Xiang v. Inovalon Holdings, Inc. et alMEMORANDUM OF LAW in Support re: 170 MOTION for Settlement for Preliminary Approval. . DocumentS.D.N.Y.March 6, 2019 1535789_1 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK x YI XIANG, Individually and on Behalf of All Others Similarly Situated, Plaintiff, vs. INOVALON HOLDINGS, INC., KEITH R. DUNLEAVY, THOMAS R. KLOSTER, DENISE K. FLETCHER, ANDRÉ S. HOFFMANN, LEE D. ROBERTS, WILLIAM J. TEUBER JR., GOLDMAN SACHS & CO., MORGAN STANLEY & CO. LLC, CITIGROUP GLOBAL MARKETS INC., MERRILL LYNCH, PIERCE, FENNER & SMITH, INCORPORATED and UBS SECURITIES LLC, Defendants. : : : : : : : : : : : : : : : : : : : x Civil Action No. 1:16-cv-04923-VM-KNF (Consolidated) CLASS ACTION LEAD PLAINTIFF’S MEMORANDUM OF LAW IN SUPPORT OF MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT Case 1:16-cv-04923-VM-KNF Document 171 Filed 03/06/19 Page 1 of 31 TABLE OF CONTENTS Page - i - 1535789_1 I. INTRODUCTION ...............................................................................................................1 II. SUMMARY OF THE LITIGATION ..................................................................................2 III. THE PROPOSED SETTLEMENT WARRANTS PRELIMINARY APPROVAL ............4 A. Terms of the Settlement ...........................................................................................5 B. The Standards for Reviewing a Proposed Settlement for Preliminary Approval ..................................................................................................................8 C. Preliminary Approval of the Settlement Should Be Granted ...................................9 1. The Complexity, Expense, and Likely Duration of the Litigation Supports Approval of the Settlement .........................................................10 2. The Reaction of the Class to the Settlement ..............................................11 3. The Stage of the Proceedings .....................................................................11 4. The Risk of Establishing Liability and Damages ......................................12 5. The Risks of Maintaining the Class Action Through Trial ........................13 6. The Ability of Defendants to Withstand a Greater Judgment....................14 7. The Reasonableness of the Settlement in Light of the Best Possible Recovery and the Attendant Risks of Litigation ........................................15 IV. THE PROPOSED FORM AND METHOD OF CLASS NOTICE AND THE FORM OF THE PROOF OF CLAIM ARE APPROPRIATE...........................................16 A. The Scope of the Notice Program Is Adequate Under Rule 23(e)(2)(C)(ii) ..........16 B. The Proposed Form of Notice Comports with the Requirements of Due Process, the PSLRA, and Rule 23 and Is the Same or Similar to the Form(s) of Notice Routinely Approved by Courts in This Jurisdiction ................18 V. THE SETTLEMENT ALSO SATISFIES RULE 23(e)(2)(C)’s ADDITIONAL ADEQUACY CRITERIA ..................................................................................................20 A. Attorneys’ Fees and Expenses ...............................................................................20 B. There Are No Side Agreements Other than Opt Outs ...........................................21 C. Class Members Are Treated Equitably ..................................................................21 Case 1:16-cv-04923-VM-KNF Document 171 Filed 03/06/19 Page 2 of 31 Page - ii - 1535789_1 VI. PROPOSED SCHEDULE .................................................................................................21 VII. CONCLUSION ..................................................................................................................22 Case 1:16-cv-04923-VM-KNF Document 171 Filed 03/06/19 Page 3 of 31 TABLE OF AUTHORITIES Page - iii - 1535789_1 CASES Allen v. Dairy Farmers of Am., Inc., No. 5:09-cv-230, 2011 U.S. Dist. LEXIS 48479 (D. Vt. May 4, 2011) ..............................................................................................................8, 9 Chatelain v. Prudential-Bache Sec., 805 F. Supp. 209 (S.D.N.Y. 1992) ............................................................................................9 Citiline Holdings, Inc. v. iStar Fin. Inc., No. 1:08-cv-03612-RJS, slip op. (S.D.N.Y. Apr. 5, 2013) ...........................................................................................................20 D’Amato v. Deutsche Bank, 236 F.3d 78 (2d Cir. 2001).......................................................................................................14 Detroit v. Grinnell Corp., 495 F.2d 448 (2d Cir. 1974).......................................................................................7, 8, 10, 12 Frank v. Eastman Kodak Co., 228 F.R.D. 174 (W.D.N.Y. 2005) ............................................................................................13 Hicks v. Morgan Stanley & Co., No. 01 Civ. 10071 (RJH), 2005 U.S. Dist. LEXIS 24890 (S.D.N.Y. Oct. 24, 2005) .........................................................................................................10 In re “Agent Orange” Prod. Liab. Litig., 597 F. Supp. 740 (E.D.N.Y. 1984), aff’d, 818 F.2d 145 (2d Cir. 1987) ...........................................................................................................................15 In re Alloy, Inc. Sec. Litig., No. 03 Civ. 1597 (WHP), 2004 U.S. Dist. LEXIS 24129 (S.D.N.Y. Dec. 2, 2004).....................................................................................................10, 12 In re AOL Time Warner, Inc. Sec. & ERISA Litig., MDL No. 1500, 2006 U.S. Dist. LEXIS 17588 (S.D.N.Y. Apr. 6, 2006) ...............................................................................................10, 12, 15 In re BHP Billiton Ltd. Sec. Litig., No. 1:16-cv-01445-NRB, slip op. (S.D.N.Y. Jan. 29, 2019) ..........................................................................................................20 In re Currency Conversion Fee Antitrust Litig., MDL No. 1409, 2006 U.S. Dist. LEXIS 81440 (S.D.N.Y. Nov. 8, 2006) ............................................................................................................8 Case 1:16-cv-04923-VM-KNF Document 171 Filed 03/06/19 Page 4 of 31 Page - iv - 1535789_1 In re Fuwei Films Sec. Litig., 634 F. Supp. 2d 419 (S.D.N.Y. 2009)......................................................................................13 In re Genworth Fin., Inc. Sec. Litig., No. 1:14-cv-02392-AKH, slip op. (S.D.N.Y. Nov. 16, 2017) ........................................................................................................20 In re Gilat Satellite Networks, Ltd., No. CV-02-1510 (CPS), 2007 U.S. Dist. LEXIS 29062 (E.D.N.Y. Apr. 19, 2007).........................................................................................................17 In re Global Crossing Sec. & ERISA Litig., 225 F.R.D. 436 (S.D.N.Y. 2004) .......................................................................................11, 15 In re Indep. Energy Holdings PLC Sec. Litig., No. 00 Civ. 6689 (SAS), 2003 U.S. Dist. LEXIS 17090 (S.D.N.Y. Sept. 29, 2003) ........................................................................................................15 In re Intercept Pharm., Inc. Sec. Litig., No. 1:14-cv-01123-NRB, slip op. (S.D.N.Y. May 23, 2016) .........................................................................................................20 In re LIBOR-Based Fin. Instruments Antitrust Litig., 327 F.R.D. 483 (S.D.N.Y. 2018) .............................................................................................14 In re LIBOR-Based Fin. Instruments Antitrust Litig., No. 11 MDL 2262 (NRB), 2014 U.S. Dist. LEXIS 172487 (S.D.N.Y. Dec. 2, 2014).............................................................................................................8 In re Luxottica Grp. S.p.A., Sec. Litig., No. CV 01-3285 (JBW)(MDG), 2005 U.S. Dist. LEXIS 27765 (E.D.N.Y. Nov. 15, 2005) ........................................................................................................17 In re Merrill Lynch & Co. Research Reports Sec. Litig., No. 02 MDL 1484 (JFK), 2007 U.S. Dist. LEXIS 9450 (S.D.N.Y. Feb. 1, 2007) ...........................................................................................................16 In re Michael Milken & Assocs. Sec. Litig., 150 F.R.D. 57 (S.D.N.Y. 1993) .................................................................................................9 In re NASDAQ Market-Makers Antitrust Litig., 176 F.R.D. 99 (S.D.N.Y. 1997) .................................................................................................9 Case 1:16-cv-04923-VM-KNF Document 171 Filed 03/06/19 Page 5 of 31 Page - v - 1535789_1 In re Platinum & Palladium Commodities Litig., No. 10cv3617, 2014 U.S. Dist. LEXIS 96457 (S.D.N.Y. July 15, 2014) ...........................................................................................................9 In re Prudential Sec. Ltd. P’ships Litig., 164 F.R.D. 362 (S.D.N.Y. 1996), aff’d sub nom. Toland v. Prudential Sec. P’ship Litig., 107 F.3d 3 (2d Cir. 1996)...................................................................................17 In re Stock Exchs. Options Trading Antitrust Litig., No. 99 Civ. 0962 (RCC), 2006 U.S. Dist. LEXIS 87825 (S.D.N.Y. Dec. 4, 2006)...........................................................................................................19 In re Warner Chilcott Ltd. Sec. Litig., No. 06 Civ. 11515 (WHP), 2008 U.S. Dist. LEXIS 99840 (S.D.N.Y. Nov. 20, 2008) ..........................................................................................................8 Newman v. Stein, 464 F.2d 689 (2d Cir. 1972).....................................................................................................15 Wal-Mart Stores, Inc. v. Visa U.S.A. Inc., 396 F.3d 96 (2d Cir. 2005).........................................................................................................8 Weinberger v. Kendrick, 698 F.2d 61 (2d Cir. 1982).......................................................................................................19 STATUTES, RULES AND REGULATIONS 15 U.S.C. §77k................................................................................................................................3, 18, 21 §77l(a)(2) .............................................................................................................................3, 14 §77o............................................................................................................................................3 §77z-1(a)(4) .........................................................................................................................6, 20 §77z-1(a)(7) .............................................................................................................................19 §77z-1(a)(7)(A)-(F)..................................................................................................................19 28 U.S.C. §1715........................................................................................................................................17 Case 1:16-cv-04923-VM-KNF Document 171 Filed 03/06/19 Page 6 of 31 Page - vi - 1535789_1 Federal Rules of Civil Procedure Rule 23 ...............................................................................................................................17, 19 Rule 23(e)(1) ..............................................................................................................................4 Rule 23(e)(2) ..............................................................................................................................4 Rule 23(e)(2)(C)(ii) ..................................................................................................................16 Rule 23(e)(2)(C)(iii).................................................................................................................20 Rule 23(e)(2)(C)(iv) .................................................................................................................21 Rule 23(e)(2)(D) ......................................................................................................................21 Rule 23(e)(3) ..............................................................................................................................5 Treasury Regulations §1.468B-1...................................................................................................................................6 SECONDARY AUTHORITIES Manual for Complex Litigation (3d ed. 1995) §30.41.........................................................................................................................................9 Case 1:16-cv-04923-VM-KNF Document 171 Filed 03/06/19 Page 7 of 31 - 1 - 1535789_1 I. INTRODUCTION Lead Plaintiff Roofers Local No. 149 Pension Fund (“Roofers 149”) respectfully submits this memorandum in support of its motion for preliminary approval of the settlement reached in this Litigation (the “Settlement”).1 The proposed Settlement provides a recovery of $17 million in cash to resolve this securities class action against defendants Inovalon Holdings, Inc. (“Inovalon” or the “Company”), Keith R. Dunleavy, Thomas R. Kloster, Denise K. Fletcher, André S. Hoffmann, Lee D. Roberts, William J. Teuber, Jr. (the “Inovalon Defendants”), Citigroup Global Markets Inc., Goldman Sachs & Co. LLC, Merrill Lynch, Pierce, Fenner & Smith, Incorporated, Morgan Stanley & Co. LLC, and UBS Securities LLC (the “Underwriter Defendants” and with the Inovalon Defendants, “Defendants”) related to Inovalon’s February 12, 2015 initial public offering (“IPO”). The Settlement is memorialized in the Stipulation. As explained further herein, the Settlement is the result of a comprehensive assessment of the strengths and weaknesses of the claims asserted in the Litigation, the costs and risk of proceeding with the Litigation, and the cash consideration payable to purchasers of Inovalon common stock on or before August 5, 2015, and represents a very good recovery based on estimated recoverable damages, as explained below. Moreover, the Settlement was reached by counsel with a keen understanding of the merits of the case after the Settling Parties conducted extensive discovery, the Class was certified, and experts were retained. The Settling Parties negotiated the Settlement with the assistance of experienced mediator Michelle Yoshida, Esq., whose efforts enabled the Settling Parties to reach a resolution of this Litigation following an all-day mediation session on October 10, 2018, and continued negotiations while litigation efforts continued. This Settlement will eliminate 1 Unless otherwise defined herein, all capitalized terms have the meanings ascribed to them in the Stipulation of Settlement dated February 19, 2019, filed concurrently herewith. Case 1:16-cv-04923-VM-KNF Document 171 Filed 03/06/19 Page 8 of 31 - 2 - 1535789_1 the risk and uncertainty of continued proceedings, as well as conserve limited judicial and financial resources. By this motion, Lead Plaintiff seeks entry of an order: (1) granting preliminary approval of the proposed Settlement; (2) approving the form and manner of notice of the proposed Settlement to the Class; and (3) setting a hearing date for final approval of the Settlement, the Plan of Allocation of the Net Settlement Fund, Lead Counsel’s application for attorneys’ fees and expenses, and Lead Plaintiff’s application for an award reflecting its contribution to the Litigation (the “Settlement Hearing”) and a schedule for various deadlines relevant thereto (“Notice Order”). As shown below, the proposed Settlement is a very good result for the Class, is fair, reasonable, and adequate under the governing standards in this Circuit, and warrants the approval of this Court. II. SUMMARY OF THE LITIGATION This Litigation arises out of Inovalon’s February 12, 2015 IPO, whereby it sold more than 25 million shares at $27 per share. Lead Plaintiff alleges that the Registration Statement and Prospectus (the “Registration Statement”) for the IPO was materially false and misleading because it failed to disclose that at the time of the IPO, New York State (“NYS”) had implemented certain corporate tax law reforms as of January 1, 2015, and New York City (“NYC”) had announced and publicized correlating reforms retroactive to January 1, 2015, that would increase Inovalon’s effective tax rate and have a material, negative impact on Inovalon’s financial performance, condition and prospects going forward. On August 5, 2015, in a press release announcing 2Q15 financial results and in its Form 10-Q with the SEC filed the next day, Inovalon disclosed the negative impact that the NYS and NYC tax reform had on its financial condition and outlook when it revealed that the Company’s effective tax rate for FY15 jumped to 43% and its FY15 earnings were cut by $0.03 per share. ECF Case 1:16-cv-04923-VM-KNF Document 171 Filed 03/06/19 Page 9 of 31 - 3 - 1535789_1 No. 66 at ¶¶41-44. When trading opened the following day, the price of Inovalon stock fell nearly 30% on unusually high trading volume. Id. at ¶45. The Litigation was commenced on June 24, 2016. On September 20, 2016, the Court appointed Roofers 149 as Lead Plaintiff, and Robbins Geller Rudman & Dowd LLP (“Robbins Geller”) as Lead Counsel. Lead Plaintiff filed its Consolidated Complaint for Violations of the Securities Act of 1933 on December 22, 2016 (the “Complaint”). ECF No. 66. Defendants deny all of Lead Plaintiff’s allegations. In accordance with the Court’s Individual Rules of Practice, following the exchange of letters between counsel to Lead Plaintiff and Defendants, on March 3, 2017, Defendants requested that the Court convene a conference or authorize the filing of a motion to dismiss by Defendants. On May 23, 2017, the Court issued an order construing the prior correspondence as a motion to dismiss, and granted in part and denied in part Defendants’ motion to dismiss the Complaint. Defendants moved for reconsideration of that portion of the Court’s order that held Lead Plaintiff’s claims were not time-barred. Lead Plaintiff opposed the motion and on July 28, 2017, the Court denied Defendants’ motion for reconsideration and request for interlocutory appeal. Defendants answered the Complaint on July 11, 2017. On January 22, 2018, Lead Plaintiff moved to certify the class. Defendants took document and deposition discovery of Lead Plaintiff and its investment manager, Baron Capital Management, and filed their opposition to the motion on February 12, 2018. Lead Plaintiff filed its reply on February 26, 2018. On September 18, 2018, the Court granted in part Lead Plaintiff’s motion with respect to its §§11 and 15 claims, and appointed Lead Plaintiff as Class Representative and Robbins Geller as Class Counsel. The Court dismissed Lead Plaintiff’s §12(a)(2) claim on standing grounds. On October 2, 2018, Defendants filed a petition with the U.S. Court of Appeals for the Second Case 1:16-cv-04923-VM-KNF Document 171 Filed 03/06/19 Page 10 of 31 - 4 - 1535789_1 Circuit to file an interlocutory appeal from the decision on the motion for class certification. Lead Plaintiff filed an opposition to the motion on October 12, 2018, and it remained pending at the time the agreement-in-principle to settle the Litigation was reached. The Settling Parties have conducted extensive fact and expert discovery, including the production, review and analysis of over 588,000 pages of documents by parties and non-parties, and the exchange of expert reports. While expert discovery was ongoing, the Settling Parties agreed to attempt to resolve the case through mediation. On October 10, 2018, the Defendants and Lead Plaintiff participated in an in-person mediation session with Michelle Yoshida, Esq., an experienced mediator. The mediation was preceded by submission of mediation statements by the Settling Parties. The Settling Parties engaged in arm’s-length negotiations during the mediation session, but were unable to reach an agreement. Following the mediation, the Settling Parties completed expert discovery while settlement discussions continued through Ms. Yoshida. On January 17, 2019, the Settling Parties reached an agreement-in-principle to resolve the Litigation. The agreement included, among other things, the Settling Parties’ agreement to settle the Litigation in return for a cash payment of $17 million for the benefit of the Class, subject to the negotiation of the terms of a Stipulation of Settlement and approval by the Court. Thereafter, the Settling Parties negotiated and executed the Stipulation of Settlement (the “Stipulation”). III. THE PROPOSED SETTLEMENT WARRANTS PRELIMINARY APPROVAL Pursuant to Rule 23(e)(1), the issue at preliminary approval is whether the Court “will likely be able to: (i) approve the proposal under Rule 23(e)(2); and (ii) certify the class for purposes of judgment on the proposal.” Rule 23(e)(2) provides: (2) Approval of the Proposal. If the proposal would bind class members, the court may approve it only after a hearing and only on finding that it is fair, reasonable, and adequate after considering whether: Case 1:16-cv-04923-VM-KNF Document 171 Filed 03/06/19 Page 11 of 31 - 5 - 1535789_1 (A) the class representatives and class counsel have adequately represented the class; (B) the proposal was negotiated at arm’s length; (C) the relief provided for the class is adequate, taking into account: (i) the costs, risks, and delay of trial and appeal; (ii) the effectiveness of any proposed method of distributing relief to the class, including the method of processing class-member claims; (iii) the terms of any proposed award of attorney’s fees, including timing of payment; and (iv) any agreement required to be identified under Rule 23(e)(3); and (D) the proposal treats class members equitably relative to each other. All of these elements are met here and are addressed below. A. Terms of the Settlement The Settlement set forth in the Stipulation resolves the Class’s claims against Defendants. The Stipulation provides that Inovalon and/or its insurance carriers, on behalf of all Defendants, will pay or cause to be paid the Settlement Amount of $17 million in cash, inclusive of attorneys’ fees and expenses. Within fifteen (15) business days of the entry of the Notice Order, the entire $17 million Settlement Amount will be paid to the Escrow Agent and the funds will be invested in U.S. Agency or Treasury Securities, or other instruments backed by the full faith and credit of the U.S. Government or an Agency thereof, or fully insured by the U.S. Government or an Agency thereof. Stipulation, ¶¶2.2, 2.6. Interest on the Settlement Amount will accrue for the benefit of the Class. Notice to the Class and the cost of settlement administration (“Notice and Administration Costs”) will be funded by the Settlement Fund. Stipulation, ¶2.10. Lead Plaintiff proposes a nationally-recognized class action settlement administrator, Gilardi & Co. LLC (“Gilardi”), be Case 1:16-cv-04923-VM-KNF Document 171 Filed 03/06/19 Page 12 of 31 - 6 - 1535789_1 retained here subject to the Court’s approval. The proposed notice plan and plan for claims processing is discussed below in §IV and in the Declaration of Michael Joaquin Regarding Notice and Administration (“Joaquin Decl.”), filed concurrently herewith. Because the Settlement Fund is a “qualified settlement fund,” within the meaning of Treas. Reg. §1.468B-1, the income earned on the Settlement Fund is taxable. All Taxes and Tax Expenses (such as expenses of tax attorneys and/or accountants) shall be paid out of the Settlement Fund. Lead Plaintiff intends to request an amount not to exceed $25,000 pursuant to 15 U.S.C. §77z-1(a)(4) in connection with its representation of the Class. Any such amount the Court awards shall be paid from the Settlement Fund. Lead Counsel will submit an application with its opening papers in support of final approval of the Settlement for: (a) an award of attorneys’ fees in an amount not to exceed 30% of the Settlement Amount; (b) payment of expenses or charges resulting from the prosecution of the Litigation not to exceed $850,000; and (c) any interest on such amounts at the same rate and for the same period as earned by the Settlement Fund. Such fees and expenses shall be paid from the Settlement Fund upon entry of the order awarding such fees and expenses. Once Notice and Administration Costs, Taxes, Tax Expenses and Court-approved attorneys’ fees and expenses and any award to Lead Plaintiff pursuant to 15 U.S.C. §77z-1(a)(4) have been paid from the Settlement Fund, the remaining amount, the Net Settlement Fund, shall be distributed pursuant to the Court-approved Plan of Allocation to Authorized Claimants who are entitled to a distribution of at least $10.00. The Plan of Allocation treats all Class Members equitably, and the recovery to individual Class Members will depend on a number of variables, including the number of shares of Inovalon common stock the Class Member purchased or acquired and when and at what price such purchases Case 1:16-cv-04923-VM-KNF Document 171 Filed 03/06/19 Page 13 of 31 - 7 - 1535789_1 or acquisitions were made. If 100% of the eligible shares purchased or acquired by Class Members participate in the Settlement, the estimated average distribution per Inovalon common share will be approximately $0.51, before deducting any Court-approved fees and expenses. Historically, actual claim rates are lower than 100%, resulting in greater distributions for class members. The Settling Parties have entered into a Supplemental Agreement which provides that if prior to the Settlement Hearing, the number of valid requests for exclusion equals or exceeds a certain amount, Defendants shall have the option to terminate the Settlement. Stipulation, ¶7.3. In exchange for the benefits provided under the Stipulation, Class Members will release any and all claims against the Released Defendant Parties that have been or could have been asserted in the Litigation or could in the future be asserted in any forum, whether foreign or domestic, which arise out of or relate in any way to (a) any of the allegations, transactions, events, disclosures, statements, acts or omissions that were asserted or could have been asserted by Lead Plaintiff or Class Members in this Litigation or in any other action or forum, and (b) arise out of, are based upon, or relate in any way to the purchase, acquisition, holding, sale or disposition of Inovalon common stock purchased or otherwise acquired by Class Members on or before August 5, 2015. Stipulation, ¶1.25. The proposed Settlement is a very good result for the Class. It provides a significant benefit to the Class, considering the risks of further litigation and considering the $17 million recovery as a percentage of maximum estimated recoverable damages of approximately $75 million. Thus, the $17 million recovery is certainly within, if not well-above, the range of what would be determined to be fair, reasonable, and adequate. Accordingly, Lead Plaintiff respectfully submits that an analysis of the Grinnell factors (Detroit v. Grinnell Corp., 495 F.2d 448 (2d Cir. 1974)), set forth below, which apply to a court’s determination of final approval of a settlement, also supports Case 1:16-cv-04923-VM-KNF Document 171 Filed 03/06/19 Page 14 of 31 - 8 - 1535789_1 preliminary approval of this Settlement. See also In re Warner Chilcott Ltd. Sec. Litig., No. 06 Civ. 11515 (WHP), 2008 U.S. Dist. LEXIS 99840, at *4 (S.D.N.Y. Nov. 20, 2008) (“Although a complete analysis of [the Grinnell] factors is required for final approval, at the preliminary approval stage, ‘the Court need only find that the proposed settlement fits “within the range of possible approval”’ to proceed.”)2; In re LIBOR-Based Fin. Instruments Antitrust Litig., No. 11 MDL 2262 (NRB), 2014 U.S. Dist. LEXIS 172487, at *12 (S.D.N.Y. Dec. 2, 2014) (“Preliminary approval is ‘not tantamount to a finding that [a proposed] settlement is fair and reasonable.’”). B. The Standards for Reviewing a Proposed Settlement for Preliminary Approval Once a proposed settlement is reached, “a court must determine whether the terms of the proposed settlement warrant preliminary approval” by making “‘a preliminary evaluation’ as to whether the settlement is fair, reasonable and adequate.” In re Currency Conversion Fee Antitrust Litig., MDL No. 1409, 2006 U.S. Dist. LEXIS 81440, at *13 (S.D.N.Y. Nov. 8, 2006); see also Wal- Mart Stores, Inc. v. Visa U.S.A. Inc., 396 F.3d 96, 116 (2d Cir. 2005); LIBOR, 2014 U.S. Dist. LEXIS 172487, at *12 (“[A]t this stage, we need only decide whether the terms of the Proposed Settlement are ‘at least sufficiently fair, reasonable and adequate to justify notice to those affected and an opportunity to be heard.’”). “In determining whether to grant preliminary approval, the court starts with the proposition that ‘there is an overriding public interest in settling and quieting litigation, and this is particularly true in class actions.’” Allen v. Dairy Farmers of Am., Inc., No. 5:09-cv-230, 2011 U.S. Dist. LEXIS 48479, at *9 (D. Vt. May 4, 2011). Where the proposed settlement appears to be the product of serious, informed, non-collusive negotiations, has no obvious deficiencies, and falls within the range of approval, preliminary 2 All citations and footnotes are omitted unless otherwise noted. Case 1:16-cv-04923-VM-KNF Document 171 Filed 03/06/19 Page 15 of 31 - 9 - 1535789_1 approval is generally granted. See In re Platinum & Palladium Commodities Litig., No. 10cv3617, 2014 U.S. Dist. LEXIS 96457, at *36 (S.D.N.Y. July 15, 2014); In re NASDAQ Market-Makers Antitrust Litig., 176 F.R.D. 99, 102 (S.D.N.Y. 1997) (citing Manual for Complex Litigation §30.41 (3d ed. 1995)). “Preliminary approval . . . ‘is at most a determination that there is what might be termed “probable cause” to submit the proposal to class members and hold a full-scale hearing as to its fairness.’” Platinum, 2014 U.S. Dist. LEXIS 96457, at *36. “Once preliminary approval is bestowed, the second step of the process ensues; notice is given to the class members of a hearing, at which time class members and the settling parties may be heard with respect to final court approval.” NASDAQ, 176 F.R.D. at 102. Thus, “[p]reliminary approval is merely the first step in a multi-step process in which the . . . [s]ettlement will be scrutinized by both the court and class members.” Allen, 2011 U.S. Dist. LEXIS 48479, at *10. “It deprives no party or non-party of any procedural or substantive rights, and provides a mechanism through which class members who object to the . . . [s]ettlement can voice those objections.” Id. A strong initial presumption of fairness attaches to the proposed settlement if, as here, it is reached by experienced counsel most closely acquainted with the facts of the underlying litigation after arm’s-length negotiations. See In re Michael Milken & Assocs. Sec. Litig., 150 F.R.D. 57, 66 (S.D.N.Y. 1993); Chatelain v. Prudential-Bache Sec., 805 F. Supp. 209, 212 (S.D.N.Y. 1992). C. Preliminary Approval of the Settlement Should Be Granted The Second Circuit has identified nine factors courts should consider in deciding whether to grant final approval of a class action settlement: (1) the complexity, expense and likely duration of the litigation; (2) the reaction of the class to the settlement; (3) the stage of the proceedings and the amount of discovery completed; (4) the risks of establishing liability; (5) the risks of establishing damages; (6) the risks of maintaining the class action through the trial; Case 1:16-cv-04923-VM-KNF Document 171 Filed 03/06/19 Page 16 of 31 - 10 - 1535789_1 (7) the ability of the defendants to withstand a greater judgment; (8) the range of reasonableness of the settlement fund in light of the best possible recovery; [and] (9) the range of reasonableness of the settlement fund to a possible recovery in light of all the attendant risks of litigation. Grinnell, 495 F.2d at 463. For the following reasons, each of the applicable Grinnell factors supports preliminary approval of the Settlement. 1. The Complexity, Expense, and Likely Duration of the Litigation Supports Approval of the Settlement Courts have consistently recognized that the complexity, expense, and likely duration of the litigation are critical factors in evaluating the reasonableness of a settlement, especially where the settlement under evaluation involves a securities class action. See, e.g., Hicks v. Morgan Stanley & Co., No. 01 Civ. 10071 (RJH), 2005 U.S. Dist. LEXIS 24890, at *6 (S.D.N.Y. Oct. 24, 2005); In re Alloy, Inc. Sec. Litig., No. 03 Civ. 1597 (WHP), 2004 U.S. Dist. LEXIS 24129, at *6 (S.D.N.Y. Dec. 2, 2004) (approving settlement, noting action involved complex securities fraud issues “that were likely to be litigated aggressively, at substantial expense to all parties”). Securities class actions brought under the Securities Act of 1933 are notoriously complex and expensive to prosecute, and this case was no exception. See, e.g., In re AOL Time Warner, Inc. Sec. & ERISA Litig., MDL No. 1500, 2006 U.S. Dist. LEXIS 17588, at *31 (S.D.N.Y. Apr. 6, 2006) (securities class actions are notoriously complex). Indeed, this case involved complex legal and factual issues concerning the duty to disclose, the materiality of the omitted information, the timeliness of Lead Plaintiff’s claims, actual knowledge, due diligence and the applicability of the negative causation defense to reduce or eliminate damages. Assuming that the Second Circuit rejected Defendants’ petition pursuant to Fed. R. Civ. 23(f), and Lead Plaintiff prevailed at summary judgment, a trial would likely have lasted several weeks, involved complicated facts, and been expensive. No doubt an appeal would have followed, Case 1:16-cv-04923-VM-KNF Document 171 Filed 03/06/19 Page 17 of 31 - 11 - 1535789_1 likely taking years to complete, regardless of the outcome. Accordingly, this factor weighs strongly in favor of preliminary approval of the proposed Settlement. 2. The Reaction of the Class to the Settlement Lead Plaintiff has participated throughout the prosecution of the case and was actively involved in the decision to enter into settlement negotiations and the Settlement. Notice regarding the Settlement has not yet been mailed or otherwise distributed to potential Class Members. If any objections are received after notice is disseminated, they will be addressed by Lead Counsel in connection with the forthcoming motion for final approval of the Settlement. 3. The Stage of the Proceedings The volume and substance of Lead Plaintiff’s and its counsel’s knowledge of the merits and potential weaknesses of the claims alleged are also adequate to support the Settlement. Lead Plaintiff and Lead Counsel developed a deep understanding of the strengths and weaknesses of the claims after conducting extensive document discovery, with Lead Counsel having received, reviewed and analyzed more than 70,000 documents from Defendants and third parties, and taken depositions of nearly all the key players in the Litigation – both from Inovalon and Inovalon’s outside tax advisors and auditors. Lead Counsel also defended the deposition of Lead Plaintiff’s fund administrator and investment manager, and retained accounting, loss causation and damages experts and consultants. The accumulation of information resulting from discovery and consultation with experts permitted Lead Plaintiff and its counsel to be well informed about the strengths and weaknesses of the case and to engage in effective settlement discussions (as the Settlement Amount reflects). See In re Global Crossing Sec. & ERISA Litig., 225 F.R.D. 436, 458 (S.D.N.Y. 2004) (“the question is whether the parties had adequate information about their claims”). This factor additionally supports preliminary approval of the Settlement. Case 1:16-cv-04923-VM-KNF Document 171 Filed 03/06/19 Page 18 of 31 - 12 - 1535789_1 4. The Risk of Establishing Liability and Damages In assessing the Settlement, the Court should balance the benefits afforded to the Class – including the immediacy and certainty of a recovery – against the risk of trial. See Grinnell, 495 F.2d at 463. Securities class actions present hurdles to proving liability that are difficult for plaintiffs to meet. See AOL Time Warner, 2006 U.S. Dist. LEXIS 17588, at *39 (noting that “[t]he difficulty of establishing liability is a common risk of securities litigation”); Alloy, 2004 U.S. Dist. LEXIS 24129, at *5-*6 (same). While Lead Plaintiff believes that its claims would be borne out by the evidence presented at trial, it also recognizes it faced hurdles to proving liability or even proceeding to trial. Defendants have repeatedly articulated defenses to the claims that the Court may accept at summary judgment or a jury may have accepted at trial. Among other things, Defendants have strenuously contended that Lead Plaintiff’s claims were time-barred, because their May 8, 2015 statements concerning the higher quarterly tax rate due to unspecified legislative changes disclosed the Registration Statement’s alleged omissions and therefore claims first alleged in June 2016 were beyond the one- year limitations period. Although the Court has repeatedly rejected this argument, when it is pressed again at summary judgment or at trial, a different and less favorable result is possible. Defendants also maintained that they had no duty to disclose the information which Lead Plaintiff alleges was omitted, and that Lead Plaintiff was attempting an improper invocation of SEC Items 303 and 503. Likewise, they maintained that any misstatements with respect to the tax law changes were immaterial to Inovalon’s revenue, earnings and income. Moreover, each Defendant (other than Inovalon) has asserted a due diligence defense with respect to its conduct in connection with the IPO and the offering materials. If Defendants prevailed on any one of these grounds, the entire case could be lost. Case 1:16-cv-04923-VM-KNF Document 171 Filed 03/06/19 Page 19 of 31 - 13 - 1535789_1 In addition, although Lead Plaintiff was confident it would have been able to support its claims with qualified and persuasive expert testimony, jury reactions to competing experts are inherently difficult to predict, and Defendants would have presented highly experienced experts to support their various defenses to liability. Lead Plaintiff also faced the possibility that the Court would limit or exclude its experts’ testimony. This risk, if realized, would have further complicated Lead Plaintiff’s chance of success in further proceedings. Finally, Lead Plaintiff faced risks in establishing damages at trial. Defendants have steadfastly maintained a negative causation defense, by which they must prove that the stock price decline is completely unconnected to the omissions or false statements. In re Fuwei Films Sec. Litig., 634 F. Supp. 2d 419, 444 (S.D.N.Y. 2009). Defendants have argued that the August 5, 2015 press release disclosed significant information having nothing to do with the Company’s effective tax rate, but rather disclosed missed revenue guidance as a result of the shifting of a merger contract and its expected revenue into the following quarter. As with contested liability issues, issues relating to negative causation and damages would have likely come down to an unpredictable and hotly disputed “battle of the experts.” Accordingly, in the absence of a settlement, there was a very real risk that the Class would have recovered an amount significantly less than the total Settlement Amount – or even nothing at all. Thus, the $17 million recovery now, particularly when viewed in the context of the risks and the uncertainties of further proceedings, weighs in favor of preliminary approval of the Settlement. 5. The Risks of Maintaining the Class Action Through Trial Although the class was certified, the Court could have revisited certification at any time – presenting a continuous risk that this case, or particular claims, might not be maintained on a class- wide basis through trial. Frank v. Eastman Kodak Co., 228 F.R.D. 174, 186 (W.D.N.Y. 2005) (“the Case 1:16-cv-04923-VM-KNF Document 171 Filed 03/06/19 Page 20 of 31 - 14 - 1535789_1 risk that the case might be not certified is not illusory”).3 Moreover, Defendants have maintained that Lead Plaintiff had actual knowledge that Inovalon derived substantial revenues from New York- based customers, and that Lead Plaintiff admitted the tax changes were publicly known. Therefore, they likely would have again tried to disqualify Lead Plaintiff and seek to decertify the Class. At the time of settlement, Defendants’ petition to the Second Circuit seeking interlocutory appeal of this Court’s order certifying the class in this action remained outstanding. Defendants claimed that testimony of Lead Plaintiff’s investment manager rendered certification improper on statute of limitations grounds and that Lead Plaintiff was not a typical or adequate class representative. While this Court thoroughly analyzed and rejected these arguments – which were asserted in related form in other briefing – there was no guarantee the Second Circuit would reject the petition. 6. The Ability of Defendants to Withstand a Greater Judgment A court may also consider a defendant’s ability to withstand a judgment greater than that secured by settlement, although it is not generally a determinative factor. See In re LIBOR-Based Fin. Instruments Antitrust Litig., 327 F.R.D. 483, 495 (S.D.N.Y. 2018) (explaining rationale of factor). Here, if Lead Plaintiff was able to secure a judgment (a far from certain outcome, as discussed above), Inovalon presumably could withstand a judgment that exceeds the Settlement Amount. But placing undue emphasis on this factor would place at risk the significant recovery earmarked for Class Members. This factor alone cannot undermine the others that together militate in favor of preliminary approval. See, e.g., D’Amato v. Deutsche Bank, 236 F.3d 78, 86 (2d Cir. 2001) (upholding district court’s decision that “this factor, standing alone, does not suggest that the settlement is unfair”); LIBOR, 327 F.R.D. at 495 (viewing the factor similarly). 3 In fact, the Court declined to certify Lead Plaintiff’s §12(a)(2) claims. Case 1:16-cv-04923-VM-KNF Document 171 Filed 03/06/19 Page 21 of 31 - 15 - 1535789_1 7. The Reasonableness of the Settlement in Light of the Best Possible Recovery and the Attendant Risks of Litigation The adequacy of the amount offered in settlement must be judged “not in comparison with the possible recovery in the best of all possible worlds, but rather in light of the strengths and weaknesses of plaintiffs’ case.” In re “Agent Orange” Prod. Liab. Litig., 597 F. Supp. 740, 762 (E.D.N.Y. 1984), aff’d, 818 F.2d 145 (2d Cir. 1987). The Court need only determine whether the Settlement falls within a “range of reasonableness” – a range which “recognizes the uncertainties of law and fact in any particular case and the concomitant risks and costs necessarily inherent in taking any litigation to completion.” Newman v. Stein, 464 F.2d 689, 693 (2d Cir. 1972); see also Global Crossing, 225 F.R.D. at 461 (noting that “the certainty of [a] settlement amount has to be judged in [the] context of the legal and practical obstacles to obtaining a large recovery”); In re Indep. Energy Holdings PLC Sec. Litig., No. 00 Civ. 6689 (SAS), 2003 U.S. Dist. LEXIS 17090, at *12-*13 (S.D.N.Y. Sept. 29, 2003) (noting few trials result in full amount of damages claimed). In addition, in considering the reasonableness of the Settlement, the Court should consider that the Settlement provides for payment to the Class now, rather than a speculative payment years down the road. See AOL Time Warner, 2006 U.S. Dist. LEXIS 17588, at *44 (where settlement fund is in escrow earning interest, “the benefit of the Settlement will . . . be realized far earlier than a hypothetical post-trial recovery”). Nevertheless, the Settlement here represents a very good result under the circumstances – approximately 23% of Lead Plaintiff’s estimated recoverable damages of approximately $75 million. Given both the risks at trial and the recognition that not all Class Members will seek recovery, the size of the recovery strongly supports preliminary approval. Case 1:16-cv-04923-VM-KNF Document 171 Filed 03/06/19 Page 22 of 31 - 16 - 1535789_1 IV. THE PROPOSED FORM AND METHOD OF CLASS NOTICE AND THE FORM OF THE PROOF OF CLAIM ARE APPROPRIATE A. The Scope of the Notice Program Is Adequate Under Rule 23(e)(2)(C)(ii) There are no “rigid rules” that apply when determining the adequacy of notice for a class action settlement. Rather, when measuring the adequacy of a notice under either the Due Process Clause or the Federal Rules, the court should look to its reasonableness. In re Merrill Lynch & Co. Research Reports Sec. Litig., No. 02 MDL 1484 (JFK), 2007 U.S. Dist. LEXIS 9450, at *26 (S.D.N.Y. Feb. 1, 2007). Accordingly, “[n]otice need not be perfect, but need be only the best notice practicable under the circumstances, and each and every class member need not receive actual notice, so long as class counsel acted reasonably in choosing the means likely to inform potential class members.” Id. at *27. The notice plan is discussed herein and in the accompanying Joaquin Declaration and includes direct mail notice to all those who can be identified with reasonable effort supplemented by the publication of the Summary Notice in The Wall Street Journal and over the Business Wire. Gilardi will utilize time-tested methods to ensure Class Members who hold Inovalon stock in their own names as well as those who hold Inovalon stock in street name will receive a copy of the Notice of Proposed Settlement of Class Action (“Notice”) and Proof of Claim and Release (“Proof of Claim”) (collectively, “Claim Package”). First, Gilardi will obtain the names of Class Members who hold Inovalon stock in their own names from Inovalon’s stock transfer agent. Joaquin Decl., ¶¶6-7. In addition, Gilardi will contact the brokers, banks and other institutions known as Nominee Holders. Based on experience locating class members who hold stock in street name, Gilardi has developed a list of approximately 250 Nominee Holders to whom it will send a Claim Package and cover letter. Id., ¶8. Gilardi has confirmed that all of the financial institutions that facilitated the IPO (or their Case 1:16-cv-04923-VM-KNF Document 171 Filed 03/06/19 Page 23 of 31 - 17 - 1535789_1 successors) are included in the proprietary list. Id.4 Lastly, Gilardi will establish and maintain a website where key documents will be posted regarding the Settlement and Claim Package and a toll- free number which Class Members can call to make inquiries about the Settlement. Id., ¶¶17-18. Through these efforts, based on experience, Gilardi estimates that more than 95% of the investors that are potential Class Members will be provided notice. Id., ¶19. Notice programs such as the one proposed by Lead Counsel have been approved as adequate under the Due Process Clause and Rule 23 in a multitude of class action settlements. See, e.g., In re Gilat Satellite Networks, Ltd., No. CV-02-1510 (CPS), 2007 U.S. Dist. LEXIS 29062, at *41-*42 (E.D.N.Y. Apr. 19, 2007) (approving proposed notice program where notice mailed to shareholders of record listed on transfer records and to “more than 2500 of the largest banks, brokerages, and other nominees”); In re Luxottica Grp. S.p.A., Sec. Litig., No. CV 01-3285 (JBW)(MDG), 2005 U.S. Dist. LEXIS 27765, at *5 (E.D.N.Y. Nov. 15, 2005) (approving notice program, consisting of broker mailing and summary notice publication in The Wall Street Journal and The New York Times); In re Prudential Sec. Ltd. P’ships Litig., 164 F.R.D. 362, 368 (S.D.N.Y. 1996) (approving proposed notice and noting mailing of notice to each identifiable class member’s last known address is “a procedure that has been given wide-spread approval in other class actions”), aff’d sub nom. Toland v. Prudential Sec. P’ship Litig., 107 F.3d 3 (2d Cir. 1996). Additionally, pursuant to the Class Action Fairness Act of 2005, 28 U.S.C. §1715 et seq., Inovalon will provide notice of the Settlement to the appropriate state and federal officials. 4 Gilardi will also send a Claim Package and cover letter to the approximately 4,500 financial institutions registered with the SEC as potential Nominee Holders. Joaquin Decl., ¶9. In addition, Gilardi will send additional copies of the Claim Package to those Nominee Holders who indicate they will directly send the Claim Package to their clients who may be Class Members. Id., ¶11. Case 1:16-cv-04923-VM-KNF Document 171 Filed 03/06/19 Page 24 of 31 - 18 - 1535789_1 Therefore, it is reasonable to conclude that the Notice will reach the vast majority of Class Members, is adequate, and should be approved by the Court. The claims process is also effective and includes a standard claim form which requests the information necessary to calculate a claimant’s claim amount pursuant to the Plan of Allocation. The Plan of Allocation will govern how Class Members’ claims will be calculated and, ultimately, how money will be distributed to Authorized Claimants. The Plan of Allocation was prepared with the assistance of Lead Plaintiff’s damages consultant and is based on the §11 statutory damages formula. It is substantively the same as plans that have been approved and successfully used to allocate recoveries in other securities class actions. A thorough claim review process, including how deficiencies are addressed, is also explained in the Joaquin Declaration. Id., ¶¶24-27. B. The Proposed Form of Notice Comports with the Requirements of Due Process, the PSLRA, and Rule 23 and Is the Same or Similar to the Form(s) of Notice Routinely Approved by Courts in This Jurisdiction As outlined in the proposed Notice Order (Exhibit A to the Stipulation), the Claims Administrator will notify Class Members of the Settlement by mailing the Notice and Proof of Claim to all Class Members who can be identified with reasonable effort. The Notice will advise Class Members of the essential terms of this Settlement and the Plan of Allocation and provide information regarding Lead Counsel’s motion for attorneys’ fees and expenses. The Notice also will provide specifics on the date, time, and place of the Settlement Hearing and set forth the procedure for objecting to the Settlement, the proposed Plan of Allocation, or the motion for attorneys’ fees and expenses. In addition to mailing the Notice and Proof of Claim, the Claims Administrator will provide for the publication of a Summary Notice in The Wall Street Journal and once over a national Case 1:16-cv-04923-VM-KNF Document 171 Filed 03/06/19 Page 25 of 31 - 19 - 1535789_1 newswire service. The Notice and related Settlement papers will also be posted on a dedicated website, www.InovalonSecuritiesSettlement.com. Similar to other notice programs, the form and manner of providing notice to the Class satisfy the requirements of due process, Rule 23, and the PSLRA, 15 U.S.C. §77z-1(a)(7). The content of a notice is generally found to be reasonable if “the average class member understands the terms of the proposed settlement and the options provided to class members thereunder.” In re Stock Exchs. Options Trading Antitrust Litig., No. 99 Civ. 0962 (RCC), 2006 U.S. Dist. LEXIS 87825, at *22 (S.D.N.Y. Dec. 4, 2006); see also Weinberger v. Kendrick, 698 F.2d 61, 70 (2d Cir. 1982) (the notice must “‘fairly apprise the prospective members of the class of the terms of the proposed settlement and of the options that are open to them in connection with [the] proceedings’”). With respect to cases filed under the PSLRA, the settlement notice must include: (1) the amount of the settlement proposed for distribution, determined in the aggregate and on an average per share basis; (2) if the parties do not agree on the average amount of damages per share recoverable in the event plaintiff prevailed, a statement from each party concerning the issue(s) on which the parties disagree; (3) a statement indicating which parties or counsel intend to apply for an award of fees and costs (including the amount of such fees and costs determined on an average per share basis), and a brief explanation supporting the fees and costs sought; (4) the name, telephone number, and address of one or more representatives of counsel for the class who will be reasonably available to answer questions concerning any matter contained in the notice of settlement; (5) a brief statement explaining the reasons why the parties are proposing the settlement; and (6) such other information as may be required by the court. See 15 U.S.C. §77z-1(a)(7)(A)-(F). The proposed Notice contains all of the information required by the PSLRA. See Notice (Exhibit A-1 to the Stipulation). The information is also provided in a format that is accessible to the Case 1:16-cv-04923-VM-KNF Document 171 Filed 03/06/19 Page 26 of 31 - 20 - 1535789_1 reader. In addition, the Notice advises recipients that they have the right to object to any aspect of the Settlement, the Plan of Allocation, or the fee and expense application. Furthermore, the Notice provides recipients with the contact information for the Claims Administrator, Gilardi & Co. LLC, and Lead Counsel. Finally, the proposed format is the same or similar to formats that have been approved by courts in this jurisdiction, which also supports its approval. See, e.g., In re Intercept Pharm., Inc. Sec. Litig., No. 1:14-cv-01123-NRB, slip op. at 2-3, Order Preliminarily Approving Settlement and Providing for Notice (S.D.N.Y. May 23, 2016). V. THE SETTLEMENT ALSO SATISFIES RULE 23(e)(2)(C)’s ADDITIONAL ADEQUACY CRITERIA A. Attorneys’ Fees and Expenses Rule 23(e)(2)(C)(iii) addresses the attorneys’ fee award Lead Counsel intends to seek. As discussed above in §III, Lead Counsel intends to request fees not to exceed 30% of the Settlement Amount and expenses in an amount not to exceed $850,000, plus interest on both amounts. These amounts are in line with recent fee requests granted by courts in the Second Circuit. See, e.g., In re BHP Billiton Ltd. Sec. Litig., No. 1:16-cv-01445-NRB, slip op. at 1 (S.D.N.Y. Jan. 29, 2019) (awarding 30% fee, plus expenses on $50 million recovery); In re Genworth Fin., Inc. Sec. Litig., No. 1:14-cv-02392-AKH, slip op. at 2 (S.D.N.Y. Nov. 16, 2017) (awarding 30% of $20 million recovery, plus expenses); Citiline Holdings, Inc. v. iStar Fin. Inc., No. 1:08-cv-03612-RJS, slip op. at 1 (S.D.N.Y. Apr. 5, 2013) (awarding 30% of $29 million recovery, plus expenses). In addition, Lead Counsel will request that any award of fees and expenses be paid at the time the Court makes its award. Further, Lead Plaintiff intends to request an amount not to exceed $25,000 pursuant to 15 U.S.C. §77z-1(a)(4) in connection with its representation of the Class. Case 1:16-cv-04923-VM-KNF Document 171 Filed 03/06/19 Page 27 of 31 - 21 - 1535789_1 B. There Are No Side Agreements Other than Opt Outs Rule 23(e)(2)(C)(iv) requires that the parties identify any side agreements. The Settling Parties have entered into a standard supplemental agreement which provides that if Class Members opt out of the Settlement such that the number of shares of Inovalon common stock represented by such opt outs equals or exceeds a certain amount, Defendants shall have the option to terminate the Settlement. Stipulation, ¶7.3. C. Class Members Are Treated Equitably As reflected in the Plan of Allocation (Stipulation, Ex. A-1 at 7-9), which tracks the §11 statutory damages methodology, the Settlement treats Class Members equitably relative to each other, based on the timing of their purchase or acquisition of Inovalon common stock prior to August 5, 2015, and their subsequent disposition of that stock by providing that each Authorized Claimant shall receive his, her or its pro rata share of the Net Settlement Fund based on their recognized losses. Accordingly, Rule 23(e)(2)(D) is satisfied. VI. PROPOSED SCHEDULE If the Court grants preliminary approval of the proposed Settlement, Lead Plaintiff respectfully submits the following procedural schedule for the Court’s review: Event Time for Compliance Deadline for commencing the mailing of the Notice and Proof of Claim to Class Members (the “Notice Date”) 21 calendar days after entry of the Notice Order Deadline for publishing the Summary Notice in The Wall Street Journal and over a national newswire service 7 calendar days after the Notice Date Filing of memoranda in support of approval of the Settlement and Plan of Allocation, and in support of Lead Counsel’s application for an award of attorneys’ fees and expenses 35 calendar days prior to the Settlement Hearing Case 1:16-cv-04923-VM-KNF Document 171 Filed 03/06/19 Page 28 of 31 - 22 - 1535789_1 Event Time for Compliance Deadline for filing objections or submitting exclusion requests 21 calendar days prior to the Settlement Hearing Filing of reply memoranda in further support of the Settlement and Plan of Allocation, and in support of Lead Counsel’s application for an award of attorneys’ fees and expenses 7 calendar days prior to the Settlement Hearing Settlement Hearing Approximately 100 calendar days after entry of the Notice Order, at the Court’s convenience Deadline for submitting Proofs of Claim 120 calendar days after the Notice Date VII. CONCLUSION Based on the foregoing, Lead Plaintiff respectfully requests that the Court enter the Notice Order in connection with this Settlement, which will provide: (1) preliminary approval of the Settlement; (2) approval of the form and manner of notice of the Settlement to the Class; and (3) a hearing date and time to consider final approval of the Settlement and related matters. DATED: March 6, 2019 Respectfully submitted, ROBBINS GELLER RUDMAN & DOWD LLP SHAWN A. WILLIAMS DANIEL J. PFEFFERBAUM JOHN H. GEORGE s/ Daniel J. Pfefferbaum DANIEL J. PFEFFERBAUM Post Montgomery Center One Montgomery Street, Suite 1800 San Francisco, CA 94104 Telephone: 415/288-4545 415/288-4534 (fax) shawnw@rgrdlaw.com dpfefferbaum@rgrdlaw.com jgeorge@rgrdlaw.com Case 1:16-cv-04923-VM-KNF Document 171 Filed 03/06/19 Page 29 of 31 - 23 - 1535789_1 ROBBINS GELLER RUDMAN & DOWD LLP SAMUEL H. RUDMAN 58 South Service Road, Suite 200 Melville, NY 11747 Telephone: 631/367-7100 631/367-1173 (fax) srudman@rgrdlaw.com ROBBINS GELLER RUDMAN & DOWD LLP ELLEN GUSIKOFF STEWART 655 West Broadway, Suite 1900 San Diego, CA 92101-8498 Telephone: 619/231-1058 619/231-7423 (fax) Lead Counsel for Lead Plaintiff SULLIVAN, WARD, ASHER & PATTON, P.C. MICHAEL J. ASHER 1000 Maccabees Center 25800 Northwestern Highway Southfield, MI 48075-1000 Telephone: 248/746-0700 248/746-2760 (fax) Additional Counsel for Lead Plaintiff Case 1:16-cv-04923-VM-KNF Document 171 Filed 03/06/19 Page 30 of 31 CERTIFICATE OF SERVICE I, Daniel J. Pfefferbaum, hereby certify that on March 6, 2019, I authorized a true and correct copy of the foregoing document to be electronically filed with the Clerk of the Court using the CM/ECF system, which will send notification of such public filing to all counsel registered to receive such notice. I further certify under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. Executed on March 6, 2019, at San Francisco, California. s/ Daniel J. Pfefferbaum DANIEL J. PFEFFERBAUM Case 1:16-cv-04923-VM-KNF Document 171 Filed 03/06/19 Page 31 of 31
