Proposed Lead Plaintiffs' Unopposed Motion For Preliminary Approval Of Proposed Class Action

300 Pages·2011·14.3 MB·English

Case 2:07-cv-01603-SRB Document 116 Filed 11/15/10 Page 1 of 26
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In re LIMELIGHT NETWORKS, INC. ) Master File No. CV07-01603-PHX-SRB
SECURITIES LITIGATION )
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This Document relates to: )
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All Actions )
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LODGED: Proposed Lead Plaintiffs’ Unopposed Motion For
Preliminary Approval Of Proposed Class Action Settlement And
Memorandum Of Points And Authorities In Support Thereof Attached
Case 2:07-cv-01603-SRB Document 116 Filed 11/15/10 Page 2 of 26
1 TIFFANY & BOSCO, P.A.
Richard G. Himelrick, #004738
2 J. James Christian, #023614
Third Floor Camelback Esplanade II
3 2525 East Camelback Road
Phoenix, Arizona 85016-4237
4 Telephone: [phone]
Facsimile: [phone]
5 [email protected]
[email protected]
6
Lead Plaintiffs’ Liaison Counsel
7
BARROWAY TOPAZ KESSLER MELTZER &
8 CHECK, LLP
Christopher L. Nelson, Esquire (Pro Hac Vice)
9 Mark S. Danek, Esquire (Pro Hac Vice)
280 King of Prussia Road
10 Radnor, PA 19087
Telephone: [phone]
11 Facsimile: [phone]
[email protected]
12 [email protected]
13 LABATON SUCHAROW LLP
Christopher J. Keller, Esquire (Pro Hac Vice)
14 Jonathan Gardner, Esquire (Pro Hac Vice)
140 Broadway
15 New York, NY 10005
Telephone: [phone]
16 Facsimile: [phone]
[email protected]
17 [email protected]
18 Lead Plaintiffs’ Counsel
19 UNITED STATES DISTRICT COURT
20 FOR THE DISTRICT OF ARIZONA
21 )
In re LIMELIGHT NETWORKS, INC. ) Master File No. CV07-01603-PHX-SRB
22 SECURITIES LITIGATION )
)LEAD PLAINTIFFS’ UNOPPOSED
23 ) MOTION FOR PRELIMINARY
This Document relates to: ) APPROVAL OF PROPOSED
24 ) CLASS ACTION SETTLEMENT AND
)MEMORANDUM OF POINTS
25 All Actions ) AND AUTHORITIES IN SUPPORT
)THEREOF
26 )
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27 )
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28 )
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LEAD PLAINTIFFS’ UNOPPOSED MOTION FOR PRELIMINARY APPROVAL OF
PROPOSED CLASS ACTION SETTLEMENT NO. CV07-01603-PHX-SRB
Case 2:07-cv-01603-SRB Document 116 Filed 11/15/10 Page 3 of 26
1 TABLE OF CONTENTS
2
TABLE OF AUTHORITIES ii
3
PRELIMINARY STATEMENT 1
4
FACTUAL BACKGROUND 3
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I. DESCRIPTION OF THE PROCEEDINGS 3
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II. SETTLEMENT DISCUSSIONS 5
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III. THE PROPOSED SETTLEMENT 6
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IV. PROPOSED SCHEDULE OF EVENTS 7
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ARGUMENT 7
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I. THE SETTLEMENT MERITS PRELIMINARY APPROVAL 7
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A. The Settlement Is the Result of a Thorough and Arm’s-Length Process 8
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B. The Settlement Is Well Within the Range of Reasonableness 9
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II. THE PROPOSED SETTLEMENT NOTICE SATISFIES THE
14 REQUIREMENTS OF RULES 23(d) AND (e) AND DUE PROCESS 11
15 III. THE COURT SHOULD PRELIMINARILY CERTIFY THE
SETTLEMENT CLASS 13
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A. Standards Applicable to Class Certification 13
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B. The Settlement Class Meets the Requirements of Rule 23(a) 14
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1. Rule 23(a)(1): Numerosity 14
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2. Rule 23(a)(2): Questions of Law or Fact Are Common 15
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3. Rule 23(a)(3): Lead Plaintiffs’ Claims Are Typical 16
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4. Rule 23(a)(4): The Lead Plaintiffs Are Adequate 16
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C. The Settlement Class Meets the Requirements of Rule 23(b)(3) 17
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1. Common Questions of Law or Fact Predominate 17
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2. A Class Action Is a Superior Method of Adjudication 18
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D. Lead Plaintiffs’ Counsel Should Be Appointed Class Counsel 19
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CONCLUSION 19
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LEAD PLAINTIFFS’ UNOPPOSED MOTION FOR PRELIMINARY APPROVAL OF i
PROPOSED CLASS ACTION SETTLEMENT, No. CV07-01603-PHX-SRB
Case 2:07-cv-01603-SRB Document 116 Filed 11/15/10 Page 4 of 26
1 TABLE OF AUTHORITIES
2 Cases Page(s)
3 Amchem Prods. Inc. v. Windsor,
521 U.S. 591 (1997) 17
4
Blackie v. Barack,
5 524 F.2d 891 (9th Cir. 1975) 15
6 Bogner v. Masari Inv. Inc.,
257 F.R.D. 529(D. Ariz. 2009) 16
7
Churchill Village, L.L.C. v. Gen. Elec.,
8 361 F.3d 566 (9th Cir. 2004) 10, 12
9 Class Plaintiffs v. City of Seattle,
955 F.2d 1268 (9th Cir. 1992) 7
10
In re Cooper Cos. Sec. Litig.,
11 254 F.R.D. 628 (C.D. Cal. 2009) 13, 17
12 Desai v. Deutsche Bank Sec. Litig.,
No. 08-55081, 2009 WL 2245223 (9th Cir. July 29, 2009) 14, 18
13
Dukes v. Wal-Mart, Inc.,
14 509 F.3d 1168 (9th Cir. 2007) 14
15 Hanlon v. Chrysler Corp.,
150 F.3d 1011 (9th Cir. 1998) 17
16
Horton v. USAA Casualty Ins. Co.,
17 266 F.R.D. 360 (D. Ariz. 2009) 8, 10, 13
18 Jaffe v. Morgan Stanley & Co.,
No. C-06-3903 THE, 2008 WL 346417 (ND. Cal. Feb. 7, 2008) 13
19
Lerwill v. Infligh t Motion Pictures, Inc.,
20 582 F.2d 507 (9th Cir. 1978) 16
21 Linney v. Cellular Alaska P’ship,
151 F.3d 1234 (9th Cir. 1998) 7
22
McPhail v. First Command Fin. Planning, Inc.,
23 247 F.R.D. 598 (S.D. Cal. 2007) 18
24 Mendoza v. Tucson Sch. Dist. No. 1,
623 F.2d 1338 (9th Cir. 1980) 12
25
Mullane v. Central Hanover Bank & Trust Co.,
26 339 U.S. 306 (1950) 12
27 Negrete v. Allianz Life Ins. Co. of N. Am.,
238 F.R.D. 482 (C.D. Cal. 2006) 18
28
LEAD PLAINTIFFS’ UNOPPOSED MOTION FOR PRELIMINARY APPROVAL OF ii
PROPOSED CLASS ACTION SETTLEMENT, No. CV07-01603-PHX-SRB
Case 2:07-cv-01603-SRB Document 116 Filed 11/15/10 Page 5 of 26
1 In re Omnivision Tech. Inc.,
559 F. Supp. 2d 1036 (N.D. Cal. 2008) 9
2
Salt River Pima-Maricopa Indian Cmty. v. U.S.,
3 266 F.R.D. 375 (D. Ariz. 2010) 15
4 Stratton v. Am. Med. Sec. Inc.,
266 F.R.D. 340 (D. Ariz. 2009) 16
5
In re THQ, Inc. Sec. Litig.,
6 No. CV-001783 (EX), 2002 WL 1832145 (C.D. Cal. Mar. 22, 2002) 13
7 Weinberger v. Jackson,
102 F.R.D. 839 (N.D. Cal. 1984) 16
8
West v. Circle K Stores, Inc.,
9 No. S-04-0438, 2006 WL 1652598 (E.D. Cal. June 13, 2006) 7, 8, 9
10 Yamner v. Boich,
No. 92-20597, 1994 WL 514035 (N.D. Cal. Sept. 15, 1994) 13, 15
11
12
13 STATUTES
14 Fed. R. Civ. P. 23(a) 14, 19
15 Fed. R. Civ. P. 23(a)(2) 15
16 Fed. R. Civ. P. 23(b)(3) 17
17 Fed. R. Civ. P. 23(b)(3)(A)-(D) 18
18 Fed. R. Civ. P. 23(g)(1) 19
19 15 U.S.C. §§ 78u-4 2
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LEAD PLAINTIFFS’ UNOPPOSED MOTION FOR PRELIMINARY APPROVAL OF iii
PROPOSED CLASS ACTION SETTLEMENT, No. CV07-01603-PHX-SRB
Case 2:07-cv-01603-SRB Document 116 Filed 11/15/10 Page 6 of 26
1 PRELIMINARY STATEMENT
2 Mitchell Robbins, David Gechlik, Thaiky Nguyen and Del G. Nuzum (collectively
3 “Lead Plaintiffs”), the Court-appointed Lead Plaintiffs for the proposed class, submit this
4 memorandum of law in support of their unopposed motion, pursuant to Fed. R. Civ. P.
5 23(e), for preliminary approval of the proposed $1,900,000 cash settlement (the
6 “Settlement”) of claims against defendants Limelight Networks, Inc. (“Limelight” or the
7 “Company”); Jeffrey W. Lunsford, Nathan F. Raciborski, Michael W. Gordon, Allan M.
8 Kaplan, Walter D. Amaral, Joseph H. Gleberman, Fredric W. Harman, Mark A. Jung,
9 Peter J. Perrone, David C. Peterschmidt, Gary Valenzuela and Matthew Hale (the
10 “Individual Defendants”); and Goldman, Sachs & Co., Morgan Stanley & Co.
11 Incorporated, Jefferies & Company, Inc., Piper Jaffray & Co., and Friedman, Billings,
12 Ramsey & Co. Inc. (the “Underwriters” and collectively, with Limelight and the
13 Individual Defendants, “Defendants”) in this proposed class action (the “Litigation”), as
14 set forth in the Stipulation of Settlement, dated as of October 29, 2010 (the
15 “Stipulation”).1
16 If approved, the Settlement will finally resolve Lead Plaintiffs’ appeal of the
17 dismissal of their claims to the United States Court of Appeals for the Ninth Circuit and
18 release all claims, and related claims, in the Litigation.
19 In connection with preliminary approval of the Settlement, and for purposes of
20 settlement only, Lead Plaintiffs respectfully request preliminary certification of a
21 settlement class of all Persons who purchased or acquired the common stock of Limelight
22 Networks, Inc. between June 7, 2007 and August 14, 2007, inclusive (the “Settlement
23 Class Period”), and were allegedly damaged thereby, including those persons or entities
24 who acquired shares of Limelight common stock issued pursuant to or traceable to
25 Limelight’s initial public offering (the “Settlement Class”), and appointment of Lead
26
All capitalized terms used herein are defined in the Stipulation and have the same
27 1
meaning as set forth therein. A true and correct copy of the Stipulation, with annexed
28 exhibits, is annexed hereto as Exhibit 1.
LEAD PLAINTIFFS’ UNOPPOSED MOTION FOR PRELIMINARY APPROVAL OF 1
PROPOSED CLASS ACTION SETTLEMENT, CV-06-5036-R (CWX)
Case 2:07-cv-01603-SRB Document 116 Filed 11/15/10 Page 7 of 26
1 Plaintiffs as Class Representatives and Labaton Sucharow LLP (“Labaton Sucharow”)
2 and Barroway Topaz Kessler Meltzer & Check, LLP (“Barroway Topaz,” together with
3 Labaton Sucharow, “Lead Plaintiffs’ Counsel”) as Class Counsel for the Settlement
4 Class. Lead Plaintiffs also seek approval of the form, substance and the requirements of
5 the proposed Notice of Pendency and Proposed Settlement of Class Action (“Notice”),
6 Proof of Claim and Release form (“Proof of Claim”), and the Summary Notice
7 (“Summary Notice”), appended as Exhibits A-1 to A-3 to the Proposed Order
8 Preliminarily Approving Settlement and Providing for Notice (“Preliminary Approval
9 Order”), annexed here to as Exhibit 2, and the means and methods for disseminating
10 notice, as comporting with due process and the Private Securities Litigation Reform Act
11 of 1995 (the “PSLRA”), 15 U. S.C. § § 78u-4 et seq.
2
12 Lead Plaintiffs respectfully submit that the $1,900,000 proposed Settlement is a
13 very substantial and fair result for the Settlement Class, given the dismissal of the claims
14 by this Court. As appellants, Lead Plaintiffs had the burden of establishing that the Court
15 erred in granting Defendants’ motion to dismiss, and there were significant risks that
16 Lead Plaintiffs would not prevail on appeal and there would be no recovery at all for the
17 Settlement Class. The decision to settle was well-informed by the rigorous motion
18 practice before this Court and the briefing of Lead Plaintiffs’ appeal to the Ninth Circuit,
19 and was the result of arm’s-length negotiations between counsel for the Defendants and
20 Lead Plaintiffs. For the following reasons, Lead Plaintiffs respectfully submit that the
21 Court should grant preliminary approval to the proposed Settlement.
22
23 In addition to the approvals mentioned above, the proposed Preliminary Approval
2
Order also seeks, inter alia: (i) the scheduling of a hearing (the “Settlement Hearing”) to
24 consider the fairness, reasonableness and adequacy of the proposed Settlement and Plan
of Allocation for distributing the Net Settlement Fund and Lead Plaintiffs’ Counsel’s
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application for an award of attorneys’ fees and expenses; (ii) approval of the appointment
of A.B. Data, Ltd. (“A.B. Data”) to administer the Settlement; (iii) approval of the
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procedures by which Persons may request to be excluded, or “opt out,” from the
Settlement Class; and (iv) approval of the procedures for Settlement Class Members to
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object to the terms of the Settlement, Plan of Allocation, or applications for fees and
28 expenses.
LEAD PLAINTIFFS’ UNOPPOSED MOTION FOR PRELIMINARY APPROVAL OF 2
PROPOSED CLASS ACTION SETTLEMENT, No. CV07-01603-PHX-SRB
Case 2:07-cv-01603-SRB Document 116 Filed 11/15/10 Page 8 of 26
1 FACTUAL BACKGROUND
2 I. DESCRIPTION OF THE PROCEEDINGS
3 The Litigation was brought on behalf of all Persons who purchased or acquired the
4 common stock of Limelight Networks, Inc. during the Settlement Class Period, and were
5 allegedly damaged thereby, including those persons or entities who acquired shares of
6 Limelight common stock issued pursuant to or traceable to Limelight’s initial public
7 offering on June 8, 2007 (the “IPO”).
8 On August 13, 2007, plaintiff Faisal Mustafa filed a securities class action
9 complaint against Limelight in the United States District Court for the Southern District
10 of New York on behalf of purchasers of Limelight common stock in the IPO. Mustafa v.
11 Limelight Networks, Inc., et al., No. 07-CIV-7205 (PAC). Subsequently, five other
12 substantially similar complaints were filed in the Southern District of New York alleging
13 violations of the federal securities laws: Radecki v. Limelight Networks, Inc., et al., No.
14 07-CIV-7394 (PAC), filed on August 20, 2007; Weernink v. Limelight Networks, Inc., et
15 al., No. 07-CIV-7404 (PAC), filed on August 20, 2007; Kairalla v. Limelight Networks,
16 Inc., et al., No. 07-CIV-7417 (PAC), filed on August 21, 2007; Paul v. Limelight
17 Networks, Inc., et al., No. 07-CIV-7432 (PAC), filed on August 21, 2007; and Artis v.
18 Limelight Networks, Inc., et al., No. 07-CIV-7475 (PAC), filed on August 23, 2007
19 (collectively, the “New York Cases”). On August 21, 2007, plaintiff Larry Heffez filed a
20 similar complaint against Limelight in the United States District Court for the District of
21 Arizona. Heffez v. Limelight Networks, Inc., et al., No. 07-CV-01603-SRB.
22 The Court appointed Mitchell Robbins, David Gechlik, Thaiky Nguyen and Del G.
23 Nuzum Lead Plaintiffs on October 31, 2007 and approved their selection of Labaton
24 Sucharow and Schiffrin Barroway Topaz & Kessler, LLP (n/k/a Barroway Topaz Kessler
25 Meltzer & Check, LLP) as Lead Plaintiffs’ Counsel.
26 On November 2, 2007, the New York Cases were transferred to the United States
27 District Court for the District of Arizona, and on December 11, 2007, the Court
28
LEAD PLAINTIFFS’ UNOPPOSED MOTION FOR PRELIMINARY APPROVAL OF 3
PROPOSED CLASS ACTION SETTLEMENT, No. CV07-01603-PHX-SRB
Case 2:07-cv-01603-SRB Document 116 Filed 11/15/10 Page 9 of 26
1 consolidated all seven actions in the present Litigation, In re Limelight Networks, Inc.
2 Securities Litigation, Master File No. CV07-01603-PHX-SRB.
3 On January 30, 2008, Lead Plaintiffs filed the operative complaint, the
4 Consolidated Class Action Complaint (the “Consolidated Complaint”). (D.E. 73.) The
5 Consolidated Complaint alleged that Limelight violated Sections 11, 12(a)(2), and 15 of
6 the Securities Act of 1933 (the “Securities Act”) when it issued a prospectus, filed in
7 connection with the IPO, that contained misrepresentations and omissions of material
8 information concerning the state of Limelight’s business and future business prospects.
9 This allegedly inflated the price of Limelight’s common stock issued in the IPO and
10 during the Settlement Class Period.
11 During the course of the Litigation, Lead Plaintiffs conducted a thorough
12 investigation of the claims and defenses at issue, which included, inter alia: (i) review
13 and analysis of filings made by Defendants with the United States Securities and
14 Exchange Commission (“SEC”); (ii) review and analysis of press releases, public
15 statements, securities analysts’ reports, conference calls and announcements made by
16 Defendants; (iii) identification of over one hundred potential witnesses and interviews
17 with approximately a dozen third parties (iv) review and analysis of news articles
18 concerning Defendants; (v) consultations with an expert in the fields of damages; and (vi)
19 research and analysis of the applicable law with respect to the claims and potential
20 defenses.
21 Defendants moved to dismiss the Consolidated Complaint on March 17, 2008.
22 Following briefing by both sides, the Court, on August 7, 2008, dismissed the Section 12
23 claim with prejudice, because the Lead Plaintiffs lacked standing, and the Section 11 and
24 15 claims, with leave to amend. On August 29, 2008, the Court entered a final judgment
25 in favor of Defendants.
26 On September 5, 2008, Lead Plaintiffs appealed the Court’s dismissal of the
27 Section 11 and 15 claims. The Lead Plaintiffs’ opening brief and record on appeal were
28 filed on December 22, 2008. Defendants’ responsive brief was filed on February 3, 2009,
LEAD PLAINTIFFS’ UNOPPOSED MOTION FOR PRELIMINARY APPROVAL OF 4
PROPOSED CLASS ACTION SETTLEMENT, No. CV07-01603-PHX-SRB
Case 2:07-cv-01603-SRB Document 116 Filed 11/15/10 Page 10 of 26
1 and Lead Plaintiffs’ reply brief was filed on March 6, 2009. Oral argument on the appeal
2 was scheduled for December 10, 2009.
3 While Lead Plaintiffs’ appeal was pending before the Ninth Circuit, the Settling
4 Parties engaged in arm’s-length negotiations and reached an agreement in principle to
5 settle the Litigation. On or about November 23, 2009, the Settling Parties entered into a
6 Memorandum of Understanding (“MOU”) setting forth the general terms of their
7 agreement. The Settling Parties informed the Ninth Circuit of the settlement in principle,
8 and oral argument on Lead Plaintiffs’ appeal was taken off calendar. Pursuant to a joint
9 motion, on April 21, 2010 the Litigation was remanded by the Ninth Circuit to the Court
10 for further proceedings in connection with the Settlement.
11 In view of the foregoing, Lead Plaintiffs were well-informed about the strengths
12 and weaknesses of their claims and had a strong foundation for negotiating the
13 Settlement.
14 II. SETTLEMENT DISCUSSIONS
15 Lead Plaintiffs and Defendants participated in a series of informal arm’s-length
16 settlement discussions and negotiations during the appellate stage of this Litigation.
17 Initially, Lead Plaintiffs and Defendants participated in a telephonic mediation before the
18 Ninth Circuit. Although this mediation did not result in settlement at that time, it laid the
19 groundwork for both sides to resume arm’s-length negotiations, which ultimately resulted
20 in the Settlement.
21 Thereafter, the Settling Parties’ negotiations focused on the key issues of the
22 Litigation (about which both sides fundamentally disagreed), the likelihood of an
23 affirmance of the Court’s dismissal and the potential of success upon remand. Chief
24 among the issues that the Settling Parties disagreed upon were two of the central
25 arguments of the Defendants’ Motion to Dismiss. The Defendants argued in their Motion
26 to Dismiss, and this Court agreed, that (1) Lead Plaintiffs failed to allege that Defendants’
27 prospectus contained material omissions or misstatements; and (2) Lead Plaintiffs failed
28
LEAD PLAINTIFFS’ UNOPPOSED MOTION FOR PRELIMINARY APPROVAL OF 5
PROPOSED CLASS ACTION SETTLEMENT, No. CV07-01603-PHX-SRB