Hopkins v. HQ Sustainable Maritime Industries, Inc. et al

Filing 76

ORDER TO SHOW CAUSE by Judge Robert S. Lasnik; Plaintiffs are ORDERED TO SHOW CAUSE within fourteen days of the date of this Order. Clerk docketed this Order in case number CV11-726 RSL. (TF)

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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE

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_______________________________________
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In re HQ SUSTAINABLE MARITIME
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INDUSTRIES, INC., DERIVATIVE
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LITIGATION,
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This document relates to:
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ALL ACTIONS
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_______________________________________)

No. C11-0910RSL
ORDER TO SHOW CAUSE

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On May 7, 2013, plaintiffs filed an unopposed “Motion for Preliminary Approval
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of Settlement” in the above-captioned matter. The case has been stayed since November 28,
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2011.
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Despite numerous assertions that the proposed settlement offers “substantial
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benefits” to HQ Sustainable Maritime Industries, Inc., and its shareholders, the Court has been
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unable to identify anything of value that will accrue to plaintiffs upon approval of this
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settlement. The $2.75 million payment mentioned in the papers has already been dispersed to
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the shareholders as part of the settlement of the related securities action, Moomjy v. HQ
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Sustainable Maritime Industries, Inc., C11-0726RSL. While the Court is willing to accept the
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theory that the pendency of the derivative actions put additional pressure on the individual
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defendants to settle (and possibly made available insurance proceeds that would not have been in
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play if only the securities claims had been pending), the fact remains that approval of the
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settlement currently before the Court would result in no additional benefit to the corporation or
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ORDER TO SHOW CAUSE

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shareholders. At the same time, the lawyers would receive a payment of $612,500.
It is hard to imagine how the proposed settlement does not run afoul of the bar

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against excessive compensation for attorneys, especially when the Moomjy settlement included a

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$495,000 attorney’s fee award that was predicated on a finding that 18% of the $2.75 million

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settlement fund was fair and reasonable under the tests used in the Ninth Circuit. Had the

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settlements been coordinated and presented to the Court at the same time, the issue would have

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been whether an attorney’s fee of over 40% of the settlement fund were reasonable, a much

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closer call. But not even that issue is before the Court. Instead, the settlements were structured

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in such a way that the Court is faced with a request to preliminarily approve a deal which

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provides nothing to the shareholders in the face of a sizeable attorney’s fee award. Based on the

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existing record, the Court is unable to conclude that the proposed award is reasonable under

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either the “percentage-of-recovery” or lodestar analysis.

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For all of the foregoing reasons, plaintiffs are hereby ORDERED TO SHOW

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CAUSE why the proposed settlement should not be rejected. Plaintiffs shall, within fourteen

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days of the date of this Order, provide any and all facts and authority that justifies approval of

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the settlement as currently structured. The Clerk of Court is directed to docket this Order in both

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the above-captioned matter and C11-726RSL and to note the Order to Show Cause on the

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Court’s calendar for May 31, 2013.

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Dated this 17th day of May, 2013.
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A

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Robert S. Lasnik
United States District Judge

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ORDER TO SHOW CAUSE

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