Brehm et al v. Engle et al

Filing 484

MEMORANDUM AND ORDER - IT IS ORDERED: 1. The plaintiffs' motion for preliminary approval of proposed partial settlement agreement (Filing No. 479 ) is granted. The proposed partial settlement agreement with defendant Geraldine Magalnick (Filin g No. 481 , Index of Evid., Scaglione Aff., Ex. 1 (Doc #481, Page ID ## 4745-4751)) is preliminarily approved. A Fairness Hearing is scheduled before the undersigned on May 23, 2011, at 11:00 a.m. (CDT), in Courtroom No. 3, Roman L. Hruska U.S. Cou rthouse, 111 South 18th Plaza, Omaha, Nebraska. A Notice of Proposed Partial Settlement of Class Action & Fairness Hearing in substantially the same form as that approved in Filing No. 321 is approved. Within 7 days of the date of this order, cla ss counsel shall mail (in the name of the clerk of court, by first class mail, postage prepaid) the Notice of Proposed Partial Settlement of Class Action & Fairness Hearing, in substantially the form approved by the court, to all class members. Within 7 days of the date of the mailing of the notice, class counsel shall file an affidavit identifying the persons to whom notice has been mailed. Ordered by Chief Judge Joseph F. Bataillon. (TEL)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
LYLE BREHM, on behalf of Willard F.
Brehm, Gladys M. Brehm, the Willard F.
Brehm Revocable Trust and the Gladys
M. Brehm Revocable Trust, REX
WELDON, on behalf of Nancy Weldon,
Robert Clark Weldon and the Robert
Clark Weldon and Nancy Weldon Trust,
JILL SCHUNEMAN, on behalf of herself
and the Jill Schuneman Living Trust,
and DAVID BUCKLEY, on behalf of
himself, the Robert L. McKissick
Irrevocable Trust and the Brenda L.
Buckley Revocable Trust, collectively on
behalf of themselves and all others
similarly situated,
Plaintiffs,
v.
REBECCA ENGLE, BRIAN
SCHUSTER, ENGLE & SCHUSTER
FINANCIAL, INC., AMERICAN
CAPITAL CORPORATION, ROYAL
PALM CAPITAL GROUP, INC.,
GERALD PARKER, JOHN BOYCE,
GERALDINE MAGALNICK, and LIANA
DOBARGANES HARRINGTON, in her
capacity as sole heir or putative
personal representative of the estate of
Patrick Harrington, deceased,
Defendants.

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8:07CV254

MEMORANDUM AND ORDER

This matter is before the court on the plaintiffs’ motion for preliminary and final
approval of a proposed partial settlement agreement with defendant Geraldine Magalnick,
pursuant to Fed. R. Civ. P. 23. Filing No. 479. This is a class action for securities fraud.
The case has been certified as a class action. Filing No. 299.

In considering preliminary approval, the court makes a preliminary evaluation of the
fairness of the settlement, prior to notice. Manual of Complex Litigation (Fourth) § 21.632
(2010); see also Fed. R. Civ. P. 23(e).

First, the court must make a preliminary

determination of the fairness, reasonableness and adequacy of the settlement terms and
must direct the preparation of notice of the proposed settlement and the date of the
fairness hearing. Id. After an agreement is preliminarily approved, the second step of the
process ensues: notice is given to the class members of a hearing, at which time class
members and the settling parties may be heard with respect to final court approval. Id.
A district court is required to consider four factors in making a final determination
that a settlement is fair, reasonable, and adequate: (1) the merits of the plaintiff's case,
weighed against the terms of the settlement; (2) the defendant's financial condition; (3) the
complexity and expense of further litigation; and (4) the amount of opposition to the
settlement. In re Wireless Telephone Federal Cost Recovery Fees Litigation, 396 F.3d
922, 931 (8th Cir. 2005). A court may also consider procedural fairness to ensure the
settlement is “not the product of fraud or collusion.” Id. at 934. The experience and
opinion of counsel on both sides may be considered, as well as whether a settlement
resulted from arm’s length negotiations, and whether a skilled mediator was involved. See
DeBoer v. Mellon Mortgage Co., 64 F.3d 1171, 1178 (8th Cir. 1995). A court may also
consider the settlement’s timing, including whether discovery proceeded to the point where
all parties were fully aware of the merits. See City P'ship Co. v. Atlantic Acquisition Ltd.
P'ship, 100 F.3d 1041, 1043 (1st Cir. 1996).
The court has reviewed the proposed settlement agreement, Filing No. 481, Index
of Evid., Affidavit of Gregory C. Scaglione (Scaglione Aff.), Ex. 1, Settlement Agreement

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(Doc #481, Page ID ## 4745-4751). The agreement provides that defendant Magalnick
will assign claims she may have against other individuals or entities to co-lead plaintiffs and
provide full and complete cooperation to co-lead plaintiffs’ counsel in prosecuting any such
claims in her name. Id. at 5 (Doc # 481, Page ID # 4749). Lead plaintiffs have also shown
that it is the understanding of lead plaintiffs’ counsel that such claims are assignable and
meritorious. Id., Scaglione Aff. at 2 (Doc # 481, Page ID # 4742). The agreement further
provides for payment to the plaintiffs of $14,000.00, plus interest, according to a payment
plan. Id., Ex. 1, Settlement Agreement at 3 (Doc # 481, Page ID ## 4747).
Further, they have shown that the proposed settlement in the best interests of the
plaintiff class because the defendant has no insurance coverage and a grim financial
position. Id., Scaglione Aff. at 2-3. The court finds the proposed settlement in the best
interests of the plaintiff class, based on the claims and defenses in this action, its
procedural posture, and the anticipated time and expense of protracted litigation. The
proposed settlement between the plaintiff class and defendant Geraldine Magalnick
appears, on preliminary review, to be within the range of reasonableness for a settlement
with an uninsured and insolvent defendant.
Accordingly, the court finds the proposed partial settlement should be submitted to
class members for their consideration and a fairness hearing under Fed. R. Civ. P. 23(e),
after which an order of final approval will issue. Accordingly,
IT IS ORDERED:
1. The plaintiffs’ motion for preliminary approval of proposed partial settlement
agreement (Filing No. 479) is granted.

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2. The proposed partial settlement agreement with defendant Geraldine Magalnick
(Filing No. 481, Index of Evid., Scaglione Aff., Ex. 1 (Doc #481, Page ID ## 4745-4751))
is preliminarily approved.
3. A Fairness Hearing is scheduled before the undersigned on May 23, 2011, at
11:00 a.m. (CDT), in Courtroom No. 3, Roman L. Hruska U.S. Courthouse, 111 South 18th
Plaza, Omaha, Nebraska.
4. A Notice of Proposed Partial Settlement of Class Action & Fairness Hearing in
substantially the same form as that approved in Filing No. 321 is approved.
5. Within 7 days of the date of this order, class counsel shall mail (in the name of
the clerk of court, by first class mail, postage prepaid) the Notice of Proposed Partial
Settlement of Class Action & Fairness Hearing, in substantially the form approved by the
court, to all class members.
6. Within 7 days of the date of the mailing of the notice, class counsel shall file an
affidavit identifying the persons to whom notice has been mailed.
DATED this 25th day of April, 2011.
BY THE COURT:

s/Joseph F. Bataillon
CHIEF DISTRICT JUDGE

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the District of Nebraska does not endorse, recom m end, approve, or guarantee any third parties or the services
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the opinion of the court.
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