JS Halberstam Irrevocable Grantor Trust v. Davis et al

Filing 42

Opinion and Order. The Court GRANTS Plaintiff's unopposed motion for final approval of the proposed settlement, 35 . The Court awards Plaintiff's counsel $721,564.48 in attorney's fees and $28,435.52 in expenses. The Court a lso authorizes $8,000 in total service (or incentive) awards, payable $2,000 each to JS Halberstam Inevocable Grantor Trust, Michael Shimberg, Melisa Ashabraner, and Jason Berning and to be deducted from the attorney's fee and expense award. The Court retains jurisdiction over the parties and all matters relating to the Settlement, including the administration, interpretation, construction, effectuation, enforcement, and consummation of the Settlement and this Opinion and Order. IT IS SO ORDERED. Signed on 5/9/2022 by Judge Michael H. Simon. (dino)

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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON

JS HALBERSTAM IRREVOCABLE
GRANTOR TRUST, Derivatively and on
behalf of Portland General Electric
Company,
Plaintiff,
V.

JACK E. DAVIS; JOHN W.
BALLANTINE; RODNEY L. BROWN,
JR.; KIRBY A. DYESS; MARK B. GANZ;
MARIE OH HUBER; KATHRYN J.
JACKSON, PH.D.; MICHAEL A. LEWIS;
MICHAEL H. MILLEGAN; NEIL J.
NELSON, M. LEE PELTON, PH.D;
MARIAM. POPE; CHARLES W.
SHIVERY; JAMES P.
TORGERSON; and JAMES LOBDELL,
Defendants,
and

PORTLAND GENERAL ELECTRIC
COMPANY,
Nominal Defendant.

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OPINION AND ORDER

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Michael G. Hanlon, LAW OFFICES OF MICHAEL G. HANLON PC, 101 SW Main Street, Suite 825,
Portland, OR 97204; and David C. Katz, Mark D. Smilow, and Joshua M. Rubin, WEISSLA w
LLP, 305 Broadway, Seventh Floor, New York, NY 10007. Of Attorneys for Plaintiffs JS
Halberstam In-evocable Trust.
Paul H. Trinchero and Eryn K. Hoerster, FOSTER GARVEY PC, 121 SW Mo1Tison Street, 11th
Floor, Pmiland, OR 97204; Dallas S. DeLuca and Stanton R. Gallegos, MARKOWITZ HERBOLD
PC, 1455 SW Broadway, Suite 1900, Portland, OR 97201; and Susan L. Saltzstein, Alexander C.
Drylewski, and Shaud G. Tavakoli, SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP, One
Manhattan West, New York, NY 10001. Of Attorneys for Defendants.

Michael H. Simon, District Judge.
Plaintiff JS Halberstam In-evocable Grantor Trust brings this derivative action on behalf
of nominal Defendant Portland General Electric (PGE) against several directors, board members,
and executives at PGE. The paiiies have reached a Stipulation and Agreement of Settlement
(Settlement) and now seek the Court's final approval under Rule 23.1 of the Federal Rules of
Civil Procedure. For the reasons explained below, the Court approves the Settlement. 1

BACKGROUND
The Actions arise out of alleged misrepresentations about PGE's energy trading practices.
Plaintiff Halberstam2 alleges that PGE maintained a risk-averse, conservative profile that led
investors and analysts to characterize PGE as a low-risk investment. Plaintiff further alleges that
this low-risk profile was especially important to PGE given its relationship with Emon Corp.

1

The Settlement fully resolves all derivative claims against all Defendants in this lawsuit,
JS Halberstam Irrevocable Grantor Trust v. Davis, Case No. 3:21-cv-00413-SI (D. Or.) (the
Halberstam Action), as well as in Shimberg v. Pope, et al., Case No. 21 CV02957 (Multnomah
Co. Cir. Ct.) (filed January 26, 2021) (the Shimberg Action); Ashabraner v. Pope et al., Case
No. 21CV13698 (Multnomah Co. Cir. Ct.) (filed April 7, 2021) (the Ashabraner Action); and
Berning, et al. vs. Pope, et al., Case No. 3:21-cv-00783-SI (D. Or.) (filed May 21, 2021) (the
Berning Action). The Comi refers to the Halberstam Action, the Shimberg Action, the
Ashabraner Action, and the Berning Action collectively as the Actions.
2

Unless otherwise explicitly stated, "Plaintiff' refers to Plaintiff Halberstam, although
the claims asserted in the Shimberg Action, the Ashabraner Action, and the Berning Action are
substantially similar to the claims asse1ied in the Halberstam Action.

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before Emon filed for bankruptcy. As with other power companies, PGE allegedly traded within
the energy market to hedge against the uncertainty of future energy prices. This price-hedging
form of energy trading is known as trading for "retail purposes." Plaintiff alleges that beginning
in early 2020, PGE also engaged in energy trading for "non-retail purposes," that is, energy
trading for the purpose of directly generating profits. As a result, Plaintiff contends, PGE's
statements in its filings with the Securities and Exchange Commission stating that PGE did not
engage in energy trading practices for non-retail purposes were false or misleading. In August
2020, PGE announced that it suffered a $127 million loss due to these high-risk non-retail trades.
After PGE' s announcement, its stock price dropped by 8 .4 percent.
This derivative lawsuit and a related securities fraud class action followed. In the
securities fraud class action (Case No. 3 :20-cv-15 83-SI), the plaintiff stockholders alleged that
PGE and its executives violated the Securities and Exchange Act by making false or misleading
statements about PGE's energy trading practices. The parties reached a settlement in that case,
and this Court has approved that settlement.
In this derivative lawsuit, Plaintiff asserts claims for violations of the Securities and
Exchange Act, breach of fiduciary duty, waste of corporate assets, contribution and
indemnification, aiding and abetting, and gross mismanagement. Before Defendants filed any
motion to dismiss, the parties reached a settlement. The Court preliminarily approved the
Settlement on March 28, 2022. Now before the Court is Plaintiffs unopposed motion for final
approval of the Settlement and award of attorney's fees, expenses, and service awards.

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DISCUSSION
A. Settlement Approval
1. General Standards

Under Federal Rule of Civil Procedure 23 .1, " [a] derivative action may be settled,
voluntarily dismissed, or compromised only with the court's approval." Fed. R. Civ. P. 23.l(c).
Courts assess settlements of derivative claims using the standards for settlements under
Rule 23(e), which requires that a settlement is "fair, reasonable, and adequate." Fed. R. Civ.
P. 23(e)(2); see In re Pac. Enters. Sec. Litig., 47 F.3d 373,377 (9th Cir. 1995) (applying
Rule 23(e) to settlement of derivative action). The settlement must be considered as a whole, and
although there are "strict procedural requirements on the approval of a class settlement, a district
court's only role in reviewing the substance of that settlement is to ensure it is 'fair, adequate,
and free from collusion."' Lane v. Facebook, Inc., 696 F.3d 811 , 818-19 (9th Cir. 2012) (quoting
Hanlon v. Ch1ysler Corp., 150 F.3d 1011, 1027 (9th Cir. 1998)).
In a class settlement, a comi must consider whether: "(A) the class representatives and
class counsel have adequately represented the class; (B) the proposal was negotiated at arm's
length; (C) the relief provided for the class is adequate; and (D) the proposal treats class
members equitably relative to each other." Fed. R. Civ. P. 23(e)(2). The Ninth Circuit has
articulated a number of factors guiding this review, including: (1) the strength of the plaintiffs'
case; (2) the risk, expense, complexity, and likely duration of further litigation; (3) the risk of
maintaining class action status throughout the trial; (4) the amount offered in settlement; (5) the
extent of discovery completed and the stage of the proceedings; (6) the experience and views of
counsel; (7) the presence of a governmental pmiicipant; and (8) the reaction of the class
members to the proposed settlement. Lane, 696 F.3d at 819. Courts within the Ninth Circuit "put

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a good deal of stock in the product of an aims-length, non-collusive, negotiated resolution. "
Rodriguez v. W Pub! 'g Corp., 563 F.3d 948, 965 (9th Cir. 2009).
The Ninth Circuit has also recognized that " O]udicial review also takes place in the
shadow of the reality that rejection of a settlement creates not only delay but also a state of
unce1tainty on all sides, with whatever gains were potentially achieved for the putative class put
at risk. " Staton v. Boeing Co., 327 F.3d 938, 952 (9th Cir. 2003). Thus, there is a "strong judicial
policy that favors settlements, particularly where complex class action litigation is concerned."
In re Hyundai & Kia Fuel Econ. Litig. , 926 F.3d 539, 556 (9th Cir. 2019) (en bane) (quoting
Allen v. Bedolla, 787 F.3d 1218, 1223 (9th Cir. 2015)).
2. Strength of PlaintifPs Case; Risk, Expense, Complexity, and Likely Duration of
Future Litigation
Plaintiff contends that although it believes it has meritorious claims, proceeding with this
litigation would be risky . Plaintiff would have to overcome Defendants' anticipated motion to
dismiss in part by demonstrating that paiticularized alleged facts show futility of making a
demand on the board of directors under In re Caremark Int 'l Inc. Derivative Litig., 698 A.2d 959
(Del. Ch. 1996). Plaintiff also explains that even if its claims survive a motion to dismiss,
Plaintiff would continue to face additional hurdles at subsequent stages of litigation, such as
overcoming the business judgment rule, overcoming the exculpatory provisions of PGE's
Articles of Incorporation, responding to any motion to dismiss filed by PGE' s Special Litigation
Committee, and proving damages. See also In re Pac. Enters. Sec. Litig., 47 F.3d at 378 (stating
that "the odds of winning" a derivative lawsuit "are extremely small"). Besides the risk of
dismissal before trial or loss at trial, continued litigation would be expensive and timeconsuming. Thus, given the parties' unce1tainty of the outcome and the complexity of this case,
these factors favor approval of the Settlement Agreement.

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3. Terms of the Settlement
Plaintiffs' counsel represents that the terms of the Settlement will confer substantial nonmonetary benefits to PGE. Under the te1ms of the Settlement, PGE agreed to make changes to its
Executive Risk Committee, Audit & Risk Committee, Nominating & Corporate Governance
Committee, and corporate government guidelines, as well as to continue its whistleblower policy
and fo1malize the job duties of the Corporate Compliance Officer. Plaintiff represents that these
corporate governance refo1ms will provide structural changes to ensure greater supervision over
energy trading risks and reporting. The Comi finds that these structural refo1ms will benefit PGE
and therefore favors approval.

4. Extent of Discovery Completed
Formal discovery is not required before a class action settlement. Linney v. Cellular

Alaska P 'ship, 151 F.3d 1234, 1239-40 (9th Cir. 1998). Rather, "[a]pproval of a class action
settlement is proper as long as discovery allowed the parties to form a clear view of the strengths
and weaknesses of their cases." Monterrubio v. Best Buy Stores, L.P., 291 F.R.D. 443,454 (E.D.
Cal. 2013). The parties assert that although this case settled before formal discovery, they
nevertheless exchanged sufficient information adequately to determine the strengths and
weaknesses of their positions. The parties exchanged information during negotiations, during
mediation sessions, in mediation statements, and in briefing Defendants' motion to dismiss.
Further, Plaintiffs conducted extensive investigation before filing their Complaint. Thus, this
factor does not weigh against approval. See Zepeda v. PayPal, Inc., 2017 WL 1113293, at *14
(N.D. Cal. Mar. 24, 2017) (concluding that although the parties had not engaged in formal
discovery, "the parties info1mally exchanged information and documents in connection with the
three prior mediations conducted in this action," which favored approval of the settlement).

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5. Experience and Views of Counsel
"Paiiies represented by competent counsel are better positioned than courts to produce a
settlement that fairly reflects each paiiy ' s expected outcome in litigation." In re Pac. Enters. Sec.
Litig., 47 F.3d at 378. Although counsel ' s views are instructive, they do not entitle the settlement
to a presumption of fairness . See Roes, 1-2 v. SFBSC Nlgmt. , LLC, 944 F.3d 1035, 1049 (9th
Cir. 2019). The Comi is satisfied that Plaintiffs counsel has extensive experience litigating
derivative actions and that Defendants' counsel are experienced litigators. Thus, the
recommendation from the parties' counsel that the Settlement is fair, reasonable, and adequate
favors approval.
6. Reaction of the PGE Stockholders to the Settlement
Plaintiffs published notice of the pending settlement and agreed-upon attorney's fees and
costs on April 4, 2022. See ECF 37. No PGE stockholder has objected to the Settlement. This
factor favors approval.
7. Evidence of Collusion
Courts must scrutinize fee anangements for signs of collusion before approving a class
action or derivative settlement. Briseno v. Henderson, 998 F.3d 1014, 1026 (9th Cir. 2021)
(holding that courts must look for signs of collusion in pre- and post-class certification
settlements); In re Pac. Enters. Sec. Litig. , 47 F.3d at 378 (stating that comis may not approve a
derivative settlement that "is the product of .. . collusion ainong[] the negotiating parties"). The
Ninth Circuit has identified three signs of collusion: (1) class counsel receives a disprop01iionate
distribution of the settlement, or when the class receives no monetary distribution but counsel is
amply awarded; (2) the parties negotiate a "clear sailing" anangement providing for the payment
of attorneys' fees separate and apart from class funds without objection by a defendant; or (3) the

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parties airange for payments not awarded to reve1i to a defendant rather than to be added to the
class fund. In re Bluetooth, 654 F.3d at 947.
The Settlement contains a clear sailing provision, which is a sign of potential collusion.
See ECF 32-1, ,r 14. Under that provision, Defendant agreed not to object to Plaintiffs request
for up to $750,000 in attorney's fees and costs. Id. The aim's length nature of the parties'
negotiation, however, shows that despite the clear sailing provision, the paiiies engaged in no
collusion. The paiiies reached a Settlement after undergoing a day-long mediation session with
an experienced mediator followed by months of negotiations. Fmiher, the paiiies reached
agreement on fees using double-blind mediator proposals and only after they had agreed to the
substantive te1ms of the Settlement. Thus, the Comi finds the Settlement is not a product of
collusion.
8. Conclusion
The above factors support approval. The Court therefore finds that the Settlement is fair,
reasonable, and adequate.

B. Attorney's Fees
Plaintiffs may be awarded attorney's fees in derivative suits if the resolution of the claim
confers a "substantial benefit" on the corporation. See Mills v. Elec. Auto-Lite Co., 396 U.S. 375,
393-95 (1970); In re Taronis Techs., Inc. S'holder Derivative Litig., 2021 WL 842137, at *3 (D.
Ariz. Mar. 5, 2021) ("Courts have consistently approved attorneys' fees and expenses in
shareholder actions where the plaintiffs' efforts resulted in corporate governance reforms but no
monetary relief."). In dete1mining the appropriate measure of attorney's fees, the court must
exercise its discretion to achieve a "reasonable" result. In re Bluetooth, 654 F.3d at 942. The
lodestar method "is especially appropriate in class actions 'where the relief sought-and
obtained-is ... primarily injunctive."' Kim v. Allison, 8 F.4th 1170, 1181 (9th Cir. 2021 ); see
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also Osher v. SCA Realty I, Inc., 945 F. Supp. 298, 307 (D.D.C. 1996) ("Courts generally regard
the lodestar method, which uses the number of hours reasonably expended, as the best approach
in cases where the nature of the settlement evades the precise evaluation needed for the
percentage of recovery method. ").
The lodestar amount is the product of the number of hours reasonably spent on the
litigation multiplied by a reasonable hourly rate. McCown v. City of Fontana, 565 F .3d 1097,
1102 (9th Cir. 2009). In making this calculation, the district comi should take into consideration
various factors ofreasonableness, including the quality of an attorney's perfo1mance, the results
obtained, the novelty and complexity of a case, and the special skill and experience of counsel.
See Perdue, 559 U.S. at 553-54; Gonzalez v. City of Maywood, 729 F.3d 1196, 1209 n.11 (9th
Cir. 2013).
The Comi is satisfied that the Settlement' s corporate governance reforms confer a
substantial benefit on PGE because they are designed to prevent the conduct at issue in this
litigation from happening again. To determine whether Plaintiffs request for $721,564.48 in
attorney's fees is reasonable, the Court will calculate Plaintiffs lodestar. Plaintiffs counsel
submits that it reasonably expended 1,053.45 hours in litigating this case and reaching a
settlement. Plaintiffs counsel expended these hours inspecting and analyzing PGE's Securities
and Exchange Committee filings, reviewing documents obtained under Oregon Revised Statues
§ 60.774, drafting the complaint, drafting an extensive mediation statement, attending a

mediation session, and engaging in negotiations with Defendant during the months following the
mediation. Plaintiffs counsel represents that it deducted some time and expense in exercise of
their judgment before submitting billing information to the Court for a lodestar calculation. See

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ECF 36-8, ~ 6; 36-10, ~ 6; 36-13, ~ 6. The court finds that 1,053.45 hours is a reasonable number
of hours to achieve these results.
Plaintiff's counsel's billing rates for attorneys ranged from $220 to $1,050 and $70 to
$375 for paralegals. Plaintiff's counsel represents that these billing rates are customary for
attorneys and paralegals in their fields. The Court is satisfied that these are reasonable hourly
rates for complex federal litigation in the relevant communities. See Barjon v. Dalton, 132
F.3d 496 (9th Cir. 1997) ("Generally, the relevant community is the forum in which the district
court sits. However, rates outside the forum may be used 'if local counsel was unavailable, either
because they are unwilling or unable to perfo1m because they lack the degree of experience,
expertise, or specialization required to handle properly the case. "' (citation omitted)
(quoting Gates v. Deukmejian, 987 F.2d 1392, 1405 (9th Cir. 1992)); United Steelworkers ofAm.
v. Phelps Dodge Corp., 896 F.2d 403,407 (9th Cir. 1990) (stating that in determining reasonable
hourly rates, "[a]ffidavits of the plaintiffs' attorney and other attorneys regarding prevailing fees
in the community, and rate determinations in other cases, particularly those setting a rate for the
plaintiffs' attorney, are satisfactory evidence of the prevailing market rate").
The Court finds that the information provided is sufficient to conclude that Plaintiff's
lodestar is $794,164.25. Plaintiff seeks $721,564.48 in attorney's fees, which constitutes a 0.91
multiplier. The Court finds that the attorney ' s fee award of $721,564.48 is reasonable. See
Littlejohn v. Copland, 819 F. App'x 491 , 494 (9th Cir. 2020) (affirming a 1.5 lodestar multiplier
for a settlement providing only injunctive relief).
C. Expenses

Plaintiffs also seek recovery of $28,435 .52 in expenses. These costs include expenses for
mediation, travel, factual and legal research, filing fees, photocopying, and pro hac vice costs.
Court finds that these expenses have been reasonably and necessarily incmTed in this case. See,
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e.g. , Wininger v. SI Mgmt., LP., 301 F.3d 1115, 1120-21 (9th Cir. 2002) ("[J]urisdiction over a
fund allows for the district court to spread the costs of the litigation among the recipients of the
common benefit."); In re lvledia Vision Tech. Sec. Litig., 913 F. Supp. 1362, 1366 (N.D.
Cal. 1996) ("Reasonable costs and expenses incuned by an attorney who creates or preserves a
common fund are reimbursed proportionately by those class members who benefit by the
settlement."). The Court therefore approves the award of $28,435 .52 in the Settlement for
expenses.

D. Service (or Incentive) Award
Plaintiffs seek approval of four service (or inventive) awards of $2,000 each to be
deducted from the attorney's fees and cost award and paid to the four representative plaintiffs in
the four cases comprising the Actions. 3 "Incentive awards are payments to class representatives
for their service to the class in bringing the lawsuit." Radcliffe, 715 F.3d at 1163.

"An incentive payment to come from the attorneys' fees awarded to plaintiffs counsel need not
be subject to intensive scrutiny, as the interests of the corporation, the public, and the defendants
are not directly affected." In re OSI Sys., Inc. Derivative Litig., 2017 WL 5642304, at *5 (C.D.
Cal. May 2, 2017) (quoting Cendant, 232 F. Supp. 2d 327, 344 (D.N.J. 2002)). The Court finds
that the requested incentive award is reasonable.

CONCLUSION
The Court GRANTS Plaintiffs unopposed motion for final approval of the proposed
settlement, ECF 35. The Court awards Plaintiffs counsel $721,564.48 in attorney's fees and
$28,435 .52 in expenses. The Court also authorizes $8,000 in total service (or incentive) awards,

3

Those plaintiffs are JS Halberstam Inevocable Grantor Trust, Michael Shimberg,
Melisa Ashabraner, and Jason Berning. See n.1, supra.

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payable $2,000 each to JS Halberstam Inevocable Grantor Trust, Michael Shimberg, Melisa
Ashabraner, and Jason Berning and to be deducted from the attorney's fee and expense award.
The Court retains jurisdiction over the parties and all matters relating to the Settlement, including
the administration, interpretation, construction, effectuation, enforcement, and consummation of
the Settlement and this Opinion and Order.
IT IS SO ORDERED.

DATED this 9th day of May, 2022.

United States District Judge

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