Case 2:11-cv-00133-MJP Document 115 Filed 02/17/12 Page 1 of 29
1 The Honorable Marsha J. Pechman
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10 UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
11 AT SEATTLE
12
Case No. C11-133 MJP
13 In re COINSTAR INC. SECURITIES
LITIGATION
14 LEAD PLAINTIFF’S UNOPPOSED
MOTION FOR PRELIMINARY
15 APPROVAL OF CLASS ACTION
This Document Relates To: SETTLEMENT, APPROVAL OF
16 NOTICE AND SCHEDULING OF
The Securities Class Action SETTLEMENT HEARING
17
18 NOTE ON MOTION CALENDAR:
March 9, 2012
19
ORAL ARGUMENT REQUESTED
20
21
22
23
24
25
26
LEAD PLAINTIFF’S UNOPPOSED MOTION LABATON SUCHAROW LLP
27 FOR PRELIMINARY APPROVAL OF CLASS 140 BROADWAY
ACTION SETTLEMENT, APPROVAL OF NEW YORK, NEW YORK 10005
28 NOTICE AND SCHEDULING OF (212) 907-0700
SETTLEMENT HEARING
C11-133 MJP
Case 2:11-cv-00133-MJP Document 115 Filed 02/17/12 Page 2 of 29
1 TABLE OF CONTENTS
Page(s)
2
TABLE OF AUTHORITIES .........................................................................................................ii
3
PRELIMINARY STATEMENT ................................................................................................... 1
4
ARGUMENT................................................................................................................................. 8
5
I. THE SETTLEMENT MERITS PRELIMINARY APPROVAL....................................... 8
6
A. The Settlement Is the Result of a Thorough, Rigorous and Arm’s-
7 Length Process and Has No Obvious Deficiencies................................................ 9
8 B. The Settlement Is Well Within the Range of Reasonableness............................. 10
9 II. THE PROPOSED NOTICE PROGRAM SATISFIES RULES 23(d) AND (e)
AND DUE PROCESS REQUIREMENTS ..................................................................... 13
10
III. THE COURT SHOULD PRELIMINARILY CERTIFY THE CLASS FOR
11 SETTLEMENT PURPOSES ........................................................................................... 14
12 A. Standards Applicable to Class Certification ........................................................ 14
13 B. The Class Meets the Requirements of Rule 23(a) ............................................... 15
14 1. Rule 23(a)(1): Numerosity....................................................................... 15
15 2. Rule 23(a)(2): Questions of Law or Fact Are Common .......................... 16
16 3. Rule 23(a)(3): Lead Plaintiff’s Claims Are Typical ................................ 17
17 4. Rule 23(a)(4): Lead Plaintiff is Adequate and Should be
Appointed Class Representative .............................................................. 17
18
B. The Class Meets the Requirements of Rule 23(b)(3)........................................... 18
19
1. Common Questions of Law or Fact Predominate.................................... 18
20
2. A Class Action Is a Superior Method of Adjudication ............................ 20
21
C. Lead Counsel Should Be Appointed Class Counsel Under Rule
22 23(g)..................................................................................................................... 21
23 CONCLUSION............................................................................................................................ 21
24
25
26
27 LEAD PLAINTIFF’S UNOPPOSED MOTION i LABATON SUCHAROW LLP
FOR PRELIMINARY APPROVAL OF CLASS 140 BROADWAY
ACTION SETTLEMENT, APPROVAL OF NEW YORK, NEW YORK 10005
28 NOTICE AND SCHEDULING OF (212) 907-0700
SETTLEMENT HEARING
C11-133 MJP
Case 2:11-cv-00133-MJP Document 115 Filed 02/17/12 Page 3 of 29
1 TABLE OF AUTHORITIES
2 Page(s)
3
FEDERAL CASES
4
Amchem Prods. v. Windsor,
5 521 U.S. 591 (1997) ............................................................................................................... 18
6 Arnold v. United Artists Theatre Circuit, Inc.,
158 F.R.D. 439 (N.D. Cal. 1994) ........................................................................................... 16
7
Basic Inc. v. Levinson,
8 485 U.S. 224 (1988) ............................................................................................................... 19
9 Blackie v. Barrack,
524 F.2d 891 (9th Cir. 1975).................................................................................................. 16
10
In re Broadwing ERISA Litig.,
11 No. 1:02-cv-00857, 2006 WL 3831382 (S.D. Ohio Oct. 5, 2006) ........................................ 13
12 Cammer v. Bloom,
711 F. Supp. 1264 (D.N.J. 1989) ........................................................................................... 19
13
Churchill Vill., L.L.C. v. Gen. Elec.,
14 361 F.3d 566 (9th Cir. 2004)............................................................................................. 11,13
15 Class Pl.’s v. City of Seattle,
955 F.2d 1268 (9th Cir. 1992).................................................................................................. 8
16
In re Computer Memories Sec. Litig.,
17 111 F.R.D. 675 (N.D. Cal. 1986) ........................................................................................... 17
18 In re Cooper Cos. Sec. Litig.,
254 F.R.D. 628 (C.D. Cal. 2009) ..................................................................................... 14, 18
19
In re Daou Sys., Inc. Sec. Litig.,
20 411 F.3d 1009 (9th Cir. 2005)................................................................................................ 12
21 In re Delphi Corp. Sec., Deriv. & ERISA Litig.,
248 F.R.D. 483 (E.D. Mich. 2008) .......................................................................................... 9
22
Desai v. Deutsche Bank Sec. Ltd.,
23 No. 08-55081, 2009 WL 2245223 (9th Cir. July 29, 2009)............................................. 15, 20
24 Dukes v. Wal-Mart, Inc.,
509 F.3d 1168 (9th Cir. 2007)................................................................................................ 15
25
Dura Pharms v. Broudo,
26 544 U.S. 336 (2005) ............................................................................................................... 12
27 LEAD PLAINTIFF’S UNOPPOSED MOTION ii LABATON SUCHAROW LLP
FOR PRELIMINARY APPROVAL OF CLASS 140 BROADWAY
ACTION SETTLEMENT, APPROVAL OF NEW YORK, NEW YORK 10005
28 NOTICE AND SCHEDULING OF (212) 907-0700
SETTLEMENT HEARING
C11-133 MJP
Case 2:11-cv-00133-MJP Document 115 Filed 02/17/12 Page 4 of 29
1 In re First Capital Holdings Corp. Fin. Prods. Sec. Litig.,
No. MDL 901, 1993 WL144861 (C.D. Cal. Feb. 26, 1993) .................................................. 16
2
In re Gilead Sci. Sec. Litig.,
3 536 F.3d 1049 (9th Cir. 2008)................................................................................................ 12
4 Hanlon v. Chrysler Corp.,
150 F.3d 1011 (9th Cir. 1998)................................................................................................ 18
5
Harris v. Palm Springs Alpine Estates, Inc.,
6 329 F.2d 909 (9th Cir. 1964).................................................................................................. 16
7 Hughes v. Microsoft Corp.,
No. C98-1646C, C93-0178C, 2001 WL 34089697 (W.D.Wash. 2001).............................. 8, 9
8
Jaffe v. Morgan Stanley & Co.,
9 No. C-06-3903, 2008 WL 346417 (N.D. Cal. Feb. 7, 2008) ................................................. 14
10 Lerwill v. Inflight Motion Pictures, Inc.,
582 F.2d 507 (9th Cir. 1978).................................................................................................. 17
11
Linney v. Cellular Alaska P’ship,
12 151 F.3d 1234 (9th Cir. 1998).................................................................................................. 8
13 McPhail v. First Command Fin. Planning, Inc.,
247 F.R.D. 598 (S.D. Cal. 2007)............................................................................................ 20
14
Mendoza v. Tucson Sch. Dist. No. 1,
15 623 F.2d 1338 (9th Cir. 1980)................................................................................................ 13
16 In re Mercury Interactive Corp. Sec. Litig.,
618 F.3d 988 (9th Cir. 2010).................................................................................................... 8
17
Metzler Inv. GMBH v. Corinthian Coll. Inc.,
18 540 F.3d 1049 (9th Cir. 2008) ............................................................................................... 12
19 Mullane v. Cent. Hanover Bank & Trust Co.,
339 U.S. 306 (1950) ............................................................................................................... 13
20
Negrete v. Allianz Life Ins. Co. of N. Am.,
21 238 F.R.D. 482 (C.D. Cal. 2006) ........................................................................................... 19
22 In re Omnivision Techs, Inc.,
559 F. Supp. 2d 1036 (N.D. Cal. 2008) ................................................................................. 10
23
Perez-Funez v. Dist Dir., I.N.S.,
24 611 F. Supp. 990 (C.D. Cal. 1984)......................................................................................... 16
25 Pierce v. Novastar Mortg., Inc.,
No. C05-5835, 2007 WL 1847216 (W.D.Wash. June 27, 2007)............................................. 8
26
27 LEAD PLAINTIFF’S UNOPPOSED MOTION iii LABATON SUCHAROW LLP
FOR PRELIMINARY APPROVAL OF CLASS 140 BROADWAY
ACTION SETTLEMENT, APPROVAL OF NEW YORK, NEW YORK 10005
28 NOTICE AND SCHEDULING OF (212) 907-0700
SETTLEMENT HEARING
C11-133 MJP
Case 2:11-cv-00133-MJP Document 115 Filed 02/17/12 Page 5 of 29
1 Satchell v. Fed. Express Corp.,
Nos. C03-2659, C03-2878, 2007 WL 1114010 (N.D. Cal. Apr. 13, 2007)............................ 9
2
In re Syncor ERISA Litig.,
3 227 F.R.D. 338 (C.D. Cal. 2005) ........................................................................................... 17
4 Teamsters Local 445 Freight Div. Pension Fund v. Bombadier, Inc.,
No. 05 CV 1898, 2006 WL 2161887 (S.D.N.Y. Aug. 1, 2006)............................................. 20
5
In re THQ, Inc., Sec. Litig.,
6 No. CV-001783, 2002 WL 1832145 (C.D. Cal. Mar. 22, 2002) .......................................... 15
7 Weinberger v. Jackson,
102 F.R.D. 839 (N.D. Cal. 1984) ........................................................................................... 17
8
Welling v. Alexy,
9 155 F.R.D. 654 (N.D. Cal. 1994) ........................................................................................... 16
10 Wilson v. Venture Financial Group, Inc.,
No. C09-5768BHS, 2011 WL 219692 (W.D.Wash. Jan. 24, 2011) ................................... 8,10
11
Yamner v. Boich,
12 No. C-92-20597, 1994 WL 514035 (N.D. Cal. Sept. 15, 1994) ............................................ 16
13 Young v. Polo Retail, LLC,
No. C-02-4546, 2006 WL 3050861 (N.D. Cal. Oct. 25, 2006) .............................................. 8
14
15
16
DOCKETED CASES
17
In re Alliance Equip. Release Program Sec. Litig.,
18 No. 98-CV-2150 (S.D. Cal. July 3, 2001).............................................................................. 11
19 In re American International Group., Inc. Sec. Litig.,
No. 04-8141 (S.D.N.Y.) ......................................................................................................... 21
20
In re Amylin Pharm. Inc. Sec. Litig.,
21 No. CV-01-1455 (S.D. Cal. 2004) ......................................................................................... 11
22 In re Biolase Tech., Inc. Sec. Litig.,
No. 04-cv-00947 (C.D. Cal. Aug. 15, 2007).......................................................................... 11
23
In re Broadcom Corp. Class Action Litig.,
24 No. 06-5036 (C.D. Cal. Aug. 11, 2010)................................................................................. 21
25 In re Countrywide Sec. Litig.,
No. 07-5295 (C.D. Cal. Mar. 4, 2011) ................................................................................... 21
26
27 LEAD PLAINTIFF’S UNOPPOSED MOTION iv LABATON SUCHAROW LLP
FOR PRELIMINARY APPROVAL OF CLASS 140 BROADWAY
ACTION SETTLEMENT, APPROVAL OF NEW YORK, NEW YORK 10005
28 NOTICE AND SCHEDULING OF (212) 907-0700
SETTLEMENT HEARING
C11-133 MJP
Case 2:11-cv-00133-MJP Document 115 Filed 02/17/12 Page 6 of 29
1 In re HealthSouth Corp. Sec. Litig.,
No. CV-03-1501 (N.D. Ala. Feb. 12, 2008) .......................................................................... 21
2
In re Limelight Networks, Inc. Sec. Litig.,
3 No. 07-01603 (D. Ariz. Mar. 23, 2011) ................................................................................. 11
4 In re LJ Int’l Inc., Sec. Litig.,
No. 07-6076 (C.D. Cal. Oct. 19, 2009) .................................................................................. 11
5
In re Maxim Pharm. Inc. Sec. Litig.,
6 No. 04 CV 1900 (S.D. Cal. Sept. 25, 2006)........................................................................... 11
7 In re Metawave Comm. Corp. Sec. Litig.,
No. 02-625 (W.D. Wash. Feb. 11, 2010) ............................................................................... 11
8
In re Northwest Biotheraputics Inc. Sec. Litig.,
9 No. C07-1254 (W.D.Wash. Feb. 20, 2009) ........................................................................... 15
10 Packer, et. al. v. Coinstar, Inc.,
No. 11-CV-00133 (W.D. Wash. 2011) .................................................................................... 3
11
City of Westland Police and Fire Ret. Sys. and
12 Plymouth Cnty. Ret. Sys. v. Sonic Solutions et al.,
No. 07-CV-05111 (N.D. Cal. Apr. 8, 2010) .......................................................................... 11
13
Wilkerson et al. v. Coinstar, Inc. et al.,
14 No. 11-176 (W.D. Wash. 2011) .............................................................................................. 3
15 Dingler, et. al. v. Coinstar, Inc., et al.,
No. 11-CV-00353 (W.D. Wash.) ............................................................................................. 3
16
Nagler, et. al. v. Coinstar, Inc., et al.,
17 No. 11-CV-00192 (W.D. Wash.) ............................................................................................. 3
18 Weiss, et. al. v. Coinstar, Inc., et al.,
No. 11-CV-00202 (W.D. Wa.)................................................................................................. 3
19
Wright, et. al. v. Coinstar, Inc., et al.,
20 No. 11-CV-00325 (W.D. Wa.)................................................................................................. 3
21
STATUTES
22
Fed. R. Civ. P. 23(a) ................................................................................................................... 20
23
Fed. R. Civ. P. 23(a)(2)............................................................................................................... 16
24
Fed. R. Civ. P. 23(b) ................................................................................................................... 18
25
Fed. R. Civ. P. 23(b)(3)(A)-(D) ............................................................................................. 18,20
26
27 LEAD PLAINTIFF’S UNOPPOSED MOTION v LABATON SUCHAROW LLP
FOR PRELIMINARY APPROVAL OF CLASS 140 BROADWAY
ACTION SETTLEMENT, APPROVAL OF NEW YORK, NEW YORK 10005
28 NOTICE AND SCHEDULING OF (212) 907-0700
SETTLEMENT HEARING
C11-133 MJP
Case 2:11-cv-00133-MJP Document 115 Filed 02/17/12 Page 7 of 29
1 Fed. R. Civ. P. 23(g)(1) .............................................................................................................. 21
2
3 OTHER AUTHORITIES
4
5
Ellen M. Ryan, Laura E. Simmons,
6 Cornerstone Research, Securities Class Action Settlements
2010 Review and Analysis (2010) ......................................................................................... 11
7
Alba Conte, Herbert B. Newberg, Newberg on Class Actions § 11.25 (1992) ............................ 8
8
Manual for Complex Litigation, Second § 30.44 (1985).............................................................. 8
9
Dr. Jordan Milev, Robert Patton, and Svetlana Starykh
10 NERA, Trends 2010 Year-End Update: Securities Class Action
Filings Accelerate in Second Half of 2010; Median Settlement
11 Value at an All-Time High (2010) ......................................................................................... 11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
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27 LEAD PLAINTIFF’S UNOPPOSED MOTION vi LABATON SUCHAROW LLP
FOR PRELIMINARY APPROVAL OF CLASS 140 BROADWAY
ACTION SETTLEMENT, APPROVAL OF NEW YORK, NEW YORK 10005
28 NOTICE AND SCHEDULING OF (212) 907-0700
SETTLEMENT HEARING
C11-133 MJP
Case 2:11-cv-00133-MJP Document 115 Filed 02/17/12 Page 8 of 29
1 Lead Plaintiff the Employees’ Retirement System of the State of Rhode Island (“Lead
2 Plaintiff”) hereby moves, pursuant to Rule 23 of the Federal Rules of Civil Procedure, for entry
3 of the proposed Preliminary Approval Order Providing for Notice and Hearing in Connection
4 with Proposed Class Action Settlement (the “Preliminary Approval Order”). The motion, which
5 Defendants (defined below) do not oppose, is based on the Stipulation and Agreement of
6 Settlement dated as of February 13, 2012 (the “Stipulation”),1 the following memorandum, all
7 other pleadings and matters of record, and such additional evidence or argument as may be
8 presented.
9 PRELIMINARY STATEMENT
10 As a result of arm’s-length negotiations and pursuant to the Stipulation, Coinstar, Inc.
11 (“Coinstar” or the “Company”) has agreed to pay $6,000,000 in cash (the “Settlement Amount”)
12 for the benefit of the Class (defined below) to settle all claims asserted in the Consolidated
13 Amended Class Action Complaint, filed on June 17, 2011 (the “Complaint”) against the
14 Defendants, and release all related claims (the “Released Claims”) by Lead Plaintiff and Class
15 Members against the Defendants and affiliated persons and entities (the “Released Defendant
16 Parties”). Lead Plaintiff respectfully submits this memorandum of law in support of its
17 unopposed motion, which seeks:
18 (i) Preliminary approval of the proposed settlement (“Settlement”) of the claims
19 against defendants Coinstar, Paul Davis and J. Scott Di Valerio (the “Individual
20 Defendants,” and together with Coinstar, “Defendants”) in this proposed class action (the
21 “Action”);
22 (ii) Preliminary certification of a settlement class (the “Class”) of all Persons who
23
1
The Stipulation is attached as Exhibit 1 to the Declaration of Jonathan Gardner in Support
24 of Lead Plaintiff’s Unopposed Motion for Preliminary Approval of Class Action Settlement,
Approval of Notice and Scheduling Settlement Hearing, dated February 16, 2012, submitted
25 herewith (the “Gardner Decl.”). All capitalized terms used in this motion are the same as the
defined terms set forth in the Stipulation.
26
27 LEAD PLAINTIFF’S UNOPPOSED MOTION 1 LABATON SUCHAROW LLP
FOR PRELIMINARY APPROVAL OF CLASS 140 BROADWAY
ACTION SETTLEMENT, APPROVAL OF NEW YORK, NEW YORK 10005
28 NOTICE AND SCHEDULING OF (212) 907-0700
SETTLEMENT HEARING
C11-133 MJP
Case 2:11-cv-00133-MJP Document 115 Filed 02/17/12 Page 9 of 29
1 purchased the common stock of Coinstar from October 29, 2010 to February 3, 2011,
2 inclusive, (the “Class Period”) and who were allegedly damaged thereby;
3 (iii) Appointment of Lead Plaintiff as Class Representative and Lead Counsel as Class
4 Counsel;
5 (iv) Approval of the form, substance and the requirements of the proposed Notice of
6 Pendency of Class Action and Proposed Settlement and Motion for Attorneys’ Fees and
7 Expenses (the “Notice”) and the Summary Notice of Pendency of Class Action and
8 Proposed Settlement and Motion for Attorneys’ Fees and Expenses (“Summary Notice”)
9 (attached as Exs. 1 and 3 to the accompanying proposed Preliminary Approval Order),
10 and the means and methods for disseminating notice, as comporting with due process and
11 the Private Securities Litigation Reform Act of 1995 (the “PSLRA”), 15 U.S.C. §§ 78u-4;
12 (v) Approval of The Garden City Group, Inc. (“GCG”) as the Claims Administrator
13 to act under the direction of Lead Counsel; and
14 (vi) Scheduling of a Settlement Hearing.
15 This Action stems from allegedly material misstatements and omissions that concerned
16 the Company’s current and future financial condition, including the impact of agreements the
17 Company had entered into with certain movie studios which delayed the Company’s ability to
18 obtain new releases from those studios for 28 days and the slate of new movies available to the
19 Company for the fourth quarter of 2010. The Complaint asserts claims arising under Sections
20 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5
21 promulgated thereunder.
22 It is respectfully submitted that the Settlement represents a substantial recovery for the
23 Class and warrants preliminary approval.
24 A. DESCRIPTION OF THE LITIGATION
25 On January 24, 2011, an initial class action complaint alleging violations of the federal
26
27 LEAD PLAINTIFF’S UNOPPOSED MOTION 2 LABATON SUCHAROW LLP
FOR PRELIMINARY APPROVAL OF CLASS 140 BROADWAY
ACTION SETTLEMENT, APPROVAL OF NEW YORK, NEW YORK 10005
28 NOTICE AND SCHEDULING OF (212) 907-0700
SETTLEMENT HEARING
C11-133 MJP
Case 2:11-cv-00133-MJP Document 115 Filed 02/17/12 Page 10 of 29
1 securities laws against Defendants was filed in the United States District Court for the Western
2 District of Washington on behalf of purchasers of Coinstar Inc. common stock captioned Packer,
3 et. al. v. Coinstar, Inc., et al., No. 11-CV-00133. A related class action, Wilkerson et al. v.
4 Coinstar, Inc. et al., No. 11-176, was filed on February 1, 2011, and both cases were
5 consolidated by the Court on February 14, 2011. Subsequently, four more actions were filed in
6 the United States District Court for the Western District of Washington: Nagler, et. al. v.
7 Coinstar, Inc., et al., No. 11-CV-00192; Weiss, et. al. v. Coinstar, Inc., et al., No. 11-CV-00202;
8 Wright, et. al. v. Coinstar, Inc., et al., No. 11-CV-00325; and Dingler, et. al. v. Coinstar, Inc., et
9 al., No. 11-CV-00353. All the actions were consolidated by Court order on March 15, 2011.
10 On April 19, 2011, the Court appointed the Employees’ Retirement System of the State
11 of Rhode Island as Lead Plaintiff pursuant to §21D(a)(3)(B) of the Exchange Act as amended by
12 the PSLRA, and approved its selection of Labaton Sucharow LLP as Lead Counsel and
13 Zwerling, Schachter & Zwerling, LLP as Liaison Counsel.
14 Lead Plaintiff later filed the Complaint on June 17, 2011. The Complaint alleged that
15 Defendants made materially false and misleading statements and failed to disclose material facts
16 concerning the Company’s current and future financial condition, in violation of §§10(b) and
17 20(a) of the Exchange Act. The Complaint further alleged that, as a result of Defendants’
18 misrepresentations and omissions, the price of Coinstar’s common stock was artificially inflated
19 during the Class Period.
20 Coinstar is a provider of automated retail services. The Company’s core automated retail
21 business includes its wholly owned subsidiary: Redbox Automated Retail LLC (“Redbox”).
22 Redbox provides Coinstar with 80% of its revenue. Redbox provides consumers with DVD
23 rentals and sales through self-service DVD kiosks. Its business model is premised on being able
24 to provide consumers new release DVDs for low prices ($1/night rentals). In 2010, Redbox was
25 forced to enter into certain delay agreements with three movie studios that prevented Redbox
26
27 LEAD PLAINTIFF’S UNOPPOSED MOTION 3 LABATON SUCHAROW LLP
FOR PRELIMINARY APPROVAL OF CLASS 140 BROADWAY
ACTION SETTLEMENT, APPROVAL OF NEW YORK, NEW YORK 10005
28 NOTICE AND SCHEDULING OF (212) 907-0700
SETTLEMENT HEARING
C11-133 MJP
Case 2:11-cv-00133-MJP Document 115 Filed 02/17/12 Page 11 of 29
1 from providing new releases until 28 days after their “street date” – 28 days after the DVDs were
2 available to the public elsewhere (the “28-Day Delay Agreements”). Despite entering into these
3 agreements in 2Q10, Coinstar issued increased guidance on October 28, 2010 for 4Q10 and FY
4 2010. The Complaint alleges that these forecasts were made at a time when Defendants knew
5 that the Company would not be able to achieve them. Lead Plaintiff also claims that Defendants
6 made false statements concerning: (1) the problems the Company would incur in the 4Q10
7 stemming from the 28-Day Delay Agreements, including lower demand for the releases subject
8 to the delay; (2) lower demand for Blu-ray titles; and (3) poor new titles expected for 4Q10 – all
9 allegedly known problems that Defendants should have taken into account when issuing
10 forecasts.
11 When Defendants disclosed on January 13, 2011 that the Company would not meet the
12 guidance issued on October 28, 2010, Coinstar’s stock price dropped 27%. Defendants
13 attributed this drop to the ongoing impact of the Company’s 28-Day Delay Agreements
14 (especially to 4Q10 revenue), slow sales of Blu-ray discs, and inventory issues. When the
15 Company announced its actual results for 4Q10 and FY10 on February 3, 2011 – Coinstar’s
16 stock price dropped an additional 11.93%.
17 The allegations in the Complaint are based upon Lead Plaintiff and Lead Counsel’s
18 extensive investigation of the claims, which included review and analysis of: (a) publicly
19 available information concerning Defendants, including newspaper articles, online publications,
20 stock price movement, statements at analyst conferences, and Bloomberg reports; (b) regulatory
21 filings made by the Company with the SEC; (c) securities analyst reports; and (d) press releases
22 and media reports issued by and disseminated by Defendants. Lead Counsel also identified and
23 interviewed numerous potential confidential witnesses and consulted with a damages expert to
24 analyze the Company’s stock price movements in response to Company-specific news and to
25 analyze issues related to loss causation.
26
27 LEAD PLAINTIFF’S UNOPPOSED MOTION 4 LABATON SUCHAROW LLP
FOR PRELIMINARY APPROVAL OF CLASS 140 BROADWAY
ACTION SETTLEMENT, APPROVAL OF NEW YORK, NEW YORK 10005
28 NOTICE AND SCHEDULING OF (212) 907-0700
SETTLEMENT HEARING
C11-133 MJP
Case 2:11-cv-00133-MJP Document 115 Filed 02/17/12 Page 12 of 29
1 On July 15, 2011, Defendants moved to dismiss the Complaint. Lead Plaintiff filed an
2 opposition to Defendants’ motion to dismiss on August 12, 2010, and Defendants filed their
3 reply brief on September 2, 2011. Argument on the motion to dismiss was held on September
4 27, 2011. On October 6, 2011, the Court denied Defendants’ motion as to three statements, and
5 granted the motion as to all other statements. Specifically, the Court allowed Lead Plaintiff to
6 proceed as to earnings projections made at two conferences in November 2010—the November
7 16 Summit and the November 17 C&R Conference—and as to a statement regarding the title
8 strength of new movies available to Redbox in 4Q10 made during the 3Q10 Earnings Call.
9 Notably, during the motion to dismiss briefing, Defendants attempted to submit fact based
10 evidence that they allege undermined Lead Plaintiff’s claims at to these statements. The Court
11 denied Defendant’s motion for judicial notice of these facts, reserving fact based determinations
12 for summary judgment.
13 B. SETTLEMENT DISCUSSIONS
14 The Parties participated in a series of formal and informal arm’s-length settlement
15 discussions and negotiations including participation in a full day mediation (on September 20,
16 2011) before an independent and highly experienced mediator, former District Court Judge Layn
17 R. Phillips, Esq. While the mediation session was not successful and the Parties were not able
18 to bridge their differences, it was productive in narrowing the gap and exploring the strengths
19 and weaknesses of the case. Following the Court’s decision on Defendants’ motion to dismiss,
20 the Parties continued to engage in settlement discussions and were able to reach a Settlement.
21 All negotiations were at arm’s-length and well informed by: (i) months of extensive informal
22 investigation by Lead Counsel, including interviews with numerous former Coinstar employees;
23 (ii) analysis of the publicly available information about Coinstar and the other Defendants; (iii)
24 an analysis of the Company’s financial condition and its ability to sustain a judgment or pay a
25 settlement; (iv) a day-long mediation session with an experienced and well respected mediator;
26
27 LEAD PLAINTIFF’S UNOPPOSED MOTION 5 LABATON SUCHAROW LLP
FOR PRELIMINARY APPROVAL OF CLASS 140 BROADWAY
ACTION SETTLEMENT, APPROVAL OF NEW YORK, NEW YORK 10005
28 NOTICE AND SCHEDULING OF (212) 907-0700
SETTLEMENT HEARING
C11-133 MJP
Case 2:11-cv-00133-MJP Document 115 Filed 02/17/12 Page 13 of 29
1 and (v) contentious motion practice seeking dismissal of the claims and the Court’s decision
2 granting in part and denying in part that motion.
3 As discussed herein, there were numerous issues about which the two sides disagreed: (i)
4 whether Lead Plaintiff could plead and prove that Defendants acted with scienter; (ii) whether
5 the statements made or facts allegedly omitted were material, false, misleading or actionable; and
6 (iii) the amount by which Coinstar stock was allegedly artificially inflated (if at all) during the
7 Class Period. With the Parties expressing differing views regarding the merits of the claims and
8 the cause of the drops in share price, the Settlement was achieved only through a long and
9 difficult negotiation.
10 Through these settlement negotiations and the mediation, the Parties reached an
11 agreement in principle to completely resolve the Action. The Parties entered into a binding
12 Memorandum of Understanding on January 11, 2012 and the formal Stipulation on February 13,
13 2012.
14 C. THE PROPOSED SETTLEMENT
15 Pursuant to the proposed Settlement, Defendants will deposit $6,000,000 into an escrow
16 account (the “Settlement Fund”) within thirty (30) calendar days after the Court enters the
17 Preliminary Approval Order. In exchange for this payment, upon the Effective Date of the
18 Settlement, Lead Plaintiff and the Class will release all Released Claims against the Released
19 Defendant Parties. The Settlement Fund, less attorneys’ fees and any expenses awarded by the
20 Court, notice and administration expenses, and any Taxes payable from the Settlement Fund, will
21 be distributed to Authorized Claimants (i.e., Class Members who file timely and valid Proofs of
22 Claim) in accordance with the Plan of Allocation described fully in the Notice. The Plan of
23 Allocation, which was drafted with the assistance of a damages consultant, takes into account the
24 alleged disclosure dates and stock drops and treats all potential claimants in a fair and equitable
25 fashion. Each Authorized Claimant will be paid that percentage of the Net Settlement Fund that
26
27 LEAD PLAINTIFF’S UNOPPOSED MOTION 6 LABATON SUCHAROW LLP
FOR PRELIMINARY APPROVAL OF CLASS 140 BROADWAY
ACTION SETTLEMENT, APPROVAL OF NEW YORK, NEW YORK 10005
28 NOTICE AND SCHEDULING OF (212) 907-0700
SETTLEMENT HEARING
C11-133 MJP
Case 2:11-cv-00133-MJP Document 115 Filed 02/17/12 Page 14 of 29
1 such Authorized Claimant’s “claim” represents in relation to the total claims of all Authorized
2 Claimants who purchased Coinstar common stock during the Class Period.
3 As set forth below, the Settlement meets the standards for preliminary approval as it falls
4 well within the range of possible approvals, was the product of rigorous arm’s-length
5 negotiations between experienced counsel and has no obvious deficiencies.
6 D. PROPOSED SCHEDULE OF EVENTS
7 Lead Plaintiff requests permission to provide notice of the Settlement to Class Members
8 at this time. Lead Plaintiff respectfully proposes the following schedule for the various
9 Settlement events, based upon, in part, the terms of the Stipulation:
10 • Deadline for mailing individual Notices and Proofs of Claim
11 (the “Notice Date”): on or before 10 business days after entry of the
12 Preliminary Approval Order.
13 • Deadline for Publication of Summary Notice in Investor’s
14 Business Daily and transmitted over PR Newswire: within 14 calendar days
15 of the Notice Date.
16 • Deadline for filing motions in support of Settlement and Lead Counsel’s
17 application for award of attorneys’ fees and expenses: on or before thirty-
18 eight (38) calendar days prior to the Settlement Hearing.
• Deadline for submission of requests for exclusion from the
19
Class or objections to the Settlement, Plan of Allocation or Lead Counsel’s
20
request for attorneys’ fees and Expenses: no later than twenty-one (21)
21
calendar days prior to the Settlement Hearing.
22
• Settlement Hearing: at the Court’s convenience, but at least
23
90 calendar days after the Notice Date.
24
• Deadline for submission of Proofs of Claim: postmarked no later than 120
25
calendar days after the Notice Date.
26
27 LEAD PLAINTIFF’S UNOPPOSED MOTION 7 LABATON SUCHAROW LLP
FOR PRELIMINARY APPROVAL OF CLASS 140 BROADWAY
ACTION SETTLEMENT, APPROVAL OF NEW YORK, NEW YORK 10005
28 NOTICE AND SCHEDULING OF (212) 907-0700
SETTLEMENT HEARING
C11-133 MJP
Case 2:11-cv-00133-MJP Document 115 Filed 02/17/12 Page 15 of 29
1 This schedule is consistent with the Ninth Circuit’s ruling in In re Mercury Interactive
2 Corp. Sec. Litig., 618 F.3d 988, 995 (9th Cir. 2010).
3 ARGUMENT
4 I. THE SETTLEMENT MERITS PRELIMINARY APPROVAL
5 Strong judicial policy favors the settlement of class actions. Class Pl.’s v. City of Seattle,
6 955 F.2d 1268, 1276 (9th Cir. 1992); Linney v. Cellular Alaska P’ship, 151 F.3d 1234, 1238 (9th
7 Cir. 1998); Hughes v. Microsoft Corp., No. C98–1646C, C93–0178C, 2001 WL 34089697, *6
8 (W.D.Wash. Mar. 26, 2001). Settlements of complex cases greatly contribute to the efficient
9 utilization of scarce judicial resources and achieve the speedy resolution of justice.
10 Approval of class action settlements normally proceeds in two stages: (i) preliminary
11 approval, followed by notice to the class; and (ii) final approval. See, e.g., Pierce v. Novastar
12 Mortg., Inc., No. C05-5835, 2007 WL 1847216, *3 (W.D.Wash. June 27, 2007). The Settlement
13 is now at the first stage of the process. Standards governing whether preliminary approval
14 should be granted have “both a procedural and a substantive component.” Young v. Polo Retail,
15 LLC, No. C-02-4546, 2006 WL 3050861, at * 5 (N.D. Cal. Oct. 25, 2006). The court in Young,
16 explained the process:
17 ‘[i]f the proposed settlement appears to be the product of serious, informed, non-
collusive negotiations, has no obvious deficiencies, does not improperly grant
18 preferential treatment to class representatives or segments of the class, and falls
within the range of possible approval, then the court should direct that the notice
19 be given to the class members of a formal fairness hearing . . . .’ Manual for
Complex Litigation, Second § 30.44 (1985). In addition, ‘[t]he court may find
20 that the settlement proposal contains some merit, is within the range of
reasonableness required for a settlement offer, or is presumptively valid.’
21 Newberg on Class Actions § 11.25 (1992). (Omission in original).
22 Id.; see also Wilson v. Venture Fin. Grp, Inc., No. C09-5768, 2011 WL 219692 (W.D.Wash. Jan.
23 24, 2011) (granting preliminary approval after finding proposed settlement was non-collusive,
24 had no obvious defects and was within the range of possible settlement approval). Applying the
25 standards set forth above, the Settlement should be preliminarily approved.
26
27 LEAD PLAINTIFF’S UNOPPOSED MOTION 8 LABATON SUCHAROW LLP
FOR PRELIMINARY APPROVAL OF CLASS 140 BROADWAY
ACTION SETTLEMENT, APPROVAL OF NEW YORK, NEW YORK 10005
28 NOTICE AND SCHEDULING OF (212) 907-0700
SETTLEMENT HEARING
C11-133 MJP
Case 2:11-cv-00133-MJP Document 115 Filed 02/17/12 Page 16 of 29
1 A. The Settlement Is the Result of a Thorough, Rigorous and
Arm’s-Length Process and Has No Obvious Deficiencies
2
The Parties have vigorously litigated the Action since its inception. The Settlement is the
3
result of a series of negotiations including mediation before former District Court Judge Layn R.
4
Phillips, an experienced mediator with considerable knowledge and expertise in the field of
5
federal securities law. The Parties did not reach an agreement at the September 20, 2011
6
mediation, but continued to litigate the Action while engaging in ongoing settlement discussions.
7
After the Court issued its decision granting in part and denying in part Defendants’ motion to
8
dismiss, the Parties ultimately reached an agreement in principle that led to this Settlement.
9
Throughout the settlement negotiations and the mediation session, the strengths and
10
weaknesses of the Parties’ respective claims and defenses were fully explored. The negotiations
11
focused on disputed issues of scienter, falsity, loss causation and damages. With an informed
12
understanding of the nuances of the disputed issues in the Action, the Parties agreed to the
13
Settlement.
14
Courts have recognized that assistance by an experienced mediator supports “that the
15
settlement is fair and reasonable [and] supports a finding that the settlement is in fact in the best
16
interests of the class members.” Hughes v. Microsoft Corp., 2001 WL 34089697, at *6. Here
17
Mr. Phillips played an active role in discussing the relevant issues with the Parties and helped
18
narrow the gap to bring about the Settlement. The fact that the Settlement was “the result of
19
extensive, arm’s-length negotiations” with “the assistance of an experienced mediator” is further
20
proof that preliminary approval should be granted. Satchell v. Fed. Express Corp., Nos. C03-
21
2659, C 03-2878, 2007 WL 1114010, at *4 (N.D. Cal. Apr. 13, 2007); see also In re Delphi
22
Corp. Sec., Deriv. & ERISA Litig., 248 F.R.D. 483, 498 (E.D. Mich. 2008) (approving settlement
23
negotiated with the assistance of Judge Phillips and referring to him as “one of the most
24
prominent and highly skilled mediators of complex actions”).
25
Although the Settlement was reached relatively early in the Action, as discussed above,
26
27 LEAD PLAINTIFF’S UNOPPOSED MOTION 9 LABATON SUCHAROW LLP
FOR PRELIMINARY APPROVAL OF CLASS 140 BROADWAY
ACTION SETTLEMENT, APPROVAL OF NEW YORK, NEW YORK 10005
28 NOTICE AND SCHEDULING OF (212) 907-0700
SETTLEMENT HEARING
C11-133 MJP
Case 2:11-cv-00133-MJP Document 115 Filed 02/17/12 Page 17 of 29
1 Lead Plaintiff had a thorough understanding of the facts of the case and merits of the claims due
2 to an extensive and thorough review of publicly available information, interviews with
3 confidential witnesses, analysis by a damages expert and briefing of a contentious motion to
4 dismiss, as well as the Court’s decision considerably narrowing the Action.
5 Throughout this process Lead Plaintiff also had the advice and counsel of Labaton
6 Sucharow, a firm with extensive experience in class action litigation (See Part III.C., below).
7 Courts have given considerable weight to the opinion of experienced and informed counsel who
8 support settlement. In deciding whether to approve a proposed settlement of a class action,
9 “[t]he recommendations of plaintiffs’ counsel should be given a presumption of reasonableness.”
10 In re Omnivision Techs., Inc., 559 F.Supp.2d 1036, 1043 (N.D. Cal. 2008) (citation omitted). In
11 Omnivision the Court held that the recommendation of counsel weighed in favor of settlement
12 given their familiarity with the dispute and their significant experience in securities litigation. Id.
13 Lead Counsel likewise has a thorough understanding of the merits of the Action and extensive
14 experience in securities litigation. Lead Counsel’s belief in the fairness and reasonableness of
15 this Settlement warrants a presumption of reasonableness.
16 B. The Settlement Is Well Within the Range of Reasonableness
17 At this preliminary approval stage, the court need only determine whether the proposed
18 settlement is within the “range of possible final approval.” Wilson, 2011 WL 219692, at *2.
19 This Settlement, in the amount of $6,000,000, is well within the range of reasonableness for
20 several reasons.
21 Lead Plaintiff’s damages consultant has estimated that class-wide damages in the Action,
22 assuming that 100% of the stock drop on both alleged corrective disclosure dates are attributable
23 to correction of the alleged fraud, are approximately $96 million. Thus the $6,000,000
24 settlement with Defendants represents a 6.25% recovery of the estimated class-wide damages.
25 To put the this into perspective, median recoveries in other securities class actions during the
26
27 LEAD PLAINTIFF’S UNOPPOSED MOTION 10 LABATON SUCHAROW LLP
FOR PRELIMINARY APPROVAL OF CLASS 140 BROADWAY
ACTION SETTLEMENT, APPROVAL OF NEW YORK, NEW YORK 10005
28 NOTICE AND SCHEDULING OF (212) 907-0700
SETTLEMENT HEARING
C11-133 MJP
Case 2:11-cv-00133-MJP Document 115 Filed 02/17/12 Page 18 of 29
1 past five years have ranged from 2.2% to 2.7% according to analyses by NERA Economic
2 Consulting. See NERA, Trends 2010 Year-End Update: Securities Class Action Filings
3 Accelerate in Second Half of 2010; Median Settlement Value at an All-Time High, by Dr. Jordan
4 Milev, Robert Patton, and Svetlana Starykh (2010) at 25 (Gardner Decl Ex. 2). In addition, over
5 half the settlements in 2010 were for less than $10 million. See Cornerstone Research, Securities
6 Class Action Settlements 2010 Review and Analysis, by Ellen M. Ryan, Laura E. Simmons
7 (2010) at 3 (Gardner Decl Ex. 3).
8 The recovery of $6,000,000 is also within the range of reasonableness when compared to
9 other class action settlements recently approved within the Ninth Circuit. See City of Westland
10 Police and Fire Ret. Sys. and Plymouth Cnty. Ret. Sys. v. Sonic Solutions et al., No. 07-CV-
11 05111 (N.D. Cal. Apr. 8, 2010) ($5 million); In re Limelight Networks, Inc. Sec. Litig., No. 07-
12 01603 (D. Ariz. Mar. 23, 2011) ($1.9 million); In re Metawave Comm. Corp. Sec. Litig., No. 02-
13 625 (W.D. Wash. Feb. 11, 2010) ($1.5 million); In re LJ Int’l Inc., Sec. Litig., No. 07-6076 (C.D.
14 Cal. Oct. 19, 2009) ($2 million); In re Biolase Tech., Inc. Sec. Litig., No. 04-cv-00947 (C.D. Cal.
15 Aug. 15, 2007) ($1.95 million); In re Maxim Pharm. Inc. Sec. Litig., No. 04 CV 1900 (S.D. Cal.
16 Sept. 25, 2006) ($1 million in cash, $1.3 million in stock); In re Amylin Pharm. Inc. Sec. Litig.,
17 No. CV-01-1455 (S.D. Cal. Dec. 30, 2004) ($2.1 million); and In re Alliance Equip. Release
18 Program Sec. Litig., No. 98-CV-2150 (S.D. Cal. July 3, 2001) ($2 million).
19 The fairness and adequacy of the Settlement is further underscored by taking into
20 account the obstacles the Class would face in ultimately succeeding on the merits, as well as the
21 expense and likely duration of the litigation. See Churchill Village, L.L.C. v. Gen. Elec., 361
22 F.3d 566, 576 (9th Cir. 2004) (citing “risk, expense, complexity, and likely duration of further
23 litigation” as factors supporting final approval of settlement).
24 Lead Plaintiff believes that it could have established that Defendants made false and
25 misleading statements regarding: (1) the Company’s earnings projections made during two
26
27 LEAD PLAINTIFF’S UNOPPOSED MOTION 11 LABATON SUCHAROW LLP
FOR PRELIMINARY APPROVAL OF CLASS 140 BROADWAY
ACTION SETTLEMENT, APPROVAL OF NEW YORK, NEW YORK 10005
28 NOTICE AND SCHEDULING OF (212) 907-0700
SETTLEMENT HEARING
C11-133 MJP
Case 2:11-cv-00133-MJP Document 115 Filed 02/17/12 Page 19 of 29
1 conferences--the November 16, 2010 Summit and November 17, 2010 C&R Conference, and (2)
2 the strength of new movie titles being offered by Redbox during 4Q10, made during the 3Q10
3 Earnings Call. Defendants, however, would have vigorously argued and presented evidence that:
4 (1) the statements made during the November 2010 conferences were protected by the safe
5 harbor because the Company accompanied these statements with sufficient cautionary language,
6 and (2) the new movie titles offered in 4Q10 were indeed strong titles because many of such
7 movies were top grossing films. Although both of these disputes are factual, if the Court
8 credited Coinstar’s cautionary language or determined that Lead Plaintiff’s evidence did not
9 sufficiently raise a genuine dispute as to any material facts, then Lead Plaintiff’s claims could
10 have been dismissed on summary judgment.
11 Were the Action to have continued, Defendants would also likely raise questions
12 regarding the Class’s ability to plead or prove loss causation and contend that the drops in the
13 market price of Coinstar stock, alleged by Lead Plaintiff to be the result of corrective disclosures,
14 were in fact caused by disclosures of information not related to the alleged fraud. The issue of
15 causation within the Ninth Circuit has been hotly contested, with litigants debating the meaning
16 and scope of the Supreme Court’s decision in Dura Pharms v. Broudo, 544 U.S. 336 (2005).
17 The Parties would need to litigate the impact of recent Ninth Circuit cases such as Metzler Inv.
18 GMBH v. Corinthian Coll. Inc., 540 F.3d 1049 (9th Cir. 2008) and In re Daou Sys., Inc. Sec.
19 Litig., 411 F.3d 1009 (9th Cir. 2005), which discuss what “disclosures” need to be revealed to
20 the public to establish loss causation, as well as In re Gilead Sci. Sec. Litig., 536 F.3d 1049 (9th
21 Cir. 2008). These loss causation issues would likely be contested were this case to proceed.
22 Accordingly, even if Lead Plaintiff prevailed at class certification and summary
23 judgment, there is no doubt that both sides would have to present complex and nuanced
24 information to a jury that would include a “battle of the experts” on the arcana of damages
25 calculations and securities disclosure requirements. The results of the trial would almost
26
27 LEAD PLAINTIFF’S UNOPPOSED MOTION 12 LABATON SUCHAROW LLP
FOR PRELIMINARY APPROVAL OF CLASS 140 BROADWAY
ACTION SETTLEMENT, APPROVAL OF NEW YORK, NEW YORK 10005
28 NOTICE AND SCHEDULING OF (212) 907-0700
SETTLEMENT HEARING
C11-133 MJP
Case 2:11-cv-00133-MJP Document 115 Filed 02/17/12 Page 20 of 29
1 certainly not end the Action, as one side, or both, would likely appeal. It has been noted that “the
2 difficulty Plaintiffs would encounter in proving their claims, the substantial litigation expenses,
3 and a possible delay in recovery due to the appellate process, provide justifications for this
4 Court’s approval of the proposed Settlement.” In re Broadwing ERISA Litig., No. 1:02-cv-
5 00857, 2006 WL 3831382, at * 3 (S.D. Ohio Oct. 5, 2006).
6 In light of all these potential obstacles to recovery at trial, and when compared to the
7 settlement amounts recovered in similar class actions nationally and within this Circuit, the
8 certain immediate recovery of $6,000,000 represents a significant result for the Class.
9 II. THE PROPOSED NOTICE PROGRAM SATISFIES RULES 23(d) AND (e) AND
DUE PROCESS REQUIREMENTS
10
Lead Counsel proposes that mailed and published notice be given in the form of the
11
Notice and Summary Notice, attached as Exhibits 1 and 3 to the proposed Preliminary Approval
12
Order. Notice to the Class in the form and in the manner set forth in the proposed Preliminary
13
Approval Order will fulfill the requirements of due process, comply with the Federal Rules of
14
Civil Procedure and the PSLRA.
15
Notice must be “reasonably calculated, under all the circumstances, to apprise interested
16
parties of the pendency of the action and afford them an opportunity to present their objections.”
17
Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950) (citations omitted);
18
Mendoza v. Tucson Sch. Dist. No. 1, 623 F.2d 1338, 1352 (9th Cir. 1980). Lead Plaintiff
19
proposes to give interested parties notice in two ways: by first-class mail, addressed to all Class
20
Members who can reasonably be identified and located, and by publication notice in Investor’s
21
Business Daily and PR Newswire.
22
The form and substance of the notice program are also sufficient. “Notice is satisfactory
23
if it ‘generally describes the terms of the settlement in sufficient detail to alert those with adverse
24
viewpoints to investigate and to come forward and be heard.’” Churchill Village, 361 F.3d at
25
575 (quoting Mendoza v. Tucson Sch. Dist. No. 1, 623 F.2d at 1352). The proposed forms of
26
27 LEAD PLAINTIFF’S UNOPPOSED MOTION 13 LABATON SUCHAROW LLP
FOR PRELIMINARY APPROVAL OF CLASS 140 BROADWAY
ACTION SETTLEMENT, APPROVAL OF NEW YORK, NEW YORK 10005
28 NOTICE AND SCHEDULING OF (212) 907-0700
SETTLEMENT HEARING
C11-133 MJP
Case 2:11-cv-00133-MJP Document 115 Filed 02/17/12 Page 21 of 29
1 notice describe in plain English the terms and operation of the Settlement, the considerations that
2 caused Lead Plaintiff and Lead Counsel to conclude that the Settlement is fair, adequate and
3 reasonable, the maximum counsel fees and expenses that may be sought, the procedure for
4 requesting exclusion from the Class, the procedure for objecting to the Settlement, the procedure
5 for participating in the Settlement, and the date and place of the Settlement Hearing. The
6 Notices will, when mailed and published as provided for in the Preliminarily Approval Order
7 submitted herewith, fairly apprise Class Members of the Settlement and their options with
8 respect thereto, and fully satisfy all due process requirements.
9 Lead Counsel also proposes that the Court appoint GCG as the claims administrator for
10 the Settlement. GCG has been a claims administrator for over 25 years and has the experience to
11 efficiently and accurately act as the claims administrator here. During GCG’s tenure, it has
12 administered thousands of class action settlements and distributed billions in settlement assets.
13 (See Gardner Decl., Ex. 4, for background information about GCG).
14 III. THE COURT SHOULD PRELIMINARILY CERTIFY THE CLASS FOR
SETTLEMENT PURPOSES
15
A. Standards Applicable to Class Certification
16
At the Settlement Hearing, the Court will be asked to grant final approval to the
17
Settlement on behalf of a class. For that reason, it is appropriate for the Court to consider, at the
18
preliminary approval stage, whether certification of a settlement class is appropriate. Jaffe v.
19
Morgan Stanley & Co., No. C-06-3903, 2008 WL 346417 (N.D. Cal. Feb. 7, 2008).
20
The Action satisfies all the factors for certification and, if the action were to proceed to
21
trial, class certification would be appropriate. In this Circuit, “Rule 23 is . . . liberally construed
22
in a securities fraud context because class actions are particularly effective in serving as private
23
policing weapons against corporate wrongdoing.” In re Cooper Cos. Sec. Litig., 254 F.R.D. 628,
24
642 (C.D. Cal. 2009) (internal citations omitted). “[T]he law in the Ninth Circuit is very well
25
established that the requirements of Rule 23 should be liberally construed in favor of class action
26
27 LEAD PLAINTIFF’S UNOPPOSED MOTION 14 LABATON SUCHAROW LLP
FOR PRELIMINARY APPROVAL OF CLASS 140 BROADWAY
ACTION SETTLEMENT, APPROVAL OF NEW YORK, NEW YORK 10005
28 NOTICE AND SCHEDULING OF (212) 907-0700
SETTLEMENT HEARING
C11-133 MJP
Case 2:11-cv-00133-MJP Document 115 Filed 02/17/12 Page 22 of 29
1 cases brought under the federal securities laws.” In re THQ, Inc., Sec. Litig., No. CV-001783,
2 2002 WL 1832145, at * 2 (C.D. Cal., Mar. 22, 2002) (internal citations omitted). See also In re
3 Metawave Comm. Corp. Sec. Litig., No. C02-625RSM (W.D. Wash. Nov. 10, 2009) (certifying
4 class for purposes of settlement in federal class action securities case); In re Northwest
5 Biotheraputics Inc. Sec. Litig., No. C07-1254 (W.D.Wash. Feb. 20, 2009) (same).
6 Under Fed. R. Civ. P. 23(a), a class may be certified if: (i) it is so numerous that joinder
7 of all members is impracticable; (ii) there are questions of law and fact common to the class; (iii)
8 the claims or defenses of the representative parties are typical of the claims or defenses of the
9 class; and (iv) the representative parties will fairly and adequately protect the interests of the
10 class. Dukes v. Wal-Mart, Inc., 509 F.3d 1168, 1176 (9th Cir. 2007). The proposed class
11 additionally must fall within one of the three categories of class actions defined in Fed. R. Civ. P.
12 23(b). See Desai v. Deutsche Bank Sec. Ltd., No. 08-55081, 2009 WL2245223, at * 3 (9th Cir.
13 July 29, 2009).
14 Lead Plaintiff requests that the Court preliminarily certify a settlement class as follows:
15 all Persons who purchased the common stock of Coinstar from October 29, 2010 to February 3,
16 2011, inclusive, and who were allegedly damaged thereby. Excluded from the Class are:
17 Defendants; the officers or directors of Coinstar during the Class Period; members of the
18 immediate family of any officer or director of Coinstar during the Class Period; the legal
19 representatives, heirs, successors or assigns of any officer or director of Coinstar during the Class
20 Period; any entity in which Defendants have or had a controlling interest; and any person or
21 entity who timely and validly seeks exclusion from the Class.
22 B. The Class Meets the Requirements of Rule 23(a)
23 1. Rule 23(a)(1): Numerosity
24 Rule 23(a)(1) requires that the class be so numerous that joinder of all members is
25 impracticable. “[I]mpracticable does not mean ‘impossibility’, but only the difficulty or
26
27 LEAD PLAINTIFF’S UNOPPOSED MOTION 15 LABATON SUCHAROW LLP
FOR PRELIMINARY APPROVAL OF CLASS 140 BROADWAY
ACTION SETTLEMENT, APPROVAL OF NEW YORK, NEW YORK 10005
28 NOTICE AND SCHEDULING OF (212) 907-0700
SETTLEMENT HEARING
C11-133 MJP
Case 2:11-cv-00133-MJP Document 115 Filed 02/17/12 Page 23 of 29
1 inconvenience of joining all members of the class. Harris v. Palm Springs Alpine Estates, Inc.,
2 329 F.2d 909, 913-14 (9th Cir. 1964). There is no fixed number of class members which either
3 compels or precludes the certification of a class. Arnold v. United Artists Theatre Circuit, Inc.,
4 158 F.R.D. 439, 448 (N.D. Cal. 1994); see also Welling v. Alexy, 155 F.R.D. 654, 656 (N.D. Cal.
5 1994) (classes consisting of as few as 25 members have been held large enough to justify
6 certification). The exact size of the class need not be known so long as general knowledge and
7 common sense indicate that the class is large. Perez-Funez v. Dist Dir., I.N.S., 611 F. Supp. 990,
8 995 (C.D. Cal. 1984). In securities litigation, courts regularly find the numerosity requirement
9 satisfied with respect to putative purchasers of nationally traded securities on the volume of
10 outstanding shares. Yamner v. Boich, No. C-92-20597, 1994 WL 514035, at * 3 (N.D. Cal. Sept.
11 15, 1994).
12 Here, there can be no dispute that the Class satisfies numerosity and consists of (at least)
13 thousands of investors. Coinstar stock was listed and actively traded during the Class Period on
14 the NASDAQ, an open and efficient market, with 31,829,467 shares of common stock
15 outstanding shortly after the end of the Class Period (See Form 10-K for the fiscal year ending
16 December 31, 2010). Common sense dictates that these shares were purchased by tens of
17 thousands of investors, making joinder impracticable.
18 2. Rule 23(a)(2): Questions of Law or Fact Are Common
19 Rule 23(a)(2) requires the existence of “questions of law or fact common to the class.”
20 Fed. R. Civ. P. 23(a)(2). Commonality does not require class members to share all issues in the
21 suit, but simply a single common issue. Blackie v. Barrack, 524 F.2d 891, 902-03 (9th Cir.
22 1975). Indeed, “[t]he Ninth Circuit has repeatedly found that common issues predominate in
23 federal securities actions where the proposed class members have all been injured by the same
24 alleged course of conduct.” In re First Capital Holdings Corp. Fin. Prods. Sec. Litig., No. MDL
25 901, 1993 WL 144861, at * 6 (C.D. Cal. Feb. 26, 1993).
26
27 LEAD PLAINTIFF’S UNOPPOSED MOTION 16 LABATON SUCHAROW LLP
FOR PRELIMINARY APPROVAL OF CLASS 140 BROADWAY
ACTION SETTLEMENT, APPROVAL OF NEW YORK, NEW YORK 10005
28 NOTICE AND SCHEDULING OF (212) 907-0700
SETTLEMENT HEARING
C11-133 MJP
Case 2:11-cv-00133-MJP Document 115 Filed 02/17/12 Page 24 of 29
1 Common questions of both law and fact abound here. The central questions of whether
2 Defendants’ public statements were false or material, whether Defendants acted with the
3 requisite mental state and whether the Class relied on Defendants’ alleged misstatements and
4 omissions are all the same for each Class Member. The claims of each Class Member arise from
5 the same operative facts and share legal theories.
6 3. Rule 23(a)(3): Lead Plaintiff’s Claims Are Typical
7 Rule 23(a)(3) is satisfied where the claims of the proposed class representatives arise
8 from the same course of conduct that gives rise to the claims of the other class members, and
9 where the claims are based on the same legal theory. In re Computer Memories Sec. Litig. 111
10 F.R.D. 675, 680 (N.D. Cal. 1986). Rule 23(a)(3) does not require plaintiffs to show that their
11 claims are identical on every issue to those of the class, but merely that significant common
12 questions exist. In re Syncor ERISA Litig., 227 F.R.D. 338, 344 (C.D. Cal. 2005). Differences in
13 the amount of damages, the size or manner of purchase, type of purchase, and even the specific
14 documents influencing the purchase will not render the claim atypical in most securities actions.
15 See Weinberger v. Jackson, 102 F.R.D. 839, 844 (N.D. Cal. 1984).
16 Here, Lead Plaintiff’s claims are identical to those of the other members of the proposed
17 Class. Lead Plaintiff, like all members of the Class, purchased Coinstar’s common stock at
18 allegedly artificially inflated prices during the Class Period and claim to have suffered damages
19 because of Defendants’ alleged material misstatements and omissions.
20 4. Rule 23(a)(4): Lead Plaintiff is Adequate and Should be Appointed
Class Representative
21
Rule 23(a)(4) entails two showings: (i) class counsel must be qualified, experienced and
22
generally able to conduct the litigation; and (ii) there must be no antagonism or disabling conflict
23
between the interests of the named class representatives and the members of the class. See, e.g.
24
Lerwill v. Inflight Motion Pictures, Inc., 582 F.2d 507, 512 (9th Cir. 1978).
25
First, Labaton Sucharow, Court-appointed Lead Counsel, is amply qualified, experienced
26
27 LEAD PLAINTIFF’S UNOPPOSED MOTION 17 LABATON SUCHAROW LLP
FOR PRELIMINARY APPROVAL OF CLASS 140 BROADWAY
ACTION SETTLEMENT, APPROVAL OF NEW YORK, NEW YORK 10005
28 NOTICE AND SCHEDULING OF (212) 907-0700
SETTLEMENT HEARING
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Case 2:11-cv-00133-MJP Document 115 Filed 02/17/12 Page 25 of 29
1 and able to conduct this litigation vigorously and effectively, and has ably represented Lead
2 Plaintiff and the proposed Class in this Action. Labaton Sucharow has a strong record of
3 successfully litigating class actions as Lead Counsel on behalf of major institutional investors.
4 (See Gardner Decl., Ex. 5 and Part III.C. below.)
5 Second, there is no genuine conflict or antagonism between the claims of the proposed
6 class representative and those of the other members of the proposed Class. Lead Plaintiff and
7 each member of the Class have a strong and identical interest in establishing Defendants’
8 liability.
9 Moreover, Lead Plaintiff has demonstrated its ability and willingness to pursue the
10 Action on behalf of the Class. Lead Plaintiff was actively involved in all aspects of this Action,
11 engaging in strategy determinations with Lead Counsel and actively participating in negotiations.
12 The Court should therefore find Lead Plaintiff adequate and appoint it Class Representative for
13 the Class.
14 B. The Class Meets the Requirements of Rule 23(b)(3)
15 1. Common Questions of Law or Fact Predominate
16 Rule 23(b)(3) sets forth two requirements, the first being that the questions of law or fact
17 common to the members of the class must “predominate” over any questions affecting only
18 individual members. Fed. R. Civ. P. 23(b)(3). The predominance inquiry “tests whether
19 proposed classes are sufficiently cohesive to warrant adjudication by representation.” Amchem
20 Prods. v. Windsor, 521 U.S. 591, 623 (1997). “When common questions present a significant
21 aspect of the case and they can be resolved for all members of the class in a single adjudication,
22 there is a clear justification for handling the dispute on a representative rather than an individual
23 basis.” Hanlon v. Chrysler Corp., 150 F.3d 1011, 1022 (9th Cir. 1998) (quoting treatise). The
24 predominance requirement is “readily met” in securities class actions. Amchem, 521 U.S. at
25 625. See also Cooper, 254 F.R.D. at 632 (“As the Ninth Circuit has so aptly stated, securities
26
27 LEAD PLAINTIFF’S UNOPPOSED MOTION 18 LABATON SUCHAROW LLP
FOR PRELIMINARY APPROVAL OF CLASS 140 BROADWAY
ACTION SETTLEMENT, APPROVAL OF NEW YORK, NEW YORK 10005
28 NOTICE AND SCHEDULING OF (212) 907-0700
SETTLEMENT HEARING
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Case 2:11-cv-00133-MJP Document 115 Filed 02/17/12 Page 26 of 29
1 fraud cases fit Rule 23 ‘like a glove.’”) (internal citations omitted).
2 The common questions of law and fact noted above clearly predominate over individual
3 question because Defendants’ alleged fraudulent statements and omissions affected all Class
4 Members in the same manner (i.e., through public statements made to the market and documents
5 publicly filed with the SEC). Predominance of common questions generally will be found
6 where, as here, “many purchasers have been defrauded over time by similar misrepresentations,
7 or by a common scheme to which alleged non-disclosures related.” Negrete v. Allianz Life Ins.
8 Co. of North America, 238 F.R.D. 482, 492 (C.D. Cal. 2006). Generalized proof will be
9 necessary with respect to the issues of whether: (1) Defendants’ alleged misstatements and
10 omissions were false and material to Coinstar investors; (2) Defendants possessed the requisite
11 scienter; and (3) Coinstar investors relied on Defendants’ alleged misstatements and omissions,
12 and were damaged thereby.
13 Moreover, whether any Class Member relied on Defendants’ alleged misstatements and
14 omissions does not raise individual issues in this case because reliance is presumed pursuant to
15 Basic’s fraud on the market doctrine.
16 The fraud on the market doctrine, as enunciated by the Supreme Court in Basic Inc. v.
17 Levinson, 485 U.S. 224 (1988), dispenses with the requirement that an investor prove awareness
18 or reliance of a particular statement. Id. at 241-42. In order to be entitled to the Basic
19 presumption of reliance, the market for the security must be “efficient.” Basic, 485 U.S. at 247.
20 Here, there is sufficient evidence of market efficiency. Cammer v. Bloom, 711 F. Supp. 1264
21 (D.N.J. 1989).2 Indeed, the Court can presume that Coinstar’s common stock traded in an
22
23 3
Coinstar stock was listed and actively traded on the NASDAQ, an open and efficient
market, with almost 31,829,467 shares of common stock outstanding shortly after the end of the
24 Class Period (See Form 10-K for the fiscal year ending December 31, 2010). As a regulated
issuer, Coinstar regularly made public filings with the SEC. It actively communicated with the
25 market through established market communications mechanisms and was actively followed and
reported on by major securities brokerages and analysts.
26
27 LEAD PLAINTIFF’S UNOPPOSED MOTION 19 LABATON SUCHAROW LLP
FOR PRELIMINARY APPROVAL OF CLASS 140 BROADWAY
ACTION SETTLEMENT, APPROVAL OF NEW YORK, NEW YORK 10005
28 NOTICE AND SCHEDULING OF (212) 907-0700
SETTLEMENT HEARING
C11-133 MJP
Case 2:11-cv-00133-MJP Document 115 Filed 02/17/12 Page 27 of 29
1 efficient market because it is traded on the NASDAQ. See, e.g., Teamsters Local 445 Freight
2 Div. Pension Fund v. Bombadier, Inc., No. 05 CV 1898 (SAS), 2006 WL 2161887, at *8
3 (S.D.N.Y. Aug. 1, 2006) (“If, for example, a security is listed on the NYSE, AMEX, NASDAQ,
4 or a similar national market, the market for that security is presumed to be efficient.”).
5 2. A Class Action Is a Superior Method of Adjudication
6 Finally, Rule 23(b)(3) also requires that the action be superior to other available methods
7 for the fair and efficient adjudication of the controversy. The rule lists several matters pertinent
8 to this finding:
9 (A) the class members’ interest in individually controlling the prosecution or
defense of separate actions;
10
(B) the extent and nature of any litigation concerning the controversy already
11 begun by or against class members;
12 (C) the desirability or undesirability of concentrating the litigation of the claims in
the particular forum; and
13
(D) the likely difficulties in managing a class action.
14
Fed. R. Civ. P. 23(b)(3)(A)-(D); see Desai, 2009 WL 2245223, at * 4. Each factor counsels
15
strongly in favor of class certification. See e.g. McPhail v. First Command Financial Planning,
16
Inc., 247 F.R.D. 598, 615 (S.D. Cal. 2007) (class action is superior to individual suits when to
17
allow individual suits would “clog . . . the federal courts with innumerable individual suits
18
litigating the same issues repeatedly” and the plaintiffs assert complex claims that “would be
19
very costly to litigate” and each claim is for a relatively small amount).
20
Further, without the class action device, Defendants could not obtain a class-wide release,
21
and therefore would have had little, if any, incentive to enter into the Settlement. Certification of
22
a class for settlement purposes will allow the Settlement to be administered in an organized and
23
efficient manner.
24
For all of the foregoing reasons, this Court should find, for settlement purposes only, that
25
the Class meets the requirements for the certification of a class pursuant to Fed. R. Civ. P. 23(a)
26
27 LEAD PLAINTIFF’S UNOPPOSED MOTION 20 LABATON SUCHAROW LLP
FOR PRELIMINARY APPROVAL OF CLASS 140 BROADWAY
ACTION SETTLEMENT, APPROVAL OF NEW YORK, NEW YORK 10005
28 NOTICE AND SCHEDULING OF (212) 907-0700
SETTLEMENT HEARING
C11-133 MJP
Case 2:11-cv-00133-MJP Document 115 Filed 02/17/12 Page 28 of 29
1 and at least one of the factors enumerated in Rule 23(b). Preliminary certification of the Class is
2 therefore warranted.
3 C. Lead Counsel Should Be Appointed
Class Counsel Under Rule 23(g)
4
Rule 23(g)(1) of the Federal Rules states that “a court that certifies a class must appoint
5
class counsel.” Fed. R. Civ. P. 23(g)(1). Lead Plaintiff respectfully requests that Labaton
6
Sucharow be appointed Class Counsel for the Class. As discussed above, Labaton Sucharow has
7
been and will continue to fairly and adequately represent the Class. Proposed counsel is
8
knowledgeable about the applicable law, extremely experienced in handling class actions, has
9
performed substantial work in pursuing the Class’s claims here and in reaching a settlement, and
10
has committed the necessary resources to representing the Class. Labaton Sucharow is among
11
the nation’s preeminent law firms in this area of practice.
12
Labaton Sucharow has also served as lead or co-lead counsel on behalf of major
13
institutional investors in numerous class actions since the enactment of the PSLRA, including In
14
re American International Group, Inc. Sec. Litig., No. 04-8141 (S.D.N.Y.) (representing the
15
Ohio Public Employees Retirement System, State Teachers Retirement System of Ohio, and
16
Ohio Police & Fire Pension Fund and reaching settlements of $1 billion); In re HealthSouth
17
Corp. Sec. Litig., No. 03-1501 (N.D.Ala.Feb. 12, 2008) (representing New Mexico State
18
Investment Council, the New Mexico Educational Retirement Board and the State of Michigan
19
Retirement System and securing settlements of more than $600 million); In re Broadcom Corp.
20
Class Action Litigation, No. 06-5036 (C.D.Cal. Aug. 11, 2010) (representing the New Mexico
21
State Investment Council and securing settlement of $160.5 million); and In re Countrywide Sec.
22
Litig., No. 07-5295 (C.D.Cal. Mar. 4, 2011)) (representing the State of New York and New York
23
City Pension Funds and reaching settlements of more than $600 million) (Gardner Decl., Ex. 5).
24
CONCLUSION
25
For the foregoing reasons, Lead Plaintiff respectfully requests that the Court issue an
26
27 LEAD PLAINTIFF’S UNOPPOSED MOTION 21 LABATON SUCHAROW LLP
FOR PRELIMINARY APPROVAL OF CLASS 140 BROADWAY
ACTION SETTLEMENT, APPROVAL OF NEW YORK, NEW YORK 10005
28 NOTICE AND SCHEDULING OF (212) 907-0700
SETTLEMENT HEARING
C11-133 MJP
Case 2:11-cv-00133-MJP Document 115 Filed 02/17/12 Page 29 of 29
1 order substantially in the form of the proposed Preliminary Approval Order: (a) preliminarily
2 certifying the proposed Class for settlement purposes only; (b) preliminarily approving the
3 Settlement; (c) holding that the manner and form of notice set forth in the Preliminary Approval
4 Order satisfies due process and is the best notice practicable under the circumstances; (d) setting
5 a date for the Settlement Hearing and establishing any currently unspecified deadlines set forth in
6 the Preliminary Approval Order; (e) appointing GCG as claims administrator; (f) appointing
7 Lead Plaintiff as Class Representative; and (g) appointing Labaton Sucharow as Class Counsel.
8 Dated: February 17, 2012
9 By:___s/ Dan Drachler
Dan Drachler, WSBA #27728
10 ZWERLING, SCHACHTER &
ZWERLING, LLP
11
1904 Third Avenue, Suite 1030
12 Seattle, Washington 98101
Telephone: (206) 223-2053
13 Facsimile: (206) 343-9636
Email: ddrachler@zsz.com
14
15 Liaison Counsel for Lead Plaintiff
16 Jonathan Gardner, admitted pro hac vice
Mark S. Goldman, admitted pro hac vice
17 LABATON SUCHAROW LLP
140 Broadway
18 New York, New York 10005
Telephone: (212) 907-0700
19
Facsimile: (212) 818-0477
20 Email: jgardner@labaton.com
Email: mgoldman@labaton.com
21
Lead Counsel for Lead Plaintiff
22
23
24
25
26
27 LEAD PLAINTIFF’S UNOPPOSED MOTION 22 LABATON SUCHAROW LLP
FOR PRELIMINARY APPROVAL OF CLASS 140 BROADWAY
ACTION SETTLEMENT, APPROVAL OF NEW YORK, NEW YORK 10005
28 NOTICE AND SCHEDULING OF (212) 907-0700
SETTLEMENT HEARING
C11-133 MJP