The opinion of the court was delivered by: MARY JOHNSON LOWE
Before the Court is the motion of Plaintiffs,
by their attorneys, brought pursuant to Fed. R. Civ. P. 23(e), for Court approval of the settlement of this action by the terms set forth in the Stipulation of Settlement (the "Stipulation") signed by the parties to the action on June 26, 1992. On August 17, 1992, this Court's Preliminary Order was filed setting the date for the hearing at which the Court would determine the fairness of the settlement, and directing counsel for the class to notify class members of the pendency of the action. 296 notices were mailed to class members representing persons who purchased 300 Class A limited partnership interests ("Units"). Of those members, no objections to the proposed settlement have been received by the Court, and seven persons representing nine Units have requested exclusion from the class. Based upon a hearing before this Court held on October 19, 1992, as well as on submissions by the parties, settlement of this action by the terms stated in the Stipulation is approved.
On December, 29, 1989, this class action was commenced in the United States District Court for the Southern District of California. The parties were identical to the present parties, but included one more defendant, National Union Fire Insurance Company of Pittsburgh, Pa. This defendant was voluntarily dismissed by Plaintiffs in April, 1992. It should also be noted that Defendant Laventhol is engaged in bankruptcy proceedings at the time of this action.
Plaintiffs filed an amended complaint on April 12, 1990. Plaintiffs' First Amended Complaint alleges that the Defendants violated Sections 12(2) and 15 of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and the rules and regulations of the Securities and Exchange Commission promulgated thereunder. It also alleges that Defendants violated the common law in connection with the sale of Units by misstating or failing to disclose material facts in the Confidential Private Placement Memorandum issued in connection with the offering of those Units. These common law charges allege fraud, negligent misrepresentation, and breach of fiduciary duty. Further, Plaintiffs allege accounting malpractice by Laventhol & Howarth, and professional negligence against Wilrock Appraising.
On July 12, 1990, the Action was transferred on motion by Defendants to the United States District Court for the Southern District of New York.
In October, 1991, Plaintiffs sought leave to file a Second Amended Complaint alleging the above causes of action as well as claims under the Federal Racketeer Influenced and Corrupt Organizations Act, common law claims, and further claims under Section 10(b) which Plaintiff sought to reinstate as timely under Section 27A of the 1934 Act as amended in 1991. Plaintiffs also sought to add additional plaintiffs as intervenors. These requests were denied at a pre-trial conference in November, 1991.
The Defendants at all times have denied allegations of wrongdoing and liability.
In the Court's Preliminary Order of August 17, 1992, this action was certified as a class action for settlement purposes on behalf of all parties who purchased Units up through and including June 26, 1992 - the date of the Stipulation of Settlement. In that order, a settlement hearing was scheduled for October 19, 1992, for the purposes of determining whether the settlement is fair, reasonable, and in the best interests of the class. At that hearing, the Court would also consider the application of Plaintiffs' counsel for an award of fees and expenses. The Preliminary Order mandated that notice of the pendency of the hearing and proposed settlement be sent to class members on or before August 21, 1992.
I. The Proposed Class Settlement Agreement
The exact terms of the proposed settlement are set forth in the Stipulation of Settlement, dated June 26, 1992, which is incorporated herein by reference. In sum, the settlement provides that Defendants will pay & total of $ 1,891,667, plus income and interest accrued, in escrow for the benefit of the class. The settlement fund will also include a $ 600,000 claim against Laventhol, which is presently engaged in bankruptcy proceedings.
The amount of the settlement fund will be reduced by the amount awarded to Plaintiffs' counsel for fees and expenses incurred, including the costs of administration of the settlement fund such as the cost of notice to the class and taxes due.
The Stipulation of Settlement contains provisions that an award of attorneys' fees shall not exceed 30% of the settlement fund, and that an award of expenses shall not exceed $ 25,000. Attorneys seek approximately 30% of the settlement fund in fees, and $ 13,726.74 as a reimbursement of expenses.
The Stipulation of Settlement provides Defendants with the option of withdrawal from the proposed settlement upon the occurrence of certain conditions. The specific conditions for this are sealed and impounded. These rights were not exercised by Defendants.
Settlement of this action is in the best interests of the parties involved. It will confer a substantial benefit upon the class, and it will end a complex and costly litigation. Plaintiffs' counsel is experienced in these matters, and has expressed their judgment that the proposed ...