Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_12-cv-04007/USCOURTS-cand-3_12-cv-04007-18/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 15:77 Securities Fraud

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

IN RE ZYNGA INC. SECURITIES 

LITIGATION 

This Document Relates To:

All Actions.

Case No. 12-cv-04007-JSC 

Consolidated with Case Nos.

12-CV-4048-JSC; 12-CV-4059-JSC;

12-CV-4064-JSC; 12-CV-4066-JSC;

12-CV-4133-JSC; 12-CV-4250-JSC

ORDER GRANTING PRELIMINARY 

APPROVAL OF CLASS ACTION 

SETTLEMENT

Re: Dkt. No. 205

Lead Plaintiff David Fee (“Lead Plaintiff”) brings this pre-certification securities class 

action against Defendants Zynga Inc. (“Zynga” or the “Company”), Mark Pincus, David M. 

Wehner, and John Schappert (the “Individual Defendants,” and collectively, “Defendants”), 

alleging that Defendants artificially inflated Zynga’s stock price by misleading investors about 

Zynga’s core business metrics and engaging in insider trading in violation of the federal securities 

laws. Now pending before the Court is Lead Plaintiff’s motion for preliminary approval of a class 

action settlement. (Dkt. No. 205.)1 Defendants consent to the motion. (Id. at 31.) After 

reviewing the proposed settlement, and with the benefit of oral argument on October 8, 2015 and 

post-hearing briefing, the Court GRANTS the motion as outlined below.

BACKGROUND

A. Factual Background

This is a securities class action on behalf of all persons who purchased or otherwise 

acquired the common stock of Zynga during the relevant class period, defined below. Zynga 

 

1 Record citations are to material in the Electronic Case File (“ECF”); pinpoint citations are to the 

ECF-generated page numbers at the top of the documents.

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develops, markets and operates online social game services that generate revenue primarily 

through in-game sale of virtual currency and goods to users, monitored mainly through a financial 

metric called “bookings.” (Dkt. No. 155 ¶ 3.) In the lead up to its December 15, 2011 initial 

public offering (“IPO”), the Individual Defendants and other corporate insiders had access to realtime data showing declines in user numbers, user spending, and bookings. Just three months after 

the IPO, and despite an IPO restriction that barred them from selling for a certain time period, 

aware of the Company’s poor financial condition the Individual Defendants and some officers sold 

their shares for hundreds of millions of dollars in a Secondary Offering on April 3, 2012. (Id. ¶¶

7-8.) Just three months later, on July 25, 2012, Zynga disclosed its poor financial results to the 

public. (Id. ¶ 10.) The officers’ actions allowed them to shift the Company’s revenue losses from 

the first quarter to the second quarter of 2012, thereby artificially inflating the price of Zynga 

shares during the first quarter. (Id. ¶¶ 11-12.) As part of their effort to artificially inflate the price 

of Zynga stock, Defendants issued a series of false and misleading statements regarding Zynga’s 

bookings, game pipeline, Facebook changes, and 2012 guidance, all while the Company’s 

finances were actually deteriorating. (See id. ¶¶ 13-21.) By the time the truth about the 

Company’s financial status was actually disclosed, Zynga’s stock price had fallen 37% in a single 

day. (Id. ¶ 23.)

B. Procedural History

Beginning on June 30, 2012, twelve class actions were filed in this Court against Zynga 

and certain of its directors and officers, as well as certain underwriters that served in connection 

with the Company’s IPO and secondary offering of personally held shares (Secondary Offering”).2 

By Stipulation and Order of September 26, 2012, the district court consolidated seven related class 

actions then pending in this District into this single class action entitled In re Zynga Inc. Securities 

 

2

These cases include DeStefano v. Zynga Inc., Case No. 12-cv-4007-JSW; Campus v. Zynga Inc., 

No. 12-cv-4048-JSW; Diemand v. Zynga Inc., No. 12-cv-4059-JSW; Phillips v. Zynga Inc., No. 

12-cv-4064-JSC; Walker v. Zynga Inc., No. 12-cv-4066-JSW; Gaines v. Zynga Inc., No. 12-cv4133-SBA; Moayyad v. Zynga Inc., No. 12-cv-4250-JSW; Draper v. Zynga Inc., No. 12-v-4017-

RS; Yan v. Zynga Inc., No. 12-cv-4360-LHK; Choukri v. Zynga Inc., No. 12-cv-4629-CRB; 

Westley v. Zynga Inc., No. 12-cv-4833-LHK; Reyes v. Zynga Inc., No. 12-cv-5065-CRB.

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Litigation, Lead Case No. 12-cv-4007-JSW.3 (Dkt. No. 30; see also Dkt. No. 206 ¶ 2.) On 

October 23, 2012, the Court related an additional five actions into this class action.4 (Dkt. No. 92; 

see also Dkt. No. 206 ¶ 2.) On January 23, 2013, the district court appointed David Fee as Lead 

Plaintiff for the putative class pursuant to Section 21D(a)(3)(B) of the Securities Exchange Act of 

1934 (“Exchange Act”) as amended by the Private Securities Litigation Reform Act (“PSLRA”), 

15 U.S.C. § 78u-4(a)(3)(B),and Section 27D(a)(3)(B) of the Securities Act of 1933 (“Securities 

Act”), 15 U.S.C. § 77z-1(a)(3)(B), and approved the law firms of Berman DeValerio and Newman 

Ferrara LLP as Lead Counsel in this class action.

On April 3, 2013, after extensive investigation by Lead Counsel, Lead Plaintiff and named 

plaintiff Joy Arjoon-Singh filed a Consolidated Complaint alleging claims under the Exchange 

Act and the Securities Act on behalf of all persons who purchased Zynga common stock between 

December 15, 2011 and July 25, 2012, inclusive. (Dkt. No. 125; see also Dkt. No. 206 ¶ 3.) The 

Consolidated Complaint asserted (1) claims under Section 20 of the Exchange Act against the 

Officer Defendants; (2) claims under Section 11 of the Securities Act against the Director 

Defendants and Underwriter Defendants; (3) claims under Section 12(a)(2) of the Securities Act 

against Zynga and the Underwriter Defendants; and (4) claims under Section 15 of the Securities 

Act against the Officer Defendants and Director Defendants. (See generally Dkt. No. 125.) The 

district court granted Defendants’ motion to dismiss the entire Consolidated Complaint with leave 

to amend. (Dkt. No. 152; see also Dkt. No. 206 ¶ 3.) 

After further investigation, Lead Plaintiff filed the First Amended Complaint (“FAC”), 

which is the operative pleading in this action. (Dkt. No. 155; see also Dkt. No. 206 ¶ 4.) The twocount FAC brings causes of action only under the Exchange Act. Plaintiff no longer brings claims 

against the Underwriter Defendants; instead, only Zynga and certain officers and directors are 

named as defendants. The first cause of action alleges that Defendants violated Section 10(b) of 

the Exchange Act and Rule 10b-5 by making materially false statements that operated as a fraud 

 

3

Specifically, the Court consolidated civil actions numbered 12-cv-4007-JSW, 12-cv-4048-JSW, 

12-cv-4059-JSW, 12-cv-4064-JSW, 12-cv-4066-JSW, 12-cv-4133-SBA, and 12-cv-4250-JSW.

4

These cases related civil actions numbered 12-cv-4017-RS, 12-cv-4360-LHK, 12-cv-4629-CRB, 

12-cv-4833-LHK, and 12-cv-5065-CRB with the consolidated action.

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and deceit upon Lead Plaintiff and the other class members in connection with their purchases of 

Zynga common stock. The second cause of action is a control-person liability claim against the 

Individual Defendants under Section 10(a) of the Exchange Act. In the FAC, Lead Plaintiff 

elected not to replead claims for shares purchased between December 14, 2011 and July 25, 2012 

(the “Earlier Period”) and instead shortened the relevant time period to only five months, running 

from February 14, 2012 to July 25, 2012 (the “FAC Class Period”). (See Dkt. No. 210; Compare 

Dkt. No. 125 at 5, with Dkt. No. 155 ¶ 2.) Lead Plaintiff made this tactical decision for three 

reasons: (1) Zynga’s first statement about its 2012 guidance was not made until February 14, 

2012, so there were no claims based on that guidance until that date; (2) the allegations about the 

changes to Facebook games solely pertain to the later period; and (3) the allegations regarding 

statements about bookings declines are more compelling later in 2012, since trends in declining 

sales would be more defined later in the quarter. (Dkt. No. 210 at 3; see also Dkt. No. 155 ¶¶ 85, 

131.)

Defendants moved to dismiss the FAC, and the Court determined that Lead Plaintiff had 

adequately alleged all claims—including those based on declining bookings, the Facebook issue, 

and the 2012 guidance—except those as to Defendants’ statements regarding Zynga’s game 

pipeline, which the Court concluded were inactionable business puffery. (Dkt. No. 176; see also 

Dkt. No. 206 ¶ 5.) The Court then denied Defendants’ motion for reconsideration of their motion 

to dismiss. (Dkt. No. 183; see also Dkt. No. 206 ¶ 5.) Thus, the FAC is the operative pleading in 

this action.

The district court held a case management conference on June 12, 2015. (Dkt. No. 187; 

see also Dkt. No. 206 ¶ 8.) Prior to the conference, the parties had agreed to participate in a 

mediation session. (Dkt. No. 186.) By the parties’ consent, the action was then reassigned to the 

undersigned magistrate judge for all further proceedings. (Dkt. Nos. 190, 193.) In August 2015, 

the parties reached a settlement. Lead Plaintiff filed the instant motion for preliminary approval of 

the parties’ agreement, and the Court held a hearing on the motion on October 8, 2015. Lead 

Plaintiff subsequently submitted a supplemental brief addressing concerns the Court raised at the 

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hearing, along with an Amended Stipulation of Settlement and Revised Class Notice.5 (Dkt. Nos. 

210, 212-1.)

SETTLEMENT PROPOSAL

On August 4, 2015, the parties participated in intensive, arm’s-length settlement 

negotiations under the supervision of experienced mediator, Hon. Edward A. Infante (Ret.) of 

JAMS. (Dkt. No. 206 ¶¶ 9-10.) At the negotiations, the parties had the benefit of having already 

exchanged extensive analyses of the legal and factual issues—including the falsity of Defendants’ 

statements, scienter, and loss causation—in connection with their briefing on the motions to 

dismiss. (Id. ¶ 12.) The parties had already served discovery requests and exchanged initial 

disclosures, and Lead Plaintiff had responded to Defendants’ Requests for Admission and 

Interrogatories. (Dkt. No 206 ¶ 7.) At the conclusion of the August 4 mediation, the parties 

reached an agreement on all materials, including the amount of the settlement. (Id. ¶ 13.) 

Thereafter, the parties engaged in further negotiations and ultimately agreed to the Settlement 

Agreement before the Court, as amended following the hearing. (See Dkt. No. 212-1.) The key 

provisions are as follows.

A. Estimated Class Size

The parties define “Settlement Class” as “all Persons who purchased or otherwise acquired 

Zynga’s common stock during the Class Settlement Period[,]” except those who opt out of the 

class in accordance with the requirements set forth in the agreed-upon notice.6 (Dkt. No. 212-1 

¶ 1.34.) The agreement, in turn, defines “Settlement Class Period” as December 15, 2011 to July 

25, 2012, inclusive. (Dkt. No. 206-1 ¶ 1.36.) The parties’ Settlement Agreement does not contain 

an estimated number of class members, but Lead Plaintiff notes that there were millions of Zynga 

common stock shares sold, so there are “likely thousands” of class members. (Dkt. No. 205 at 

 

5

In this Order, the Court refers to the Amended Stipulation of Settlement and Revised Class 

Notice as the Settlement Agreement and Class Notice, respectively. 

6

Excluded from the Settlement Class are “Defendants, the Officer Defendants, the Director 

Defendants, the Underwriter Defendants, the officers and directors of Zynga during the Settlement 

Class period, members of their immediate families and their legal representatives, heirs, 

successors or assigns, and any entity which Defendants have or had a controlling interest.” (Dkt. 

No. 206-1 ¶ 1.34.)

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21.) Lead Plaintiff expects to receive 100,000 claim forms. (Dkt. No. 212-1 at 61.) Notably, the 

proposed Settlement Class includes class members whose claims are no longer part of the 

operative complaint.

B. Settlement Fund

The parties’ Settlement Agreement provides a Settlement Fund of $23,000,000 plus 

interest earned until entry of final approval. (Dkt. No. 212-1 ¶¶ 4.1, 4.3) Deducted from that fund 

are (1) taxes; (2) attorneys’ fees; (2) actual litigation costs; (3) notice and claims administration 

expenses; and (4) all other costs, fees and expenses associated with the settlement or approved by 

the Court. (Id. ¶ 5.2.) 

The parties’ Settlement Agreement itself does not set maximum amounts for any of these 

categories of costs. (See Dkt. No. 212-1 ¶¶ 7.1—7.5.) However, the Notice indicates that Lead 

Counsel will ask the Court to approve payment of up to 25% of the Settlement Fund, or 

approximately $5,750,000 in attorneys’ fees and up to $276,000 for reimbursement of litigation 

expenses. (Dkt. No. 212-1 at 61; see also Dkt. No. 206 ¶ 16.) Likewise, the Notice indicates that 

Lead Plaintiff will seek $900,000 in claims administrator’s expenses. (Dkt. No. 212-1 at 61; see 

also Dkt. No. 206 ¶ 19.) Before the effective date of final approval, Lead Counsel may use up to 

$500,000 of the Settlement Fund to pay notice and administration costs, such as the actual costs of 

publication, printing and mailing the Notice and Claim Form, reimbursement to nominee owners 

for forwarding the Notice and Claim Form to the beneficial owners, fees and costs incurred in 

searching for class members. (Dkt. No. 212 ¶ 4.2.) 

Lead Counsel estimates the average distribution as $0.15 per share purchased during the 

Settlement Class Period before deduction of fees and expenses. (Dkt. No. 206 ¶ 17.) 

C. Claims & Exclusion Procedures

Class members may request exclusion by submitting a request for exclusion identifying 

their name, contact information, numbers of shares of Zynga common stock purchased during the 

class period along with the date of acquisition and price or other consideration paid, the date of 

sale of each share, number of shared held immediately before the Settlement Class Period

commenced, and a statement of intent to be excluded from the class. (Dkt. No. 212-1 ¶ 9.1.) 

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Class members may submit their exclusion request either in signed, written form or via email 

directly to the claims administrator. (Id.; see also Dkt. No. 212-1 at 60 (noting that exclusion 

requests can be submitted via email to admin@zyngasecuritieslitigation.com).) Any class member 

who does not submitted a timely written request for exclusion within 70 days after Notice is 

mailed and published will be bound by the settlement. (Id. ¶ 9.2.)

The remaining funds are then distributed to the class members who do not opt out of the 

class. To share in the Settlement Fund, each class member must submit a claim form sent to the 

claim administrator. (Dkt. No. 212-1 ¶ 1.5.) Class members may submit a signed, written claim 

form in hard copy by regular mail or submit a copy via email to the claims administrator. (Dkt. 

No. 212-1 at 52, 58, 70.) The claim must be filed by the actual beneficial purchaser or their legal 

representative, not by the record purchaser. (Id. at 71.) The claim form itself is a two-page 

document. Part I of the claim form asks for the claimants’ name, social security number or 

taxpayer identification number, phone number, email address, and identification of the purchaser 

of record if different from the beneficial purchaser of the Zynga common stock. (Id. at 72.) Part 

II of the claim form asks for information about transactions in Zynga common stock, including: 

the number of shares held at the end of trading on December 14, 2011; information—e.g., trade 

date, number of shares purchased, price per share, and total purchase price—on purchases or 

acquisition of Zynga common stock between December 11, 2011 and October 23, 2012; the same 

information on sales of Zynga common stock during the same period; and the number of shares of 

Zynga common stock held at the close of trading on October 23, 2012. (Id. at 73.) The claim 

must be supported by broker confirmations or other documentations of the listed transactions. (Id.

at 71-72.) The claim form instructs claimants to read the release of claims. (Id.) Any class 

member who neither timely excludes himself from the class nor timely submits a claim form will 

be barred from receiving a distribution. (Id.)

If, however, the shares of Zynga common stock purchased during the Settlement Class 

Period by persons who timely and validly seek exclusion from the class exceeds a certain 

threshold, Zynga retains the option to terminate the agreement. (Id. ¶ 12.2.) The threshold 

number is set forth in a separate supplemental agreement between Lead Plaintiff and Defendants,

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which the Court has reviewed in camera. (Dkt. No. 213.)

D. Individual Distribution: Plan of Allocation

Class members will receive a pro rata share of the fund based on the agreed-upon Plan of 

Allocation. Based on the number of shares that each class member purchased during the class 

period, the Plan of Allocation—defined only in the Notice itself and not in the Settlement 

Agreement—then determines each class member’s funds in the following way:

For each share of Zynga common stock purchased between 

December 15, 2011 and the close of trading on February 14, 2012, 

inclusive, and:

a) Sold prior to the close of trading on July 25, 2012, the 

Recognized Loss is zero ($0.00).

b) Sold at a loss after the close of trading on July 25, 2012 through 

and including the close of trading on October 23, 2012, the 

Recognized Loss shall be the lesser of 1) $0.12 per share; or 2) the 

difference between the purchase price per share and the sale price 

per share.

c) Held as of the close of trading on October 23, 2012, the 

Recognized Loss shall be the lesser of $0.12 per share; or the 

difference between the purchase price per share and $3.18 per share.

For each share of Zynga common stock purchased between February 

14, 2012 (including the after-hours market on February 14, 2012) 

and the close of trading on July 25, 2012, inclusive, and:

a) Sold prior to the close of trading on July 25, 2012, the 

Recognized Loss is zero ($0.00).

b) Sold at a loss after the close of trading on July 25, 2012 through 

and including the close of trading on October 23, 2012, the 

Recognized Loss shall be the lesser of 1) $1.14 per share; or 2) the 

difference between the purchase price per share and the sale price 

per share.

c) Held as of the close of trading on October 23, 2012, the 

Recognized Loss shall be the lesser of $1.14 per share; or the 

difference between the purchase price per share and $3.18 per share.

(Dkt. No. 212-1 at 65-66.) No distribution will be made to any claimants who would receive less 

than $10.00 or to any class member who had a gain from his or her overall transactions in Zynga 

common stock during the class period. (Id. at 64.) The Recognized Loss will average $0.15 per 

share if all class members participate. 

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E. Release of Claims

Class members agree to release all claims in the operative complaint (FAC) as well as 

those alleged in the dismissed Consolidated Complaint, as well as “Released Claims” against 

“Released Persons.” (Dkt. No. 212-1 at 74-76.) The scope of “Released Claims” is defined as 

follows:

[A]ny and all claims, demands, rights, liabilities, suits, debts, 

obligations and causes of action, of every nature and description 

whatsoever (including, without limitation, Unknown Claims, as 

defined in § 1.43 herein), whether known or unknown, contingent or 

absolute, mature or unmature, discoverable or undiscoverable, 

liquidated or unliquidated, accrued or unaccrued, including those 

that are concealed or hidden, regardless of legal or equitable theory 

(including without limitations, claims for negligence, gross 

negligence, recklessness, deliberate recklessness, intentional 

wrongdoing, fraud, breach of fiduciary duty, breach of the duty of 

care and/or loyalty, violation of any federal or state statute, rule or 

regulation, tort, breach of contract, violation of international law or 

violation of the law of any foreign jurisdiction) that Lead Plaintiff or 

any Member of the Settlement Class (i) asserted in this Action; (ii) 

could have or might have asserted in the Action and/or in any other 

litigation, action or forum that arise out of, are based upon or are 

related in any way directly or indirectly, in whole or in part, to (a) 

both: (1) the allegations, transactions, facts, matters, occurrences, 

representations or omissions involved, set forth or referred to in the 

Action, and (2) any purchase, sale or acquisition of, or decision to 

hold Zynga common stock during the Settlement Class Period; 

and/or (b) Defendants’ defense or settlement of the Action and/or 

Defendants’ defense of settlement of the Released Claims.

(Dkt. No. 212-1 ¶ 1.30.) Not included are claims relating to enforcement of the Settlement 

Agreement and claims asserted on behalf of Zynga in a derivative action based on similar 

allegations, including a number of such suits now pending in other courts. (Id.) The parties define 

“Released Persons” as Defendants, their immediate family members or entities in which 

Defendants or their immediate family member has a controlling interest, any trust or estate for the 

benefit of an Individual Defendant, and the Underwriter Defendants and any associated entity.7 

 

7

In addition, “Released Persons” includes those Persons’ 

respective past, present and future heirs, executors, administrators,

predecessors, successors, assigns, employees, agents, affiliates, 

analysts, assignees, associates, attorneys, auditors, insurers and coinsurers and reinsurers, commercial bank lenders, consultants, 

controlling shareholders, directors, divisions, domestic partners, 

employers, financial advisors, general or limited partners and 

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(Id. ¶ 1.31.)

F. Cy Pres Distribution

There will be no reversion of the Settlement Fund to Defendants. (Dkt. No. 212-1 ¶ 4.4.) 

Any funds remaining after distribution to class members will be donated to “a non-profit 

charitable organization unaffiliated with Defendants, Lead Plaintiff or Lead counsel, selected by 

Lead Plaintiff and subject to Court approval.” (Id.) No particular organization is identified in the 

parties’ Settlement Agreement.

G. Deadlines

Following preliminary approval, Defendants have 14 business days to deposit the principal 

amount of the Settlement Fund ($23,000,000) into the settlement fund account, in a check issued 

to the Zynga Securities Class Action Settlement Fund care of Lead Counsel. (Id. ¶ 4.1.) Lead 

Counsel shall provide Defendants with any necessary tax forms within 10 calendar days of 

execution of the settlement. (Id.) 

In addition, within 5 days of preliminary approval Defendants must provide to the claims 

administrator a list of its common stockholders (including common stock holder names and 

addresses during the Settlement Class Period) in electronic form. (Id. ¶ 8.2.) Within 7 days of the 

Court’s entry of an order granting preliminary approval, Defendants must mail and publish notice 

of the settlement. (Dkt. No. 205 at 31; Dkt. No. 212-1 at 44-45.) Class Members then have 70 

days after mailing and publication of notice to return the claim form with supporting 

documentation or to submit a written request to opt out of the settlement. (Id. ¶ 9.2.) Written 

objections to the settlement or to Lead Counsel’s fee request are also due by the same claims 

receipt deadline. (Dkt. No. 205 at 31.) There is no deadline for class members to cash their 

checks.

 

partnerships, investment advisors, investment bankers and banks, 

joint ventures and ventures, managers, managing directors, marital 

communities, members, officers, parents, personal or legal 

representatives, principals, shareholders, spouses, subsidiaries 

(foreign or domestic), trustees, underwriters and retained 

professionals, in their respective capacity as such. 

(Dkt. No. 212-1¶ 1.31.)

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DISCUSSION

A class action settlement must be fair, adequate, and reasonable. Fed. R. Civ. P. 23(e)(2). 

When, as here, parties reach an agreement before class certification, “courts must peruse the 

proposed compromise to ratify both the propriety of the certification and the fairness of the 

settlement.” Staton v. Boeing Co., 327 F.3d 938, 952 (9th Cir. 2003). If the Court temporarily 

certifies the class and finds the settlement appropriate after “a preliminary fairness evaluation,” 

then the class will be notified and a final “fairness” hearing scheduled to determine if the 

settlement is fair, adequate, and reasonable pursuant to Federal Rule of Civil Procedure 23. 

Villegas v. J.P. Morgan Chase & Co., No. CV 09-00261 SBA, 2012 WL 5878390, at *5 (N.D. 

Cal. Nov. 21, 2012).

A. Conditional Certification of Settlement Class

Class actions must meet the following requirements prior to certification: 

1) the class is so numerous that joinder of all members is 

impracticable; 2) there are questions of law or fact common to the 

class; (3) the claims or defenses of the representative parties are 

typical of the claims or defenses of the class; and 4) the 

representative parties will fairly and adequately protect the interests 

of the class.

Fed. R. Civ. P. 23(a).

In addition to meeting the requirements of Rule 23(a), a potential class must also meet one 

of the conditions outlined in Rule 23(b)—of relevance here, the condition that “the court finds that 

the questions of law or fact common to class members predominate over any questions affecting 

only individual members, and that a class action is superior to other available methods for fairly 

and efficiently adjudicating the controversy.” Fed. R. Civ. P. 23(b)(3). In evaluating the proposed 

class, “pertinent” matters include:

(A) the class members’ interests in individually controlling the 

prosecution or defense of separate actions;

(B) the extent and nature of any litigation concerning the 

controversy already begun by or against the class members;

(C) the desirability or undesirability of concentrating the litigation of 

the claims in the particular forum; and

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(D) the likely difficulties in managing a class action.

Fed. R. Civ. P. 23(b)(3). Prior to certifying the class, the Court must determine that Lead Plaintiff 

has satisfied his burden to demonstrate that the proposed class satisfies each element of Rule 23.

1. Rule 23(a)

a. Numerosity

There is no exact class size that meets the numerosity requirement; rather, “[w]here the 

exact size of the class is unknown but general knowledge and common sense indicate that it is 

large, the numerosity requirement is satisfied[.]” In re Rubber Chems. Antitrust Litig., 232 F.R.D. 

346, 250-51 (N.D. Cal. 2005) (internal quotation marks and citation omitted). “[I]n securities 

cases, when millions of shares are traded during the proposed class period, a court may infer that 

the numerosity requirement is satisfied.” Howell v. JBI, Inc., 298 F.R.D. 649, 654-55 (D. Nev. 

2014) (citations omitted); see also Blackie v. Barrack, 524 F.2d 891, 901 (9th Cir. 1975) 

(numerosity is satisfied where the class period involved 120,000 transactions involving 

21,000,000 shares); In re Cooper Cos. Inc. Secs. Litig., 254 F.R.D. 628, 634 (C.D. Cal. 2009); In 

re Wireless Facilities, Inc. Sec. Litig., 253 F.R.D. 630, 634-35 (S.D. Cal. Sept. 2008).

Here, millions of Zynga common stock shares were publicly traded during the Settlement 

Class Period. (Dkt. No. 205 at 21.) Lead Plaintiff estimates that the Settlement Class, which 

consists of purchasers of Zynga common stock during the Settlement Class Period, numbers in the 

thousands. (Id.) Therefore, the Settlement Class is sufficiently numerous such that joinder of 

each member would be impracticable. 

b. Commonality

Second, to certify a class there must be “questions of law or fact common to the class.” 

Fed. R. Civ. P. 23(a)(2). This case concerns a number of common questions of fact and law, 

including: (a) whether Defendants made statements to the investing public during the Settlement 

Class Period that omitted or misrepresented material facts about Zynga’s bookings, guidance, and 

Facebook changes that may affect bookings; (2) whether Defendants acted willfully, knowingly, 

or with deliberate recklessness in making these omissions or misrepresentations; (3) whether 

Defendants’ omissions or misrepresentations constituted fraud on the market by artificially 

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inflating the market price of Zynga common stock during the Settlement Class Period; and (4) 

whether the class members have sustained damages caused by Defendants’ statements. While the 

amount to which each class member is entitled will differ, the issues described above are common 

to the proposed Settlement Class, so the commonality requirement is satisfied.

c. Typicality

Lead Plaintiff claims that he and the members of the Settlement Class all purchased Zynga 

common stock at artificially inflated prices due to Defendants’ conduct. The proof that Lead 

Plaintiff would need to establish his claim would also prove the claims of the proposed Settlement 

Class. Lead Plaintiff’s injury would be common to the injury suffered by the Settlement Class. 

Although there may be differences in damages calculations depending on when Lead Plaintiff and 

the other class members purchased their shares of Zynga common stock—i.e., in the Earlier Period 

dismissed from the initial consolidated complaint or the later FAC Class Period which provides 

for a higher recovery—the injury is common to the Settlement Class. There is no indication that 

Lead Plaintiff, who purchased shares in both periods but only has Recognized Loss for shares 

purchased during the FAC Class Period—would face any unique defenses that could make his 

claims atypical of the Settlement Class. Because the claims of Lead Plaintiff are typical, this 

element is satisfied.

d. Adequacy of Representation

Finally, both Lead Plaintiff and Lead Counsel appear adequate. Lead Plaintiff purchased

Zynga common stock on the market during the Settlement Class Period and was injured by 

suffering losses in the same manner as the rest of the class. Thus, he possesses the same interest 

and suffered the same injury as the rest of the Settlement Class, which supports his adequacy. Se 

Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 594-95 (1997) (“Representatives must be part of 

the class and possess the same interest and suffer the same injury as the class members.”). Lead 

Plaintiff has clarified that he purchased stock during both periods, though he only has damaged 

shares from the FAC Class Period. This ameliorates any concern that Lead Plaintiff accepted this 

Settlement Agreement to ensure recovery for the Earlier Period members at the expense of the 

FAC Class Period members, whom Lead Plaintiff concedes have stronger claims.

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Lead Counsel is also adequate, as the District Court has already determined that Lead 

Counsel “is highly qualified to represent the class.” (See Dkt. No. 110 at 4.) Since that Order, 

Lead Counsel has demonstrated its adequacy by litigating several motions to dismiss, investigating 

the class action claims, working with experts and damages consultants and ultimately arriving at 

the instant Settlement Agreement. 

2. Rule 23(b)

Rule 23(b)(3) requires establishing the predominance of common questions of law or fact 

and the superiority of a class action relative to other available methods for the fair and efficiency 

adjudication of the controversy. See Fed. R. Civ. P. 23(b)(3). Both prongs of this test are met 

here. 

Rule 23(b)(3) first requires “predominance of common questions over individual ones” 

such that “the adjudication of common issues will help achieve judicial economy.” Valentino v. 

Carter Wallace, Inc., 97 F.3d 1227, 1234 (9th Cir. 1986). This “inquiry focuses on the 

relationship between the common and individual issues.” Vinole v. Countrywide Home Loans, 

Inc., 571 F.3d 935, 944 (9th Cir. 2009) (internal quotation marks and citations omitted). In 

particular, the predominance requirement “tests whether proposed classes are sufficiently cohesive 

to warrant adjudication by representation.” Amchem Prods., 521 U.S. at 594. Here, common 

questions of law and fact predominate. The same set of operative facts and a single proximate 

cause applies to each proposed class member, because each class member purchased and/or 

acquired Zynga common stock during the Settlement Class Period and suffered losses in their 

shares’ value as a result of Defendants’ misrepresentations that artificially inflated the prices then 

allowed the price to plummet. 

The second prong—that a class action is the superior means to adjudicate the claims 

raised—is also easily met. If Lead Plaintiffs and class members each brought individual actions, 

they would each be required to prove the same wrongdoing to establish Defendants’ liability. 

Different courts could interpret the claims different, resulting in inconsistent rulings or unfair 

results. The Settlement Agreement efficiently resolves the claims of the entire Settlement Class at 

once. Thus, class resolution is superior to other methods and will avoid the possibility of 

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repetitious litigation.

B. Preliminary Approval of the Class Action Settlement

In determining whether a settlement agreement is fair, adequate, and reasonable, a court 

typically considers the following factors: “(1) the strength of the plaintiff’s 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 participant; and (8) the reaction of the class members of the proposed 

settlement.” In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935, 946 (9th Cir. 2011)

(quoting Churchill Vill., L.L.C. v. Gen. Elec., 361 F.3d 566, 575 (9th Cir. 2004)). 

However, when “a settlement agreement is negotiated prior to formal class certification, 

consideration of these eight . . . factors alone is” insufficient. Id. In these cases, courts must 

show not only a comprehensive analysis of the above factors, but also that the settlement did not 

result from collusion among the parties. Id. at 947. Because collusion “may not always be 

evident on the face of a settlement, . . . [courts] must be particularly vigilant not only for explicit 

collusion, but also for more subtle signs that class counsel have allowed pursuit of their own selfinterests and that of certain class members to infect the negotiations.” Id. In Bluetooth, the court 

identified three such signs:

(1) when class counsel receives a disproportionate distribution of the 

settlement, or when the class receives no monetary distribution but 

counsel is amply rewarded;

(2) when the parties negotiate a “clear sailing” arrangement 

providing for the payment of attorney’s fees separate and apart from 

class funds without objection by the defendant (which carries the 

potential of enabling a defendant to pay class counsel excessive fees 

and costs in exchange for counsel accepting an unfair settlement); 

and

(3) when the parties arrange for fees not awarded to revert to 

defendants rather than be added to the class fund.

Id.

The Court cannot fully assess all of these fairness factors until after the final approval 

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hearing; thus, “a full fairness analysis is unnecessary at this stage.” Alberto v. GMRI, Inc., 252 

F.R.D. 652, 665 (E.D. Cal. 2008) (internal quotation marks and citation omitted). Instead, “the 

settlement need only be potentially fair, as the Court will make a final determination of its 

adequacy at the hearing on Final Approval, after such time as any party has had a chance to object 

and/or opt out.” Acosta v. Trans Union, LLC, 243 F.R.D. 377, 386 (C.D. Cal. 2007). At this 

juncture, “[p]reliminary approval of a settlement and notice to the class is appropriate if [1] the 

proposed settlement appears to be the product of serious, informed, noncollusive negotiations, [2] 

has no obvious deficiencies, [3] does not improperly grant preferential treatment to class 

representatives or segments of the class, [4] and falls within the range of possible approval.” Cruz 

v. Sky Chefs, Inc., No. 12-02705, 2014 WL 2089938, at *7 (N.D. Cal. May 19, 2014) (quoting In 

re Tableware Antitrust Litig., 484 F. Supp. 2d 1078, 1079 (N.D. Cal. 2007)). Ultimately, “[t]he 

initial decision to approve or reject a settlement proposal is committed to the sound discretion of 

the trial judge.” Officers for Justice v. Civil Serv. Comm’n, 688 F.2d 615, 625-26 (9th Cir. 1982).

1. The Fairness Factors

a. Means at Which Parties Arrived at Settlement

The first factor concerns “the means by which the parties arrived at settlement.” Harris v. 

Vector Mktg. Corp., No. 08-5198, 2011 WL 1627973, at *8 (N.D. Cal. Apr. 29, 2011). For the 

parties “to have brokered a fair settlement, they must have been armed with sufficient information 

about the case to have been able to reasonably assess its strengths and value.” Acosta, 243 F.R.D. 

at 396. Particularly with pre-certification settlements, enough information must exist for the court 

to assess “the strengths and weaknesses of the parties’ claims and defenses, determine the 

appropriate membership of the class, and consider how class members will benefit from 

settlement” in order to determine if it is fair and adequate. Id. at 397 (internal quotation marks 

omitted).

The use of a mediator and the presence of discovery “support the conclusion that the 

Plaintiff was appropriately informed in negotiating a settlement.” Villegas, 2012 WL 5878390, at 

*6; Harris, 2011 WL 1627973, at *8 (noting that the parties’ use of a mediator “further suggests 

that the parties reached the settlement in a procedurally sound manner and that it was not the result 

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of collusion or bad faith by the parties or counsel”). However, the use of a neutral mediator “is 

not on its own dispositive of whether the end of product is a fair, adequate, and reasonable 

settlement agreement.” Bluetooth, 654 F.3d at 948.

Here, prior to mediation, the parties engaged in limited discovery. Specifically, the parties 

exchanged discovery requests and initial disclosures, but only Lead Plaintiff had responded to 

Defendants’ requests for admission and interrogatories. (Dkt. No. 206 ¶ 7.) In preparation for 

mediation, the parties also exchanged mediation statements that explained their positions on 

liability and damages, and Defendants produced confidential internal Zynga documents in support 

of their position. (Id. ¶ 9.) In addition to these disclosures, the parties had engaged in two rounds 

of substantive briefing on Defendants’ motions to dismiss and therefore had fulsome 

understandings of their respective positions on the legal and factual issues in the case. For 

example, Defendants contend that (1) none of the challenged statements were false and misleading 

when made and that the guidance statements are protected by the statutory safe harbor for 

forward-looking statements; (2) Lead Plaintiff’s scienter allegations fail because Zynga reported 

record bookings when the Individual Defendants committed to sell their stock; (3) the class 

members would have trouble establishing loss causation—i.e., showing what part of the stockprice decline is attributed to the fraudulent statements rather than other bad news at Zynga. (Id.

¶¶ 12-13.) Indeed, a court in this District recently noted that in “any securities litigation case, it 

[is] difficult for [plaintiff] to prove loss causation and damages at trial.” In re Celera Corp. Sec. 

Litig., No. 5:10-CV-02604-EJD, 2015 WL 1482303, at *5 (N.D. Cal. Mar. 31, 2015). Thus, Lead 

Plaintiff has demonstrated that there is a substantial risk in litigating this case further. 

On balance, based on the parties’ litigation history, disclosure of information, 

representation by experienced counsel and use of a neutral mediator, the Settlement Agreement 

appears to be the product of serious, informed, non-collusive negotiation, which weighs in favor of 

preliminary approval. Their participation in mediation along with the fact that there is no 

reversion to Defendants indicates the absence of collusion between the parties.

b. Obvious Deficiencies

The Court next considers “whether there are obvious deficiencies in the Settlement 

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Agreement.” Harris, 2011 WL 1627973, at *8. No obvious deficiency is present here.

The first Bluetooth red flag is whether class counsel receives a disproportionate 

distribution of the settlement, or the class receives no monetary distribution but counsel is amply 

rewarded. 654 F.3d at 947. Not so here. Lead Counsel is seeking a maximum of 25% of the 

Settlement Fund in attorneys’ fees, totaling $5,750,000. The Ninth Circuit has noted that 25 

percent of the fund is considered the “benchmark” for a reasonable fee. Id. at 942. Thus, the first 

sign of collusion is absent here.

The second sign of collusion is whether the parties’ agreement contains a “clear sailing” 

agreement, which “is one where the party paying the fee agrees not to contest the amount to be 

awarded by the fee-setting court so long as the award falls beneath a negotiated ceiling.” In re 

Toys R Us-Del., Inc.—Fair & Accurate Credit Transactions Act (FACTA) Litig., 295 F.R.D. 438, 

458 (C.D. Cal. Jan. 17, 2014) (quotation marks and citation omitted). Here, while Defendants 

have agreed generally to “cooperate fully in seeking Court approval of the Preliminary Approval 

Order and the Settlement” and to “cooperate to the extent reasonably necessary to effectuate, 

implement and accomplish all of the terms and conditions of this Stipulation” (Dkt. No. 212-1 

¶ 14.18), there is no agreement that Defendants will not object to the attorneys’ fees that Lead 

Plaintiff seeks. In fact, the Settlement Agreement itself does not include an amount of attorneys’ 

fees at all; instead, it merely states that Lead Counsel for the class “may apply to the Court for a 

collective award of attorneys’ fees to Lead Counsel” and “reimbursement of Litigation expenses.” 

(Id. ¶ 7.1.) The agreement seems to contemplate some disagreement or litigation about attorneys’ 

fee awards, noting that such award is neither a necessary term nor a condition of the parties’ 

agreement. (Id. ¶ 7.4.) There is also no reversion here, which is a further indication of the 

fairness of the parties’ settlement. Thus, the parties’ settlement lacks obvious deficiencies that 

would preclude preliminary approval.

c. Lack of Preferential Treatment

Under this factor, “the Court examines whether the Settlement provides preferential 

treatment to any class member.” Villegas, 2012 WL 5878390, at *7; see also Portal Software, 

2007 WL 1991529, at *5 (examining whether the settlement “improperly grant[s] preferential 

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treatment to the [Lead Plaintiff] or segments of the class”). Lead Plaintiff does not stand to 

receive any incentive award, enhancement payment, or distribution of any other funds beyond the 

Recognized Loss applicable to all class members according to the Plan of Allocation. 

Notably, the Plan of Allocation separates recovery during the Settlement Class Period into 

two separate time periods—the Earlier Period and the FAC Class Period. Lead Plaintiff elected 

not to replead the claims that fall in the Earlier Period for three reasons: (1) Zynga’s first statement 

about its 2012 guidance was not made until February 14, 2012, so there were no claims based on 

that guidance statement until that date; (2) the allegations about the changes to Facebook games 

solely pertain to the later period; and (3) the allegations regarding statements about bookings 

declines are more compelling later in 2012, since trends in declining sales would be more defined 

later in the quarter. (Dkt. No. 210 at 3; see also Dkt. No. 155 ¶¶ 85, 131.) In ruling on 

Defendants’ motion to dismiss the FAC, the district court upheld Lead Plaintiff’s claims related to 

bookings, Facebook, and the 2012 guidance, but granted the motion as to misrepresentations about 

Zynga’s pipeline. (Dkt. No. 176.) 

Under these circumstances, and with the help of a damages consultant, Lead Plaintiff 

concluded that claims in the Earlier Period are weaker and therefore entitled to a lower-valued 

recovery. Lead Plaintiff himself will recover solely based on claims in the FAC Class Period; 

although he purchased shares in the Earlier Period, he sold them prior to July 25, 2012, so there is 

no Recognized Loss. (Dkt. No. 210 at 6.) Lead Plaintiff explains that this result is common: most 

investors who purchased Zynga common stock in the Earlier Period did not hold on to their shares 

through the close of the entire Settlement Class Period. (Id. at 6 n.3.) “Courts frequently endorse 

distributing settlement proceedings according to the relative strengths and weaknesses of the 

various claims.” Portal Software, 2007 WL 1991529, at *6. Given Lead Plaintiff’s explanation, 

the Plan of Allocation does just that, and therefore distributes the funds without giving undue 

preferential treatment to any class members.

d. Range of Possible Approval

Next, the Court must determine whether the proposed Settlement Agreement falls within 

the range of possible approval. “To evaluate the range of possible approval criterion, which 

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focuses on substantive fairness and adequacy, courts primarily consider plaintiff’s expected 

recovery balanced against the value of the settlement offer.” Harris, 2011 WL 1627973, at (9 

(internal quotation marks and citations omitted); see In re Tableware Antitrust Litig., 484 F. Supp. 

2d 1078, 1080 (N.D. Cal. 2007) (citations omitted); see also In re Mego Fin. Corp. Sec. Litig., 213 

F.3d at 456 (instructing courts to compare the settlement amount to the parties’ “estimates of the 

maximum amount of damages recoverable in a successful litigation”). “[A] cash settlement 

amounting to only a fraction of the potential recovery does not per se render the settlement 

inadequate or unfair,” however. In re Mego Fin. Corp. Sec. Litig., 213 F.3d at 456.

Here, the Settlement Agreement provides for a Settlement Fund of $23,000,000. (Dkt. No. 

212-1 ¶ 4.1.) Lead Plaintiff argues that the Settlement Fund represents approximately 14% of its 

estimated damages.8 (Dkt. No. 206 ¶ 14.) A review of securities litigation cases indicates that this 

percentage exceeds the typical recovery. See In re Rite Aid Corp. Sec. Litig., 146 F. Supp. 2d 706, 

715 (E.D. Pa. 2001) (citing studies noting that the average securities fraud class action settlement 

between 1995 and 2001 results in a recovery between 5.5 and 6.2% of the estimated losses); see, 

e.g., Celera Corp., 2015 WL 1482303, at *6 (granting preliminary approval in securities litigation 

class action where plaintiffs stood to recover 5.5% of their estimated losses). But the total amount 

will not be distributed to class members. Instead, the requested attorneys’ fees, costs, and claims 

administrator costs bring the total down to $16,072,000 less some undisclosed amount in tax 

deductions to be distributed to class members. This is still 10 percent of the total estimated losses, 

and therefore remains above the typical recovery in securities litigation. This recovery also 

represents a substantial benefit to some class members: the class includes members who purchased 

Zynga common stock in the Earlier Period, whose claims were not included in the FAC. Thus, the 

Settlement Agreement secures part of this recovery for Zynga investors who would be without a 

remedy at trial in these consolidated actions.

Turning to the recovery for each individual investor, Lead Counsel estimates that the 

average distribution before deduction of fees and costs is $0.15 per damaged share purchased in 

 

8 By this calculation, Lead Plaintiff anticipates that the Settlement Class would receive a damages 

award of just over $164,000,000 if it prevailed on all of its claims at trial.

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the entire Settlement Class Period—i.e., Earlier Period plus FAC Class Period—compared to 

$1.14 per share if plaintiffs prevailed at trial. (Dkt. No. 206 ¶ 17.) This represents a per-share 

recovery that is approximately 13 percent of the estimated recovery at trial. Plaintiffs do not 

include any total estimate of the per-share distribution after deduction of attorneys’ fees and costs. 

However, they indicate that the attorneys’ fees and costs—without making clear whether “costs” 

also includes the $900,000 claims administration fee—will total $0.04 per share. (Id. ¶ 16.) This 

deduction would result in $0.11 per damaged share after deductions for attorneys’ fees and costs, 

which is 9.6 percent of the estimated per share recovery at trial. This number is still well above 

the average per-share recovery in a securities fraud class action. See In re Rite Aid Corp. Sec. 

Litig., 146 F. Supp. 2d at 715; Celera Corp., 2015 WL 1482303, at *6. Thus, the Court is 

satisfied, at least for the purposes of preliminary approval, that the class members’ potential 

recovery falls within the range of possible approval.

e. Cy Pres Distribution

Finally, the Settlement Agreement leaves open-ended the question of what non-profit 

organization will receive any remaining funds after the distributions. A cy pres award must 

qualify as “the next best distribution” to giving the funds directly to class members. Dennis v. 

Kellogg Co., 697 F.3d 858 (9th Cir. 2012). As a result, “[n]ot just any worthy recipient can 

qualify as an appropriate cy pres beneficiary.” Id. The Ninth Circuit “require[s] that there be a 

driving nexus between the plaintiff class and the cy pres beneficiaries.” Id. (citation omitted). A 

cy pres award must be “guided by (1) the objectives of the underlying statute(s) and (2) the 

interests of the silent class members, and must not benefit a group too remote from the plaintiff 

class[.]” Id. (internal quotation marks omitted) (citing Nachshin, 663 F.3d 1034, 1039 (9th Cir. 

2011), and Six Mexican Workers v. Ariz. Citrus Growers, 904 F.2d 1301, 1305 (9th Cir. 19990)). 

Here, the cy pres distribution is a fallback plan: the parties’ Settlement Agreement

envisions distribution pursuant to the Plan of Allocation, and even a potential second round of 

distribution pursuant to the plan. Only if the funds remaining makes it “not cost effective or 

efficient to redistribute the amount to the Settlement Class” will those remaining funds be donated 

to a charitable organization. (See Dkt. No. 212-1 ¶ 4.4) While normally a court must ensure that 

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the chosen cy pres distribution does not “little or nothing to do with the purposes of the underlying 

lawsuit or the class of plaintiffs involved[,]” Nachsin v. AOL, LLC, 663 F.3d 1034, 1039 (9th Cir. 

2011), in light of the possibility of such a small amount of the funds being directed to a charitable 

organization, the Court is satisfied with the conditions that the organization be unaffiliated with 

either party and, in any event, subject to later court approval.

C. Plan of Allocation

The Court also must preliminarily approve the Plan of Allocation. Such a distribution plan 

is governed by the same legal standards that apply to the approval of a settlement: the plan must 

be fair, reasonable, and adequate. See In re Citric Acid Antitrust Litig., 145 F. Supp. 2d 1152, 

1154 (N.D. Cal. 2001). “This means that, to the extent feasible, the plan should provide class 

members who suffered greater harm and who have stronger claims a larger share of the 

distributable settlement amount.” Hendricks v. StarKist Co., No. 13-cv-00729-HSG, at *7 (N.D. 

Cal. July 23, 2015) (citations omitted); see, e.g., Rieckborn, 2015 WL 468329, at *8; In re 

Omnivision Techs., Inc., No. 04-cv—2297-SC, 2007 WL 4293467, at *7 (N.D. Cal. Dec. 6, 2007); 

In re Oracle Sec. Litig., No. 90-cv-2297-VRW, 1994 WL 502054, at *1 (N.D. Cal. June 18, 1994). 

“A settlement in a securities class action case can be reasonable if it fairly treats class members by 

awarding a pro rata share to every Authorized Claimant, but also sensibly makes interclass 

distinctions based upon, inter alia, the relative strengths and weaknesses of class members’ 

individual claims and the timing of purchases of the securities at issue.” Vinh Nguyen v. Radient 

Pharms. Corp., No. 11-cv-00406, 2014 WL 1802293, at *5 (C.D. Cal. May 6, 2014) (quotation 

marks and citation omitted). “[C]ourts recognize that an allocation formula need only have a 

reasonable, rational basis, particularly if recommended by experienced and competent counsel.” 

Id. at *5.

The Plan of Allocation here uses a Recognized Loss value calculated for each damaged 

share. The Settlement Fund will be distributed on a pro rata basis according to each class 

member’s Recognized Loss. The Plan of Allocation does not provide monetary recovery for 

shares bought during the relevant period but sold before the Settlement Class Period closed—i.e., 

while the stock price was still benefitting from Zynga’s alleged misrepresentations. Lead Plaintiff 

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developed the allocation formulas in consultation with a damages expert. The formulas provide 

that damaged shares purchased during the FAC Class Period receive a higher per-share recovery 

than those purchased during the Earlier Period. Lead Plaintiff estimates that the average per-share 

recovery for all shares will be $0.15393; $0.01551 per damaged share for stock purchased during 

the Earlier Period; and $0.15506 per damaged share purchased during the FAC Class Period. (See

Dkt. No. 212-1 at 51.)

Courts in this District and elsewhere endorse distribution of settlement proceeds according 

to the relative strengths and weaknesses of the various claims. See Portal Software, 2007 WL 

4171201, at *6 (collecting cases). The formula in the Plan of Allocation “meet[s] the PSLRA 

requirement of providing a calculation of the amount of settlement proposed to be distributed on a 

per share basis. See In re Veritas Software Corp. Sec. Litig., 496 F.3d 962, 969 (9th Cir. 2007). 

While the Notice indicates that class members may receive more per share if fewer than all 

members submit claim forms, it is still sufficiently clear to give members notice of how their share 

is calculated. See Portal Software, 2007 WL 4171201, at *6. Other courts in this District have 

approved similar formulas for distribution in securities litigation cases. See, e.g., Veritas 

Software, 496 F.3d at 969; Portal Software, 2007 WL 4171201, at *6.

In his supplemental submission, Lead Plaintiff provides a fulsome explanation of the 

reasons for only bringing claims in the FAC for shares purchased during the FAC Class Period, 

instead of the Earlier Period. See supra Section B.1.c. The proposed Plan of Allocation gives 

only a fraction of the recovery to claims for shares purchased during the Earlier Period for those 

same reasons. In addition, Lead Plaintiff’s damages consultant estimates that a very small portion 

of the shares purchased during the Earlier Period are damaged shares—i.e., shares with any 

Recognized Loss—because Zynga’s common stock was heavily traded during the Earlier Period, 

especially following Zynga’s December 12, 2011 initial public offering. (See Dkt. No. 211 ¶ 2.) 

According to the damages consultant, stock is heavily traded following an initial public offering. 

(Id.) Because the stock was so heavily traded, the damages consultant estimates that only a small 

portion of shares purchased during the Earlier Period were held through July 25, 2012, when 

Defendant disclosed the true facts about the company’s status. (Id.) Notably, the damages 

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consultant further estimates that because there are so few damaged shares from the Earlier Period, 

allowing a smaller recovery for those shares will not significantly change the recovery for shares 

purchased in the FAC Class Period. (Id. ¶ 3.) Specifically, the proposed Plan of Allocation 

provides for an average per share recovery of Zynga common stock purchased during the FAC 

Class Period of $0.15506. (Id.) The damages consultant estimates that there are so few damaged 

shares during the Earlier Period that if the Plan of Allocation was amended to preclude recovery

for shares purchased during the Earlier Period, the per share recovery for the FAC Class Period 

would increase only slightly to $0.15519. (Id.) Given Lead Plaintiff’s explanation of the relative 

strengths and weaknesses of the claims based on shares purchased in the Earlier Period versus the 

FAC Class Period and the low number of damaged shares purchased during the Earlier Period, the 

Court concludes that the Plan of Allocation is fair, reasonable, and adequate.

D. Proposed Class Notice

Affected natural persons are entitled to due process, so they must be given notice of the 

proposed settlement and their rights, including the right to exclude themselves and the opportunity 

to be heard. Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 811-12 (1985). For any class 

certified under Rule 23(b)(3), class members must be afforded the best notice practicable under 

the circumstances, which includes individual notice to all members who can be identified through 

reasonable effort. The notice must clearly and concisely state in plain, easily understood 

language:

(i) the nature of the action;

(ii) the definition of the class certified; 

(iii) the class claims, issues, or defenses;

(iv) that a class member may enter an appearance through an 

attorney if the member so desires;

(v) that the court will exclude from the class any member who 

requests exclusion;

(vi) the time and manner for requesting exclusion; and

(vii) the binding effect of a class judgment on members under Rule 

23(c)(3).

Fed. R. Civ. P. 23(c)(2)(B). The Ninth Circuit has stated that “[n]otice is satisfactory if it 

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generally describes the terms of the settlement in sufficient detail to alert those with adverse 

viewpoints to investigate and to come forward and be heard.” Churchill Vill., L.L.C. v. Gen Elec., 

361 F.3d 566, 575 (9th Cir. 2004) (internal quotations omitted).

Lead Plaintiff submitted his 15-page Notice and 2-page Summary Notice for publication

one time in Investor’s Business Daily. (Dkt. No. 212-1 at 51-67 (“Notice”); id. at 80-81

(“Summary Notice”).) Though lacking in the initial submission, Lead Plaintiff’s notice now fully 

explains to the class members the rationale behind the Plan of Allocation. Likewise, while the 

initial notice included some potentially misleading information about class members’ opportunity 

to object, Lead Plaintiff’s notice now clarifies that class members can object to the amount of 

attorneys’ fees and costs sought. The information described in the notice otherwise meets the 

requirements of Rule 23(c)(B)(2).

The Notice Plan itself is likewise adequate. See supra Settlement Proposal Section G.

Lead Counsel’s motion for final approval and motion for attorneys’ fees are due 30 days before 

the deadline to object to the settlement. (See Dkt. No. 205 at 31; see also Dkt. No. 204.) Thus, 

class members have sufficient time to object to the fee motion in accordance, as required. See In 

re Mercury Interactive Corp. Sec. Litig., 618 F.3d 988, 993 (9th Cir. 2010) (requiring the “court to 

set the deadline for objections to counsel’s fee request on a date after the motion and documents 

supporting it have been filed”).

In addition, the claims administrator will maintain a website for the class members. In his 

supplemental submission, Lead Plaintiff expresses an intent to include thirteen different 

documents identified as “key pleadings” on the website. (Dkt. No. 210 at 8.) The Court 

welcomes Lead Plaintiff to include them all. At a minimum, however, Lead Counsel shall ensure 

that the website has a complete copy of the settlement agreement, the Notice and Claim form, the 

Motion for Preliminary Approval, Lead Plaintiff’s Supplemental Submission in Support of his 

Motion for Preliminary Approval, this Order, the Motion for Attorneys’ Fees and Costs, and the 

Motion for Final Approval of the Class Action Settlement.

CONCLUSION

The Court preliminarily finds that the proposed Settlement Class meets the requisite 

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certification standards and GRANTS conditional certification of the Settlement Class for 

settlement purposes. The proffered settlement agreement, as amended by the parties’ amended

stipulation filed October 15, 2015 (Dkt. Nos. 210, 211, 212), meets the requisite requirements for 

fair, adequate, and reasonable settlement as this juncture of the settlement process. For the reasons 

stated above, the Court therefore GRANTS the motion for preliminary approval of the class action 

settlement as follows:

1. Notice shall be provided in accordance with the notice plan and this Order.

2. Within 40 days after mailing and publication of notice, Lead Counsel shall file a 

motion seeking approval of attorneys’ fees and costs.

3. Counsel shall return before this Court for a final fairness hearing, at which the 

Court shall finally determine whether the settlement is fair, reasonable, and adequate, on January 

28, 2016 at 9:00 a.m. in Courtroom F, 450 Golden Gate Ave., San Francisco, California.

4. Lead Counsel shall file a noticed motion for final approval of the settlement no 

later than 35 days before the final approval hearing.

IT IS SO ORDERED.

Dated: October 27, 2015

________________________

JACQUELINE SCOTT CORLEY

United States Magistrate Judge

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