United States District Court, S.D. New York
IN RE: GENERAL ELECTRIC COMPANY SECURITIES LITIGATION
For State Universities Retirement System of Illinois, Plaintiff: Joseph J. Tabacco, Jr., Berman DeValerio, San Francisco, CA; Glen DeValerio, Kathleen M. Donovan-Maher, Kristin J. Moody, Steven J. Buttacavoli, Daryl D. Andrews, Berman DeValerio, Boston, MA; Kyle G. DeValerio, Berman DeValerio, Palm Beach Gardens, FL; Richard Wolfe Cohen and David Harrison, Lowey Dannenberg Cohen & Hart, P.C., White Plains, NY.
Clarke Hampe, Objector and Appellant, Pro se, Tyler, TX.
OPINION & ORDER
DENISE COTE, United States District Judge.
This Opinion addresses a motion pursuant to Rule 7 of the Federal Rules of Appellate Procedure for an order compelling Clark Hampe, a pro se objector to the settlement in this class action securities case, to post an appeal bond for the amount of $54,700. For the following reasons, the motion is granted.
This case has a long and tortured history. It will be summarized here to put the objections made by Hampe to the settlement in context.
This litigation began on March 3, 2009, when a putative class consisting of all purchasers of stock of General Electric Company (" GE" ) between January 23 and February 27, 2009 filed a complaint against GE and various individual officers and directors of GE. This complaint alleged violations of Section 10(b), Rule 10b-5, and Section 20(a) of the Securities Exchange Act of 1934 (" Exchange Act" ). The principal
allegation was that the defendants disseminated materially false information regarding GE's financial health; when the truth regarding GE's financial health was later revealed in the form of a significantly reduced dividend, the stock price for GE fell sharply. The matter was initially assigned to the Honorable Denny Chin.
In an Order of July 29, the action was consolidated with other related actions. In addition to alleging fraud, these actions included strict liability claims premised on violations of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (" Securities Act" ) and named additional defendants, including various investment banks that served as underwriters to GE in a secondary public offering in October 2008. In the same Order, the State Universities Retirement System of Illinois was appointed lead plaintiff (" Lead Plaintiff" ), and its choice of counsel, Berman DeValerio, was approved (" Lead Counsel" ).
On October 2, the Lead Plaintiff filed a consolidated class action complaint. For the Exchange Act claims, the putative class was expanded to all purchasers of GE stock between September 25, 2008 to March 19, 2009. For the Securities Act claims, the putative class was all who purchased GE stock in the October 2008 secondary public offering. The new class of defendants consisted of GE; the Chairman and Chief Executive Officer, Jeffrey Immelt (" Immelt" ); the Vice Chairman and Chief Financial Officer, Keith Sherin (" Sherin" ); various other officers; various directors; and the corporate underwriters. The principal allegation on all claims remained that the defendants made materially false statements regarding GE's financial health.
On November 24, the defendants moved to dismiss the complaint. The motion was fully submitted as of March 26, 2010. On April 28, however, the case was reassigned to the Honorable Richard J. Holwell, when Judge Chin assumed his seat on the Second Circuit Court of Appeals.
On June 9, 2010, the Lead Plaintiff filed a Second Consolidated Class Action Complaint (" SAC" ), which is the operative complaint here. Defendants again moved to dismiss the SAC. This motion was fully submitted as of August 25, and oral argument on the motion was heard on November 23.
In an Opinion of January 12, 2012, the motion to dismiss was granted in part (" January Opinion" ). In re General Elec. Co. Secs. Litig., 857 F.Supp.2d 367 (S.D.N.Y. 2012). The Securities Act and Exchange Act claims survived in large part. On January 26, two sets of defendants brought separate motions for partial reconsideration of the January Opinion with respect to both the surviving Securities Act claims and the surviving Exchange Act claims. On February 7, 2012, this matter was reassigned to this Court. Following a March 6 conference that clarified that the motions for reconsideration should also be construed as motions for judgment on the pleadings, pursuant to Rule 12(c), Fed. R. Civ. P., the parties completed briefing. These motions were fully submitted on March 23.
In an Opinion of April 18, the motion for partial reconsideration and judgment on the pleadings for the Securities Act claims was granted. In re General Elec. Co. Sec. Litig., 856 F.Supp.2d 645 (S.D.N.Y. 2012) (" April Opinion" ). As explained in the April Opinion, among other things, the recent Second Circuit decision in Fait v. Regions Fin. Corp., 655 F.3d 105, 110 (2d Cir. 2011), required dismissal of the Securities Act claims. The motion for partial reconsideration and judgment on the pleadings for the Exchange Act claims was denied. The upshot of the April Opinion was the dismissal of all strict liability
claims and all claims against the underwriter banks, the corporate directors, and all but two of the corporate officers. The remaining defendants were GE, Immelt, and Sherin. A subsequent motion to amend the SAC was denied on July 12. In re General Electric Co. Secs. Litig., 09 Civ. 1951 (DLC), (S.D.N.Y. July 12, 2012).
On November 2, 2012, the Lead Plaintiff again moved for leave to amend the SAC. The proposed Third Consolidated Class Action Complaint dramatically altered the Lead Plaintiff's theory of the case, and permitting the amendment at that late stage raised the genuine possibility of prejudicing the defendants, for reasons explained in detail on the record at a January 11, 2013 conference. Additionally, whether leave to amend were granted or not, the Lead Plaintiff stated that it intended to shorten the class period substantially because it could not prove damages for the full class period. Following the conference, on January 25 the defendants moved for judgment on the pleadings, arguing that defendants should prevail on a loss causation defense given the shortened class period. This motion was fully submitted as of February 15, 2013.
On April 29, the Lead Plaintiff filed a motion for preliminary approval of a $40 million settlement, approval of notice to the putative class, and preliminary approval of certification of a settlement class. On May 8, a conference was held to discuss preliminary approval of the settlement, as well as to review the proposed class notice. On May 30, preliminary approval was granted for a $40 million settlement. A fairness hearing was scheduled for August 16, 2013, notice of exclusion decisions was due by July 27, and objections were due in writing by August 2. These dates were later extended for those who received a tardy notice, and the fairness hearing was rescheduled for September 6, 2013.
Millions of postcard notices were mailed out, and tens of thousands of full notices were also mailed. Approximately one hundred requests to opt-out of the settlement class were received. Eight objections were also received. One of the eight objections was submitted by Clarke Hampe (" Hampe" ), who purchased 0.06 shares of GE stock during the class period. The details of Hampe's objections are discussed below.
On September 6, the Court considered all objections, the Grinell factors, and the Goldberger factors. Although
a $40 million settlement amounted to $0.01 per share for the class, in light of the history of the case and the serious risks to the class in proceeding with the litigation, the settlement was approved as fair and reasonable. The Lead Plaintiff's request for approximately $4.1 million in attorney's fees was reduced, albeit slightly. These issues will also be discussed in detail below.
On October 1, 2013, Hampe filed a timely notice of appeal. On November 20, the Lead Plaintiff moved for an order compelling Hampe to post an appeal bond in the amount of $54,700. The motion was fully submitted as of December 11.
The principal legal question raised by the present motion is whether the administration expenses for a class action settlement may be included in an appeal bond under Rule 7, Fed. R. App. P. (referred to in this Opinion as a " Rule 7 Bond" ). The Lead Plaintiff has sought such a bond, consisting of $5,700 in ordinary appellate costs and $49,000 in administrative costs. The latter figure is an estimate of the incremental expenses of administering this class action settlement for the additional period of time resulting fro Hampe's appeal. As Hampe does not object to providing a Rule 7 Bond ...