Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_04-cv-02433/USCOURTS-cand-3_04-cv-02433-0/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 15:78m(a) Securities Exchange Act

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United States District Court

For the Northern District of California

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

In re 

OMNIVISION TECHNOLOGIES, INC.

 

This Document Relates To:

CASE NOS. 04-2297-SC, 04-2298-SC,

04-2385-SC, 04-2410-SC, 04-2419-SC,

04-2425-SC, 04-2433-SC, 04-2474-SC,

04-2514-SC, 04-2525-SC, 04-2570-SC,

and 04-4350-SC

___________________________________

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Master File No. 

C-04-2297 SC

ORDER GRANTING

PLAINTIFFS’ MOTION

FOR FINAL APPROVAL OF

SETTLEMENT AND THE

PLAN OF ALLOCATION;

APPROVING APPLICATION

FOR FEES AND EXPENSES

I. INTRODUCTION

On May 14, 2007, the parties in this litigation stipulated to

a settlement of all claims. See Stipulation of Settlement, Docket

No. 213 (“Settlement”). The parties then sought and received the

Court’s preliminary approval of the Settlement. See Docket Nos.

218, 220. Lead Plaintiffs Ken Churchill as Trustee for the

Churchill Family Trust, Gerald A. Madore, Rocco Peters and Michael

J. Hannan on behalf of Coyote Growth Management (“Lead

Plaintiffs”) now move the Court for final approval of the

Settlement and Plan of Allocation. See Docket No. 222 (“Motion

for Settlement”). The Lead Plaintiffs also move the Court to

approve their counsel’s application for fees and reimbursement of

costs. See Docket No. 223 (“Motion for Fees”). 

The Court received objections to the Settlement from Patricia

A. Rivera and Elvin M. Rivera (“the Riveras”), Steven P. Wierzba,

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and James J. Hayes. See Docket Nos. 232 (“Rivera Obj.”), 235

(“Wierzba Obj.”), 236 (“Hayes Obj.”). Defendants and Lead

Plaintiffs both responded to these objections. See Docket Nos.

238 (“Def. Response”), 241 (“Pl. Response”). The Court held a

fairness hearing on this matter on September 7, 2007, at which Mr.

Wierzba addressed the Court and submitted an additional statement

in support of his objections to the Settlement. See Docket No.

242 (“Wierzba Supp. Obj.”).

Having considered all of the arguments and evidence submitted

by the parties, the Court hereby GRANTS Lead Plaintiffs’ Motion

for Settlement and Motion for Fees. 

II. BACKGROUND

Plaintiff Mitchell Vince brought this class action suit in

June 2004, alleging violations of the Securities Exchange Act of

1934. See Compl., Docket No. 1. This suit was one of many

addressing common issues of law and fact, all of which the Court

consolidated in July 2004. See Order Consolidating and Relating

Cases for Purposes of Discovery and Pre-Trial, Docket No. 9. 

Generally, Plaintiffs allege that defendant OmniVisison

Technologies, Inc. (“OmniVision”), and individual defendants Shaw

Hong, Raymond Wu, H. Gene McCown, and John T. Rossi (collectively

“Defendants”) issued materially false and misleading press

releases and other statements regarding OmniVision’s financial

results in order to artificially inflate the value of OmniVision’s

common stock. On the morning of June 9, 2004, Defendants

announced that OmniVision would not release its financial results

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for the 2004 fiscal year at that time and that they were

considering a restatement of the company’s financial results for

the first three quarters of that year. See 2d Consol. Am. Compl.

(“Operative Complaint”), Docket No. 131, ¶ 5. The announcement

precipitated a mass sell-off of OmniVision shares, causing the

price to plummet $7.84 per share from the previous day’s closing

price of $25.47, an overnight drop of over 30% per share. Id. ¶

6. Plaintiffs allege that Defendants violated Section 10(b) of

the Securities Exchange Act and Rule 10b-5 thereunder, and that

the individual Defendants, as the persons controlling OmniVision,

violated Section 20(a) of the Securities Exchange Act. See id. ¶¶

131-145.

On May 14, 2007, the parties executed a Stipulation of

Settlement (“Settlement”). See Docket No. 213. Pursuant to the

Settlement, Defendants were to pay $13,750,000 in cash into the

Settlement Fund. Id. ¶ 2.1(a). The Settlement further provided

that the Settlement Fund would be used to pay Lead Counsel’s fees

to the extent permitted by the Court, reasonable costs and

expenses of the litigation, and taxes and tax-related expenses,

with the balance (the “Net Settlement Fund”) distributed to Class

Members who submitted timely, valid proof of claim forms. Id. ¶

5.2(a)-(d). The Net Settlement Fund was to be distributed

according to the Plan of Allocation, if approved by the Court. 

Id. ¶ 5.2(d); see also id. Ex. A-1 at 14-16 (“Plan of

Allocation”). 

The Class includes those who purchased or acquired shares of

OmniVision common stock between June 11, 2003, and June 9, 2004

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(the “Class Period”). The Plan of Allocation provides no

recognizable claim (i.e., recovery of $0.00) for shares purchased

between June 11, 2003, and June 8, 2004, and sold prior to June 8,

2004. See Plan of Allocation. Similarly, shares purchased on

June 9, 2004, would receive no recognizable claim. Id. For those

shares purchased between June 11, 2003, and June 8, 2004, and sold

on June 9, 2004, or held at the close of trading on June 9, 2004,

the Plan of Allocation sets a recognizable claim as the least of

(1) $7.84 per share (the decline in price per share from June 8,

2004, to June 9, 2004); (2) the purchase price of the stock (not

to exceed $25.47 per share) less the sales proceeds; or (3) the

purchase price of the stock less $17.63 (the closing price on June

9, 2004). See id. 

The Court preliminarily approved the Settlement on May 25,

2007. Order Preliminarily Approving Settlement & Providing For

Notice (“Notice Order”), Docket No. 220. Pursuant to the Notice

Order, the claims administrator, Giraldi & Co. LLC

(“Administrator”), sent notice of the proposed settlement to the

class members beginning on June 12, 2007. Sylvester Aff. ¶ 3. As

of August 29, 2007, the Administrator had mailed notice to 57,630

potential class members. Sylvester Supp. Aff. ¶ 5. The

Administrator has also posted the notice and Settlement on its

website. Sylvester Aff. ¶ 8. Plaintiffs also published the

Summary Notice in the Wall Street Journal and distributed it over

the Business Wire. See Andrejkovis Aff. ¶ 2, Exs. A, B. 

The Administrator received four requests to be excluded from

the Settlement. Sylvester Supp. Aff. ¶ 6, Exs. A, B. 

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1

At the outset of this litigation, Milberg Weiss LLP was known

as Milberg Weiss Bershad & Schulman LLP, which subsequently became

known as Milberg Weiss & Bershad LLP, before adopting its current

name. For the purposes of this order, there is no need to

distinguish between the different entities. For convenience, the

Court will refer to the firm simply as “Milberg Weiss.” 

5

Additionally, the Court received objections to the Settlement from

the Riveras, Wierzba, and Hayes. See Rivera Obj.; Wierzba Obj.;

Hayes Obj. 

The Riveras purchased 355 shares of OmniVision stock during

the Class Period, but sold them prior to June 8, 2004. Rivera

Obj. The Riveras do not object to the terms of the Settlement or

to the requested attorney’s fees; rather, they object only to the

Plan of Allocation. See id. Because the Riveras sold their

OmniVision stock before June 8, 2004, they will not recover

anything under the Plan of Allocation as it stands.

Hayes purchased 1000 shares of OmniVision stock on June 9,

2004. Hayes Obj. Hayes objects to the Settlement as a whole,

arguing that the amount Defendants must pay into the Settlement

Fund is inadequate, and that the Settlement is tainted by the

recent indictments of Plaintiffs’ Lead Counsel’s law firm, Milberg

Weiss LLP,1 and two of its partners. See id. Like the Riveras,

Hayes will not recover anything under the Plan of Allocation.

Wierzba purchased 3000 shares and sold 1000 shares of

OmniVision common stock during the Class Period. Wierzba Supp.

Obj. Like Hayes, Wierzba objects to the involvement of Milberg

Weiss. Id. According to Wierzba, “This appears to be yet another

case constructed to benefit Milberg Weiss, and not a genuine class

action suit.” Wierzba Obj. Wierzba maintains that OmniVision is

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a profitable and innovative company and that OmniVision management

never misled anyone. Wierzba Supp. Obj. 

III. MOTION FOR SETTLEMENT

A. Legal Standards Governing Settlement

Settlement of a class action law suit requires approval of

the court. See Fed. R. Civ. P. 23(e). The court must find that

the proposed settlement is fundamentally fair, adequate, and

reasonable. Staton v. Boeing Co., 327 F.3d 938, 959 (9th Cir.

2003) (citing Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th

Cir. 1998)). In making this determination, the court may consider

any or all of the following factors, if applicable: 

the strength of plaintiffs’ case; the risk,

expense, complexity, and likely duration of

further litigation; the risk of maintaining

class action status throughout the trial; the

amount offered in settlement; the extent of

discovery completed, and the stage of the

proceedings; the experience and views of

counsel; the presence of a governmental

participant; and the reaction of the class

members to the proposed settlement.

Officers for Justice v. Civil Serv. Comm’n, 688 F.2d 615, 625 (9th

Cir. 1982). This list is not intended to be exhaustive; the court

must consider the applicable factors in the context of the case at

hand. See id. Where, as here, the parties agree to settle the

dispute prior to certification of the class, the court must be

particularly vigilant in its scrutiny of the settlement. Hanlon,

150 F.3d at 1026. 

Despite the importance of fairness, the court must also be

mindful of the Ninth Circuit’s policy favoring settlement,

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particularly in class action law suits. See, e.g., Officers for

Justice, 688 F.2d at 625 (“Finally, it must not be overlooked that

voluntary conciliation and settlement are the preferred means of

dispute resolution. This is especially true in complex class

action litigation. . . .”).

While balancing all of these interests, the court’s inquiry

is ultimately limited “to the extent necessary to reach a reasoned

judgment that the agreement is not the product of fraud or

overreaching by, or collusion between, the negotiating parties.” 

Id. The court, in evaluating the agreement of the parties, is not

to reach the merits of the case or to form conclusions about the

underlying questions of law or fact. See id. 

B. The Risk of Continued Litigation

The first relevant factor in the present matter is the risk

of continued litigation balanced against the certainty and

immediacy of recovery from the Settlement. See Dunleavy v. Nadler

(In re Mego Fin. Corp. Sec. Litig.), 213 F.3d 454, 458 (9th Cir.

2000). Although Plaintiffs’ case has survived two motions to

dismiss, see Docket Nos. 128, 142, it still faces numerous

hurdles. For example, when the parties entered serious settlement

discussions, Plaintiffs’ Motion for Class Certification was still

pending before the Court, and has been taken off calendar because

of the Settlement. See Docket Nos. 179, 206. Defendants opposed

class certification. See Docket No. 190. That motion may be

outcome-determinative in itself. If the Court were to refuse

certification, the unrepresented potential plaintiffs would likely

lose their chance at recovery entirely. Even if the Court were to

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certify the class, there is no guarantee the certification would

survive through trial, as Defendants might have sought

decertification or modification of the class.

Setting aside certification, Plaintiffs still faced a number

of problems in actually proving their case on the merits. The

Securities and Exchange Commission has already investigated

Defendants’ restatement of OmniVision’s earnings and decided not

to take further action, suggesting some weaknesses on the merits. 

See Westerman Decl. ¶¶ 83, 85. Lead Counsel believes that if the

case were to proceed, Defendants would likely move for summary

judgment on the issues of scienter, loss causation, and damages. 

See id. ¶¶ 77, 84. Prior to settlement negotiations, Plaintiffs

sought the Court’s assistance in collecting evidence from thirdparties in Hong Kong, pursuant to the Hague Convention, which

Defendants also opposed. See Docket Nos. 192, 201. It is

therefore unclear whether Plaintiffs would even be able to secure

the evidence they believe supports the case. Finally, merely

reaching trial is no guarantee of recovery.

The amount Plaintiffs might recover if they prevailed at

trial is uncertain. A number of factors, including general market

conditions and the non-misleading forecasts in the June 9

statement, may have affected the portion of the damages

attributable to Defendants’ purportedly misleading statements. If

the case goes to trial, Plaintiffs’ attorneys’ fees and costs

would increase steadily, cutting further into any award they might

receive. Litigation is also time-consuming; if Defendants were to

appeal a jury verdict in favor of Plaintiffs, it could be years

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before Plaintiffs see a dollar.

Against all of this, the Settlement, which offers an

immediate and certain award for a large number of potential class

members, appears a much better option. As Defendants agree to the

class certification for the purposes of the Settlement, there is

much less risk of anyone who may have actually been injured going

away empty-handed. This factor therefore favors approval of the

Settlement.

C. Amount of Settlement

Under the circumstances, the Court finds that the amount of

the Settlement is reasonable. Plaintiffs’ damages expert

estimated damages totaling approximately $151.8 million. 

Westerman Decl. ¶ 84. Defendants estimate that the total damages

if Plaintiffs prevailed on all claims would be between $15.1

million and $18.6 million. Def. Response, at 2. The Settlement

will give Plaintiffs $13.75 million, which is just over 9% of the

maximum potential recovery asserted by either party. After

accounting for attorneys’ fees and costs, the Settlement will give

Plaintiffs a certain recovery in excess of 6% of the potential. 

This is higher than the median percentage of investor losses

recovered in recent shareholder class action settlements. See In

re Heritage Bond Litig., No. 02-ML-1475-DT, 2005 U.S. Dist. LEXIS

13627, at *27-28 (C.D. Cal. June 10, 2005) (median amount

recovered in settlement was 2.7% in 2002, 2.8% in 2003, 2.3% in

2004, 3% in 2005, and 2.2% in 2006). 

While this percentage may seem small compared to the

potential maximum, that alone is not sufficient reason to reject

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the Settlement. "It is well-settled law that a cash settlement

amounting to only a fraction of the potential recovery does not

per se render the settlement inadequate or unfair." Officers for

Justice, 688 F.2d at 628. Plaintiffs here have agreed to accept a

smaller certain award rather than seek the full recovery but risk

getting nothing. The Court finds the amount agreed upon by the

parties reasonable. This factor therefore weighs in favor of

approval of the Settlement.

D. Extent of Discovery

The extent of the discovery conducted to date and the stage

of the litigation are both indicators of Lead Counsel’s

familiarity with the case and of Plaintiffs having enough

information to make informed decisions. See, e.g., Dunleavy, 213

F.3d at 459. To date, Lead Counsel has taken or defended eleven

depositions and noticed eight more. Westerman Decl. ¶¶ 53-55. 

Lead Counsel has also issued approximately fifty subpoenas

requesting documents from third parties, has propounded numerous

document requests to Defendants, and has engaged in substantive

review of the tens of thousands of documents received. Id. ¶¶ 39-

46. In addition to discovery, Lead Counsel has briefed numerous

substantive motions and prepared for and participated in a

successful mediation. See id. ¶¶ 30-32, 35-37, 47-52, 56-58. The

Court is confident that Lead Counsel in this matter is thoroughly

familiar with the facts of this case and was therefore able to

help Plaintiffs make an informed decision regarding the merits of

the Settlement.

/// 

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2The relevance of recent indictments against Milberg Weiss is

discussed below.

3

In responding to the three objections, Plaintiffs also

address a press release issued by Theodore Bechtold, another

securities lawyer. See Pl. Response at 9-16. Bechtold has not

filed an objection or appeared in this matter on his own behalf or

on behalf of other Class Members. That he communicated with class

members based on a grudge he allegedly has against Milberg Weiss is

of no concern to the Court, as Plaintiffs do not identify any

tangible negative effect resulting from the press release. The

Court bases its decision on the arguments and evidence on the

record, and will not comment further on what Plaintiffs have

accurately termed a “sideshow.”

11

E. Experience of Counsel

“The recommendations of plaintiffs’ counsel should be given a

presumption of reasonableness.” Boyd v. Bechtel Corp., 485 F.

Supp. 610, 622 (N.D. Cal. 1979). In addition to being familiar

with the present dispute, Lead Counsel has significant expertise

in securities litigation.2

 See id. ¶ 107. There is nothing to

counter the presumption that Lead Counsel’s recommendation is

reasonable. Therefore, the recommendation of counsel also weighs

in favor of approving the Settlement.

F. Reaction of the Class

“It is established that the absence of a large number of

objections to a proposed class action settlement raises a strong

presumption that the terms of a proposed class settlement action

are favorable to the class members.” Nat’l Rural Telecomms. Coop.

v. DIRECTV, Inc., Case No. CV 99-5666 LGB, 2004 U.S. Dist. LEXIS

11458, at *17 (C.D. Cal. Jan. 5, 2004). After receiving notice of

the proposed settlement, the Class in this suit has been nearly

silent. The Court received objections from only 3 out of 57,630

potential Class Members who received the notice.3 By any

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standard, the lack of objection of the Class Members favors

approval of the Settlement. See, e.g., Churchill Village LLC v.

Gen. Elec., 361 F.3d 566, 577 (9th Cir. 2004) (affirming

settlement with 45 objections out of 90,000 notices sent);

Rodriguez v. West Publ. Corp., Case No. CV05-3222 R, 2007 U.S.

Dist. LEXIS 74767, at *33 (C.D. Cal. Sept. 10, 2007) (54

objections out of 376,000 notices).

The Court now turns its attention to the specific objections

presented in this case. 

1. The Rivera Objection

Simply put, there is no basis for the Riveras to recover

damages. They bought and sold all of their OmniVision shares

during the Class Period and held none at the time of the

purportedly corrective disclosure. See Rivera Obj. Where an

investor sells his shares “before the relevant truth begins to

leak out, the misrepresentation will not have led to any loss.” 

Dura Pharm., Inc. v. Broudo, 544 U.S. 336, 342 (2005); see also In

re Cornerstone Propane Partners, L.P. Sec. Litig., No. C 03-2522

MHP, 2006 U.S. Dist. LEXIS 25819, at *27-28 (N.D. Cal. May 3,

2006) (plaintiffs who bought and sold stock before corrective

disclosure cannot prove loss causation and therefore are not

entitled to recover). The Riveras claim that OmniVision’s

financial difficulties were apparent prior to the June 9, 2004,

disclosure, and argue that the Settlement penalizes those

investors who were proactive and sold prior to that date to

protect their investments. However, the Operative Complaint

contains no allegations that any information regarding

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4

Even if Hayes had standing, his objections lack merit. Hayes

objects first to the involvement of Milberg Weiss in the Settlement

negotiation. The Court addresses this issue below, in the context

of the Wierzba Objection. Hayes also objects to the Settlement

amount, arguing without support that it should be a minimum of $98

million, and as much as $196 million. Even with these figures, the

Settlement would represent a recovery of 4.3%, which the Court

would still find adequate for the reasons outlined above. 

Hayes claims that Plaintiffs withheld information necessary to

make a competent evaluation of the Settlement, but provides no

basis for this allegation. The parties did not agree about the

total amount of damages at stake, and Plaintiffs were therefore not

bound to disclose that sum. See 15 U.S.C. § 78u-4(a)(7)(B)(i) (“If

the settling parties agree on the average amount of damages per

share that would be recoverable if the plaintiff prevailed on each

claim alleged under this title,” the disclosure of proposed

13

OmniVision’s true financial situation came out prior to the June 9

corrective statement. See Operative Compl. ¶¶ 55-59. As such,

Plaintiffs – including the Riveras – cannot recover for any change

in price prior to June 9, 2004. See Sparling v. Daou (In re Daou

Sys., Inc. Sec. Litig.), 411 F.3d 1006, 1026-27 (9th Cir. 2005),

cert. denied, 126 S. Ct. 1335 (2006) (decline in stock price

cannot be causally related to fraudulent accounting practices

where price dropped before alleged revelation of fraud). 

2. The Hayes Objection

Hayes purchased OmniVision stock after the June 9, 2004,

corrective disclosure. As such, he cannot have reasonably relied

on OmniVision’s alleged prior misrepresentations about the

company’s financials. What’s more, Hayes purchased the OmniVision

shares after the stock price dropped, so he did not suffer any

injury as a result of the alleged prior representation. Because

Defendants did not cause any injury to Hayes, Hayes lacks standing

to object to the Settlement, regardless of his membership in the

Class.4 See Wolford v. Gaekle (In re First Capital Holdings Corp.

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settlement to all class members shall include “a statement

concerning the average amount of such potential damages per

share.”). 

Hayes believes the Class should proceed with the litigation to

have a chance of winning the “lottery” in the form of a full

recovery. It is easy for Hayes to discount the value of a certain

and immediate recovery given that he has not actually suffered any

injury. The Class has already chosen, reasonably, to reject that

gamble. 

14

Fin. Prods. Sec. Litig.), 33 F.3d 29, 30 (9th. Cir. 1994) (“Simply

being a member of a class is not enough to establish standing. One

must be an aggrieved class member.”).

3. The Wierzba Objection

Mr. Wierzba is a Class Member and is eligible to recover

under the Plan of Allocation. His objection is not that the

Settlement provides too small a recovery to Plaintiffs but that it

provides a recovery at all. See Wierzba Obj. Wierzba believes

that OmniVision is a healthy and innovative company, that its

leadership did not mislead anyone, and that the entire lawsuit was

constructed for the benefit of Milberg Weiss rather than the

benefit of the Class. See id.; Wierzba Supp. Obj. 

Essentially, Wierzba alleges a conspiracy involving hedge

funds, financial analysts, and Milberg Weiss attorneys to attack

OmniVision and create fear among investors, and then to profit

from that fear. See Wierzba Supp. Obj. at 2-4. It is unfortunate

that recent indictments against Milberg Weiss and its attorneys

make these allegations appear less fanciful than they might have

appeared a few years ago. They are fanciful nonetheless.

Wierzba offers no evidence to support his allegations, and

nothing to connect Milberg Weiss’s purported wrongdoings in other

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actions to this case. For example, Wierzba notes that Milberg

Weiss has filed numerous lawsuits on behalf of the same client,

Seymour Lazar. Id. at 3. Despite Wierzba’s assertion that

Milberg Weiss brought this suit “with Mr. Lazar, family and

friends as lead plaintiffs,” see Wierzba Obj., Lazar is not a

party to this suit, nor is there evidence of a connection between

him and any of the actual plaintiffs. Milberg Weiss is Lead

Counsel, but this suit was consolidated from actions brought by

many different plaintiffs with many different attorneys, many of

whom sought to be designated as lead plaintiffs and lead counsel. 

It is therefore difficult to see how the lawsuit as a whole can be

attributed to a Milberg Weiss conspiracy. Neither this lawsuit

nor the parties involved in it were mentioned in the indictments

against Milberg Weiss. Pl. Response at 5; see Lin Decl., Exs. D

(Indictment against Milberg Weiss Bershad & Schulman LLP), E

(Statement of David Bershad). The primary Milberg Weiss attorneys

working on this matter have not been implicated in any wrongdoing. 

Pl. Response at 5. 

While the integrity of counsel is critical to the integrity

of the Settlement, there is no evidence of wrongdoing by counsel,

and therefore no basis for rejecting the Settlement. The prior

actions of Milberg Weiss and certain of its attorneys, in and of

themselves, are not sufficient basis to tar every client the firm

has represented. The Court is satisfied that Lead Counsel and

Lead Plaintiffs in this matter have fairly represented the

interests of the Class. There is no evidence to the contrary.

///

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G. Plan of Allocation

“Approval of a plan of allocation of settlement proceeds in a

class action . . . is governed by the same standards of review

applicable to approval of the settlement as a whole: the plan must

be fair, reasonable and adequate.” In re Oracle Sec. Litig., No.

C-90-0931-VRW, 1994 U.S. Dist. LEXIS 21593, at *3 (N.D. Cal. June

16, 1994) (citing Class Pls. v City of Seattle, 955 F.2d 1268,

1284-85 (9th Cir 1992)). It is reasonable to allocate the

settlement funds to class members based on the extent of their

injuries or the strength of their claims on the merits. See id.

at *3-4 (citing In re Gulf Oil/Cities Serv. Tender Offer Litig.,

142 F.R.D., 588, 596 (S.D.N.Y. 1992)).

The Plan of Allocation proposed here meets these criteria. 

The Class contains anyone who bought shares of OmniVision common

stock during the Class Period. The Plan of Allocation divides the

shares held by Class Members into three distinct groups: (1)

shares sold prior to the corrective disclosure on June 9, 2004;

(2) shares purchased before June 9, 2004, and sold on or after

that date; and (3) shares purchased on June 9, 2004 (the last day

of the Class Period). See Plan of Allocation. The Plan of

Allocation sets the “Recognized Claim” for the shares in the first

and third groups to $0.00 per share. See id. The owners of the

first group of shares suffered no injury because they sold before

Defendants issued the corrective statement that Plaintiffs allege

precipitated the 30% price drop. See Dura Pharm., 544 U.S. at

342. The Riveras fall into this category. See Section III(F)(1),

supra. The owners of the shares in the third group purchased

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their stock after the corrective disclosure and therefore cannot

have reasonably relied on Defendants’ alleged misrepresentations

to their detriment. Hayes falls into this category. See Section

III(F)(2), supra. 

The Plan of Allocation appropriately disburses the Net

Settlement Fund to Class Members who owned shares in the second

group – the only Class Members to suffer any injury. Because the

disbursement is allocated on a per-share basis, each Class Member

will receive a portion of the Net Settlement Fund proportional to

the number of shares owned in the second group, and therefore

proportional to actual injury.

IV. MOTION FOR FEES

A. Legal Standards Governing Attorneys’ Fees

It is well established that “a private plaintiff, or his

attorney, whose efforts create, discover, increase or preserve a

fund to which others also have a claim is entitled to recover from

the fund the costs of his litigation, including attorneys’ fees.” 

Vincent v. Hughes Air W., Inc., 557 F.2d 759, 769 (9th Cir. 1977). 

This rule, known as the “common fund doctrine,” is designed to

prevent unjust enrichment by distributing the costs of litigation

among those who benefit from the efforts of the litigants and

their counsel. See Paul, Johnson, Alston, & Hunt v. Graulty, 886

F.2d 268, 271 (9th Cir. 1989) (“Paul, Johnson”). 

In the Ninth Circuit, district courts presiding over common

fund cases have the discretion to award attorneys’ fees based on

either the lodestar method (essentially a modification of hourly

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billing) or the percentage method proposed here. Chem. Bank v.

City of Seattle (In re Wash. Pub. Power Supply Sys. Sec. Litig.),

19 F.3d 1291, 1296 (9th Cir. 1994). Despite this discretion, use

of the percentage method in common fund cases appears to be

dominant. See, e.g., Vizcaino v. Microsoft Corp., 290 F.3d 1043,

1047 (9th Cir. 2002); Six Mexican Workers v. Ariz. Citrus Growers,

904 F.2d 1301, 1311 (9th Cir. 1990); Paul, Johnson, 886 F.2d at

272. The advantages of using the percentage method have been

described thoroughly by other courts. See, e.g., In re Activision

Sec. Litig., 723 F. Supp. 1373, 1374-77 (N.D. Cal. 1989)

(collecting authority and describing benefits of the percentage

method over the lodestar method). The Court finds those

advantages persuasive, and adopts the percentage method in this

matter.

The ultimate goal under either method of determining fees is

to reasonably compensate counsel for their efforts in creating the

common fund. See Paul, Johnson, 886 F.2d at 271-72. It is not

sufficient to arbitrarily apply a percentage; rather the district

court must show why that percentage and the ultimate award are

appropriate based on the facts of the case. Vizcaino, 290 F.3d at

1048. The Ninth Circuit has approved a number of factors which

may be relevant to the district court’s determination: (1) the

results achieved; (2) the risk of litigation; (3) the skill

required and the quality of work; (4) the contingent nature of the

fee and the financial burden carried by the plaintiffs; and (5)

awards made in similar cases. See id. at 1048-50. It is no

surprise that these factors are similar to those used in

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evaluating the adequacy of a settlement.

B. Results Achieved

The overall result and benefit to the class from the

litigation is the most critical factor in granting a fee award. 

Heritage Bond, 2005 U.S. Dist. LEXIS 13627, at *27. As previously

discussed, the Settlement creates a total award of approximately

9% of the possible damages, which is more than triple the average

recovery in securities class action settlements. Id. at *27-28;

see also Section III(C), supra; Westerman Decl. ¶ 84. This is a

substantial achievement on behalf of the class, and weighs in

favor of granting the requested 28% fee.

C. Risk of Litigation

The risk that further litigation might result in Plaintiffs

not recovering at all, particularly a case involving complicated

legal issues, is a significant factor in the award of fees. See

Vizcaino, 290 F.3d at 1038. Plaintiffs did not face an easy path

if they continued to trial. Although they had survived two

motions to dismiss, the Court had not yet certified the class, and

Defendants were likely to move for summary judgment on the issues

of loss causation and scienter. See id. ¶¶ 77, 84. The parties’

estimates of possible damages varied dramatically, such that if

Plaintiffs prevailed on liability but Defendants prevailed on

damages, the reward could have been even smaller. Even if they

proceeded to trial before a jury, the outcome remained uncertain. 

In the last five years, only two securities class action lawsuits

in this district have resulted in verdicts, both of which were for

defendants. See Dan Levine, JDS Uniphase Scores a Win in

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Online: http://www.law.com/jsp/article.jsp?id=1196181563591

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Securities Case, THE RECORDER, November 28, 2007.5 Nationwide,

Plaintiffs have won only three of eleven such cases to reach

verdicts since 1996. Id. The risk that Plaintiffs would have

recovered less, if anything, also supports granting the requested

fee.

D. Skill of Counsel

The "prosecution and management of a complex national class

action requires unique legal skills and abilities." Edmonds v.

United States, 658 F. Supp. 1126, 1137 (D.S.C. 1987). This is

particularly true in securities cases because the Private

Securities Litigation Reform Act makes it much more difficult for

securities plaintiffs to get past a motion to dismiss. See, e.g.,

In re Ikon Office Solutions, Inc., 194 F.R.D. 166, 181, 194 (E.D.

Pa. 2000). That Plaintiffs’ case withstood two such motions,

despite other weaknesses, is some testament to Lead Counsel’s

skill. This factor also supports the requested fee.

E. Contingent Nature of the Fee

The importance of assuring adequate representation for

plaintiffs who could not otherwise afford competent attorneys

justifies providing those attorneys who do accept matters on a

contingent-fee basis a larger fee than if they were billing by the

hour or on a flat fee. See Chem. Bank, 19 F.3d at 1299-1300;

Vizcaino, 290 F.3d at 1050. This suit began over three years ago. 

During that time, the various attorneys representing Plaintiffs

have spent over 7500 hours litigating this case, without receiving

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any compensation. See Williams Decl., Kahn Decl., Weiss Decl., De

Bartolomeo Decl., Piven Decl., McKenna Decl., and Gregorek Decl.

(Compendium of Declarations in Support of Application for

Attorneys’ Fees and Reimbursement of Expenses (“Fees Compendium”),

Docket No. 228). Counsel also advanced over $560,000 in expenses

related to prosecuting this action. Westerman Decl. ¶ 98. This

substantial outlay, when there is a risk that none of it will be

recovered, further supports the award of the requested fees.

F. Awards in Similar Cases

The percentage of the Settlement Fund that Lead Counsel seeks

is slightly in excess of the benchmark of 25% established by the

Ninth Circuit. See, e.g., Powers v. Eichen, 229 F.3d 1249, 1256

(9th Cir. 2000). However, in most common fund cases, the award

exceeds that benchmark. Activision, 723 F. Supp. at 1377-78

(surveying securities cases nationwide and noting, “This court’s

review of recent reported cases discloses that nearly all common

fund awards range around 30%. . . .”); see also Ikon Office

Solutions, 194 F.R.D. at 194 (“The median in class actions is

approximately twenty-five percent, but awards of thirty percent

are not uncommon in securities class actions.”). The Activision

court concluded that, where a court adopts the percentage method,

“absent extraordinary circumstances that suggest reasons to lower

or increase the percentage, the rate should be set at 30%.” 723

F. Supp. at 1378. Plaintiffs provide substantial authority

reflecting the same trend. Mot. for Fees at 12-13. The awards in

other similar cases therefore support an award of 28% of the

Settlement Fund.

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G. Reaction of the Class

The reaction of the class may also be a determining factor in

the determining the fee award. Heritage Bond, 2005 U.S. Dist.

LEXIS 13627, at *48. In response to the 57,630 copies of the

Notice sent out to potential class members, the Court received

only three objections and four requests to opt-out. The Notice

explicitly stated that Lead Counsel would file the instant Motion

for Fees and seek 28% of the Settlement Fund, plus reimbursement

for expenses. None of the objectors raised any concern about the

amount of the fee. This factor, like those above, also supports

the requested award of 28% of the Settlement Fund.

H. Lodestar Comparison

As a final check on the reasonableness of the requested fees,

courts often compare the fee counsel seeks as a percentage with

what their hourly bills would amount to under the lodestar

analysis. See, e.g., Vizcaino, 290 F.3d at 1050-51 (“Calculation

of the lodestar, which measures the lawyers’ investment of time in

the litigation, provides a check on the reasonableness of the

percentage award.”). 

Plaintiffs’ attorneys spent a total of 7,619.49 hours on this

case, which, at their hourly rates, results in a total lodestar of

approximately $2,901,492.15. See Westerman Decl. ¶ 97; Fees

Compendium. The requested 28% fee would amount to $3,850,000.00. 

This represents a multiplier of approximately 1.33 times the

lodestar. In similar cases, courts have approved multipliers

ranging between 1 and 4. See In re Chiron Corp. Secs. Litig., No.

C-04-4293 VRW, Docket No. 130, at 17-18 (N.D. Cal. Nov. 30, 2007)

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(surveying fee awards in class action suits and rejecting a

multiplier of 8.34). 

Comparison with the lodestar demonstrates that the requested

28% fee award is reasonable, and further supports the Court’s

decision to approve the fee application.

I. Reimbursement of Counsel’s Expenses

The Motion for Fees also seeks to recover from the Settlement

Fund $560,489.90, plus interest, spent by all of Plaintiffs’

attorneys in prosecuting this action to date. Attorneys may

recover their reasonable expenses that would typically be billed

to paying clients in non-contingency matters. See Harris v.

Marhoefer, 24 F.3d 16, 19 (9th Cir. 1994). 

Plaintiffs’ Counsel’s expenses are documented in great detail

in the declarations from counsel at each of the law firms which

represented Plaintiffs in this suit. See Fees Compendium. The

expenses relate to photocopying, printing, postage and messenger

services, court costs, legal research on Lexis and Westlaw,

experts and consultants, and the costs of travel for various

attorneys and their staff throughout the case. See id.; Mot. for

Fees at 16. Attorneys routinely bill clients for all of these

expenses, and it is therefore appropriate for counsel here to

recover these costs from the Settlement Fund.

J. Reimbursement of Lead Plaintiffs’ Time and Expenses

Finally, the Lead Plaintiffs seek to recover $29,913.80 from

the Settlement Fund for reimbursement of their costs and expenses

(including lost wages) relating to their representation of the

Class. Mot. for Fees at 18. Throughout this litigation, the Lead

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Plaintiffs have helped form the strategy for the suit, reviewed

pleadings and motions, assisted with preparation for depositions

and the mediation, and consulted with counsel throughout the

negotiation of the Settlement. See Madore Decl., Hannan Decl.,

Peters Decl., Churchill Decl. The Notice adequately informed all

potential Class Members that the Lead Plaintiffs would seek to

recover these costs, and no one objected. It is therefore

appropriate to reimburse Lead Plaintiffs for their reasonable

costs and expenses.

V. CONCLUSION

For the reasons outlined above, the Court GRANTS Plaintiffs’

Motion for Settlement and GRANTS Plaintiffs’ Motion for Fees, and

ORDERS as follows:

1. The Court hereby APPROVES the Settlement and Plan of

Allocation.

2. The Court AWARDS Plaintiffs’ Counsel attorneys’ fees in

the amount of 28% of the Gross Settlement Fund.

3. The Court AWARDS Plaintiffs’ Counsel reimbursement of

litigation expenses in the amount of $560,489.90 from

the Gross Settlement Fund, with interest on such

expenses from the date the Settlement Fund was funded to

the date of payment, at the same net rate the Settlement

Fund earns.

4. The Court AWARDS Lead Plaintiffs $29,913.80 from the

Gross Settlement Fund for reimbursement of their

reasonable costs and expenses relating to their

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representation of the Class. Awards to individual Lead

Plaintiffs shall be in the amounts specified in the

Madore, Hannan, Peters, and Churchill Declarations.

 IT IS SO ORDERED.

Dated: December 6, 2007 

UNITED STATES DISTRICT JUDGE

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