Maritime Asset Management, LLC v. Neurogesx, Inc. et al

Filing 94

ORDER PRELIMINARILY APPROVING SETTLEMENT AND CERTIFYING SETTLEMENT CLASS, APPROVING CLASS NOTICE AND SETTING SETTLEMENT HEARING [AS MODIFIED BY THE COURT] re 84 MOTION for an Order Granting Preliminary Approval of Class Action Settlemen t and Directing Dissemination of Notice to the Class filed by Maritime Asset Management, LLC. Signed by Judge Yvonne Gonzalez Rogers on 6/27/14. (Attachments: # (1A-1) Exhibit: Notice of Settlement, # (1A-2) Exhibit: Claim Form )(fs, COURT STAFF) (Filed on 6/27/2014)

EXHIBIT 1A-1

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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OAKLAND DIVISION

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MARITIME ASSET MANAGEMENT, LLC,
on Behalf of Itself and All Others Similarly
Situated,

Case No. CV 12-05034-YGR
CLASS ACTION

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Plaintiff,
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NOTICE OF SETTLEMENT
v.

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EXHIBIT A-1
NEUROGESX, INC., ANTHONY A.
DITONNO, STEPHEN F. GHIGLIERI, and
JEFFREY K. TOBIAS, M.D.,

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Defendants.
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NOTICE OF SETTLEMENT
Case No. CV 12-05034-YGR

July 3, 2014

By Registered U.S. Mail
(Addressees)

Re: Maritime Asset Management, LLC v. NeurogesX, Inc. et al.
Dear Shareholder:
I write to provide notice of the proposed settlement of a class action involving
NeurogesX and alleged misrepresentations made in relation to the private placement of
NeurogesX securities that occurred on July 21, 2011. As a member of the proposed settlement
class of shareholders, you may recover money as part of the settlement. We estimate that, if you
and all other eligible class members choose to participate in the settlement, your recovery will be
approximately $_______ (as explained in more detail below). If you choose to participate in the
settlement, you will be required to waive and release all rights and claims against NeurogesX and
related parties arising from your investment in NeurogesX securities. To participate in the
settlement you must submit a completed claim form.
A copy of the settlement agreement is enclosed for your review, along with the proposed
form of judgment and the court’s order preliminarily approving the settlement. Also enclosed is
a claim form, which you must submit no later than August 5, 2014, if you wish to be eligible to
receive a payment in the settlement.
The Proposed Settlement
Members of the settlement class will share a settlement fund of $1,250,000. The
settlement fund will be reduced by certain attorneys’ fees and litigation expenses payable to class
counsel. The net settlement fund will be distributed to class members who submit valid claim
forms on a pro rata basis based on the ratio of the purchase price paid by each participating class
member to the total purchase price paid by all participating class members.
Request for Attorneys’ Fees and Litigation Expenses: Lead counsel will apply to the
court for an award of attorneys’ fees in an amount of no more than $312,500. In addition, lead
counsel will apply to the court for reimbursement of certain litigation expenses in an amount of
no more than $25,000. These amounts, if approved by the court, will be deducted from the
$1,250,000 settlement payment.
Your Estimated Recovery: Class counsel estimates that, if you and all other eligible
shareholders choose to participate in the settlement, your net recovery will be approximately

$_____________ ($1,250,000 minus maximum attorneys’ fees of $312,500 and litigation
expenses of $25,000 yields a net settlement fund of $912,500, multiplied by the total purchase
price you paid to acquire NeurogesX securities in the private placement ($_______), divided by
the total purchase price paid by all participating class members ($19,986,033.64)). This
represents approximately 4.6 percent of the purchase price you paid for your shares. However,
your actual recovery could be higher (if, for example, fewer than all eligible class members
submit valid claim forms).
Release of Claims Against NeurogesX and the Individual Defendants: In order to
participate in the settlement, you will be required to stipulate to a judgment of dismissal of all
claims with prejudice. You will also be required to release all claims belonging to you (and
persons related to or affiliated with you) against NeurogesX, the individual defendants, and their
respective related persons and entities, that were asserted or could have been asserted in the
action or that relate in any way to your purchase of NeurogesX securities.
Background of the Action and the Proposed Settlement
The action arises from a private placement of NeurogesX securities completed on
July 21, 2011. Lead class representative Maritime Asset Management, LLC was one of
the investors in the private placement. Maritime was appointed as lead class
representative by court order entered on September 13, 2012.
The action names as defendants NeurogesX and three of its former executives – Anthony
A. DiTonno, Stephen F. Ghiglieri, and Jeffrey K. Tobias, M.D. The complaint asserts claims
against NeurogesX and Dr. Tobias under section 10(b) of the Securities Exchange Act and Rule
10b-5, and against the individual defendants under section 20(a) of the Exchange Act.
The complaint also asserts two individual claims on behalf of Maritime only. These
claims are for breach of contract against NeurogesX and fraud in the inducement against Dr.
Tobias. These claims arise out of alleged conversations directly between Maritime and Dr.
Tobias. Other members of the class did not participate in those alleged conversations. These
claims are the subject of a separate settlement between Maritime, NeurogesX, and Dr. Tobias, as
explained below.
Defendants have moved to dismiss all the claims asserted in the action and Maritime
opposed that motion. Prior to oral argument on Defendants’ motions to dismiss, the parties
participated in a mediation with an experienced mediator, the Honorable Edward I. Infante of
JAMS.
With the assistance of the mediator, the parties reached an agreement-in-principle
concerning this proposed settlement after arm’s-length negotiations. The mediator determined
that the proposed settlement is a fair and reasonable compromise that is in the best interests of all
investors in the private placement and all parties in the action.
The principal reason for Maritime’s agreement to the settlement is to provide a benefit to
the settlement class. This benefit must be compared to the risk that no recovery might be
achieved after contested motions, a contested trial, and likely appeals, possibly years into the
future. While Maritime believes that the claims would survive a motion to dismiss and a motion

for summary judgment and ultimately result in a verdict for the class, Defendants believe
otherwise and have repeatedly denied the allegations in the litigation and asserted that they
engaged in no wrongdoing whatsoever and have complete defenses to the allegations.
Defendants also maintain that any damages recoverable by the class at trial would be no more
than $3 million or 25.9 cents per NeurogesX unit. Maritime and its counsel recognize the risk of
proceeding to a jury trial on claims that are complex and likely to involve expert testimony
presenting competing views. Thus, Maritime recognizes that a jury could find completely in
Defendants’ favor or, even if Maritime was successful, the jury could award damages that are
less than the size of the settlement payment. The settlement therefore enables the class to
recover a substantial amount without incurring any additional risk or costs.
The Proposed Settlement Class
The Court has preliminarily certified a settlement class of all persons and entities that
purchased or otherwise acquired NeurogesX common stock and/or warrants to purchase
NeurogesX’s common stock in the private placement completed on July 21, 2011. The
settlement class does not include the individual defendants, the officers and directors of
NeurogesX, members of their immediate families, or any entity in which a defendant has a
controlling interest.
Separate Settlement of Maritime’s Individual Claims
Maritime’s complaint asserted two individual claims on behalf of Maritime only. These
claims are for breach of contract against NeurogesX and fraud in the inducement against Dr.
Tobias. These claims arise out of alleged telephone conversations directly between Maritime
and Dr. Tobias.
Maritime has entered into a separate settlement with NeurogesX and the individual
defendants with regard to these claims. The settlement provides for a payment of $250,000 to
Maritime. Out of this individual settlement, Maritime will pay attorneys’ fees of $82,500 to its
counsel. Under the individual settlement, Maritime (and persons related to or affiliated with it)
will generally release NeurogesX, the individual defendants, and their respective related persons
and entities, from every claim, including unknown claims, of every type and with respect to any
subject arising on or before the date of the settlement.
Exclusion Request and Binding Release
UNLESS YOU SUBMIT A VALID REQUEST FOR EXCLUSION FROM THE CLASS
SETTLEMENT BY AUGUST 5, 2014, YOU WILL BE BOUND BY THE JUDGMENT OF
DISMISSAL WITH PREJUDICE OF ALL CLAIMS BELONGING TO YOU (and persons
related to or affiliated with you) against NeurogesX, the individual defendants, and their
respective related persons and entities, arising out of your purchase of NeurogesX securities.
THIS INCLUDES A RELEASE OF ALL INDIVIDUAL CLAIMS similar to those
asserted (and being settled) by Maritime individually.
UNLESS YOU SUBMIT A VALID REQUEST FOR EXCLUSION FROM THE CLASS
SETTLEMENT BY AUGUST 5, 2014, YOU WILL NOT HAVE ANY ABILITY TO ASSERT

ANY INDIVIDUAL CLAIMS against NeurogesX, the individual defendants, or their respective
related parties arising from your investment in NeurogesX securities.
Court Hearing on Approval of the Settlement
A hearing will be held on September 2, 2014, at 2:00 p.m., before the Honorable
Yvonne Gonzalez Rogers, at the United States District Court for the Northern District of
California, Oakland Division, 1301 Clay Street, Courtroom 1, 4th Floor, Oakland, California, to
determine whether the class settlement described in this notice should be approved and whether
to award attorneys’ fees and litigation expenses to lead counsel.
You are not required to attend the hearing. If you wish to object to the settlement or to
lead counsel’s application for an award of attorneys’ fees and litigation expenses, you may
appear in person at the hearing. You may also object without attending the hearing by submitting
your objections in writing.
If you wish to object, you should file your objections with the clerk of the court at the
address set forth below. You must also send a copy of your objections to class counsel, Nicholas
Porritt, at the address set forth below.
The deadline for filing and serving your objections is August 5, 2014. You will not be
entitled to be heard at the September 2 hearing unless you have filed and delivered valid and
timely written notices of objection, unless the Court otherwise orders.

Office of the Clerk of the Court
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF
CALIFORNIA, OAKLAND DIVISION
1301 Clay Street
Oakland, CA 94612

LEVI & KORSINSKY
Nicholas I. Porritt
1101 30th Street NW, Suite 115
Washington, DC 20007

MORRISON & FOERSTER LLP
Darryl P. Rains
755 Page Mill Road
Palo Alto, CA 94304

COOLEY LLP
John C. Dwyer
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306

Claim Form for Participation In the Settlement
You will be a member of the settlement class unless you submit a valid request for
exclusion as set forth below. To be eligible to receive a payment from the settlement fund, you
must complete, sign, and submit the attached claim form no later than August 5, 2014.
As a member of the settlement class, you will be bound by the settlement if the court
approves it, and the court’s judgment of dismissal will be binding on you. You will be

permanently barred and enjoined from bringing any action against NeurogesX, the individual
defendants, and their respective related persons and entities, arising out of your purchase of
NeurogesX securities in the private placement completed on July 21, 2011. Unless you submit a
timely and valid request for exclusion, the settlement will be binding on you whether or not you
submit a claim form.
Request for Exclusion from the Settlement
You may request exclusion from participation in the settlement. To request exclusion
from the settlement class, you must deliver a written request for exclusion no later than August
5, 2014. The exclusion request should be delivered to the clerk of the court and class counsel at
the addresses set out above.
If you validly request exclusion from the class, you will not receive any payment or other
benefit in the settlement, you will not be required to waive or release any claims against
NeurogesX or the individual defendants, and you will not be bound by the terms of the
settlement or any order that may be entered by the court in the action.
Request for Additional Information
This notice is meant merely to provide you with a summary of the settlement. The
complete terms of the proposed settlement are set forth in the enclosed documents, including the
Stipulation of Settlement and the preliminary order of approval.
If you would like further information, you may contact lead counsel at the following
address:
LEVI & KORSINSKY
Nicholas I. Porritt
1101 30th Street NW, Suite 115
Washington, DC 20007
Sincerely,