In re Braskem Securities Litigation

MEMORANDUM OF LAW in Support re: 139 MOTION for Disbursement of Funds . . Document

S.D.N.Y.November 16, 2018

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK IN RE BRASKEM, S.A., SECURITIES LITIGATION Civil Action No. 15-CV-5132-PAE MEMORANDUM OF LAW IN SUPPORT OF UNOPPOSED MOTION FOR ENTRY OF A CLASS DISTRIBUTION ORDER Lead Plaintiff Boilermaker-Blacksmith National Pension Trust (“Boilermaker” or “Lead Plaintiff”) submits this memorandum in support of its Unopposed Motion for Entry of a Class Distribution Order (the “Motion”). The proposed plan for distribution of the Net Settlement Fund is set forth in the accompanying Declaration of Stephanie Amin-Giwner in Support of Motion for Distribution of Net Settlement Fund (“Amin-Giwner Decl.”), submitted on behalf of the Court- approved Claims Administrator, Garden City Group, LLC (“GCG”). Lead Plaintiff has provided reasonable notice of the Motion to Defendants (together, with Lead Plaintiff, the “Parties”), consistent with paragraph 39 of the Stipulation and Agreement of Settlement (ECF No. 121) (the “Settlement”).1 I. OVERVIEW On September 14, 2017, the Parties entered into the Settlement and Lead Plaintiff filed a motion for preliminary approval thereof. ECF No. 122. The Court granted that motion on September 15, 2017. ECF No. 126 (“Preliminary Approval Order”). Pursuant to the Preliminary Approval Order, the Claims Administrator mailed approximately 26,709 copies of the Notice of 1 Unless otherwise noted, capitalized terms have the meanings set forth in the Settlement and the Amin-Giwner Declaration. Case 1:15-cv-05132-PAE Document 141 Filed 11/16/18 Page 1 of 7 2 Pendency of Class Action and Proposed Settlement (the “Notice Packet”) to potential members of the Settlement Class, published the Settlement Notice over PR Newswire and in The Wall Street Journal, established a Settlement website (http://www.braskemsecuritiessettlement.com), and set up a telephone hotline. See Affidavit of Jose C. Fraga dated February 14, 2018, ECF No. 129-2, and Supplemental Affidavit of Jose C. Fraga dated February 14, 2018, ECF No. 130-1. The website and hotline enabled Settlement Class Members to obtain information about the Settlement, including deadlines for requesting exclusion, objecting, and filing claims, and provided access to important documents relevant to the Settlement, including the Notice Packet. Id. Under the terms of the Settlement, a $10,000,000 Settlement Fund was established for the settlement of the Released Claims asserted against Defendants. Pursuant to the Settlement, Notice, and Proof of Claim Form, all Settlement Class Members wishing to participate in the Settlement were required to submit Proof of Claim Forms by mail, postmarked on or before January 16, 2018. As detailed in the Amin-Giwner Declaration, the Claims Administrator received and reviewed all submitted Claims and, to the extent that a Claim was deficient in any regard, the Claims Administrator notified the Claimant of the deficiency and advised the Claimant as to the possible ways to cure the deficiency. Amin-Giwner Decl., ¶¶ 6-22. As described more fully in the Amin-Giwner Declaration, of the 3,589 Claims received by the Claims Administrator, 388 were postmarked after the January 16, 2018 deadline. Amin-Giwner Decl,, ¶ 32. No Claim that was received after the deadline, but is otherwise eligible, has been recommended for rejection. It is our belief that when the equities are balanced, it would be unfair to prevent an otherwise valid Claim from participating in the distribution of the Net Settlement Fund solely because it was submitted after the deadline to submit Proof of Claim Forms, but while the Claims were still being processed. Accordingly, it is respectfully requested that this Court Case 1:15-cv-05132-PAE Document 141 Filed 11/16/18 Page 2 of 7 3 approve GCG’s administrative recommendation and permit GCG to include late, but otherwise eligible, Proofs of Claim in the Distribution Plan. See Amin-Giwner Decl., ¶¶ 32-33. Despite the request that the Court grant approval of distribution to late but otherwise eligible Claims that have been received, there must be a final cut-off date after which no more Claims may be accepted so that a proportional distribution of the Net Settlement Fund may take place. Acceptance of any Claim received after preparation of this Motion would necessarily require a delay in the distribution. Accordingly, it is also respectfully requested that this Court enter an Order directing that no Claim received after October 15, 2018 be included in the initial distribution, unless the Court later orders otherwise. “[A]t some point in the distribution of a large class action settlement, such as this one, ‘a cutoff date is essential and … the matter must be terminated.’” In re Citigroup Inc. Sec. Litig., No. 09-MD-2070 (SHS), 2014 WL 7399039, at *4 (S.D.N.Y. Dec. 29, 2014) (quoting In re Gypsum Antitrust Cases, 565 F.2d 1123, 1127 (9th Cir. 1977)) (ellipses in original). Indeed, because of “pro rata distribution[], processing the [l]ate [c]laims would delay pay-out to the current authorized claimants, and ‘much of the value of a settlement lies in the ability to make funds available promptly.’” Id. (citing In re Agent Orange Prod. Liab. Litig., 611 F. Supp. 1396, 1406 (E.D.N.Y. 1985)). Accordingly, Lead Plaintiff respectfully requests that the Court impose a cut-off date of October 15, 2018. II. THE DEFICIENCY PROCESS AND DISPUTED CLAIMS If a Proof of Claim Form was deficient or defective, GCG sent a rejection letter, samples of which are attached as Exhibit A to the Amin-Giwner Declaration, advising the Claimant that he, she, or it had 20 days to submit additional information to cure the Claim, or else GCG would recommend the Claim for rejection. Amin-Giwner Decl., ¶¶ 19-21. GCG sent approximately 3,095 such letters, and worked diligently with Claimants to resolve deficiencies where possible. Id. As a result of this process, a number of Claimants with initially deficient Claims are now eligible to Case 1:15-cv-05132-PAE Document 141 Filed 11/16/18 Page 3 of 7 4 participate in the Settlement. Id. Nevertheless, 3,044 Claims were ultimately rejected, mostly because the transactions did not calculate to a Recognized Loss. Id., ¶ 35. For example, many Claimants filed Claims indicating they had purchased Braskem ADRs during the Class Period, but had also sold out of their positions completely before March 10, 2015—the sole date on which the operative complaint alleges the fraud was revealed. As such, under the theory of the operative complaint, such Claimants were not harmed by the fraud, as they both purchased and sold at an inflated price. E.g., Dura Pharm., Inc. v. Broudo, 544 U.S. 336, 342 (2005) (“But if, say, the purchaser sells the shares quickly before the relevant truth begins to leak out, the misrepresentation will not have led to any loss.”) As part of the deficiency process, GCG informed Claimants whose Claims were rejected that they could request judicial review of their Claim. To date, one Claimant (Claim 1116419) has requested such review, and the Claimant’s correspondence with GCG is attached as Exhibit B to the Amin-Giwner Declaration. As that correspondence indicates, that Claimant purchased 5,300 Braskem ADRs in July and August 2011, and sold the same amount on March 19, 2012—three years before the fraud was allegedly disclosed on March 10, 2015. As such, this Claimant cannot satisfy the loss causation standard set forth in Dura. Moreover, the documentation provided to support the purchase of 4,800 of the Braskem ADRs was inadequate. Amin-Giwner Decl., ¶ 31; id., Exhibit B. Accordingly, Lead Plaintiff and Lead Counsel agree with GCG that this Claim should be rejected. III. DISPOSITION OF CLAIMS As detailed in the Amin-Giwner Declaration, GCG has determined that 545 Claims are acceptable and should receive a distribution. This number includes 469 timely filed valid Claims Case 1:15-cv-05132-PAE Document 141 Filed 11/16/18 Page 4 of 7 5 and 76 late, but otherwise valid, Claims. Amin-Giwner Decl., ¶ 32. These claims represent total Recognized Losses of $22,752,978.61.2 Id., ¶ 34. IV. DISTRIBUTION OF NET SETTLEMENT FUND Based on the substantial experience of Lead Counsel in similar distributions, it can be expected that a certain number of the payments to be distributed to Settlement Class Members who filed valid Claims will not be cashed promptly. To encourage Authorized Claimants to promptly cash their distributions and to avoid or reduce future expenses relating to unpaid distributions, we propose that all the distribution checks bear a notation “CASH PROMPTLY, VOID AND SUBJECT TO RE-DISTRIBUTION IF NOT CASHED WITHIN 90 DAYS AFTER ISSUE DATE.” Amin-Giwner Decl., at ¶ 42. Moreover, as described above, in order to allow the full and final distribution of the Net Settlement Fund, it is necessary to bar any further claims against the Net Settlement Fund and to provide that all persons involved in the review, verification, calculation, tabulation, or any other aspect of the processing of the claims submitted herein, or otherwise involved in the administration or taxation of the Net Settlement Fund, be released and discharged from any and all claims arising out of such involvement beyond the amount allocated to them. Accordingly, it is respectfully requested that the Court issue an order for distribution of the balance of the Net Settlement Fund 2 Recognized Losses total $16,632,533.11 for timely valid Claims, and $6,120,445.50 for late but otherwise valid Claims. Additionally, the $10,000,000 settlement represents approximately 44% of total Recognized Losses. And, after fees and expenses, Class Members are projected to recover approximately 32% of their Recognized Losses—a substantial figure in securities class actions. E.g., Stefan Boettrick and Svetlana Starykh, NERA Economic Consulting, Recent Trends in Securities Class Action Litigation: 2017 Full-Year Review, dated January 29, 2018, available at http://www.nera.com/content/dam/nera/publications/2018/PUB_Year_End_Trends_Report_0118 _final.pdf, at 38 (reporting median ratio of settlement to investor losses of between 1.3% to 2.7% between 2008 and 2017). Case 1:15-cv-05132-PAE Document 141 Filed 11/16/18 Page 5 of 7 6 allowing for these terms. The proposed Class Distribution Order filed herewith includes such terms at paragraph 8. V. DISPOSITION OF UNCLAIMED OR UNCASHED DISTRIBUTION CHECKS, OR OF REMAINING FUNDS IN THE NET SETTLEMENT FUND Paragraph 39 of the Settlement provides that if any funds remain in the Net Settlement Fund by reason of uncashed checks or otherwise, after the Claims Administrator has made reasonable and diligent efforts to encourage Authorized Claimants who are entitled to participate in the distribution of the Net Settlement Fund to cash their distribution checks, then the Net Settlement Fund will be paid to Authorized Claimants from the Escrow Account in specified increments until, in the determination of the Claims Administrator, in consultation with Lead Counsel, it is no longer economically feasible to distribute the remaining funds, at which time any such remaining funds, after payment of any further Notice and Administration Costs and Taxes, shall be donated to a nonsectarian charitable organization(s) certified as tax-exempt under the United States Internal Revenue Code Section 501(c)(3), as approved by the Court. The proposed Class Distribution Order filed herewith confirms the Settlement’s provisions for such re-distribution of any residue of the Net Settlement Fund. VI. CONCLUSION For the above reasons, Lead Plaintiff respectfully requests that its Motion for a Class Distribution Order be granted. Dated: November 16, 2018 Respectfully submitted, COHEN MILSTEIN SELLERS & TOLL PLLC /s/ Christopher Lometti Steven J. Toll Times Wang 1100 New York Avenue, N.W. Suite 500 Washington, D.C. 20005 Case 1:15-cv-05132-PAE Document 141 Filed 11/16/18 Page 6 of 7 7 (202) 408-4600 stoll@cohenmilstein.com twang@cohenmilstein.com Christopher Lometti 88 Pine Street, 14th Floor New York, NY 10005 (212) 838-7797 clometti@cohenmilstein.com Lead Counsel for Lead Plaintiff Case 1:15-cv-05132-PAE Document 141 Filed 11/16/18 Page 7 of 7