LEAD PLAINTIFFS’ MOTION FOR FINAL APPROVAL 

OF SETTLEMENT AND PLAN OF ALLOCATION

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BERNSTEIN LITOWITZ BERGER

 & GROSSMANN LLP 

JONATHAN D. USLANER (Bar No. 256898) 

jonathanu@blbglaw.com 

2121 Avenue of the Stars, Suite 2575 

Los Angeles, CA 90067 

Tel: (310) 819-3472 

Counsel for Lead Plaintiffs Public School 

Teachers’ Pension & Retirement Fund of 

Chicago and Arkansas Teacher Retirement 

System and Lead Counsel for the Class 

[Additional counsel appear on signature page] 

UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF CALIFORNIA 

OAKLAND DIVISION 

IN RE RH, INC. SECURITIES 

LITIGATION 

Case No. 4:17-00554-YGR 

ECF CASE 

LEAD PLAINTIFFS’ MOTION 

FOR FINAL APPROVAL OF 

SETTLEMENT AND PLAN OF 

ALLOCATION, AND 

MEMORANDUM OF POINTS AND 

AUTHORITIES IN SUPPORT 

THEREOF 

Judge: Hon. Yvonne Gonzalez Rogers 

Courtroom: 1 

Date: October 22, 2019 

 Time: 2:00 p.m. 

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TABLE OF CONTENTS 

Page 

TABLE OF AUTHORITIES ...................................................................................................................... ii 

NOTICE OF MOTION ................................................................................................................................1 

STATEMENT OF ISSUES TO BE DECIDED ..........................................................................................1

MEMORANDUM OF POINTS AND AUTHORITIES .............................................................................2

PRELIMINARY STATEMENT .................................................................................................................2

ARGUMENT ...............................................................................................................................................4

I. The Settlement Warrants Final Approval ........................................................................................4

A. Lead Plaintiffs and Lead Counsel Have Adequately Represented the Class .......................5

B. The Settlement Was Reached After Substantial Discovery, Arm’s-Length 

Negotiations Between Experienced Counsel, and Mediation with an Experienced 

Mediator ...............................................................................................................................6

C. The Relief that the Settlement Provides for the Class Is Adequate, Taking into 

Account the Costs and Risks of Further Litigation and All Other Relevant Factors ...........8

1. The Amount Offered in Settlement..........................................................................8

2. The Strength of Lead Plaintiffs’ Case and the Significant Risks of 

Continued Litigation ..............................................................................................10

3. The Duration and Costs of Continued Litigation ...................................................13

4. All Other Factors Set Forth in Rule 23(e)(2)(C) Support Approval of the 

Settlement ..............................................................................................................14

D. The Settlement Treats Class Members Equitably Relative To Each Other .......................16

E. Additional Factors Considered by the Ninth Circuit Support Approval of the 

Settlement ..........................................................................................................................16

II. The Plan of Allocation Is Fair and Reasonable .............................................................................17

III. Notice to the Class Satisfied the Requirements of Rule 23 and Due Process ................................19

CONCLUSION ..........................................................................................................................................21

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TABLE OF AUTHORITIES 

Page(s) 

CASES

In re Amgen Inc. Sec. Litig., 

2016 WL 10571773 (C.D. Cal. Oct. 25, 2016) ........................................................................11, 13, 17 

In re Anthem, Inc. Data Breach Litig., 

327 F.R.D. 299 (N.D. Cal. 2018) ...........................................................................................................7 

In re AOL Time Warner, Inc. Sec. & “ERISA” Litig., 

2006 WL 903236 (S.D.N.Y. Apr. 6, 2006)..........................................................................................13 

In re Biolase, Inc. Sec. Litig., 

2015 WL 12720318 (C.D. Cal. Oct. 13, 2015) ......................................................................................9 

In re Bluetooth Headset Prods. Liab. Litig., 

654 F.3d 935 (9th Cir. 2011) .............................................................................................................7, 8 

In re Celera Corp. Sec. Litig., 

U.S. Dist. LEXIS 157408 (N.D. Cal. Nov. 20, 2015)..........................................................................13 

Churchill Village L.L.C. v. General Electric, 

361 F.3d 566 (9th Cir. 2004) .....................................................................................................5, 16, 20 

Class Plaintiffs v. City of Seattle, 

955 F.2d 1268 (9th Cir. 1992) .........................................................................................................5, 17 

Destefano v. Zynga, Inc., 

2016 WL 537946 (N.D. Cal. Feb. 11, 2016) .........................................................................8, 9, 13, 20 

Eisen v. Carlisle & Jacquelin, 

417 U.S. 156 (1974) .............................................................................................................................20 

Garner v. State Farm Mut. Auto. Ins. Co., 

2010 WL 1687832 (N.D. Cal. Apr. 22, 2010) .......................................................................................4 

In re Global Crossing Sec. & ERISA Litig., 

225 F.R.D. 436 (S.D.N.Y. 2004) .........................................................................................................13 

Hanlon v. Chrysler Corp., 

150 F.3d 1011 (9th Cir. 1998) .......................................................................................................5, 6, 8 

Hartless v. Clorox Co., 

273 F.R.D. 630 (S.D. Cal. 2011), aff’d in relevant part, 

473 F. App’x 716 (9th Cir. 2012) ........................................................................................................14 

Hayes v. MagnaChip Semiconductor Corp., 

2016 WL 6902856 (N.D. Cal. Nov. 21, 2016) ....................................................................................20 

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Hefler v. Wells Fargo & Co., 

2018 WL 6619983 (N.D. Cal. Dec. 18, 2018) .....................................................................................16 

In re Heritage Bond Litig., 

2005 WL 1594403 (C.D. Cal. June 10, 2005) ...............................................................................13, 18 

IBEW v. Int’l Game Tech., 

2012 WL 5199742 (D. Nev. Oct. 19, 2012) ........................................................................................10 

In re Immune Response Sec. Litig., 

497 F. Supp. 2d 1166 (S.D. Cal. 2007) ................................................................................................11 

Kirkorian v. Borelli, 

695 F. Supp. 446 (N.D. Cal. 1988) ......................................................................................................16 

Knapp v. Art.com, Inc., 

283 F. Supp. 3d 823 (N.D. Cal. 2017) .................................................................................................10 

Lane v. Facebook, Inc., 

696 F.3d 811 (9th Cir. 2012) .................................................................................................................5 

In re Lendingclub Sec. Litig., 

282 F. Supp. 3d 1171 (N.D. Cal. 2017) .................................................................................................5 

Lerwill v. Inflight Motion Pictures, Inc., 

582 F.2d 507 (9th Cir. 1978) .................................................................................................................6 

In re LinkedIn User Privacy Litig., 

309 F.R.D. 573 (N.D. Cal. 2015) .........................................................................................................13 

Linney v. Cellular Alaska P’ship, 

1997 WL 450064 (N.D. Cal. July 18, 1997), aff’d, 151 F.3d 1234 (9th Cir. 1998) ..............................7 

Luna v. Marvell Tech. Grp., 

2018 WL 1900150 (N.D. Cal. Apr. 20, 2018) .....................................................................................20 

McPhail v. First Command Fin. Planning, Inc., 

2009 WL 839841 (S.D. Cal. Mar. 30, 2009) .......................................................................................10 

In re Mego Fin. Corp. Sec. Litig., 

213 F.3d 454 (9th Cir. 2000) .................................................................................................................8 

Nat’l Rural Telecommc’ns Coop. v. DIRECTTV, 

221 F.R.D. 523 (C.D. Cal. 2004) .........................................................................................................16 

In re Netflix Privacy Litig., 

2013 WL 1120801 (N.D. Cal. Mar. 18, 2013) .......................................................................................7 

Officers for Justice v. Civil Serv. Comm’n, 

688 F.2d 615 (9th Cir. 1982) .............................................................................................................5, 9 

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In re Omnivision Techs., Inc., 

559 F. Supp. 2d 1036 (N.D. Cal. 2008) .......................................................................................4, 9, 17 

In re Online DVD-Rental Antitrust Litig., 

779 F.3d 934 (9th Cir. 2015) ...............................................................................................................16 

In re Oracle Sec. Litig., 

1994 WL 502054 (N.D. Cal. June 18, 1994) .......................................................................................18 

In re Polaroid ERISA Litig., 

240 F.R.D. 65 (S.D.N.Y. 2006) .............................................................................................................6 

Shapiro v. JPMorgan Chase & Co., 

2014 WL 1224666 (S.D.N.Y. Mar. 24, 2014) .......................................................................................9 

Spann v. J.C. Penney Corp., 

314 F.R.D. 312 (C.D. Cal. 2016) .........................................................................................................20 

In re Syncor ERISA Litig., 

516 F.3d 1095 (9th Cir. 2008) ...............................................................................................................4 

Thomas v. MagnaChip Semiconductor Corp., 

2017 WL 4750628 (N.D. Cal. Oct. 20, 2017)......................................................................................16 

Torrisi v. Tucson Elec. Power Co., 

8 F.3d 1370 (9th Cir. 1993) ...........................................................................................................10, 13 

Trabakoolas v. Watts Water Techs., Inc., 

2014 WL 12641599 (N.D. Cal. Aug. 5, 2014) ......................................................................................7 

Velazquez v. Int’l Marine & Indus. Applicators, LLC, 

2018 WL 828199 (S.D. Cal. Feb. 9, 2018) ..........................................................................................14 

In re Volkswagen “Clean Diesel” Mktg., Sales Practices, & Prods. Liab. Litig., 

2019 WL 2077847 (N.D. Cal. May 10, 2019) .......................................................................................5 

STATUTES & RULES

Private Securities Litigation Reform Act of 1995, 

15 U.S.C. § 78u-4(a)(7) .......................................................................................................................21 

Fed. R. Civ. P. 23 .............................................................................................................................2, 17, 20 

Fed. R. Civ. P. 23(b)(3)..............................................................................................................................20 

Fed. R. Civ. P. 23(c)(2)(B) ..................................................................................................................20, 21 

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Fed. R. Civ. P. 23(e) .......................................................................................................................... passim

Fed. R. Civ. P. 23(f) .....................................................................................................................................3 

OTHER AUTHORITIES

Cornerstone Research, Securities Class Action Settlements: 2018 Review and Analysis 

(2019) .....................................................................................................................................................9 

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NOTICE OF MOTION FOR FINAL APPROVAL 

OF SETTLEMENT AND PLAN OF ALLOCATION 

TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD: 

PLEASE TAKE NOTICE that, pursuant to Rule 23(e)(2) of the Federal Rules of Civil Procedure 

and the Court’s Order Preliminarily Approving Settlement and Providing for Notice (ECF No. 142) 

(“Preliminary Approval Order”), Lead Plaintiffs Public School Teachers’ Pension & Retirement Fund of 

Chicago (“Chicago Teachers”) and Arkansas Teacher Retirement System (“ATRS”) (collectively, “Lead 

Plaintiffs”) will and hereby do move the Court, before the Honorable Yvonne Gonzalez Rogers, on 

October 22, 2019, at 2:00 p.m. in Courtroom 1 of the United States District Court for the Northern 

District of California, 1301 Clay Street, Oakland, CA 94612, or at such other location and time as set by 

the Court, for (1) entry of a judgment granting final approval of the proposed settlement of this Action 

(the “Settlement”) and (2) entry of an order granting approval of the proposed plan of allocation of the 

net proceeds of the Settlement (the “Plan of Allocation”). 

This Motion is based on the following Memorandum of Points and Authorities, the 

accompanying Declaration of Jonathan D. Uslaner in Support of (I) Lead Plaintiffs’ Motion for Final 

Approval of Settlement and Plan of Allocation, and (II) Lead Counsel’s Motion for Attorneys’ Fees and 

Litigation Expenses (“Uslaner Declaration” or “Uslaner Decl.”) and its exhibits, all other prior pleadings 

and papers in this Action, arguments of counsel, and any additional information or argument that may be 

required by the Court. The proposed Judgment and a proposed Order approving the Plan of Allocation 

will be submitted with Lead Plaintiffs’ reply submission. 

STATEMENT OF ISSUES TO BE DECIDED 

1. Whether the Court should approve the proposed Settlement of this securities class action 

as fair, reasonable, and adequate under Rule 23(e)(2); and 

2. Whether the Court should approve the Plan of Allocation as fair and reasonable. 

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MEMORANDUM OF POINTS AND AUTHORITIES 

Lead Plaintiffs, on behalf of themselves and the Class, respectfully submit this memorandum in 

support of their motion for final approval of the proposed Settlement and the plan of allocation of the 

settlement proceeds.1

PRELIMINARY STATEMENT 

Subject to Court approval, Lead Plaintiffs have agreed to settle the claims in this action in 

exchange for a cash payment for the benefit of the Class of $50,000,000.00, which has been deposited 

into an escrow account in accordance with the Settlement Agreement. Lead Plaintiffs respectfully submit 

that the proposed Settlement is an excellent result for the Class and satisfies the standards for final 

approval under Rule 23 of the Federal Rules of Civil Procedure. As detailed in the accompanying 

Uslaner Declaration and summarized in this memorandum, the proposed Settlement provides a 

substantial, certain, and immediate recovery for the Class while avoiding the significant risks of 

continued litigation, including the risk that the Class could recover nothing or less than the Settlement 

Amount after years of additional litigation and delay. 

The Settlement was reached after months of arm’s-length negotiations between the Parties, 

which included two separate mediation sessions with former United States District Judge Layn R. 

Phillips, an experienced and highly respected mediator of complex class actions, and was based on a 

mediator’s recommendation made by Judge Phillips. 

Lead Plaintiffs and Lead Counsel were well informed of the strengths and weaknesses of the 

claims in the Action at the time the Settlement was reached, based on their extensive prosecution of the 

claims asserted in the Action. By the time of the Settlement, Lead Counsel had, among other things, 

(i) conducted an extensive investigation into the alleged fraud; (ii) drafted the initial complaint in the 

Action and a detailed consolidated complaint based on the investigation; (iii) successfully opposed 

Defendants’ motion to dismiss through briefing and argument; (iv) engaged in substantial fact discovery, 

including obtaining and reviewing more than 10 million pages of documents produced by Defendants 

1

 Unless otherwise defined in this memorandum, all capitalized terms have the meanings defined in the 

Stipulation and Agreement of Settlement, dated May 6, 2019 (ECF No. 135-1) (the “Stipulation”) or the 

Uslaner Declaration. Citations to “¶ __” herein refer to paragraphs in the Uslaner Declaration and 

citations to “Ex. __” refer to exhibits to the Uslaner Declaration. 

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and third parties; (v) conducted 15 depositions, including of fact and expert witnesses; (vi) successfully 

moved for certification of the Class; (vii) successfully opposed Defendants’ Rule 23(f) petition to appeal 

the certification of the Class; (viii) consulted with experts in retail home-furnishings industry and classwide damages; and (ix) exchanged two sets of mediation statements and participated in two full-day 

mediations overseen by Judge Phillips.

The Settlement is particularly favorable in light of the risks of litigation. As discussed below and 

in the Uslaner Declaration, Lead Plaintiffs faced meaningful risks in establishing each element of their 

claims at trial, including that (a) Defendants’ challenged statements about the launch of RH Modern and 

RH’s inventory were false or misleading when made; (b) the challenged statements were made with 

intent to mislead or severe recklessness; and (c) the correction of prior false statements, rather than other 

factors, caused the declines in the price of RH’s stock price. Neither the SEC nor any other 

governmental entity has brought a related investigation or asserted a parallel enforcement action against 

RH, and the Company was never required by its auditor to restate any of its financial statements. In 

addition, the price of RH’s stock has fully rebounded since the Class Period, and the RH Modern brand 

has proven to be extremely successful. Although Lead Plaintiffs believes in the merits of their claims, it 

recognized the risks associated with continued litigation, including at the summary judgment stage, at 

trial, and on any appeals. 

The Settlement has the full support of the Court-appointed Lead Plaintiffs, which are both 

institutional investors that took an active role in supervising the litigation and participated directly in 

settlement negotiations. Further, although the deadline to object to the Settlement has not yet passed, no 

Class Members have objected to-date to the Settlement.2

In light of these considerations and the other factors discussed below, Lead Plaintiffs respectfully 

submit that the Settlement is fair, reasonable, and adequate and warrants final approval by the Court. 

Additionally, Lead Plaintiffs request that the Court approve the Plan of Allocation, which was set forth 

in the Notice mailed to potential Class Members. The Plan of Allocation, which was developed by Lead 

Counsel in consultation with Lead Plaintiffs’ damages expert, provides a reasonable method for 

2

 The deadline for submission of objections is October 1, 2019. Should any objections be received, Lead 

Counsel will address them in its reply papers. 

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allocating the Net Settlement Fund among Class Members who submit valid claims based on damages 

they suffered on purchases of RH common stock that were attributable to the alleged fraud. 

ARGUMENT 

I. The Settlement Warrants Final Approval 

Federal Rule of Civil Procedure 23(e) requires judicial approval for any compromise or 

settlement of class-action claims. See Fed. R. Civ. P. 23(e). A class-action settlement should be 

approved if the court finds it “fair, reasonable, and adequate.” Fed. R. Civ. P. 23(e)(2). 

The Ninth Circuit recognizes “a strong judicial policy that favors settlements, particularly where 

complex class action litigation is concerned.” In re Syncor ERISA Litig., 516 F.3d 1095, 1101 (9th Cir. 

2008); see also In re Omnivision Techs., Inc., 559 F. Supp. 2d 1036, 1041 (N.D. Cal. 2008) (“the court must 

also be mindful of the Ninth Circuit’s policy favoring settlement, particularly in class action law suits”). 

Class actions readily lend themselves to compromise because of the difficulties of proof, the 

uncertainties of the outcome, and the typical length of the litigation. Settlements of complex cases such 

as this one greatly contribute to the efficient utilization of scarce judicial resources and achieve the 

speedy resolution of claims. See, e.g., Garner v. State Farm Mut. Auto. Ins. Co., 2010 WL 1687832, at 

*10 (N.D. Cal. Apr. 22, 2010) (“Settlement avoids the complexity, delay, risk and expense of continuing 

with the litigation and will produce a prompt, certain, and substantial recovery for the Plaintiff class.”). 

In determining whether a proposed settlement is “fair, reasonable, and adequate,” the Court 

should consider whether: 

(A) the class representatives and class counsel have adequately represented the class; 

(B) the proposal was negotiated at arm’s length; 

(C) the relief provided for the class is adequate, taking into account, [among other 

things,] the costs, risks, and delay of trial and appeal . . .; and 

(D) the proposal treats class members equitably relative to each other. 

Fed. R. Civ. P. 23(e)(2). 

In addition, the Ninth Circuit has held that district courts should consider the following factors in 

evaluating the fairness of a class action settlement: 

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(1) the strength of the plaintiffs’ 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 to the 

proposed settlement. 

Churchill Village L.L.C. v. Gen. Elec., 361 F.3d 566, 575 (9th Cir. 2004); accord Lane v. Facebook, Inc., 

696 F.3d 811, 819 (9th Cir. 2012); Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir. 1998); see 

also In re Volkswagen “Clean Diesel” Mktg., Sales Practices, & Prods. Liab. Litig., 2019 WL 2077847, 

at *1 (N.D. Cal. May 10, 2019) (approving settlement after considering both the “Rule 23(e)(2) factors, 

which became effective on December 1, 2018, and the factors identified in” Ninth Circuit case law). 

The Ninth Circuit has cautioned that courts’ review of settlements should be “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, and that the settlement, taken as a whole, 

is fair, reasonable and adequate to all concerned.” Hanlon, 150 F.3d at 1027. In other words, a 

settlement hearing should “not to be turned into a trial or rehearsal for trial on the merits,” Officers for 

Justice v. Civil Serv. Comm’n, 688 F.2d 615, 625 (9th Cir. 1982), and a court “need not ‘reach any 

ultimate conclusions on the contested issues of fact and law which underlie the merits of the dispute, for 

it is the very uncertainty of outcome in litigation and avoidance of wasteful and expensive litigation that 

induce consensual settlements.’” Class Plaintiffs v. City of Seattle, 955 F.2d 1268, 1291 (9th Cir. 1992). 

A. Lead Plaintiffs and Lead Counsel Have 

Adequately Represented the Class 

In determining whether to approve a class action settlement, the Court should consider whether 

“the class representatives and class counsel have adequately represented the class.” Fed. R. Civ. P. 

23(e)(2)(A); see In re Lendingclub Sec. Litig., 282 F. Supp. 3d 1171, 1182 (N.D. Cal. 2017) (to 

determine adequacy, “courts consider two questions: (1) do the named plaintiffs and their counsel have 

any conflicts of interest with other class members, and (2) will the named plaintiffs and their counsel 

prosecute the action vigorously on behalf of the class?”). 

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In granting class certification, the Court found that Lead Plaintiffs were adequate to serve as 

Class Representatives, and Lead Counsel was fit to serve as Class Counsel. See ECF No. 111, at 6-7. 

Lead Plaintiffs’ claims are typical of and coextensive with those of the Class, and Lead Plaintiffs do not 

have any interests that are antagonistic to the interest of other members of the Class. See Lerwill v. 

Inflight Motion Pictures, Inc., 582 F.2d 507, 512 (9th Cir. 1978); Hanlon, 150 F.3d at 1020. Lead 

Plaintiffs—like all other Class Members—have an interest in obtaining the largest possible recovery 

from Defendants. See In re Polaroid ERISA Litig., 240 F.R.D. 65, 77 (S.D.N.Y. 2006) (“Where 

plaintiffs and class members share the common goal of maximizing recovery, there is no conflict of 

interest between the class representatives and other class members.”). 

Lead Plaintiffs and Lead Counsel have adequately represented the Class in both their vigorous 

prosecution of the Action during the past two-and-a-half years and in the negotiation and achievement of 

the Settlement. The institutional investor Lead Plaintiffs played an active role in supervising and 

participating in the litigation, attended both mediation sessions, and retained counsel who are highly 

experienced in securities litigation and have successfully prosecuted many complex class actions 

throughout the United States. See Ex. 7 (Lead Counsel’s firm resume). Lead Counsel vigorously 

prosecuted the Class’s claims, including by conducting a thorough investigation, overcoming 

Defendants’ motion to dismiss, obtaining certification of the Class, and engaging in extensive discovery. 

Accordingly, as the Court previously found in certifying the Class and in appointing Lead 

Plaintiffs as Class Representatives and Lead Counsel as Class Counsel, Lead Plaintiffs and Lead 

Counsel have adequately represented the Class. 

B. The Settlement Was Reached After Substantial Discovery, 

Arm’s-Length Negotiations Between Experienced Counsel, 

and Mediation with an Experienced Mediator 

In weighing approval of a class action settlement, courts consider whether the settlement “was 

negotiated at arm’s length.” Fed. R. Civ. P. 23(e)(2)(B). This includes consideration of related 

circumstances bearing on the procedural fairness of the settlement, including (i) counsel’s understanding 

of the strengths and weakness of the case based on factors such as “the extent of discovery completed 

and the stage of the proceedings,” Hanlon, 150 F.3d at 1026; (ii) the presence or absence of any indicia of 

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collusion, see In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935, 947 (9th Cir. 2011); and 

(iii) the involvement of a mediator. 

Here, the Settlement was reached only after several months of arm’s-length negotiations between 

the Parties, which included two separate mediation sessions with Judge Phillips, a former federal judge 

with more than 25 years of experience in mediating complex civil litigation. ¶¶ 48-53. The parties 

prepared and exchanged detailed mediation statements before participating in the mediation sessions and 

exchanged their views on the merits of the case. ¶¶ 49-52. 

As courts in this District have explained, the fact that the Parties reached a settlement after 

arm’s-length negotiations between experienced counsel creates a presumption of its fairness. See In re 

Netflix Privacy Litig., 2013 WL 1120801, at *4 (N.D. Cal. Mar. 18, 2013) (“Courts have afforded a 

presumption of fairness and reasonableness of a settlement agreement where that agreement was the 

product of non-collusive, arms’ length negotiations conducted by capable and experienced counsel”); 

Linney v. Cellular Alaska P’ship, 1997 WL 450064, at *5 (N.D. Cal. July 18, 1997) (“The involvement 

of experienced class action counsel and the fact that the settlement agreement was reached in arm’s 

length negotiations, after relevant discovery had taken place create a presumption that the agreement is 

fair.”), aff’d, 151 F.3d 1234 (9th Cir. 1998). Indeed, the involvement of an experienced mediator in the 

settlement process, like Judge Phillips, “confirms that the settlement is non-collusive.” In re Anthem, 

Inc. Data Breach Litig., 327 F.R.D. 299, 327 (N.D. Cal. 2018); see also Trabakoolas v. Watts Water 

Techs., Inc., 2014 WL 12641599, at *2 (N.D. Cal. Aug. 5, 2014) (finding that settlement “resulted from 

extensive, good-faith, arm’s-length negotiations between experienced counsel” where Judge Phillips 

“presided during two in-person mediation sessions and follow-up negotiations between the parties over 

several months, which ultimately resulted in the settlement before the Court”).

In addition, as noted above, the Parties and their counsel were knowledgeable about the strengths 

and weaknesses of the case before reaching the agreement to settle it. As described in the Uslaner 

Declaration, Lead Counsel conducted a detailed, substantive investigation into the alleged fraud by, 

among other things, reviewing SEC filings, analyst research reports, investor conference calls, press 

releases, media reports, and RH promotional materials, and conducting dozens of interviews of former 

RH employees. ¶¶ 12-14. Lead Counsel also performed extensive legal research in preparing the 

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complaints and briefing the opposition to Defendants’ motions to dismiss. ¶¶ 15-20. After the motion 

to dismiss was decided, Lead Counsel engaged in substantial fact discovery, including obtaining over 10 

million pages of documents produced by Defendants and third-parties and taking numerous depositions, 

including of high-level RH employees. ¶¶ 24-39. Lead Counsel also consulted with experts regarding 

loss causation, damages, and the retail home furnishings industry. ¶¶ 46-47. Finally, the Parties 

engaged in extensive settlement negotiations assisted by an experienced private mediator, which further 

informed the Parties of the strength of each side’s arguments. ¶¶ 50-51. 

Further, the Settlement has none of the indicia of possible collusion identified by the Ninth 

Circuit, such as a “clear-sailing” fee agreement or a provision that would allow settlement proceeds to 

revert to Defendants. See Bluetooth Headset, 654 F.3d at 947. In short, the Settlement here was reached 

after arm’s-length negotiations by capable counsel after substantial discovery and was not a product of 

fraud, overreaching, or collusion among the Parties. 

C. The Relief that the Settlement Provides for the Class Is 

Adequate, Taking into Account the Costs and Risks of 

Further Litigation and All Other Relevant Factors 

In determining whether a class-action settlement is “fair, reasonable, and adequate,” the Court 

must also consider whether “the relief provided for the class is adequate, taking into account . . . the 

costs, risks, and delay of trial and appeal,” as well as other relevant factors. Fed. R. Civ. P. 23(e)(2)(C). 

This factor under Rule 23(e)(2)(C) essentially encompasses four of the seven factors of the traditional 

Hanlon analysis: (1) the strength of plaintiffs’ case; (2) the risk, expense, complexity, and likely 

duration of further litigation; (3) the risk of maintaining class-action status throughout the trial; and 

(4) the amount offered in settlement. See Hanlon, 150 F.3d at 1026. As demonstrated below, each of 

these factors supports approval of the Settlement under Rule 23(e)(2)(C). 

1. The Amount Offered in Settlement 

The amount of a settlement “is generally considered the most important [factor], because the 

critical component of any settlement is the amount of relief obtained by the class.” Destefano v. Zynga, 

Inc., 2016 WL 537946, at *11 (N.D. Cal. Feb. 11, 2016). However, “[i]t 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.” In re Mego Fin. Corp. Sec. Litig., 213 F.3d 454, 459 (9th Cir. 2000). In 

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assessing the recovery, a fundamental question is how the value of the settlement compares to the 

amount the class potentially could recover at trial, discounted for risk, delay, and expense. “Naturally, 

the agreement reached normally embodies a compromise; in exchange for the saving of cost and 

elimination of risk, the parties each give up something they might have won had they proceeded with 

litigation.” Officers for Justice, 688 F. 2d at 624; see also Shapiro v. JPMorgan Chase & Co., 2014 WL 

1224666, at *11 (S.D.N.Y. Mar. 24, 2014) (holding that settlement amount must be judged “not in 

comparison with the possible recovery in the best of all possible worlds, but rather in light of the 

strengths and weaknesses of plaintiffs’ case”). 

Here, the Settlement amount—$50 million in cash, plus interest—represents a significant 

recovery for the Class. The Settlement amount is approximately six times the size of the median 

securities class-action settlement in the Ninth Circuit between 2009 and 2018 ($8.3 million). See 

Cornerstone Research, Securities Class Action Settlements: 2018 Review and Analysis (2019) (Ex. 9), at 

19. Moreover, the recovery under the proposed Settlement provides a substantial financial benefit to the 

Class in comparison to overall potential damages and eliminates the significant risk that the Class could 

recover less, or even nothing at all, if the Action continued through summary judgment, trial, and 

appeals. Lead Counsel estimates that the maximum damages for the Class that could be realistically 

established at trial, assuming Plaintiffs prevailed on all liability issues of falsity and scienter, would be 

$117.1 million to $306.5 million, depending on the resolution of certain disputed loss causation issues. 

¶ 69. Thus, the $50 million Settlement represents approximately 43% to 16% of the maximum realistic 

damages that could be recovered for the Class if Lead Plaintiffs prevailed at trial on all liability issues of 

falsity and scienter. Id. 

Courts have routinely approved and lauded settlements with substantially lower percentage 

recoveries than obtained here as fair and reasonable. See, e.g., Zynga, 2016 WL 537946, at *11 

(“Settlement Amount represent[ing] approximately 14 percent of likely recoverable aggregate damages 

at trial” was “well within the range of percentages approved in other securities-fraud related actions”);

In re Biolase, Inc. Sec. Litig., 2015 WL 12720318, at *4 (C.D. Cal. Oct. 13, 2015) (finding that 

settlement recovery of 8% of estimated damages “equals or surpasses the recovery in many other 

securities class actions”); Omnivision, 559 F. Supp. 2d at 1042 (finding that settlement yielding 9% of 

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potential damages was “higher than the median percentage of investor losses recovered in recent 

shareholder class action settlements”); McPhail v. First Command Fin. Planning, Inc., 2009 WL 839841, 

at *5 (S.D. Cal. Mar. 30, 2009) (finding that securities-class-action settlement recovery of 7% of estimated 

damages “weigh[s] in favor of final approval”); IBEW v. Int’l Game Tech., 2012 WL 5199742, at *3 (D. 

Nev. Oct. 19, 2012) (approving settlement representing “about 3.5% of the maximum damages that 

Plaintiffs believe[d] could be recovered at trial” and finding it “within the median recovery in securities 

class actions settled in the last few years”). 

2. The Strength of Lead Plaintiffs’ Case and the 

Significant Risks of Continued Litigation 

Courts evaluating proposed class action settlements consider the strength of the plaintiffs’ case 

and the risks of further litigation. See Torrisi v. Tucson Elec. Power Co., 8 F.3d 1370, 1376 (9th Cir. 

1993). To determine whether the proposed Settlement is fair, reasonable, and adequate, the Court “must 

balance the risks of continued litigation, including the strengths and weaknesses of plaintiff’s case, against 

the benefits afforded to class members, including the immediacy and certainty of a recovery.” Knapp v. 

Art.com, Inc., 283 F. Supp. 3d 823, 831 (N.D. Cal. 2017). 

In considering whether to enter into the Settlement, Lead Plaintiffs, represented by counsel 

experienced in securities litigation, weighed the risks inherent in establishing the elements of their 

claims, including risks at trial of proving to a jury the elements of falsity, scienter, loss causation, and 

full damages, as well as the likely duration of the Action. Lead Plaintiffs and Lead Counsel believed in 

the merits of the claims they asserted, but also recognized that there were meaningful risks. Lead 

Plaintiffs and Lead Counsel were aware that, in order to prevail at trial, they would have to prove not 

only that Defendants’ statements were false or misleading, but also that Defendants knew or were 

deliberately reckless in not knowing that their statements were false when made; and that those 

statements were corrected and caused recoverable damages for the Class. Each of these elements is 

addressed below: 

Falsity. Lead Plaintiffs and Lead Counsel recognize that they faced challenges in proving that 

Defendants’ statements were materially false and misleading when made. RH was never required to 

restate or amend any of its financial statements, and Defendants have consistently asserted that their 

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statements were accurate when they were made. ¶¶ 59-62. Defendants would continue to argue at trial 

and subsequent stages that their statements were not false when made. For example, with respect to 

their statements made prior to RH Modern’s launch, Defendants would point to evidence showing that 

unexpected problems encountered after RH Modern’s launch were the cause of the launch’s failures. 

Specifically, they would continue to contend that one key overseas vendor experienced unforeseen 

difficulties scaling up their production of RH Modern products, which was the major cause of supply 

chain difficulties they later suffered. ¶ 60. They would further contend that they reasonably relied on 

assurances from their vendors in making the statements and had a good faith belief that their vendors 

would meet their production deadlines. Id. Lead Plaintiffs recognize that, while they have responses to 

these arguments, there is a meaningful risk that a fact-finder might find these arguments, backed by RH 

employee testimony, persuasive and determine that Defendants’ statements prior to the launch of RH 

Modern were not false and misleading. Id. 

With respect to Defendants’ statements after RH Modern’s launch, Defendants would also 

continue to argue that their statements were accurate, and that RH did not realize that its major vendor 

would be unable to meet its commitments until after they made their statements. ¶ 61. Defendants 

would further contend that they did not omit anything when they spoke to investors, but rather candidly 

disclosed to investors how RH’s in-stock position was “not great.” Id. In addition, Lead Plaintiffs 

expect that Defendants would offer expert opinion to support their public statements that macroeconomic factors—including oil and home prices—adversely impacted RH’s business. Id. 

Scienter. Assuming that Lead Plaintiffs were able to prove to a jury that Defendants’ statements 

were materially false, they would still need to prove that Defendants made the alleged false statements 

with the intent to mislead investors or with deliberate recklessness. As courts have recognized, 

defendant’s state of mind in a securities case “is the most difficult element of proof and one that is rarely 

supported by direct evidence.” See In re Amgen Inc. Sec. Litig., 2016 WL 10571773, at *3 (C.D. Cal. Oct. 

25, 2016).; see also In re Immune Response Sec. Litig., 497 F. Supp. 2d 1166, 1172 (S.D. Cal. 2007) 

(noting that scienter is a “complex and difficult [element] to establish at trial”). 

Pointing to contemporaneous documents, Defendants would argue that they reasonably made 

their statements based on assurances from RH’s vendors. Defendants would contend that they believed, 

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based on the information received from RH’s vendors and other sources, that the statements were 

accurate when made. ¶ 64. They would also point to the fact that RH made several cautionary 

statements to investors about possible delays in deliveries during the Class Period which, they would 

argue, were inconsistent with Lead Plaintiffs’ allegations of intentional fraud on this issue. Id. 

Moreover, Defendants would argue that they had no motive to commit fraud. For example, they would 

point to their absence of “insider sales” as evidence of a lack of intent. ¶ 63. They would also point to 

the absence of any “whistleblowers” or SEC inquiry or criticism as further evidence of an absence of 

scienter. Id. Finally, they would argue that there was no logical basis for Defendants to engage in the 

alleged fraud because they would have known that the truth would be quickly revealed. Id. 

Loss Causation and Damages. Lead Plaintiffs also confronted considerable hurdles in 

establishing loss causation and full damages. These risks were a meaningful factor in assessing the 

value of this case. Specifically, Lead Plaintiffs faced substantial challenges in proving that the 

revelation of the truth about Defendants’ false and misleading statements caused the declines in the 

prices of RH stock. ¶¶ 65-67. Lead Plaintiffs and Lead Counsel anticipate that Defendants, backed by 

their expert’s testimony, would argue at trial and appeal that the declines in the price of RH common 

stock identified by Lead Plaintiffs were not caused entirely—or at all—by the alleged corrective 

disclosures. ¶ 66. As Defendants have noted, on the same dates as certain of the alleged corrective 

disclosures, Defendants revealed other, unrelated, negative financial news, including that quarterly 

revenue would be at the low end of prior guidance or below prior guidance. Id. With the support of 

their experts, Defendants would argue that this non-fraud related news, rather than any correction of 

prior misstatements, was responsible for the subsequent declines in RH’s stock price following the 

disclosures. Defendants also would have argued that Lead Plaintiffs could not, as they must, 

“disaggregate” the declines caused by disclosure of the alleged fraud from the declines caused by this 

unrelated, non-fraud related news. ¶ 67. 

Moreover, Defendants would contend that, even if Lead Plaintiffs could disaggregate the fraudrelated news, such disaggregation would substantially reduce damages. ¶ 67. For example, Defendants 

would continue to argue that the revelation on June 8, 2016 that RH had spent $18 million to “elevate 

customer experience” represented only a small fraction of RH’s earnings-per-share and thus could, at 

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most, account for only a small percentage of the stock price decline on a date that also involved 

disclosure of other disappointing financial results. Id. If Defendants were able to prevail on any of 

these arguments, the amount of the Class’s potential damages would have been severely reduced. Id. 

The resolution of these disputed issues regarding damages and loss causation would have boiled 

down to a “battle of experts,” and Defendants would undoubtedly have been able to present a wellqualified expert who would opine that the Class’s damages were small or nonexistent. ¶ 66. As Courts 

have long recognized, the uncertainty as to which side’s expert’s view might be credited by the jury 

presents a substantial litigation risk in securities actions. See In re Celera Corp. Sec. Litig., U.S. Dist. 

LEXIS 157408, at *17 (N.D. Cal. Nov. 20, 2015) (finding that risks related to the “battle of experts” 

weighed in favor of settlement approval); In re Global Crossing Sec. & ERISA Litig., 225 F.R.D. 436, 

459 (S.D.N.Y. 2004) (“[P]roof of damages in securities cases is always difficult and invariably requires 

expert testimony which may, or may not be, accepted by a jury.”). 

3. The Duration and Costs of Continued Litigation 

Courts consistently recognize that the likely duration and costs of continued litigation are key 

factors in evaluating the reasonableness of a settlement. See, e.g., Torrisi, 8 F.3d at 1376 (finding that 

“the cost, complexity and time of fully litigating the case” rendered the settlement fair). “Generally, 

unless the settlement is clearly inadequate, its acceptance and approval are preferable to lengthy and 

expensive litigation with uncertain results.” In re LinkedIn User Privacy Litig., 309 F.R.D. 573, 587 

(N.D. Cal. 2015). Due to the “notorious complexity” of securities class actions in particular, settlement 

is often appropriate because it “circumvents the difficulty and uncertainty inherent in long, costly trials.” 

In re AOL Time Warner, Inc. Sec. & “ERISA” Litig., 2006 WL 903236, at *8 (S.D.N.Y. Apr. 6, 2006); 

see also In re Heritage Bond Litig., 2005 WL 1594403, at *6 (C.D. Cal. June 10, 2005) (finding that 

class actions have well-deserved reputation as most complex litigation). 

Continuing litigation through the conclusion of fact discovery, expert discovery, summary 

judgment, trial, and appeals would have delayed any recovery for Class Members, possibly for years. 

See Zynga, 2016 WL 537946, at *10; Amgen, 2016 WL 10571773, at *3 (“A trial of a complex, factintensive case like this could have taken weeks, and the likely appeals of rulings on summary judgment 

and at trial could have added years to the litigation.”). And even with a verdict at trial affirmed on 

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appeal, the Class would have faced a potentially complex, lengthy, and contested claims-administration 

process.3 Barring settlement, there is no question that resolution of this case would take considerable 

time and require additional expenses, with the end result far from certain. See Hartless v. Clorox Co., 

273 F.R.D. 630, 640 (S.D. Cal. 2011) (“Considering these risks, expenses and delays, an immediate and 

certain recovery for class members . . . favors settlement of this action.”), aff’d in relevant part, 473 F. 

App’x 716 (9th Cir. 2012). 

Thus, the risk, complexity, and likely duration of further litigation support approval of the 

Settlement. The present value of a certain recovery now, as opposed to the mere chance for a possibly 

greater one years later, supports approval of a settlement that eliminates the expense and delay of 

continued litigation and the risk that the Class could receive no recovery. See Velazquez v. Int’l Marine 

& Indus. Applicators, LLC, 2018 WL 828199, at *4 (S.D. Cal. Feb. 9, 2018) (holding that courts “shall 

consider the vagaries of litigation and compare the significance of immediate recovery by way of the 

compromise to the mere possibility of relief in the future, after protracted and expensive litigation”). 

4. All Other Factors Set Forth in Rule 23(e)(2)(C) 

Support Approval of the Settlement 

Rule 23(e)(2)(C) also instructs courts to consider whether the relief provided for the class is 

adequate in light of “the effectiveness of any proposed method of distributing relief to the class, 

including the method of processing class-member claims,” “the terms of any proposed award of 

attorney’s fees, including timing of payment,” and “any agreement required to be identified under Rule 

23(e)(3).” Fed. R. Civ. P. 23(e)(2)(C)(ii)-(iv). Each of these factors also supports approval of the 

Settlement or is neutral and does not suggest any basis for inadequacy of the Settlement. 

First, the procedures for processing Class Members’ claims and distributing the proceeds of the 

Settlement to eligible claimants are well-established, effective methods that have been widely used in 

3

 In other securities-fraud class actions that have gone to trial, the time from a verdict to a final 

judgment has been as long as seven years. See Jaffe Pension Plan v. Household Int’l, Inc., No. 1:-02-cv05893, Verdict Form, ECF No. 1611 (N.D. Ill. May 7, 2009) & Final Judgment and Order of Dismissal 

With Prejudice, ECF No. 2267 (N.D. Ill. Nov. 10, 2016); see also Vivendi Universal, S.A. Sec. Litig., 

Civ. No. 02-5571 (RJH/HBP), Verdict Form, ECF No. 998 (S.D.N.Y. Feb. 2, 2010) (jury verdict issued 

on Jan. 29, 2010) & Final Judgment Approving Class Action Settlement of All Remaining Claims, ECF 

No. 1317 (S.D.N.Y. May 9, 2017). 

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securities class action litigation. The proceeds of the Settlement will be distributed to Class Members 

who submit eligible Claim Forms with required documentation to the Court-approved Claims 

Administrator, A.B. Data, Ltd. (“A.B. Data”). A.B. Data, an independent company with extensive 

experience administering securities class actions, will review and process the claims under Lead 

Counsel’s supervision, provide claimants with an opportunity to cure any deficiencies in their claims or 

request review of the denial of their claims by the Court, and then mail or wire claimants their pro rata

share of the Net Settlement Fund (as calculated under the Plan of Allocation) upon approval of the 

Court.4 This type of claims processing is standard in securities class actions and has long been used and 

found to be effective. This claim procedure is necessary because neither Lead Plaintiffs nor Defendants 

possess data regarding investors’ transactions in RH common stock that would allow the Parties to 

create a claims-free process to distribute Settlement funds. 

Second, the relief provided for the Class in the Settlement is also adequate when the terms of the 

proposed award of attorney’s fees are taken into account. Lead Counsel requests a fee of 15% of the 

Settlement Fund to be paid upon approval by the Court. As discussed in the Fee Memorandum, the 

requested fee is well below the 25% benchmark for percentage fee awards in the Ninth Circuit and 

below the range of percentages that courts within this Circuit award for similarly sized settlements. 

Most importantly, with respect to the Court’s consideration of the fairness of the Settlement, is the fact 

that approval of the requested attorneys’ fees is entirely separate from approval of the Settlement, and 

neither Lead Plaintiffs nor Lead Counsel may terminate the Settlement based on this Court’s or any 

appellate court’s ruling with respect to attorneys’ fees. See Stipulation ¶¶ 20, 22. 

Lastly, Rule 23(e)(2)(C) asks the Court to consider the proposed Settlement’s fairness in light of 

any agreements required to be identified under Rule 23(e)(3). See Fed. R. Civ. P. 23(e)(2)(C)(iv). Here, 

the only such agreement (other than the Stipulation itself) is the Parties’ Supplemental Agreement, 

which was previously submitted to the Court. See ECF No. 137. This agreement affords RH the option 

to terminate the Settlement if the number of Class Members who request exclusion from the Class 

4

 The Settlement is not a claims-made settlement. If the Settlement is approved, Defendants will have 

no right to the return of any portion of the Settlement based on the number or value of claims submitted. 

See Stipulation ¶ 16. 

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exceeds a specified threshold. Such agreements are standard in securities class actions and other similar 

class actions. These agreements indirectly benefit the class because they encourage defendants to agree 

to larger class action settlements by providing assurance that they will have the right to terminate if the 

number of opt outs is unexpectedly high. Courts have consistently found that such provisions have no 

negative impact on the fairness of the Settlement. See In re Online DVD-Rental Antitrust Litig., 779 

F.3d 934, 948 (9th Cir. 2015) (rejecting objector’s argument that such a provision rendered the 

settlement unfair); Hefler v. Wells Fargo & Co., 2018 WL 6619983, at *7 (N.D. Cal. Dec. 18, 2018)

(“The existence of a termination option triggered by the number of class members who opt out of the 

Settlement . . . does not weigh against approval” of settlement); Thomas v. MagnaChip Semiconductor 

Corp., 2017 WL 4750628, at *7 (N.D. Cal. Oct. 20, 2017) (agreement permitting defendant to terminate 

the settlement if an opt-out threshold is reached “does not render the settlement unfair”).

D. The Settlement Treats Class Members Equitably Relative To Each Other 

In determining whether a class action settlement is “fair, reasonable, and adequate,” the Court 

must also consider whether the Settlement treats class members equitably relative to each other. See 

Fed. R. Civ. P. 23(e)(2)(D). The proposed Settlement here treats members of the Class equitably. As 

discussed below in Part II (discussing the Plan of Allocation), eligible claimants approved for payment 

by the Court will receive their pro rata share of the recovery based on damages they suffered that were 

attributable to the alleged fraud. No subset of the Class is receiving any special treatment and Lead 

Plaintiffs will receive the same level of pro rata recovery under the Plan of Allocation (based on their 

Recognized Claims as calculated under the Plan) as all other Class Members. 

E. Additional Factors Considered by the 

Ninth Circuit Support Approval of the Settlement 

Two additional factors considered in assessing a proposed settlement are “the experience and 

views of counsel” and “the reaction of the class members to the proposed settlement.” Churchill, 361 

F.3d at 575. Both of these additional factors support the Settlement. 

As courts in this Circuit explain, “[t]he recommendation of experienced counsel carries 

significant weight in the court’s determination of the reasonableness of the settlement.” Kirkorian v. 

Borelli, 695 F. Supp. 446, 451 (N.D. Cal. 1988); see Nat’l Rural Telecommc’ns Coop. v. DIRECTTV, 

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221 F.R.D. 523, 528 (C.D. Cal. 2004) (“‘Great weight’ is accorded to the recommendation of 

counsel . . . because ‘parties represented by competent counsel are better positioned than courts to 

produce a settlement that fairly reflects each party’s expected outcome in the litigation’”). Here, Lead 

Counsel—based on a thorough understanding of the Action—concluded that the Settlement represents a 

favorable outcome for Class Members in light of the range and probability of potential outcomes. 

Likewise, the positive reaction of the Class to the Settlement is another factor that favors 

approval of the Settlement. See Amgen, 2016 WL 10571773, at *4. Pursuant to the Preliminary 

Approval Order, the Court-appointed Claims Administrator, A.B. Data, sent a total of 76,685 copies of 

the Notice Packet to potential Class Members and nominees as of September 13, 2019. See Miller Decl. 

(Ex. 3) ¶ 8. In addition, the Summary Notice was published in The Wall Street Journal and transmitted 

over the PR Newswire on July 23, 2019. See id. ¶ 11. The Notices set out the essential terms of the 

settlement and informed potential Class Members of, among other things, their right to opt out of the 

Class or object to any aspect of the Settlement. While the October 1, 2019 deadline for Class Members 

to exclude themselves or object has not yet passed, to date, no objections to the Settlement or the Plan of 

Allocation have been received, see Uslaner Decl. ¶ 77, and no requests for exclusion from the Class 

have been received, see Miller Decl. ¶ 17. The absence of any objections or requests for exclusion 

supports approval of the Settlement here. 

* * * 

In sum, all of factors to be considered under Rule 23(e)(2) support a finding that the Settlement 

is fair, reasonable, and adequate. 

II. The Plan of Allocation Is Fair and Reasonable 

In addition to seeking final approval of the Settlement, Lead Plaintiffs seek approval of the 

proposed Plan of Allocation for the Settlement proceeds. The Plan of Allocation is set forth at pages 11 

to 15 of the Notice mailed to Class Members. It is the same Plan of Allocation as that which was 

contained in the Notice approved by the Court in its Preliminary Approval Order. 

The standard for approval of a plan of allocation in a class action under Rule 23 is the same as 

the standard applicable to the settlement as a whole: the plan must be “fair, reasonable, and adequate.” 

Class Plaintiffs, 955 F.2d at 1284-85; see also Omnivision, 559 F. Supp. 2d at 1045. An allocation 

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formula need only have a reasonable basis, particularly if recommended by experienced class counsel. 

See Heritage Bond, 2005 WL 1594403, at *11. Courts hold that “[a] plan of allocation that reimburses 

class members based on the extent of their injuries is generally reasonable.” In re Oracle Sec. Litig., 

1994 WL 502054, at *1 (N.D. Cal. June 18, 1994). 

Lead Counsel developed the Plan of Allocation with the assistance of Lead Plaintiffs’ damages 

expert. ¶ 79. The Plan provides for the distribution of the Net Settlement Fund to Class Members on a 

pro rata basis based on the extent of their injuries attributable to the alleged fraud. ¶ 79. In developing 

the Plan of Allocation, Lead Plaintiffs’ expert calculated the estimated amount of artificial inflation in 

the per-share closing prices of RH’s common stock that was allegedly proximately caused by 

Defendants’ alleged false and misleading statements and omissions. ¶ 84. To calculate the estimated 

artificial inflation, the expert considered the price changes in RH common stock in reaction to the public 

disclosures that allegedly corrected the alleged misrepresentations and omissions, adjusting for price 

changes attributable to market or industry factors. Id. 

The Plan of Allocation calculates a “Recognized Loss Amount” for each purchase of RH 

common stock during the Class Period that is listed in the Claim Form and for which adequate 

supporting documentation is provided. The calculation of Recognized Loss Amounts will depend upon 

several factors, including when the claimant’s stock was purchased and sold and the purchase or sale 

price. In general, Recognized Loss Amounts will be the lower of: (i) the difference between the 

estimated artificial inflation on the date of purchase and the estimated artificial inflation on the date of 

sale, and (ii) the difference between the actual purchase price and sales price. Notice ¶¶ 61, 71. For 

shares sold during or after the 90-day period following the end of the Class Period, the Plan also limits 

Recognized Loss Amounts based on the average price of the stock during that 90-day period, consistent 

with the PSLRA. Notice ¶¶ 71(C), 71(D). Under the Plan of Allocation, claimants who purchased 

shares during the Class Period but did not hold those shares through at least one of the alleged corrective 

disclosures will have no Recognized Loss Amount as to those transactions because any loss they 

suffered would not have been caused by revelation of the alleged fraud. Notice ¶¶ 61, 71. The sum of a 

claimant’s Recognized Loss Amounts for all of his, her, or its Class Period purchases is the Claimant’s 

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“Recognized Claim,” and the Net Settlement Fund will be allocated to Authorized Claimants on a pro 

rata basis based on the relative size of their Recognized Claims. Notice ¶¶ 72, 80-81. 

One hundred percent of the Net Settlement Fund will be distributed to Class Members who 

submit eligible claims. If any funds remain after an initial distribution to Authorized Claimants, as a 

result of uncashed or returned checks or other reasons, subsequent cost-effective distributions will also 

be conducted. Notice ¶ 83. In the event any residual funds remain after all cost-effective distributions 

of the Net Settlement Fund to Eligible Claimants have been completed, the Plan of Allocation identifies 

the Investor Protection Trust as the proposed cy pres recipient. Notice ¶ 83. The Investor Protection 

Trust is a 501(c)(3) nonprofit organization devoted to investor education. See Uslaner Decl. ¶ 87. The 

Investor Protection Trust is an appropriate cy pres recipient because its mission is related of the nature 

of the securities fraud claims asserted in the Action, and courts in this District have approved it as a cy 

pres recipient in other securities fraud class actions in recent years, including In re Volkswagen “Clean 

Diesel” Mktg., Sales Practices, & Prods. Liab. Litig., ML No. 2672 CRB (JSC) (Breyer, J.), Hefler v. 

Wells Fargo & Company, Case No. 4:16-cv-05479-JST (N.D. Cal.) (Tigar, J.), and In re HP Securities 

Litigation, Case No. 3:12-CV-05980-CRB (N.D. Cal.) (Breyer, J.). As noted, payment will only be 

made to this charity when the residual amount left for re-distribution to Class Members is so small that a 

further re-distribution would not be cost effective—for example, in the event the administrative costs of 

conducting an additional distribution would largely subsume the funds available. 

Of note, as of September 13, 2019, more than 76,000 copies of the Notice, which contains the 

Plan of Allocation and advises Class Members of their right to object to the Plan, have been mailed to 

potential Class Members. See Miller Decl. ¶ 8. To date, no objections to the Plan of Allocation have 

been received. See Uslaner Decl. ¶ 77. 

In sum, Lead Plaintiffs respectfully submit that the proposed Plan of Allocation is fair and 

reasonable and should be approved. 

III. Notice to the Class Satisfied the Requirements of Rule 23 and Due Process 

In accordance with the Court’s Preliminary Approval Order, A.B. Data, the Court-approved 

Claims Administrator, began mailing copies of the Notice Packet to potential Class Members and 

nominees on July 9, 2019. See Miller Decl. ¶¶ 3-5. As of September 13, 2019, A.B. Data had mailed 

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76,685 copies of the Notice Packet by first-class mail to potential Class Members and nominees. See id. 

¶ 8. In addition, A.B. Data arranged for the Summary Notice to be published in The Wall Street Journal 

and transmitted over the PR Newswire on July 23, 2019. See id. ¶ 11. A.B. Data established a dedicated 

settlement website, RHSecuritiesLitigation.com, to provide potential Class Members with information 

concerning the Settlement and access to downloadable copies of the Stipulation, the Complaint, and any 

related orders entered by the Court. See id. ¶ 16. Copies of the Notice and Claim Form are also made 

available on Lead Counsel’s website, www.blbglaw.com. See Uslaner Decl. ¶ 76. 

The Notice provided to the Class in accordance with the Court’s Preliminary Approval Order 

satisfied all the requirements of due process, Rule 23, and the PSLRA. For any class certified under 

Rule 23(b)(3), due process and Rule 23 require that class members be given “the best notice that is 

practicable under the circumstances, including individual notice to all members who can be identified 

through reasonable effort.” Fed. R. Civ. P. 23(c)(2)(B); see also Eisen v. Carlisle & Jacquelin, 417 U.S. 

156, 173-75 (1974). Notice of a class action settlement “is satisfactory if it 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.” See Churchill, 361 F.3d at 575; Luna v. Marvell Tech. Grp., 2018 WL 1900150, 

at *2 (N.D. Cal. Apr. 20, 2018) (same); Spann v. J.C. Penney Corp., 314 F.R.D. 312, 330 (C.D. Cal. 

2016) (“Settlement notices must fairly apprise the prospective members of the class of the terms of the 

proposed settlement and of the options that are open to them in connection with the proceedings.”). 

The Notice program’s combination of individual first-class mail to all Class Members who could 

be identified with reasonable effort, supplemented by notice in a widely circulated publication, 

transmission over a business newswire, and publication on internet websites, was “the best notice . . . 

practicable under the circumstances.” Fed. R. Civ. P. 23(c)(2)(B); see, e.g., Hayes v. MagnaChip 

Semiconductor Corp., 2016 WL 6902856, at *4-5 (N.D. Cal. Nov. 21, 2016) (approving similar notice 

program); Zynga, 2016 WL 537946, at *7 (finding individual notice mailed to class members combined 

with summary publication constituted “the best form of notice available under the circumstances”). 

The contents of the Notice, which was approved by the Court in the Preliminary Approval Order 

and structured in the same way as notices previously approved by Court in Hatamian v. Advanced Micro 

Devices, No. 4:14-cv-00226-YGR, and Nathanson v. Polycom, Inc., No. 13-3476-YGR, provided the 

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necessary information for Class Members to make an informed decision regarding the Settlement and 

contained all of the information required by Rule 23(c)(2)(B), the PSLRA (15 U.S.C. § 78u-4(a)(7)), and 

this District’s Procedural Guidelines for Class Action Settlements. The Notice informed Class Members 

of, among other things, (1) the nature of the Action and the claims asserted; (2) the definition of the 

Class; (3) the amount of the Settlement; (4) the reasons why the parties are proposing the Settlement; 

(5) the estimated average recovery per affected class member; (6) the maximum amount of attorneys’ 

fees and expenses that will be sought; (7) the identity and contact information for the representatives of 

Lead Counsel who are reasonably available to answer questions from Class Members; (8) Class 

Members’ right to opt out of the Class or to object to the Settlement, the Plan of Allocation, or the 

requested attorneys’ fees or expenses; (9) the binding effect of a judgment on Class Members; and (10) 

the dates and deadlines for Settlement-related events. The Notice also contained the Plan of Allocation 

and provided Class Members with information on how to submit a Claim Form in order to be eligible to 

receive a distribution from the Net Settlement Fund. 

In sum, the Notice fairly apprised Class Members of their rights with respect to the Settlement, is 

the best notice practicable under the circumstances, and complied with the Court’s Preliminary Approval 

Order, the Federal Rules of Civil Procedure, the PSLRA, and due process. 

CONCLUSION 

For these reasons, Lead Plaintiffs respectfully requests that the Court grant final approval of the 

proposed Settlement and approve the Plan of Allocation. 

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Dated: September 17, 2019 Respectfully submitted, 

BERNSTEIN LITOWITZ BERGER & 

 GROSSMANN LLP 

By: s/ Jonathan D. Uslaner

JONATHAN D. USLANER 

jonathanu@blbglaw.com

2121 Avenue of the Stars, Suite 2575 

Los Angeles, CA 90067 

Tel: (310) 819-3472 

 --and-- 

GERALD H. SILK 

jerry@blbglaw.com 

AVI JOSEFSON 

avi@blbglaw.com 

JOHN C. BROWNE (Pro Hac Vice) 

johnb@blbglaw.com 

1251 Avenue of the Americas, 44th Floor 

New York, NY 10020 

Tel: (212) 554-1400 

Fax: (212) 554-1444 

Counsel for Lead Plaintiffs Public School 

Teachers’ Pension & Retirement Fund of 

Chicago and Arkansas Teacher Retirement System, 

and Lead Counsel for the Class

#1321022 

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