Rafton v. Rydex Series Funds et al

Filing 130

Order by Hon. Lucy H. Koh granting 104 Motion for Final Approval of Class Settlement; Final Judgment; and Order of Dismissal.(lhklc1, COURT STAFF) (Filed on 2/10/2012)

1
2
3
4

UNITED STATES DISTRICT COURT

5

NORTHERN DISTRICT OF CALIFORNIA

6

SAN JOSE DIVISION

7
8
9
United States District Court
For the Northern District of California

10
11
12
13
14

JAMES RAFTON, TRUSTEE OF THE
JAMES & CYNTHIA RAFTON TRUST, et
al.,
v.

Plaintiffs,

RYDEX SERIES FUNDS, et al.,
Defendants.

)
)
)
)
)
)
)
)
)
)
)
)
)

No. 10-CV-01171 LHK
[PROPOSED] FINAL JUDGMENT AND
ORDER OF DISMISSAL
AS MODIFIED
CLASS ACTION

15
16
17
18
19
20
21
22
23
24
25
26
27
28

1

Case No. 10-CV-01171-LHK
[PROPOSED] FINAL JUDGMENT AND ORDER OF DISMISSAL

1

This Court having considered: the Stipulation and Agreement of Settlement dated July 28,
2011, including all Exhibits thereto (the “Stipulation”), between James Rafton and James Darst, Jr.

3

(“Lead Plaintiffs”), on behalf of themselves and the Class, and Rydex Series Funds, Padco

4

Advisors Inc. d/b/a Rydex Investments, Inc., Rydex Distributors, Inc., (collectively, the “Rydex

5

Defendants”), and Richard M. Goldman, Carl G. Verboncoeur, Nick Bonos, Michael P. Byrum,

6

John O. Demaret, Corey A. Colehour, J. Kenneth Dalton, Werner E. Keller, Thomas F. Lydon,

7

Roger Somers, and Patrick T. McCarville (collectively, the “Individual Defendants”) (together, the

8

Rydex Defendants and the Individual Defendants are referred to as “Defendants”); and having held

9

a hearing on February 9, 2012; and having considered all of the submissions and arguments with

10
United States District Court
For the Northern District of California

2

respect thereto, and the one objection to the attorneys’ fees percentage, and otherwise being fully

11

informed, and good cause appearing therefore,

12

IT IS HEREBY ORDERED that:

13
14

Introductory Findings
1.

This Final Judgment and Order of Dismissal (“Judgment”) incorporates herein and

15

makes a part hereof, the Stipulation, including the Exhibits thereto. Unless otherwise defined

16

herein, all capitalized terms used herein shall have the same meanings as set forth in the

17

Stipulation.

18

2.

The Court has personal jurisdiction over Lead Plaintiffs, the Class Members and

19

Defendants for purposes of this Action and settlement, and has subject matter jurisdiction to

20

approve the Stipulation and the terms and conditions of the settlement set forth therein (the

21

“Settlement”).

22
23

Affirmance Of Class Certification
3.

Pursuant to Rule 23 of the Federal Rules of Civil Procedure (“Federal Rule 23”), the

24

Court confirms certification of the following Class, as ordered by the Court in its September 13,

25

2011 Order Preliminarily Approving Settlement and Providing for Notice (Docket No. 99) (the

26

“Preliminary Approval Order”):

27
28

2

Case No. 10-CV-01171-LHK
[PROPOSED] FINAL JUDGMENT AND ORDER OF DISMISSAL

1
“All persons and entities who purchased or otherwise acquired shares
of the Fund during the Class Period and who were damaged thereby.
Excluded from the Class are Defendants; the Rydex Defendants’s officers
and directors; members of Defendants’ immediate families; Defendants’
legal representatives, heirs, successors, or assigns; and any entity in which
Defendants have or had a controlling interest. Also excluded from the
Class are any proposed Class Members who properly excluded themselves
by filing a valid and timely request for exclusion in accordance with the
requirements set forth in the Notice (“the Class”).”

2
3
4
5
6
7

“Class Period” means the period from August 1, 2007 through July 31,
2009, inclusive.

8
9
United States District Court
For the Northern District of California

10
11

4.

The Court confirms that certification of the Class met the requirements of Federal

Rule 23 as follows:
(a)

There are thousands of Members of the Class, and the Class is of sufficient

12

size and geographical dispersion that joinder of all Class Members is impracticable, satisfying

13

Federal Rule 23(a)(1).

14

(b)

There are questions of law and fact common to the Class, thus satisfying

15

Federal Rule 23(a)(2). Among the questions of law and fact common to the Class are whether the

16

Securities Act of 1933 was violated by Defendants’ acts as alleged; whether statements made in the

17

Rydex Inverse Government Long Bond Strategy Fund Registration Statements and Prospectuses

18

misrepresented or omitted material facts; and whether the Members of the Class have sustained

19

damages and, if so, what is the proper measure thereof.

20
21
22
23
24
25
26
27
28

(c)

Lead Plaintiffs’ claims for violations of Sections 11, 12(a)(2) and 15 of the

Securities Act of 1933 are typical of the claims of the Class, satisfying Federal Rule 23(a)(3).
(d)

Lead Plaintiffs and Sparer Law Group (“Class Counsel”) have and will fairly

and adequately protect the interests of the Class, thus satisfying Federal Rule 23(a)(4).
(e)

The questions of law and fact common to the Class predominate over any

questions affecting only individual members, satisfying Federal Rule 23(b)(3).
(f)

A class action is superior to other available methods for the fair and efficient

adjudication of the controversy, satisfying Federal Rule 23(b)(3).
3

Case No. 10-CV-01171-LHK
[PROPOSED] FINAL JUDGMENT AND ORDER OF DISMISSAL

1
2

5.

In making all of the foregoing findings, the Court has exercised its discretion in

certifying the Class.

3
Class Notice Findings And Opt-Outs

4
5
6
7
8
9
United States District Court
For the Northern District of California

10
11
12
13
14
15
16
17

6.

the Court in its Preliminary Approval Order. The Court finds that such Notice: (i) constitutes
reasonable and the best practicable notice; (ii) constitutes notice that was reasonably calculated,
under the circumstances, to apprise Class Members of the pendency of the Action, the terms of the
Settlement, and the Class Members’ right to object to or exclude themselves from the Class and to
appear at the settlement final approval hearing held on January 5, 2012 (the “Final Approval
Hearing”); (iii) constitutes due, adequate, and sufficient notice to all persons or entities entitled to
receive notice; and (iv) meets the requirements of due process, Federal Rule 23, and Section 27 of
the Securities Act of 1933, 15 U.S.C. §77z-1(a)(7), as amended by the Private Securities Litigation
Reform Act of 1995 (the “PSLRA”).
7.

20

the persons or entities listed on Exhibit A hereto.
Findings That Arm’s-Length Negotiations Occurred
8.

23
24
25
26
27
28

The Court finds that extensive arm’s-length negotiations have taken place in good

faith between Class Counsel and Defendants’ Counsel resulting in the Stipulation.
Approval Of The Settlement

21
22

No individuals or entities, other than those listed on Exhibit A hereto, have timely

and validly excluded themselves from the Class. This Judgment shall have no force or effect on

18
19

The record shows that Notice has been given to the Class in the manner approved by

9.

Pursuant to Federal Rule 23(e), the Court hereby finally approves in all respects the

Settlement on the terms and conditions set forth in the Stipulation and finds that the Settlement and
the Stipulation are, in all respects, fair, reasonable and adequate, and in the best interest of the
Class.
10.

The settling parties are hereby directed to implement and consummate the

Settlement according to the terms and provisions of the Stipulation.
4

Case No. 10-CV-01171-LHK
[PROPOSED] FINAL JUDGMENT AND ORDER OF DISMISSAL

1
2
3
4
5
6
7
8
9
United States District Court
For the Northern District of California

10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

Approval Of The Plan Of Allocation
11.

The Court hereby finds that Lead Plaintiff and Lead Counsel’s proposed Plan of

Allocation is fair, adequate and reasonable. The Plan of Allocation appropriately utilizes a formula
that takes into consideration both major claims in the First Amended Complaint to determine each
Class Member’s Summary of Recognized Losses. Class Plaintiffs. v City of Seattle, 955 F.2d
1268, 1284-85 (9th Cir 1992)). “It is reasonable to allocate the settlement funds to class members
based on the extent of their injuries or the strength of their claims on the merits.”
12.

Distributions will be made to Class Members who do not exclude themselves from

the settlement after all claims have been processed. The distributions will allocate the Net
Settlement Fund pro-rata based on the amount of each Class Member’s Recognized Losses
compared to the total Recognized Losses of all Class Members.
13.

If any funds remain in the Net Settlement Fund by reason of un-cashed checks or

otherwise, then, after the Claims Administrator has made reasonable and diligent efforts to
distribute such funds, any balance remaining shall be contributed to one or more nonsectarian, not
for profit, 501(c)(3) organization(s) designated by Class Counsel.
Dismissal Of Claims And Release
14.

The Consolidated Class Action Complaint filed in the Action and all claims asserted

therein (except the individual claims of those individuals and entities listed on Exhibit A hereto)
are hereby dismissed with prejudice and without costs to any party, except as otherwise provided in
the Stipulation.
15.

The Court finds that during the course of the Action, the settling parties and their

respective counsel at all times complied with the requirements of Rule 11 of the Federal Rules of
Civil Procedure.
16.

Upon the Effective Date of the Settlement (as defined in Paragraph 22 of the

Stipulation), the Releasing Plaintiff Parties (as defined in Paragraph 1(dd) of the Stipulation) shall
release and forever discharge the Released Claims (as defined in Paragraph 1(x) of the Stipulation)
as against the Released Defendant Parties (as defined in Paragraph 1(y) of the Stipulation).
5

Case No. 10-CV-01171-LHK
[PROPOSED] FINAL JUDGMENT AND ORDER OF DISMISSAL

1

17.

Upon the Effective Date of the Settlement (as defined in Paragraph 22 of the

2

Stipulation), the Releasing Defendant Parties (as defined in Paragraph 1(cc) of the Stipulation)

3

shall release and forever discharge the Released Defendants’ Claims (as defined in Paragraph 1(z)

4

of the Stipulation) as against the Released Plaintiff Parties (as defined in Paragraph 1(bb) of the

5

Stipulation).

6

18.

No Class Member, either directly, representatively, or in any other capacity (other

7

than the individuals or entities listed on Exhibit A hereto), shall commence, continue, or prosecute

8

against any or all Released Defendant Parties any action or proceeding in any court or tribunal

9

asserting any of the Released Claims defined in the Stipulation, and are hereby permanently

United States District Court
For the Northern District of California

10
11

enjoined from so proceeding.
19.

Each Class Member, except the individuals and entities listed on Exhibit A hereto,

12

whether or not such Class Member executes and delivers a Proof of Claim or Dispute Form, is

13

bound by this Judgment, including, without limitation, the release of claims as set forth in the

14

Stipulation.

15

20.

This Judgment, the Preliminary Approval Order, the Stipulation and its terms, the

16

negotiations leading up to the Stipulation, the Settlement, and the proceedings taken pursuant to the

17

Settlement, shall not: (1) be construed as an admission of liability or an admission of any claim or

18

defense on the part of any Party, in any respect; (2) form the basis for any claim of estoppel by any

19

third party against any of the Released Defendant Parties; or (3) be admissible in any action, suit,

20

proceeding, or investigation as evidence, or as an admission, of any wrongdoing or liability

21

whatsoever by any of the Released Defendant Parties or as evidence of the truth of any of the

22

claims or allegations contained in any complaint filed in the Action, or deemed to be evidence of or

23

an admission or concession that Lead Plaintiffs or any Class Members have suffered any damages,

24

harm or loss. Neither this Judgment, nor the Preliminary Approval Order, nor the Stipulation, nor

25

any of their terms and provisions, nor any of the negotiations or proceedings connected with them,

26

nor any action taken to carry out this Judgment, the Preliminary Approval Order, or Stipulation by

27

any of the Parties shall be referred to, offered into evidence, or received in evidence in any pending

28

6

Case No. 10-CV-01171-LHK
[PROPOSED] FINAL JUDGMENT AND ORDER OF DISMISSAL

1

or future civil, criminal or administrative action or proceeding, except in a proceeding to enforce

2

this Judgment, the Preliminary Approval Order or the Stipulation, or to enforce any insurance

3

rights, to defend against the assertion of Released Claims (including to support a defense or

4

counterclaim based on principles of res judicata, collateral estoppel, release, good faith settlement,

5

judgment bar or reduction), or by Class Counsel to demonstrate its adequacy to serve as lead

6

counsel under the PSLRA or class counsel pursuant to Federal Rule 23(g) (or its state law analogs),

7

or as otherwise required by law.

8

Escrow Account

9

21.

The Court finds that the Escrow Account (as defined in Paragraph 1(i) of the

United States District Court
For the Northern District of California

10

Stipulation) is a “Qualified Settlement Fund” as defined in Section 1.468B-1(a) of the Treasury

11

Regulations in that it satisfies each of the following requirements:

12

(a)

The Escrow Account was established pursuant to an order of this Court,

13

specifically the Preliminary Approval Order, and is subject to the continuing jurisdiction of this

14

Court;

15

(b)

The Escrow Account was established to resolve or satisfy one or more

16

contested or uncontested claims that have resulted or may result from an event that has occurred

17

and that has given rise to at least one claim asserting liability arising out of an alleged violation of

18

law; and

19

(c)

The assets of the Escrow Account are segregated from other assets of

20

Defendants, the transferors of payments to the Settlement Fund, and from the assets of persons

21

related to Defendants.

22
23
24

22.

Under the “relation-back” rule provided under section 1.468B-1(j)(2)(i) of the

Treasury Regulations, the Court finds that:
(a)

The Escrow Account met the requirements of Paragraphs 19(b) of this

25

Judgment at the time it was established pursuant to the Preliminary Approval Order, subject to the

26

continued jurisdiction of this Court; and

27
28

7

Case No. 10-CV-01171-LHK
[PROPOSED] FINAL JUDGMENT AND ORDER OF DISMISSAL

1

(b)

Defendants and the “administrator” under Section 1.468B-2(k)(3) of the

2

Treasury Regulations may jointly elect to treat the Escrow Account as coming into existence as a

3

“Qualified Settlement Fund” on the earlier of the date the Escrow Account met the requirements of

4

Paragraph 19(b) of this Judgment or January 1 of the calendar year in which all of the requirements

5

of Paragraph 19 of this Judgment are met. If such relation-back election is made, the assets held by

6

the Escrow Account on such date shall be treated as having been transferred to the Escrow Account

7

on that date.

8
9

Continuing Jurisdiction
23.

Without affecting the finality of this Judgment, the Court retains continuing and

United States District Court
For the Northern District of California

10

exclusive jurisdiction over all matters relating to administration, consummation, enforcement and

11

interpretation of the Stipulation, the Settlement, and of this Judgment, to protect and effectuate this

12

Judgment, and for any other necessary purpose. Defendants, Lead Plaintiffs and each Class

13

Member are hereby deemed to have irrevocably submitted to the exclusive jurisdiction of this

14

Court for the purpose of any suit, action, proceeding or dispute arising out of or relating to the

15

Settlement or the Stipulation, including the Exhibits thereto, and only for such purposes. Without

16

limiting the generality of the foregoing, and without affecting the finality of this Judgment, the

17

Court retains exclusive jurisdiction over any such suit, action or proceeding. Solely for purposes of

18

such suit, action or proceeding, to the fullest extent they may effectively do so under applicable

19

law, Defendants, Lead Plaintiffs and each Class Member are hereby deemed to have irrevocably

20

waived and agreed not to assert, by way of motion, as a defense or otherwise, any claim or

21

objection that they are not subject to the jurisdiction of this Court, or that this Court is, in any way,

22

an improper venue or an inconvenient forum.

23
24

Miscellaneous
24.

Any plan for allocating the Net Settlement Fund to eligible Class Members

25

submitted by Class Counsel or any order regarding any fee and expense application, or any appeal,

26

modification or change thereof, shall in no way disturb or affect this Judgment and shall be

27

considered separate from this Judgment.

28

8

Case No. 10-CV-01171-LHK
[PROPOSED] FINAL JUDGMENT AND ORDER OF DISMISSAL

1

25.

In the event that the Settlement does not become effective according to the terms of

2

the Stipulation, this Judgment shall be rendered null and void as provided by the Stipulation, shall

3

be vacated, and all orders entered and releases delivered in connection herewith shall be null and

4

void to the extent provided by and in accordance with the Stipulation.

5

26.

The Clerk shall close the file.

6
7
8
9

IT IS SO ORDERED.

Dated: February

, 2012

________________________________
LUCY H. KOH
United States District Judge

United States District Court
For the Northern District of California

10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

9

Case No. 10-CV-01171-LHK
[PROPOSED] FINAL JUDGMENT AND ORDER OF DISMISSAL

Case5:10-cv-01171-LHK Document120-1 Filed12/22/11 Page1 of 2

Exhibit A

Case5:10-cv-01171-LHK Document120-1 Filed12/22/11 Page2 of 2

Rafton v. Rydex Series Funds, et al.
Requests for Exclusion as of December 20, 2011
#
1
2
3
4
5
6

GCG ID#
1030218
1140710
1145757
1146464
1152506
1172433

Party
Sanford F. Ress Trust
Charles T. Koehn & Yoo Jung Chong
Scott Finlayson
Louis Debole
Scott Finlayson
Annie B. Mitchell