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In re Wilmington Trust Securities Litigation

United States District Court, D. Delaware

November 19, 2018

IN RE WILMINGTON TRUST SECURITIES LITIGATION This document relates to ALL ACTIONS

          MEMORANDUM

          EDUARDO C. ROBRENO, J.

         Presently before the Court are Plaintiffs' “Motion for Final Approval of Class Action Settlements and Plan of Allocation” and Plaintiffs' “Motion for an Award of Attorney's Fees and Reimbursement of Litigation Expenses.” On behalf of themselves and other members of the class, Lead Plaintiffs[1] have agreed to two class action settlements:[2] (i) a settlement with the Wilmington Trust Defendants and Underwriter Defendants, and (ii) a settlement with KPMG LLP (“KPMG”). The settlements will resolve the instant matter, in which Lead Plaintiffs allege that Defendants violated federal securities laws by making false and misleading statements to conceal Wilmington Trust Corporation's (“Wilmington Trust”) true financial condition and lending practices. Lead Plaintiffs allege that these statements caused investors to purchase stock at artificially inflated prices and to suffer damages as a result.

         For the reasons that follow, the Court will grant both motions.

         I. BACKGROUND

         A. Factual and Procedural History

         Beginning in November 2010, numerous securities class actions were filed against certain Defendants in the United States District Court for the District of Delaware, alleging violations of federal securities laws. On March 7, 2010, the Court consolidated the various actions under the caption In re Wilmington Trust Securities Litigation pursuant to the Private Securities Litigation Reform Act of 1995 (“PSLRA”), and appointed Lead Plaintiffs and Lead Counsel.

         On May 16, 2011, Lead Plaintiffs filed their Consolidated Securities Class Action Complaint. ECF No. 39. The matter was assigned to the Honorable Sue L. Robinson. After several rounds of motions to dismiss and to amend, Lead Plaintiffs filed the operative complaint, their Fourth Amended Consolidated Securities Class Action Complaint (“FAC”), on June 13, 2013. ECF No. 149.

         The FAC asserted claims for (i) violations of § 10(b) of the Securities Exchange Act of 1934, and SEC Rule 10b-5, (ii) violations of § 20(a) of the Exchange Act, (iii) violations of § 11 of the Securities Act of 1933, (iv) violations of § 12(a)(2) of the Securities Act, and (v) violations of § 15 of the Securities Act. On March 20, 2013, the Court denied Defendants' motions to dismiss the FAC as to all Defendants except two. ECF No. 185.

         On September 12, 2014, Lead Plaintiffs moved for class certification. ECF No. 259. On September 3, 2015, the Court granted Lead Plaintiff's class certification motion in full, appointed Lead Plaintiffs as “Class Representatives, ” Lead Counsel as “Class Counsel, ” and Chimicles & Tikellis LLP as “Liaison Counsel” for the Class. ECF No. 406.

         On January 15, 2016, the Court approved notice to be disseminated to potential members of the Class. ECF No. 429. The Class Notice informed Class Members of (i) the action pending against the Defendants, (ii) the Court's certification of the action as a class action, and (iii) Class Members' right to request exclusion from the Class. Id. Beginning on March 1, 2016, the Class Notice was mailed to potential Class Members.

         On June 13, 2017, the Action was reassigned to the Honorable Eduardo C. Robreno of the United States District Court for the Eastern District of Pennsylvania, sitting by designation in the District of Delaware.

         At that time, Lead Plaintiffs, Wilmington Trust Defendants and Underwriter Defendants reached an agreement to settle. The agreed-upon settlement stipulated that Wilmington Trust would pay $200, 000, 000 in cash to resolve all claims against the Wilmington Trust Defendants and Underwriter Defendants. On May 15, 2018, the parties signed the stipulated settlement. On May 21, 2018, Lead Plaintiffs and KPMG reached an agreement stipulating that KPMG would pay $10, 000, 000 to resolve all claims against it. On May 25, 2018, Lead Plaintiffs and KPMG signed the stipulation. Lead Counsel assert that the total settlement amount, $210 million, is the second largest securities class action recovery obtained in Delaware.

         On July 2, 2018, the Court held a hearing regarding the motion for preliminary approval of the settlement agreements and granted the motion and approved the notice program on July 10, 2018. ECF Nos. 824 & 825.

         From July 25, 2018 through September 14, 2018, the claims administrator, Epiq Class Action & Claims Solutions, Inc. (“Epiq”), sent out the approved notice packets. Epiq also published the notices as specified in the settlement agreements and maintained a toll-free information line and website.

         Lead Counsel filed the current motions for final approval of the settlements and for fees and costs on September 15, 2018. On October 25, 2018, Lead Counsel updated its filings by reply indicating that no Class Member had objected to the settlements or request for attorney's fee and costs. The Court held a hearing on the two motions on November 5, 2018. ECF No. 826.

         B. The Proposed Class Action Settlements

         The terms of the proposed class action settlement agreements are set forth in the Stipulation and Agreement of Settlement with Wilmington Trust Defendants and Underwriter Defendants, ECF No. 821 Exh. 1, and the Stipulation and Agreement of Settlement with KPMG. ECF No. 821 Exh. 2. The terms are outlined below.

         1. The Class

         The settlement agreements provide for a Class defined as follows:

All persons or entities who purchased or otherwise acquired Wilmington Trust common stock during the period of January 18, 2008 up to November 1, 2010 (the “Class Period”), including all persons or entities who purchased shares of Wilmington Trust common stock issued in the secondary common stock offering that occurred on or about February 23, 2010 (the “Offering”), and were damaged thereby.[3]

ECF No. 821 Exhs. 1 & 2, at 8-9.

         2. The Proposed Settlement Terms

         The settlement agreements provide that Wilmington Trust will pay $200, 000, 000 and KPMG will pay $10, 000, 000. Class Members who submit a valid claim form will be reimbursed a pro rata share of the settlement funds in accordance with the proposed Plan of Allocation.

         The Plan of Allocation is a method of weighing the claims of the claimants against one another to make pro rata allocations of the settlement funds based on the timing of and amount of Wilmington Trust stock each claimant purchased. Each claimant's Recognized Loss Amount will be based primarily on the difference between the amount of artificial inflation in the prices of Wilmington Trust common stock at the time of acquisition and at the time of sale, or the difference between the actual purchase price and the sale price.

         The settlement agreements and notices provided that the settlement funds would also be used to pay attorney's fees not to exceed 28% of each settlement fund, and expenses and costs of not more than $7, 500, 000. In the instant motions, Plaintiffs' Counsel seek exactly 28% in fees, and $6, 845, 500.88 in costs and expenses for themselves and Lead Plaintiffs.

         In exchange for the benefits provided by the settlement, settlement Class Members agree to release all claims that they alleged or could have alleged in the action.

         II. DISCUSSION

         Under Federal Rule of Civil Procedure 23(e), the settlement of a class action requires court approval. Fed.R.Civ.P. 23(e)(2). A district court may approve a settlement agreement only “after a hearing and on finding that it is fair, reasonable, and adequate.” Id. The factual determinations necessary to make Rule 23 findings must be made by a preponderance of the evidence. In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 320 (3d Cir. 2008). “The decision of whether to approve a proposed settlement of a class action is left to the sound discretion of the district court.” In re Prudential Ins. Co. Am. Sales Practice Litig. Agent Actions, 148 F.3d 283, 299 (3d Cir. 1998) (quoting Girsh v. Jepson, 521 F.2d 153, 156 (3d Cir. 1975)).

         Under Rule 23(h), at the conclusion of a successful class action, class counsel may apply to a court for an award of attorney's fees. The amount of an attorney's fee award “is within the district court's discretion so long as it employs correct standards and procedures and makes finding of fact not clearly erroneous[.]” Sullivan v. DB Invs., Inc., 667 F.3d 273, 329 (3d Cir. 2011) (en banc) (internal quotation marks omitted).

         A. Whether the Notice to the Class Members Was Adequate

         The Court must review the settlement notice procedures implemented by the parties. In that notice of the class action was previously approved, the Court is only concerned with notice of the settlements. Rule 23 includes two provisions concerning notice to the class members.

         First, Rule 23(c)(2)(B) requires that class members be given the best notice practicable under the circumstances, including individual notice to all potential class members identifiable through reasonable efforts. Specifically, the Rule provides that such notice must, in clear, concise, and plain language, state: (i) the nature of the action; (ii) the definition of the class certified; (iii) the class claims, issues, or defenses; (iv) the class member's right to enter an appearance by an attorney; (v) the class member's right to be excluded ...


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