Make A Difference Foundation, Inc. v. Hopkins et al

Filing 170

ORDER Granting 159 Plaintiff's Motion for Final Approval of Derivative Litigation Settlement ; The Court hereby ISSUES final approval of the Second Amended Stipulation and Agreement of Settlement and Release entered into between the parti es to this action ECF No. [147-1]; Granting 160 Plaintiff's Motion in Support of Application for Award of Attorneys' Fees and Expenses; The Court hereby AWARDS the total sum of $250,000 in attorneys fees and expenses to Plaintiff, by Judge William J. Martinez on 3/19/2012.(ervsl, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge William J. Martínez
Civil Action No. 10-cv-00408-WJM-MJW
MAKE A DIFFERENCE FOUNDATION, INC., a Mississippi corporation,
Plaintiff,
v.
CHRISTOPHER H. HOPKINS;
T. MURRAY WILSON;
RONALD BLAKELY;
PAUL CHING;
BRIAN MACNEILL;
RONALD PHILLIPS;
JOHN READ;
GORDON TALLMAN;
PAMELA WALLIN;
THOMAS MILNE; and
W. SCOTT THOMPSON,
Defendants,
and
OILSANDS QUEST, INC., a Colorado corporation,
Nominal Defendant.

ORDER GRANTING FINAL APPROVAL OF DERIVATIVE LITIGATION
SETTLEMENT

This matter is before the Court on Plaintiff’s Motion for Final Approval of
Derivative Litigation Settlement (ECF No. 159), and Plaintiff’s Motion in Support of
Application for Award of Attorneys’ Fees and Expenses (ECF No. 160). For the
foregoing reasons, the Court GRANTS the two Motions, issues final approval of the
Second Amended Stipulation and Agreement of Settlement and Release filed on

October 28, 2011 (ECF No. 147-1), and awards Plaintiff’s counsel $250,000 in attorneys’
fees and expenses.
I. BACKGROUND
Plaintiff filed this action on February 24, 2010 (ECF No. 1), and filed the operative
Second Amended Verified Derivative Complaint (“Complaint”) on September 20, 2010
(ECF No. 79). In the Complaint, Plaintiff alleged, inter alia, that current and former
directors of Oilsands Quest, Inc. (“Oilsands”) breached their duty of loyalty and good
faith and committed waste by approving transactions that directly benefitted certain
Oilsands executives and directors, but harmed Oilsands and its shareholders. (Id.) On
September 29, 2010, Defendants filed Motions to Dismiss the Complaint, moving to
dismiss the Complaint on numerous grounds. (ECF No. 84-86.)
The Court had not yet ruled on the Motions to Dismiss when Plaintiff, on August
11, 2011, filed a Stipulation and Agreement of Settlement and Release. (ECF No. 131.)
Plaintiff subsequently filed an Amended Stipulation and Agreement of Settlement and
Release, and also filed an Unopposed Motion for Order to Preliminarily Approve
Derivative Litigation Settlement. (ECF No. 138-140.) The proposed settlement
agreement would result in the enactment of corporate governance reforms – specifically
a “Related Person Transaction Policy” – that would require approval of related party
transactions by a special committee of the Oilsands Board of Directors. (ECF No. 1381.)
On October 6, 2011, the Court denied without prejudice the Unopposed Motion for
Order to Preliminarily Approve Derivative Litigation Settlement, solely on the ground that
the parties’ proposed form and program of notice of the settlement to shareholders was
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deficient. (ECF No. 146.) On October 28, 2011, Plaintiff filed an Amended Motion for
Order Preliminary Approving Derivative Litigation Settlement, and a Second Amended
Stipulation and Agreement of Settlement and Release, which remedied the inadequacies
of the prior proposed form and program of notice to shareholders. (ECF No. 146-147.)
As a result, the Court granted the Amended Motion for preliminary approval of the
settlement. (ECF No. 148-149.)
Plaintiff’s counsel has filed a declaration under penalty of perjury that the Courtapproved form and program of notice was completed in full, including the mailing of
47,142 notices of the settlement to the then-current record holders and beneficial owners
of Oilsands common stock. (ECF No. 161.) Between mid-November 2011, when the
notices were mailed, and mid-February 2012, when the derivative litigation settlement
fairness hearing (“settlement hearing”) took place, the Court received a total of three
written objections to the proposed settlement. (ECF No. 150, 156, 157.) The three
objections were all very cursory in nature, not providing an adequate basis to call into
question the propriety of the settlement. At the settlement hearing held before the Court
on February 24, 2012, the Court expressly overruled the three objections. (ECF No.
167.) No objectors attended the settlement hearing. (See id.)
As indicated by Plaintiff’s filings on January 4, 2012 (ECF No. 151) and February
28, 2012 (ECF No. 169), and confirmed by counsel at the settlement hearing, Oilsands
has recently sought protection under the Canadian bankruptcy laws. The Court of
Queen’s Bench of Alberta has explicitly lifted any stay in those proceedings to allow this
Court to act in approving or disapproving the proposed settlement of this action. (See
ECF No. 169, at 5-6.)
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On February 3, 2012, three weeks prior to the settlement hearing, Plaintiff filed its
Motion for Final Approval of Derivative Litigation Settlement (ECF No. 159), and Motion
in Support of Application for Award of Attorneys’ Fees and Expenses (ECF No. 160).
II. ANALYSIS
A.

Motion for Final Approval of Settlement
In considering the arguments raised in Plaintiff’s Motion for Final Approval of

Derivative Litigation Settlement, the arguments made by the parties at the settlement
hearing, and the (few and inadequate) objections to the proposed settlement, the Court
finds good cause to order final approval of the settlement in this action.
“Before approving the settlement of a shareholders’ derivative action . . ., the
district court must determine that there has been no fraud or collusion in arriving at the
settlement agreement, and that it is fair, reasonable, and adequate.” Maher v. Zapata
Corp., 714 F.2d 436, 455 (5th Cir. 1983); see also 10 Federal Procedure, Lawyers
Edition § 25:175 (“The general standard used to evaluate a settlement [in a derivative
shareholder action] is that it must be fair, adequate, and reasonable, and not the result of
fraud or collusion, and that it must be in the best interests of the parties.”).
The Court finds that the settlement has been negotiated at arm’s length and
arrived at in good faith, there being no evidence of fraud or collusion between the
parties. See Maher, 714 F.2d at 456-57 (stating that a factor favoring approval of a
derivative litigation settlement is that it “was the result of arm’s-length negotiation, after
extensive discovery and intelligent evaluation of the lawsuit by the parties and their
capable counsel”). Indeed, with Defendants’ Motions to Dismiss still pending at the time
of the settlement, the Plaintiff’s prospects for success in this action were certainly in
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question. See id. at 455 (“Settlements of shareholder derivative actions are particularly
favored because such litigation is notoriously difficult and unpredictable. The courts,
therefore, do not lightly reject such settlements.”).
The Court also finds that the terms of the settlement are fair, adequate, and
reasonable. The fact that the settlement involves only corporate governance reforms (in
addition to payment of attorneys’ fees) does not weigh against approval of the
settlement. To the contrary, the corporate governance reforms provided for as part of
the settlement are specifically and appropriately designed to prevent the alleged director
misconduct that formed the basis for this action. See id. at 466 (“[A] settlement may
fairly, reasonably, and adequately serve the best interest of a corporation, on whose
behalf the derivative action is brought, even though no direct monetary benefits are paid
by the defendants to the corporation.”); Zimmerman v. Bell, 800 F.2d 386, 391 (4th Cir.
1986) (“Influencing the future conduct of management may serve the interests of the
corporation as fully as a recovery for past misconduct, and a settlement may be
accepted ‘even though no direct monetary benefits are paid by the defendants to the
corporation.’”) (quoting Maher); Sved v. Chadwick, 783 F. Supp. 2d 851, 864 (N.D. Tex.
2009) (approving derivative litigation settlement because it “offers tangible, long-term
remedial measures that are specifically designed to avoid the alleged missteps in [the
company’s] past and protect shareholders as the company moves forward”).
Finally, the fact that only three conclusory written objections to the settlement
were received and no objectors appeared at the settlement hearing, despite the fact that
notice of the settlement was sent to more than 47,000 record holders of Oilsands stock,
weighs heavily in favor of approval of the derivative litigation settlement. See Wal-Mart
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Stores, Inc. v. Visa U.S.A., Inc., 396 F.3d 96, 118 (2d Cir. 2005) (“If only a small number
of objections are received, that fact can be viewed as indicative of the adequacy of the
settlement.”); D’Amato v. Deutsche Bank, 236 F.3d 78, 86-87 (2d Cir. 2001) (where
27,883 notices were sent to class members, but only 72 class members requested
exclusion from the settlement and only 18 class members objected, court stated that
“this small number of objections weigh[s] in favor of the settlement”); In re Rambus Inc.
Derivative Litig., No. C 06-3513, 2009 WL 166689, at *3 (N.D. Cal. 2009) (“The reaction
of the class to the proffered settlement . . . is perhaps the most significant factor to be
weighed in considering its adequacy . . . .”) (quotation marks and brackets omitted); In re
SmithKline Beckman Corp. Sec. Litig., 751 F. Supp. 525, 530 (E.D. Pa. 1990) (“Both the
utter absence of objections and the nominal number of shareholders who have exercised
their right to opt out of this litigation militate strongly in favor of approval of the
settlement.”); In re Dun & Bradstreet Credit Servs. Customer Litig., 130 F.R.D. 366, 372
(S.D. Ohio 1990) (giving the lack of meaningful objection “substantial weight in approving
the proposed settlement”).
Based on these considerations, the Court finds good cause to order final approval
of the settlement entered into between the parties to this action.
B.

Application for Award of Attorneys’ Fees and Expenses
The Court also finds good cause to award Plaintiff’s counsel their requested

attorneys’ fees and expenses in the amount of $250,000.
Attorneys’ fees are properly calculated by determining the “lodestar” – the number
of hours reasonably expended multiplied by reasonably hourly rates – and then adjusting
the lodestar figure, if appropriate, by considering one or more of the factors in Johnson v.
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Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974) (“the Johnson factors”).1
See, e.g., Anchondo v. Anderson, Crenshaw & Assocs., L.L.C., 616 F.3d 1098, 1102-04
(10th Cir. 2010); Homeward Bound, Inc. v. Hissom Mem’l Ctr., 963 F.2d 1352, 1355-56
(10th Cir. 1992).
Plaintiff’s counsel represents that the appropriate lodestar figure in this action is
$202,796.00, based on 410.95 hours of attorney time, multiplied by hourly billing rates of
$90 per hour for paralegal work and from $350 – $700 per hour for attorney work. (ECF
No. 159-2.) At the settlement hearing, Plaintiff’s counsel also expressly represented to
the Court that the attorneys on the case exercised appropriate billing judgment in
determining that portion of actual time expended by Plaintiff’s legal representatives for
which they would seek recompense from this Court. Plaintiff’s counsel represented that
the 410 hours listed was a conservative figure because every attorney excluded some
time from their final numbers, and also because the time spent at a law firm that had
been previously retained by Plaintiff was not included in the final figures at all. The Court
finds that $202,796.00 is an appropriate assessment of the lodestar, reflecting the
reasonable number of hours worked on the case, and the reasonable billing rates (given
the complexity of the case and the unchallenged expertise of Plaintiff’s counsel in
prosecuting shareholder derivative litigation).

1

The Johnson factors are: (1) the time and labor required; (2) the novelty and difficulty
of the questions; (3) the skill required to perform the service properly; (4) the preclusion of other
employment by the attorney due to acceptance of the case; (5) the customary fee; (6) whether
the fee is fixed or contingent; (7) time limitations imposed by the client or the circumstances; (8)
the amount involved and the results obtained; (9) the experience, reputation, and ability of the
attorney; (10) the undesirability of the case; (11) the nature and length of the professional
relationship with the client; and (12) awards in similar cases. See id. at 717-19.

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The Court also finds that Plaintiff incurred $42,483.25 in expenses, a reasonable
figure. Subtracting that $42,483.25 in expenses from the entire requested amount of
$250,000 (see ECF No. 160, at 7 n.4) leaves a total request for attorneys’ fees in the
amount of $207,516.75. Thus, Plaintiff’s counsel is requesting that the Court apply a
multiplier of approximately 1.02 (somewhat more precisely, 1.0232783) to the lodestar
figure of $202,796.00, resulting in an attorneys’ fees award of $207,516.75, and a total
award of attorneys’ fees and expenses in the amount of $250,000.2 The Court finds it
appropriate to apply the very modest multiplier of approximately 1.02 to arrive at the total
fee award of $207,516.75 and the total award of fees and expenses of $250,000. Cf. In
re UnitedHealth Group Inc. S’holder Derivative Litig., 631 F. Supp. 2d 1151, 1160 (D.
Minn. 2009) (applying 2.75 multiplier to lodestar figure in shareholder derivative suit in
which plaintiffs’ counsel worked on contingency in the face of considerable risk and
uncertainty); see also Miniscribe Corp. v. Harris Trust Co. of Cal., 309 F.3d 1234, 1245
(10th Cir. 2002) (affirming fee award based on a lodestar multiplier of 2.57 in class
action); Lucken Family Ltd. Partnership, LLLP v. Ultra Resources, Inc., No. 09-cv-01543,
2010 WL 5387559, at *3-*4 (D. Colo. Dec. 22, 2010) (applying 1.82 lodestar multiplier in
class action); Lucas v. Kmart Corp., No. 99-cv-01923, 2006 WL 2729260, at *9 (D. Colo.
July 27, 2006) (applying 1.87 lodestar multiplier in class action).

2

At the settlement hearing, Plaintiff’s counsel represented that Oilsands has insurance
coverage in the amount of $250,000, and thus Plaintiff’s counsel has limited their request to
$250,000 based on a 1.02 multiplier to the lodestar. Counsel also explained at the settlement
hearing that the insurer at issue is in the process of seeking to obtain a “comfort order” from the
U.S. Bankruptcy Court for the Southern District of New York, a ministerial document that
approves the insurer’s payment of policy funds despite the existence of the Canadian
bankruptcy proceedings. (See also ECF No. 169, at 8-10.)

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The scope and nature of the work required by Plaintiff’s counsel during the two
years this action has been pending, the complexity of the case, and the fact that
Plaintiff’s counsel was working on contingency basis all weigh in favor of a significant
attorneys’ fees award in this action. See Johnson, 488 F.2d at 717-19. Further, the
Court finds the $250,000 award to be modest compared to awards in other, similar
cases. See id.; see also Srebnik v. Dean, No. 05-cv-01086, 2007 WL 2422146, at *4 (D.
Colo. Aug. 22, 2007); In re UnitedHealth Group Inc. S’holder Derivative Litig., 631 F.
Supp. 2d at 1158-60; Cohn v. Nelson, 375 F. Supp. 2d 844, 860-66 (E.D. Mo. 2005);
Strougo v. Bassini, 258 F. Supp. 2d. 254, 263-64 (S.D.N.Y. 2003). The Court therefore
concludes that $250,000 constitutes fair compensation to Plaintiff’s counsel for their work
in this case.
III. CONCLUSION
In accordance with the foregoing, the Court ORDERS as follows:
(1)

Plaintiff's Motion for Final Approval of Derivative Litigation Settlement (ECF
No. 159) is GRANTED;

(2)

The Court hereby ISSUES final approval of the Second Amended
Stipulation and Agreement of Settlement and Release entered into
between the parties to this action (ECF No. 147-1);

(3)

Plaintiff's Motion in Support of Application for Award of Attorneys' Fees and
Expenses (ECF No. 160) is GRANTED;

(4)

The Court hereby AWARDS the total sum of $250,000 in attorneys’ fees
and expenses to Plaintiff.

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Dated this 19th day of March, 2012.
BY THE COURT:

_________________________
William J. Martínez
United States District Judge

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