affymax s largest customer, for the commercial success of OMONTYS and that in order to protect the commercial viability of OMONTYS, Defendants allegedly concealed serious adverse events ( SAE ) including the allergic reactions causing anaphylaxis and deaths of patients being treated with OMONTYS. The Complaint further alleged that during the Class Period, Defendants touted their supply agreement with FMC and told investors that the FMC s pilot conversion from EPOGEN (OMONTYS direct competitor product) was not in jeopardy due to the product s safety and efficacy. The truth allegedly began to trickle out on February,, after the market closed, and just one day after Defendant Orwin made positive statements about the safety of OMONTYS. On that day FMC announced that it would pause its pilot program and further investigate the drug s safety and efficacy due to patients suffering from serious allergic reactions. As a result of this partial disclosure, the stock dropped %, closing at $. on February,, from $. on February,, on extremely high trading volume. The Complaint alleges, however, that the Company still refused to report the SAEs that it knew existed at this time. Then, less than two weeks later, on Saturday, February,, the Defendants announced a voluntary total recall of OMONTYS due to patients experiencing anaphylaxis, with the FDA calling it a serious and life-threatening allergic reaction in the agency s statements. When the market learned of this second partial disclosure, the price of Affymax stock plummeted by more than %, closing at $. per share on February, Pursuant to the Order of Preliminary Approval, Dkt. No., Lead Plaintiff filed all papers in support of the Motion for Attorneys Fees and Reimbursement of Expenses on November 0. Case No. :-cv-00-who
Case:-cv-00-WHO Document Filed/0/ Page of 0, down $.0 per share from the prior Friday night s close, on an unusually high volume of trading. Defendants have denied and continue to deny all of the claims and contentions alleged in the Complaint. Defendants expressly have denied and continue to vigorously deny all charges of wrongdoing or liability against them arising out of any of the conduct, statements, acts or omissions alleged, or that could have been alleged, in the litigation. A. Procedural History This Action was initiated on February,. On July,, Lead Plaintiff filed the Complaint against Affymax and four of its senior executives and directors, CEO John A. Orwin ( Orwin ), CFO Herbert C. Cross ( Cross ), CMO Anne-Marie Duliege ( Duliege ) and COO Jeffrey H. Knapp ( Knapp ). On May,, the Court entered the Stipulation and Order Setting Schedule for Filing Consolidated Amended Complaint and Responses Thereto. Also, on May,, the Court appointed Tommy Jay Carter as Lead Plaintiff, and approved Lead Plaintiff s selections of Pomerantz LLP ( Pomerantz LLP ) as Lead Counsel, and Glancy Binkow & Goldberg LLP as Liaison Counsel. The Court found that Lead Plaintiff satisfies the requirements for Lead Plaintiff pursuant to Section D(a)()(B)(iii) of the PSLRA, which includes adequacy of representation. Dkt. No.. The Motion to Dismiss was fully briefed, and on January,, the Court heard oral argument on Defendants Motion to Dismiss. On January,, the Court issued an order granting in part and denying in part Defendants Motion to Dismiss. The Court dismissed claims related to the period of August, through February,, arising from the August, and November, misrepresentations, with leave to re-plead those claims, and upheld claims relating to the period of February, to February,, arising from the February, misrepresentation., Dkt. Nos. 0 through 0-;. Case No. :-cv-00-who
Case:-cv-00-WHO Document Filed/0/ Page of 0 Following the Court s decision on Defendants Motion to Dismiss, and prior to the Plaintiff filing a Second Amended Complaint, the parties agreed to participate in mediation in an attempt to resolve the Action. On May,, the Parties participated in a day-long mediation presided over by Judge Layn R. Phillips (ret.) in the offices of Irell & Manella in Newport Beach, California. After several hours of extensive, arms-length discussions supervised by Judge Phillips the Parties were able to reach an agreement in principle as to the material terms of the relief for the Class and executed the Term Sheet on May,. At all times, the parties negotiations were at arm s length and in good faith. The parties finalized and executed the Stipulation of Settlement on July,. B. Preliminary Approval and Notice On July,, Lead Plaintiff moved the Court for an order granting preliminary approval to the Settlement and directing dissemination of an approved notice of settlement to the Class. On August,, the Court entered the Order, preliminarily approving the Settlement and approving the form of Notice to be disseminated to the Class. Beginning on September 0,, the Claims Administrator, Kurtzman Carson Consultants LLC ( KCC ), began mailing Notice Packets to Class members. Hughes Aff. -. As of December,, KCC has received, names and addresses of potential Class Members (after exact duplicate mailing records were removed) from individuals, brokers, dealers, banks and other nominees requesting Notice Packets to be mailed to such persons. Also, KCC has received requests from brokers and other nominees for,0 Notice Packets to be sent to such brokers and nominees so that they could forward them to their customers. All such requests have been complied with in a timely manner. As a result of the efforts described above, as of December,, KCC has mailed a total of, Notice Packets. Id. at -. Lead Counsel caused the approved summary notice to be published over Business Wire on September, (over BusinessWire) and on November,, November,, and November, all over Globenewswire. Smollar Decl.,. Case No. :-cv-00-who
Case:-cv-00-WHO Document Filed/0/ Page of 0 In addition, KCC established and continues to maintain a toll-free telephone number (---) to accommodate potential Class Members with questions about the Settlement. As of December,, KCC has received a total of calls to the telephone hotline for assistance. Id. at. Finally, in coordination with Lead Counsel, KCC designed and implemented a website, www.affymaxshareholdersettlement.com, dedicated to the Settlement to assist potential Class Members. The website was operational beginning on September 0,, and is accessible hours a day, days a week. The website lists the exclusion, objection, and claim filing deadlines, as well as the date and time of the Court s Final Settlement Hearing. Also posted on the website are relevant Court Documents, including: the Stipulation of Settlement; Plaintiff s Motion for Preliminary Approval and Supporting Papers; Order of Preliminary Approval; Plaintiff s Motion for Attorneys Fees and Reimbursement of Expenses and Supporting Papers; and Proposed Order of Final Approval, all of which may be downloaded by potential Class Members. In addition, the website posted the Notice and Proof of Claim form, which shareholders may download. The website contains electronic claims filing instructions, as well as the contact information for KCC. As of December,, the website has received,0 hits. Id. at. III. APPLICABLE STANDARDS FOR FINAL APPROVAL OF CLASS ACTION SETTLEMENTS It is well established in the Ninth Circuit that voluntary conciliation and settlement are the preferred means of dispute resolution. Officers for Justice v. Civil Serv. Comm n of City and County of San Francisco, F.d, (th Cir. ). Class action suits readily lend themselves to compromise because of the difficulties of proof, the uncertainties of the outcome and the typical length of the litigation. An overriding public interest exists in settling litigation, and this is particularly true in class action suits. Van Bronkhorst v. Safeco Corp., F.d, 0 (th Cir. ); see also Util. Reform Project v. Bonneville Power Admin., F.d, (th Cir. ). Case No. :-cv-00-who
Case:-cv-00-WHO Document Filed/0/ Page of 0 In approving a proposed class action settlement under Fed. R. Civ. P. (e), the Court must find that the proposed settlement is fair, reasonable, and adequate. To make this determination, the Ninth Circuit instructs the lower courts to consider several factors: [T]he strength of plaintiffs case; the risk, expense, complexity, and likely duration of further litigation; the risk of maintaining class action status throughout the trial; the amount offered in settlement; the extent of discovery completed, and the stage of the proceedings; the experience and views of counsel; the presence of a governmental participant; and the reaction of the class members to the proposed settlement. Officers for Justice, F.d at. Accord Staton v. Boeing Co., F.d, (th Cir. 0); Molski v. Gleich, F.d, (th Cir. 0); Torrisi v. Tucson Elec. Power Co., F.d 0, (th Cir. ). In deciding whether to approve a proposed settlement pursuant to Federal Rule of Civil Procedure (e), the Ninth Circuit has a strong judicial policy that favors settlements, particularly where complex class action litigation is concerned. Linney v. Cellular Alaska P ship, F.d, (th Cir. ); Class Plaintiffs v. City of Seattle, F.d, (th Cir. ); see also In re Omnivision Techs., Inc., F. Supp. d 0, 0 (N.D. Cal. 0) ( the court must also be mindful of the Ninth Circuit s policy favoring settlement, particularly in class action law suits ); In re Syncor ERISA Litig., F.d 0, 0 (th Cir. 0) ( [T]here is a strong judicial policy that favors settlements, particularly where complex class action litigation is concerned. ) (citing Class Plaintiffs, F.d at ). The determination of fairness falls within the sound discretion of the district court. Torrisi, F.d at -. However, courts recognize that a strong initial presumption of fairness applies where, as here, the settlement is reached by experienced counsel after arm s length negotiations. See McPhail v. First Command Fin. Planning, Inc., No. 0--IEG, 0 WL, at * (S.D. Cal. Mar. 0, 0); see also Boyd v. Bechtel Corp., F. Supp. 0, (N.D. Cal. ) (finding that [t]he recommendations of plaintiffs counsel should be given a presumption of reasonableness ). Case No. :-cv-00-who
Case:-cv-00-WHO Document Filed/0/ Page of 0 The Ninth Circuit has placed limits on the inquiry to be made by the Court in considering a settlement. The Court in Officers for Justice held that a: [F]airness hearing is not to be turned into a trial or rehearsal for trial on the merits. Neither the trial court nor this court is to reach any ultimate conclusions on the contested issues of fact and law which underlie the merits of the dispute, for it is the very uncertainty of outcome in litigation and avoidance of wasteful and expensive litigation that induce consensual settlements. The proposed settlement is not to be judged against a hypothetical or speculative measure of what might have been achieved by the negotiators. F.d at (citations omitted). Here, it is the considered judgment of Lead Counsel that this Settlement provides for a fair, reasonable and adequate resolution of the litigation and thus, should be entitled to a presumption of reasonableness. See Hughes v. Microsoft Corp., No. C-C, C-0C, 0 WL 0, at * (W.D. Wash. Mar., 0). This presumption of reasonableness is further strengthened because the arm s-length negotiating process involved a mediator experienced in these types of cases. In re Pac. Enters. Sec. Litig., F.d, (th Cir. ) (finding mediator s involvement supports settlement approval). Thus, Lead Plaintiff requests that the Court find that the Settlement is fair, reasonable, and adequate, as required by Fed. R. Civ. P. (e). As demonstrated below, consideration of several factors asserted by the Ninth Circuit weighs in favor of settlement in this case. IV. THE COURT SHOULD GRANT FINAL APPROVAL OF THE SETTLEMENT AND CERTIFY THE SETTLEMENT CLASS A. The Settlement Is Fair, Reasonable And Adequate See also In re Cardizem CD Antitrust Litig., F.R.D. 0, 0 (E.D. Mich. 0) (stating that involvement of mediator or other third parties in settlement discussions is further evidence of the arm s length... nature of the settlement); In re Indep. Energy Holdings PLC, 00 Civ. (SAS), 0 WL, at * (S.D.N.Y. Sept., 0) (holding that the fact that the Settlement was reached after exhaustive arm s-length negotiations, with the assistance of a private mediator experienced in complex litigation, is further proof that it is fair and reasonable ). Case No. :-cv-00-who
Case:-cv-00-WHO Document Filed/0/ Page of 0 To determine whether a proposed settlement is fair, reasonable and adequate, a court may consider some or all of the following factors: () the strength of the plaintiffs case, including the risk, expense, complexity, and likely duration of further litigation; () the risk of maintaining class action status through trial; () the amount offered in settlement; () the extent of discovery completed and the stage of the proceedings; () the experience and views of counsel; () the presence of a governmental participant; and () the reaction of the class members to the proposed settlement. Linney, F.d at ; Hanlon v. Chrysler Corp., 0 F.d 0 (th Cir. ); Torrisi, F.d at. This list is not exclusive and different factors may predominate in different factual contexts. Torrisi, F.d at (citation omitted). As set forth below, an analysis of each of these factors demonstrates that the Settlement is fair, adequate, and reasonable in this case.. The Overall Strength of Plaintiffs Case, Including the Risk, Expense, Complexity, and Likely Duration of Further Litigation, Supports Final Approval of the Settlement Lead Counsel, who has a great deal of experience in litigating and resolving complex securities class actions, carefully evaluated the merits of this case, in light of all of the risks and potential weaknesses, before Lead Plaintiff entered into the Settlement. Indeed, Lead Plaintiff and his counsel conducted a thorough investigation of the claims in this pharmaceutical case whose merits are intertwined with highly-technical facts. In addition to their industry-specific investigation, Lead Counsel conducted a detailed review of Affymax s public filings with the SEC, its press releases and transcripts from its quarterly earnings calls and investment conference appearances, scientific publications, as well as a broad review of media, analyst and news reports about the Company, and other publicly-available data, including trading data relating to the price and trading volume of Affymax s publicly-traded securities. In addition, Lead Counsel conducted extensive investigation and analysis of nonpublic information, including interviews with former Affymax and Fresenius employees. Lead Counsel also consulted with a Food and Drug Administration ( FDA ) expert and analysis of FDA information received through a Freedom of Information Act request. Lead Case No. :-cv-00-who
Case:-cv-00-WHO Document Filed/0/ Page of 0 Counsel also obtained and reviewed internal documents during the settlement process to confirm the adequacy of the Settlement, including an interview of Defendant John Orwin, Affymax s Chief Executive Officer. Thus, while Lead Plaintiff believes that the case is strong based on the substantial research and investigation conducted, he must be cognizant of the substantial risk posed to the Class in continuing this Action, to wit, that the case might not be certified, or that the Action might succumb at the summary judgment stage to attacks regarding loss causation, scienter, liability, or damages. See In re Heritage Bond Litig., No. 0-ML- DT, 0 WL 0, at * (C.D. Cal. June 0, 0) ( It is known from past experience that no matter how confident one may be of the outcome of litigation, such confidence is often misplaced ) (citations omitted); Omnivision, F. Supp. d at 0. Here, the Court upheld only a ten day Class Period based on one alleged false and misleading statement. Further, the Company was on the brink of bankruptcy at the time the settlement negotiations occurred (and has since liquidated the Company).. The Risks of Continued Litigation Weigh Heavily in Favor of Settlement The risk that the litigation might result in the Class not recovering at all, particularly in a case involving complicated legal issues, is a significant factor in the award of fees. In re Omnivision Techs., Inc., F. Supp. d 0, 0 (N.D. Cal. 0) (citing Vizcaino v. Microsoft Corp., 0 F.d 0, 0 ( th Cir. 0)); see also In re Washington Public Power Supply System Sec. Lit., F.d, -0 ( th 0 Case No. :-cv-00-who Cir. ). To determine whether the proposed Settlement is fair, reasonable and adequate, the Court must balance the continuing risks of litigation against the benefits afforded to Class Members and the immediacy and certainty of a substantial recovery. In Re Mego Fin. Corp., F.d, ( th Cir. 00); In re Omnivision Techs., Inc., F. Supp. d 0, 0 (N.D. Cal. 0). Although Lead Counsel believes that the case is meritorious, the risks discussed below render the outcome of lengthy litigation and trial extremely uncertain. See In re Mfrs. Life Ins.
Case:-cv-00-WHO Document Filed/0/ Page of 0 Co. Premium Litig., MDL 0, WL, at * (S.D. Cal. Dec., ) (stating that even if it is assumed that a successful outcome for plaintiffs at summary judgment or at trial would yield a greater recovery than the Settlement which is not at all apparent there is easily enough uncertainty in the mix to support settling the dispute rather than risking no recovery in future proceedings ). Therefore, careful consideration of the litigation risks supports approval of the Settlement as fair, adequate and reasonable. See Nobles v. MBNA Corp., No. C 0--CRB, 0 WL at (N.D. Cal. June, 0), (deferring to the reasoned judgment of class counsel in opting to settle, although the class might have achieved greater recovery in taking the case to trial). The Complaint alleges three statements which were false and misleading: (i) the August, statements, (ii) the November, statements, and (iii) the February, statements. The Court granted the motion to dismiss as to all Defendants with respect to the August and November statements, and granted the motion with respect to all claims brought against the individual Defendants under Section (a) of the Securities Act. The only statements not dismissed by the Court were those made by defendant Orwin on February,. The effect of this ruling drastically curtailed the Class Period and potential Class. a. August, Statements The Court dismissed without prejudice the claims against all Defendants arising out of the August, statements, where defendant Duliege stated that OMONTYS posed no safety concerns. While the Complaint alleged that Defendants knew of the safety concerns posed by the drug when the statement was made, the Court held that the Complaint failed to allege falsity and scienter because the first adverse event (a death associated with the drug) was not reported to the FDA until August,. While the Court granted leave to amend, it is uncertain whether Lead Plaintiff could allege specific factual allegations that demonstrate that Defendants were aware of the death at the time the statement was made. Moreover, even if the Defendants were aware of one death, it is unclear whether the low number of adverse events extent in August would have been material to investors. Case No. :-cv-00-who
Case:-cv-00-WHO Document Filed/0/ Page of 0 b. November, Statements Likewise, the Court also dismissed without prejudice the claims against all Defendants arising out of the November. The alleged statements (i) touted Affymax s continuing, prosperous relationship with Fresenius, one of its major customers, and (ii) misled the market concerning the change to OMONTYS s label. Contrary to Defendants public statements, the Complaint alleges the relationship was in jeopardy and the label was changed because of adverse event reports regarding OMONTYS. The Court held that the Complaint did not demonstrate that Fresenius was considering ending its relationship with Affymax as it continued to recommend the drug, and that Defendants did not mislead the public with regard to the label change, pointing out that the Company did disclose that the label change was due to the adverse event reports. Just as with the August statements, there is no certainty that Lead Plaintiff would be able to adequately allege facts to prove that the adverse events had put in jeopardy Affymax s relationship with Fresenius at the time of the November, statements, especially given the fact that Fresenius expanded its use of OMONTYS after November,. In this case, in light of the issues with regard to the statements above, the value of Settlement far outweighed the risks of continuing to litigate. Throughout this litigation, Defendants presented strong arguments questioning Lead Plaintiff s ability to prove scienter, and the falsity of Defendants August and November statements when made. These legitimate risks, as detailed below, factored heavily into Lead Counsel s determination that this Settlement would provide the most favorable relief to Lead Plaintiff and the Class. By agreeing to settle the case at this juncture, Lead Counsel is able to afford some recovery to investors who purchased pursuant to the August and November statements. c. February Statements Although the Court sustained Lead Plaintiff s claims with respect to the alleged misstatements in February, Defendants raised specific defenses based on the timing of Case No. :-cv-00-who
Case:-cv-00-WHO Document Filed/0/ Page of 0 the statements and the filing of adverse events by Fresenius and other providers to the FDA. Although Lead Plaintiff believes that it could adequately respond to the fact specific defenses, it is not clear that a jury would agree to Lead Plaintiffs timeline or explanation of the reporting mechanism for adverse events and notification to Defendants. By entering into the Settlement, Lead Plaintiff was able to recover a larger than average recovery for members of the Class who purchased Affymax common stock during the ten day Class Period associated with the February statements. In sum, despite the perceived strength of Lead Plaintiff s case, the risk, expense, complexity, and likely duration of further litigation clearly support approval of the Settlement. See In re Syncor ERISA Litig., F.d at 0; Nat l Rural Telecomms. Coop. v. DirecTV, Inc., F.R.D., (C.D. Cal. 0) ( [U]nless settlement is clearly inadequate, approval is preferable to lengthy and expensive litigation with uncertain results. ). Given the issues Lead Plaintiff faces regarding establishing liability, loss causation, and damages, there is a substantial risk that nothing would be recovered if this case were to proceed to trial. Further, Defendants have no ability to pay any potential judgment given their liquidation. The ability to settle the Action now allowed Class Members who purchased in the period for the claims which were upheld by the Court to achieve % of maximum potential damages, before the deduction for fees and expenses, if Plaintiffs won on every single issue at trial. This factor thus weighs in favor of this Court s final approval of the Settlement.. The Amount Offered to Settle the Action Represents a Significant Portion of Provable Damages The settlement amount of $. million in cash is in-line with amounts awarded in securities fraud class action settlements in. According to Cornerstone Research s Securities Class Action Settlements: Review and Analysis ( Cornerstone Report ), the median settlement for securities class action settlements in was $. million. See Exhibit attached to the Smollar Decl. Thus, the proposed settlement of $. million in this Action is Case No. :-cv-00-who
Case:-cv-00-WHO Document Filed/0/ Page of 0 exactly the same as the median settlement amount for all securities class action settlements approved in. For the claims which were upheld by the Court, the settlement represents % of the maximum estimated damages, before the deduction for fees and expenses, for that period of time. Indeed, settlements valued at a much lower percentage of possible damages are routinely approved. See In re Cendant Corp. Litig., F.d, (d Cir. 0) (noting that typical recoveries in securities class actions range from.% to % of total losses); In re Omnivision, F. Supp. d at 0 (approving settlement amount of % of maximum potential damages); cf., Glancy Decl., Ex. (Cornerstone Research study reviewing settlements reported for the years -0, found that where, as here, estimated damages were in the range of $- million, the median settlement was.% of damages -- with that figure dropping to.% in ). Moreover, the estimated recovery of % of maximum potential damages does not take into account the various defenses put forth by Defendants. If a jury chooses to credit Defendants damages and loss causation experts over Lead Plaintiff s experts, in whole or in part, with respect to whether a significant portion of either or both of the alleged share price declines were causally related to Defendants alleged misrepresentations and omissions, damages could substantially be reduced or eliminated. See, e.g., Heritage, 0 WL 0, at * (citing In re Sumitomo Copper Litig., F.R.D., (S.D.N.Y. )) (noting instances where a settlement was rejected by a court only to have the ultimate recovery generated by continued litigation be less than the proposed settlement). Finally, when compared with the present value of the damages plaintiffs would likely recover if successful, appropriately discounted for the risk of not prevailing, the Settlement reached in this case is even more valuable. In re Warfarin Sodium Antitrust Litig., F.d, (d Cir. 0). Thus, where the trial of this class action would be a long, arduous process requiring great expenditures of time and money on behalf of both the parties and the court, the recovery of a substantial sum certain today, weighs in favor of the Settlement. In Case No. :-cv-00-who
Case:-cv-00-WHO Document Filed/0/ Page of 0 re Prudential Ins. Co. Am. Sales Practice Litig. Agent Actions, F.d, (d Cir. ); see also Omnivision, F. Supp. d at 0 ( [T]he Settlement, which offers an immediate and certain award for a large number of potential class members, appears a much better option ). The Defendants will have no ability to pay any judgment even if Plaintiff wins at trial given the fact that Affymax has already liquidated.. The Amount of Discovery Completed and the Stage of the Proceedings Support Approval of the Settlement Lead Plaintiff has sufficient information to evaluate the prospects for this case on a going-forward basis and assess the adequacy of the Settlement. By the time the Settlement was reached, Co-Lead Counsel had: () reviewed and analyzed Affymax s Class Period and pre-class Period public filings, annual reports, press releases, quarterly earnings call and industry and investment conference transcripts, and other public statements; () collected and reviewed a comprehensive compilation of analyst reports and major financial news service reports on Affymax; () reviewed and analyzed stock trading data relating to Affymax; () reviewed Lead Plaintiff s qualifications to serve as a class representative; () investigated biochemical and pharmaceutical company practices, as well as industry specific practices; () conducted extensive investigation and analysis of publicly-available scientific literature, data, presentations, and other relevant materials; () conducted extensive investigation and analysis of non-public information, including interviews with former Affymax and Fresenius employees; () consulted with a Food and Drug Administration ( FDA ) expert and analysis of FDA information received through a Freedom of Information Act Request; () drafted the initial complaint and the detailed Amended Consolidated Complaint to comply with the Private Securities Litigation Reform Act of (PSLRA ); (0) researched, drafted and argued the opposition to Defendants Motion to Dismiss and Request for Judicial Notice; () traveled to California for oral argument on the Motion to Dismiss; () analyzed and conducted further investigation of non-public information to determine whether to file a proposed Second Amended Complaint; () prepared for and engaged in a full day mediation, Case No. :-cv-00-who
Case:-cv-00-WHO Document Filed/0/ Page of 0 including drafting a mediation statement, as well as continued negotiation efforts over the weeks following the mediation in order to finalize the Settlement; () traveled to California for oral argument on Preliminary Approval; () obtained and reviewed internal documents during the settlement process to confirm the adequacy of the Settlement; and () conducted an interview of Defendant John Orwin, Affymax s Chief Executive Officer. Smollar Dec.,. Under these circumstances, Lead Plaintiff and Lead Counsel were in an excellent position to evaluate both the strengths and weaknesses of the Action and the substantial risks of continued litigation, and to conclude that the Settlement provides a fair, adequate, and reasonable recovery in the best interests of the Class. Having sufficient information to properly evaluate the Action, Co-Lead Counsel has managed to settle this Action on terms very favorable to the Class without the substantial additional expense, risk, and uncertainty of continued litigation.. Experienced Counsel Concur that the Settlement, Which Was Negotiated in Good Faith and at Arm s-length, Is Fair, Reasonable, and Adequate [T]he fact that experienced counsel involved in the case approved the settlement after hard-fought negotiations is entitled to considerable weight. Ellis v. Naval Air Rework Facility, F.R.D., (N.D.Cal. 0); see also Nat l Rural, F.R.D. at ( Great weight is accorded to the recommendation of counsel, who are most closely acquainted with the facts of the underlying litigation. ) (quoting In re Painewebber Ltd. P ships. Litig., F.R.D. 0, (S.D.N.Y. )). Moreover, a presumption of correctness is said to attach to a class settlement reached in arm s-length negotiations between experienced, capable counsel after meaningful discovery. MANUAL FOR COMPLEX LITIGATION (Third) 0. (); Riker v, Gibbons, No. :0-cv-00-LRH-VPC, 0 WL 0, at * (D. Nev. Oct., 0) (quoting A. Conte & H.B. Newberg, Newberg on Class Actions : (th ed. 0)). This case has been litigated by experienced and well-respected counsel on both sides, all of whom specialize in the area of securities litigation. Dkt. No., - through - (All Counsel s firm resumes). In addition, the Settlement was achieved with the aid of a Case No. :-cv-00-who
Case:-cv-00-WHO Document Filed/0/ Page of 0 nationally-regarded mediator, the Honorable Layn R. Phillips (Ret.). The Parties engaged in negotiation during an all-day mediation on May,. Smollar Decl. -. The negotiations were in good faith, at arm s-length and were in no way collusive. Id. After a day of spirited discussion and back-and-forth bargaining, the Parties agreed to settle the Action for a payment of $,00,000. After the settlement in principle was reached, the Parties engaged in further negotiations over the details of the Stipulation and the other facets of the Settlement and its documentation. Id. Only after several weeks of additional negotiations, and substantial effort in drafting all of the Settlement-related documentation and necessary filings, did the Parties finally agree to all the terms of the Settlement reflected in the Stipulation. Id. That the Action was hard-fought at every stage by experienced counsel strongly weighs in favor of a finding that the Settlement is fair and reasonable and should be approved.. The Absence of a Governmental Participant There was no governmental participant litigating on behalf of or alongside the Class. Without this private, civil action there would have been no recovery for the Class. Accordingly, this factor supports Settlement approval.. The Reaction of the Class Members Supports Approval of the Settlement Pursuant to the Court s Order dated August, (the Preliminary Approval Order Dkt. No. 0), over,000 Notice Packets were sent to potential Settlement Class Members, and Summary Notices were distributed over various business wires four separate times. Smollar Decl., Ex. C thereto. The reaction of the Class to the Settlement was very favorable. While the deadline for Settlement Class Members to exclude themselves from the Settlement Class or to object to the Settlement, the Plan of Allocation and the application for attorneys fees and reimbursement of litigation expenses passed on November,, as of the filing of this Motion, there has been only one late objection who appears to have no Case No. :-cv-00-who
Case:-cv-00-WHO Document Filed/0/ Page of standing, and only two exclusions. Hughes Aff., -0. [T]he fact that the overwhelming 0 majority of the class willingly approved the offer and stayed in the class presents at least some objective positive commentary as to its fairness. Hanlon, 0 F.d at 0; see also Mego, F.d at. The small number of objections raises a strong presumption that the settlement is favorable to the class. See In re Omnivision Technologies, Inc., F.Supp.d 0, 0 (N.D.Cal.0); In re Apple Inc. Sec. Litig., No. :0-CV-0-JF HRL, WL, at * (N.D. Cal. May, ) Accordingly, Class Members reaction to the Settlement also warrants approval. B. Final Certification Of The Class Should Be Granted In the Court s Order dated August,, the Court conditionally certified the settlement class consisting of all Persons who purchased or otherwise acquired Affymax common stock during the Class Period, August, through February,, both dates inclusive. Dkt. No.. As described in detail in Lead Plaintiff s memorandum in support of preliminary approval of the settlement, Dkt. No. at -, certification of the Class under Rule of the Federal Rules of Civil Procedure is appropriate.. The Class Meets the Requirements of Rule (a) In order for a class to be certified, it must meet the following requirements: (a) numerosity; (b) commonality; (c) typicality; and (d) adequacy of representation. Hanlon v. Chrysler Corp., 0 F.d 0 (th Cir. ). As detailed in Lead Plaintiff s memorandum in support of preliminary approval, the Class meets all the requirements of Rule (a). First, as to numerosity, the class is sufficiently numerous given that the Company had approximately million shares of common stock outstanding during the Class Period. Given this amount of shares, it is safe to assume that there are several thousand potential members of the Class who purchased during the Class Period. The objection, filed by Michelle Enright, was received by Lead Counsel via the docket on December,. Ms. Enright has no proof that she purchased shares during the Class Period. Her objections are addressed by Lead Counsel in a separate brief. Case No. :-cv-00-who
Case:-cv-00-WHO Document Filed/0/ Page of 0 Second, all of the conduct alleged in the complaint was common to all members of the Class. All of the Class Members purchased common shares of Affymax during the Class Period. Therefore, all of the Defendants alleged misrepresentations and omissions were made to each of the Class Members. Third, all of the Class Members claims are interrelated, and Lead Plaintiff s claims are typical of those of the rest of the class. All Class Members suffered losses by virtue of the corrective disclosures. Fourth, Lead Plaintiff is an adequate representative of the Class. Lead Plaintiff has no conflicts with the other class members, and has retained counsel with vast experience in the prosecution of securities class actions. Lead Plaintiff has been actively involved in the case from its inception, maintaining communication with Lead Counsel. Due to Lead Plaintiff s diligence and retention of experienced counsel, his representation is adequate.. The Class Meets the Requirements of Rule (b)() Rule (b)() authorizes class certification where, in addition to the requirements of Rule (a), common questions of law or fact predominate over any individual question and a class action is superior to other available means of adjudication. See Amchem Prods. v. Windsor, U.S., 0 (). This standard, as in most securities class actions, is easily met here. The root of the class action whether Defendants publicly disseminated releases and statements omitted and/or misrepresented material facts is the central issue and predominates over any theoretical individual issue that may arise. Additionally, the class action mechanism is the best method of resolving this suit. Since the controversy for each class member is identical, adjudicating in one suit and one forum is the most economical means of resolving this matter. Moreover, some of the class members damages are arguably too small to make it feasible to incur substantial litigation costs that could potentially exceed any potential recovery. C. The Proposed Plan of Allocation is Fair, Reasonable and Adequate and Should be Approved Case No. :-cv-00-who