MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT 

Case No. 4:17-00554-YGR 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

BERNSTEIN LITOWITZ BERGER 

 & GROSSMANN LLP 

JONATHAN D. USLANER (Bar No. 256898) 

jonathanu@blbglaw.com 

12481 High Bluff Drive, Suite 300 

San Diego, CA 92130 

Tel: (858) 793-0070 

Fax: (858) 793-0323 

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’ NOTICE OF 

UNOPPOSED MOTION FOR 

PRELIMINARY APPROVAL OF 

SETTLEMENT, AND 

MEMORANDUM OF POINTS AND 

AUTHORITIES IN SUPPORT 

THEREOF 

Judge: Hon. Yvonne Gonzalez Rogers 

Courtroom: 1 

Date: June 18, 2019 

 Time: 2:00 p.m. 

Case 4:17-cv-00554-YGR Document 135 Filed 05/06/19 Page 1 of 30
MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT 

Case No. 4:17-00554-YGR -i1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

TABLE OF CONTENTS 

PAGE 

TABLE OF AUTHORITIES ......................................................................................................... iii 

NOTICE OF UNOPPOSED MOTION FOR PRELIMINARY APPROVAL OF 

SETTLEMENT .................................................................................................................. vi

STATEMENT OF ISSUES TO BE DECIDED ........................................................................... vii

MEMORANDUM OF POINTS AND AUTHORITIES ................................................................ 1

I. PRELIMINARY STATEMENT ......................................................................................... 1

A. Factual Background ................................................................................................ 3

B. Procedural History .................................................................................................. 3

C. Settlement Negotiations .......................................................................................... 6

II. THE PROPOSED SETTLEMENT ..................................................................................... 6

A. The Terms Of The Settlement................................................................................. 6

B. The Plan Of Allocation ........................................................................................... 8

III. ARGUMENT ...................................................................................................................... 8

A. The Court Should Grant Preliminary Approval Of The Proposed 

Settlement ............................................................................................................... 8

1. The Proposed Settlement Is The Product Of Good Faith, 

Arm’s-Length Negotiations Among Experienced Counsel 

Mediated By An Experienced Private Mediator ......................................... 9

2. The Proposed Settlement Has No Obvious Deficiencies And 

Does Not Improperly Grant Preferential Treatment To Class 

Representatives Or Segments Of The Class .............................................. 11

3. The Proposed Settlement Falls Well Within The Range Of 

Reasonableness And Warrants Notice And A Hearing On Final 

Approval ................................................................................................... 11

IV. THE PLAN OF ALLOCATION IS FAIR AND REASONABLE ................................... 14

V. THE COURT SHOULD APPROVE THE PROPOSED FORM OF NOTICE 

AND THE PROPOSED PLAN FOR PROVIDING NOTICE TO THE 

CLASS AND PROCESSING CLAIMS ........................................................................... 15

A. Retention of A.B. Data.......................................................................................... 15

B. Proposed Notice Procedures ................................................................................. 16

Case 4:17-cv-00554-YGR Document 135 Filed 05/06/19 Page 2 of 30
MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT 

Case No. 4:17-00554-YGR -ii1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

C. Claims Processing ................................................................................................. 18

D. Estimated Notice and Administrative Costs ......................................................... 18

VI. ATTORNEYS’ FEES, LITIGATION EXPENSES AND PLAINTIFFS’ 

EXPENSES ....................................................................................................................... 19

VII. PROPOSED SCHEDULE OF EVENTS .......................................................................... 20

VIII. CONCLUSION ................................................................................................................. 21

Case 4:17-cv-00554-YGR Document 135 Filed 05/06/19 Page 3 of 30
MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT 

Case No. 4:17-00554-YGR -iii1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

TABLE OF AUTHORITIES 

CASES PAGE(S) 

In re Biolase, Inc. Sec. Litig., 

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

Churchill Vill., L.L.C. v. Gen. Elec., 

361 F.3d 566 (9th Cir. 2004) ......................................................................................................11 

Class Plaintiffs v. Seattle, 

955 F.2d 1268 (9th Cir. 1992) ......................................................................................7, 8, 14, 15 

Destefano v. Zynga, Inc., 

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

Hatamian v. Advanced Micro Devices, Inc., 

Case No. 4:14-cv-00226-YGR (N.D. Cal. Mar. 2, 2018), ECF No. 363 ......................................8 

Hatamian v. Advanced Micro Devices, Inc., 

Case No. 4:14-cv-00226-YGR (N.D. Cal. Mar. 2, 2018), ECF No. 364 ....................................19 

Hatamian v. Advanced Micro Devices, Inc., 

Case No. 4:14-cv-00226-YGR (N.D. Cal. Mar. 6, 2018), ECF No. 367 ......................................7 

Hefler v. Wells Fargo & Co., 

2018 WL 6619983 (N.D. Cal. Dec. 18, 2018) ............................................................................20 

Hefler v. Wells Fargo & Co., 

Case No. 3:16-cv-05479-JST (N.D. Cal. Dec. 20, 2018), ECF No. 253 ......................................8 

Huddlestun v. Harrison Glob., LLC, 

2018 WL 3752368 (S.D. Cal. Aug. 7, 2018) ............................................................................8, 9 

In re Indep. Energy Holdings PLC Sec. Litig., 

2003 WL 22244676 (S.D.N.Y. Sept. 29, 2003) ..........................................................................10 

In re Int’l Rectifier Corp. Sec. Litig., 

Case No. 2:07-cv-02544-JFW (C.D. Cal. Feb. 8, 2010), ECF No. 316 .....................................19 

Linney v. Cellular Alaska P’ship, 

151 F.3d 1234 (9th Cir. 1998) ......................................................................................................8 

Linney v. Cellular Alaska P’ship, 

1997 WL 450064 (N.D. Cal. July 18, 1997) .................................................................................9 

Louie v. Kaiser Found. Health Plan, Inc., 

2008 WL 4473183 (S.D. Cal. Oct. 6, 2008) ...............................................................................12 

Case 4:17-cv-00554-YGR Document 135 Filed 05/06/19 Page 4 of 30
MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT 

Case No. 4:17-00554-YGR -iv1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

In re N.C.A.A. Athletic Grant-in-Aid Cap Antitrust Litig., 

2017 WL 6040065 (N.D. Cal. Dec. 6, 2017), aff’d, 

2019 WL 1752610 (9th Cir. Apr. 17, 2019) ...............................................................................20 

Nat’l Rural Telecomms. Coop. v. DIRECTV, Inc., 

221 F.R.D. 523 (C.D. Cal. 2004) ..................................................................................................9 

In re Netflix Privacy Litig., 

2013 WL 1120801 (N.D. Cal. Mar. 18, 2013) ..............................................................................9 

In re Omnivision Techs., Inc., 

559 F. Supp. 2d 1036 (N.D. Cal. 2008) ................................................................................10, 13 

Paul, Johnson, Alston & Hunt v. Graulty, 

886 F.2d 268 (9th Cir. 1989) ......................................................................................................19 

In re Portal Software, Inc. Sec. Litig., 

2007 WL 1991529 (N.D. Cal. June 30, 2007) ............................................................................18 

Reyn’s Pasta Bella, LLC v. Visa USA, Inc., 

442 F.3d 741 (9th Cir. 2006) ........................................................................................................7 

Reynolds v. Direct Flow Med., Inc., 

2019 WL 1084179 (N.D. Cal. Mar. 7, 2019) ..............................................................................11 

Satchell v. Fed. Express Corp., 

2007 WL 1114010 (N.D. Cal. Apr. 13, 2007) ............................................................................10 

In re Sorbates Direct Purchaser Antitrust Litig., 

2002 WL 31655191 (N.D. Cal. Nov. 15, 2002) .........................................................................18 

St. Louis Police Ret. Sys. v. Severson, 

2014 WL 3945655 (N.D. Cal. Aug. 11, 2014) ...........................................................................20 

Stewart v. Applied Materials, Inc., 

2017 WL 3670711 (N.D. Cal. Aug. 25, 2017) ...........................................................................10 

In re Sunpower Sec. Litig., 

Case No. 3:09-cv-5473-RS (N.D. Cal. July 3, 2013), ECF No. 268 ............................................7 

In re Tableware Antitrust Litig., 

484 F. Supp. 2d 1078 (N.D. Cal. 2007) ........................................................................................9 

Vizcaino v. Microsoft Corp., 

290 F.3d 1043 (9th Cir. 2002) ....................................................................................................20 

West v. Circle K Stores, Inc., 

2006 WL 1652598 (E.D. Cal. June 13, 2006) ..............................................................................8 

Case 4:17-cv-00554-YGR Document 135 Filed 05/06/19 Page 5 of 30
MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT 

Case No. 4:17-00554-YGR -v1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

In re Yahoo! Inc. Customer Data Sec. Breach Litig., 

2019 WL 387322 (N.D. Cal. Jan. 30, 2019) .................................................................................9 

Young v. Polo Retail, LLC, 

2006 WL 3050861 (N.D. Cal. Oct. 25, 2006).............................................................................11 

STATUTES, RULES & REGULATIONS

15 U.S.C. 

§ 78u-4(a)(4) ...............................................................................................................................20 

§ 78u-4(a)(7) ...............................................................................................................................16 

28 U.S.C. 

§ 1715 (2005) ..............................................................................................................................17 

Federal Rules of Civil Procedure 

Rule 23(c)(2)(B)..........................................................................................................................17 

Rule 23(e)(1) .............................................................................................................1, 8, 9, 11, 17 

Rule 23(e)(2) .................................................................................................................................8 

Case 4:17-cv-00554-YGR Document 135 Filed 05/06/19 Page 6 of 30
MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT 

Case No. 4:17-00554-YGR -vi1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

NOTICE OF UNOPPOSED MOTION 

FOR PRELIMINARY APPROVAL OF SETTLEMENT 

TO: ALL PARTIES AND THEIR ATTORNEYS OF RECORD 

PLEASE TAKE NOTICE that Lead Plaintiffs Public School Teachers’ Pension & 

Retirement Fund of Chicago and Arkansas Teacher Retirement System hereby move for an order 

pursuant to Rule 23(e)(1) of the Federal Rules of Civil Procedure that will: (1) preliminarily 

approve the proposed Settlement of this Action; (2) approve the form and manner of giving notice 

of the proposed Settlement to the Class; and (3) schedule a final settlement hearing before the 

Court to determine whether the proposed Settlement, proposed Plan of Allocation, and Lead 

Counsel’s motion for an award of attorneys’ fees and Litigation Expenses should be approved.1

The motion is noticed for a hearing on June 18, 2019, at 2:00 p.m. before the Honorable Yvonne 

Gonzalez Rogers, United States District Judge, at the United States District Court for the Northern 

District of California, 1301 Clay Street, Oakland, CA 94612, but, as the motion is unopposed, the 

Parties agree that it may be decided on the papers at this time and before the deadline for any 

opposition and without a hearing. 

The grounds for this motion are that the proposed Settlement is within the range of what 

could be found to be fair, reasonable, and adequate and that notice of its terms is appropriate and 

may be disseminated to members of the proposed Class and a hearing for final approval of the 

proposed Settlement scheduled. 

This motion is supported by the following memorandum of points and authorities in 

support thereof, and the Stipulation and Agreement of Settlement dated May 6, 2019, and the 

exhibits thereto, which embody the terms of the proposed Settlement between the Parties, 

submitted herewith, the previous filings and orders in this case, and such other and further 

representations as may be made by counsel at any hearing on this matter. 

1

 Unless otherwise indicated, capitalized terms shall have their meaning as defined in the 

Stipulation, attached as Exhibit 1. 

Case 4:17-cv-00554-YGR Document 135 Filed 05/06/19 Page 7 of 30
MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT 

Case No. 4:17-00554-YGR -vii1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

STATEMENT OF ISSUES TO BE DECIDED 

1. Whether the proposed $50 million cash settlement of this Action is within the range 

of fairness, reasonableness, and adequacy to warrant the Court’s preliminary approval and the 

dissemination of notice of its terms to members of the proposed Class. 

2. Whether the proposed form of settlement notice and proof of claim and release form 

and the manner for dissemination to the Class should be approved. 

3. Whether the Court should set a date for a hearing for final approval of the proposed 

Settlement, the proposed Plan of Allocation, and the application of Lead Counsel for an award of 

attorneys’ fees and reimbursement of Litigation Expenses. 

Case 4:17-cv-00554-YGR Document 135 Filed 05/06/19 Page 8 of 30
MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT 

Case No. 4:17-00554-YGR -1- 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

MEMORANDUM OF POINTS AND AUTHORITIES

I. PRELIMINARY STATEMENT 

Lead Plaintiffs Public School Teachers’ Pension & Retirement Fund of Chicago and 

Arkansas Teacher Retirement System (“Lead Plaintiffs”) respectfully submit this memorandum of 

points and authorities in support of their unopposed motion, pursuant to Rule 23(e)(1) of the 

Federal Rules of Civil Procedure, for preliminary approval of the proposed settlement (the 

“Settlement”) of this class action. As this motion is unopposed, the Parties agree that it may be 

decided on the papers at this time.

The Settlement, as set forth in the Stipulation and Agreement of Settlement dated as of 

May 6, 2019 (the “Stipulation”), attached hereto as Exhibit 1, provides for a payment of $50 million 

in cash into an escrow account for the benefit of the Class. Lead Plaintiffs submit that the 

Settlement represents an excellent result for the Class and ultimately should be approved by this 

Court, especially given the risks, costs, and delays of continued litigation, including an expected 

motion for summary judgment, trial, and appeals that would be taken from any verdict for the 

Class at trial. 

The Settlement was reached only after months of arms’-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. Prior to entering into the 

Settlement, Lead Plaintiffs and Lead Counsel had conducted a thorough investigation of the 

claims; filed a detailed amended complaint; defeated Defendants’ motion to dismiss; consulted 

extensively with experts; and engaged in substantial fact discovery, which involved obtaining and 

reviewing more than 10 million pages of documents from Defendants and third parties and taking 

or defending 15 depositions. Accordingly, Lead Plaintiffs and Lead Counsel had a well-developed 

understanding of the strengths and weaknesses of the claims in the Action at the time the 

Settlement was reached. 

Lead Plaintiffs and Lead Counsel believe that the Settlement represents an excellent result 

for the Class based on the risks and possible outcomes of the litigation. Depending upon the 

Case 4:17-cv-00554-YGR Document 135 Filed 05/06/19 Page 9 of 30
MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT 

Case No. 4:17-00554-YGR -2- 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

outcome of certain disputes, Lead Plaintiffs may have recovered nothing or substantially less than 

the Settlement Amount. Here, Lead Plaintiffs and the Class would face substantial obstacles in 

proving that the Defendants’ alleged misstatements were false, that Defendants acted with scienter, 

in establishing loss causation, and demonstrating the full amount of the Class’s damages. For 

example, Lead Plaintiffs would face significant challenges in proving that Defendants’ statements 

about the launch of RH Modern and the Company’s inventory levels were false when made. 

Defendants would argue at summary judgment and trial that the Company had simply suffered 

unexpected short-term supply chain issues and, accordingly, their statements were accurate when 

made. Defendants would also argue that, even if any of their statements were false or misleading, 

they did not have an intent to mislead investors. Defendants would further contend that they had 

no motive to commit fraud and that the Individual Defendants did not benefit from the alleged 

fraud. 

Even if falsity and scienter could be established, Defendants would argue that Lead 

Plaintiffs would have difficulty establishing loss causation because certain of the disclosures were 

not clearly corrective of the previously alleged misstatements. Defendants would also contend that 

all or most of the stock price declines following the alleged disclosures resulted from other news 

released by the Company on those dates, unrelated to the alleged fraud, such as lower than 

projected net revenues, and that Lead Plaintiffs would not be able to disaggregate the effect of any 

fraud-related disclosures in order to prove damages or, if they could do so, the damages resulting 

from disclosure of the alleged fraud would be substantially smaller. In light of all these risks and 

the costs and delays of further litigation, Lead Plaintiffs and Lead Counsel believe the $50 million 

Settlement represents an excellent resolution of the Action for the Class. 

Lead Plaintiffs request that this Court enter the Proposed Order Preliminarily Approving 

Settlement and Providing for Notice (the “Preliminary Approval Order”) attached as Exhibit A to 

the Stipulation and as Exhibit 2 hereto. The Preliminary Approval Order, among other things: 

(i) schedules a final hearing to consider the fairness, reasonableness, and adequacy of the proposed 

Settlement, the proposed Plan of Allocation of the Net Settlement Fund, and Lead Counsel’s 

application for attorneys’ fees and expenses (the “Settlement Hearing”); (ii) preliminarily approves 

Case 4:17-cv-00554-YGR Document 135 Filed 05/06/19 Page 10 of 30
MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT 

Case No. 4:17-00554-YGR -3- 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

the Settlement as fair, reasonable, and adequate to the Class, pending the Settlement Hearing; 

(iii) approves the form and method of disseminating notice to the Class; (iv) appoints the claims 

administrator recommended by Lead Counsel to disseminate notice and administer the Settlement; 

and (v) establishes procedures and deadlines for Class Members to submit Claim Forms for 

payments from the Net Settlement Fund, request exclusion from the Class, or object to the terms of 

the Settlement, Plan of Allocation, and/or requested fees and expenses. 

A. Factual Background 

The allegations and claims in this Action are familiar to the Court and detailed in the 

Consolidated Class Action Complaint for Violations of the Federal Securities Laws (ECF No. 45) 

(the “Complaint”). In short, Lead Plaintiffs allege that, from March 26, 2015 through June 8, 

2016 (the “Class Period”), Defendants made misrepresentations to investors about important 

elements of RH’s business including the launch of its new RH Modern line and about the 

Company’s inventory levels Lead Plaintiffs allege that those misrepresentations and omissions 

artificially inflated the price of RH stock during the Class Period, and that the stock price fell 

through a series of partial disclosures of the alleged misstatements beginning on December 10, 

2015 and concluding on June 8, 2016. 

Defendants deny any wrongdoing. Defendants contend that they made no material 

misstatements or omissions during the Class Period and that, in any event, Class Members were 

not damaged by the alleged misstatements. Moreover, Defendants could point to the fact that 

there was no SEC or other government investigation of the alleged fraud, that there was never any 

restatement of RH’s financial statements, and that RH’s stock price swiftly rebounded and today 

trades at a higher price than the highest price during the Class Period. 

B. Procedural History 

On February 2, 2017, a class action complaint, styled City of Miami General Employees’ 

& Sanitation Employees’ Retirement Trust v. RH, Inc., et al., Case No. 4:17-cv-00554-YGR, was 

filed in the United States District Court for the Northern District of California (the “Court”) 

asserting violations of federal securities laws against RH and the Individual Defendants. (ECF 

No. 1.) In accordance with the Private Securities Litigation Reform Act of 1995, 15 U.S.C. 

Case 4:17-cv-00554-YGR Document 135 Filed 05/06/19 Page 11 of 30
MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT 

Case No. 4:17-00554-YGR -4- 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

§ 78u-4 (the “PSLRA”), notice to the public was issued stating the deadline by which putative 

class members could move the Court for appointment as lead plaintiff. A related securities class 

action complaint, Errichiello v. RH, Case No. 3:17-cv-01425-WHO (“Errichiello”), was filed in 

the Court on March 16, 2017.

Public School Teachers’ Pension & Retirement Fund of Chicago and Arkansas Teacher 

Retirement System moved for appointment as Lead Plaintiffs on April 3, 2017, as did several 

other groups of competing movants. (ECF Nos. 7-26.) On April 26, 2017, the Court entered an 

Order which provided that the case be recaptioned as In re RH, Inc. Securities Litigation, Case 

No. 4:17-cv-00554-YGR (the “Action”); ordered that Errichiello be consolidated into the Action 

and that any subsequently filed, removed, or transferred actions related to the claims asserted in 

the Action be consolidated; appointed Public School Teachers’ Pension & Retirement Fund of 

Chicago and Arkansas Teacher Retirement System as Lead Plaintiffs for the Action; and approved 

Lead Plaintiffs’ selection of Bernstein Litowitz Berger & Grossmann LLP (“BLB&G”) as Lead 

Counsel for the Class. (ECF No. 39.) 

On June 12, 2017, Lead Plaintiffs filed and served the Consolidated Class Action 

Complaint for Violations of the Federal Securities Laws (ECF No. 45) asserting claims against all 

Defendants under Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and 

Rule 10b-5 promulgated thereunder, and against the Individual Defendants under Section 20(a) of 

the Exchange Act. The Complaint alleges that, during the Class Period, Defendants made 

materially false and misleading statements about the launch of RH’s new product line, RH 

Modern, and the Company’s inventory levels. The Complaint further alleges that the price of RH 

common stock was artificially inflated as a result of Defendants’ allegedly false and misleading 

statements and declined when the truth was revealed. 

On August 2, 2017, Defendants filed and served a motion to dismiss the Complaint (ECF 

No. 50) and a request that the Court consider documents incorporated by reference in the 

Complaint and take judicial notice of other documents submitted to the Court. (ECF No. 51.) On 

September 11, 2017, Lead Plaintiffs filed and served memoranda of law in opposition to 

Defendants’ motion to dismiss and request for judicial notice. (ECF Nos. 53-54.) On October 6, 

Case 4:17-cv-00554-YGR Document 135 Filed 05/06/19 Page 12 of 30
MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT 

Case No. 4:17-00554-YGR -5- 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2017, Defendants filed and served reply papers in support of their motion and their request for 

judicial notice and made a supplemental request for judicial notice. (ECF Nos. 56-58.) On 

October 13, 2017, Lead Plaintiffs filed objections to reply evidence accompanying Defendants’ 

reply papers. (ECF No. 59.) 

The Court held oral argument on the motion to dismiss and related request for judicial 

notice on October 31, 2017. (ECF Nos. 60, 63.) On February 26, 2018, the Court entered an 

Order which denied Defendants’ motion to dismiss. (ECF No. 68.) Defendants filed their Answer 

to the Complaint on April 10, 2018. (ECF No. 78.) 

Discovery in the Action commenced in March 2018. Lead Plaintiffs prepared and served 

initial disclosures, requests for production of documents, and interrogatories on Defendants, 

exchanged numerous letters with Defendants concerning discovery issues, and served dozens of 

document subpoenas on third parties. Defendants and third parties produced a total of over 10 

million pages of documents to Lead Plaintiffs, and Lead Plaintiffs produced over 12,000 pages of 

documents to Defendants in response to their requests. Fifteen depositions were taken in the 

Action, which included depositions of representatives of both Lead Plaintiffs and of Defendants’ 

expert witness taken in connection with the motion for class certification, and twelve depositions 

of fact witnesses. 

On June 22, 2018, Lead Plaintiffs filed their motion for class certification, which was 

accompanied by a report from Lead Plaintiffs’ expert, Dr. Steven Feinstein, which opined that RH 

common stock traded in an efficient market during the Class Period and that per-share damages 

could be measured for all Class Members using a common methodology. (ECF Nos. 94-95.) On 

August 14, 2018, Defendants filed their opposition to the class certification motion, which 

included an expert report challenging Dr. Feinstein’s conclusion regarding the common damages 

methodology. (ECF No. 101). Lead Plaintiffs filed reply papers in further support of their motion 

on September 11, 2018. (ECF Nos. 103-104.) 

On October 1, 2018, the Court held oral argument on Lead Plaintiffs’ motion for class 

certification. (ECF Nos. 108, 110.) On October 11, 2018, the Court granted the motion, 

certifying the proposed Class, appointing Lead Plaintiffs as Class Representatives and appointing 

Case 4:17-cv-00554-YGR Document 135 Filed 05/06/19 Page 13 of 30
MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT 

Case No. 4:17-00554-YGR -6- 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

BLB&G as Class Counsel. (ECF No. 111.) On October 25, 2018, Defendants filed a petition to 

appeal the Court’s order certifying the Class to the Court of Appeals for the Ninth Circuit pursuant 

to Rule 23(f) of the Federal Rules of Civil Procedure. (ECF No. 112.) The Court of Appeals 

denied that petition on January 24, 2019. (ECF No. 121.) 

C. Settlement Negotiations 

While discovery and the briefing of Lead Plaintiffs’ class certification motion were 

ongoing, the Parties agreed to discuss the possibility of resolving the Action through settlement 

and scheduled a mediation with former United States District Judge Layn R. Phillips, an 

experienced mediator of complex litigation. On August 6, 2018, in advance of the mediation, the 

Parties exchanged detailed mediation statements with numerous exhibits that were also submitted 

to Judge Phillips. A full-day, in-person mediation session with Judge Phillips was held on 

August 24, 2018. At the mediation session, the Parties engaged in vigorous settlement 

negotiations with the assistance of Judge Phillips but were not able to reach an agreement. 

Following certification of the Class, the Parties scheduled a second mediation session 

before Judge Phillips for March 1, 2019. In advance of that session, the Parties submitted and 

exchanged supplemental mediation statements on February 15, 2019. After a full-day, in-person 

mediation session on March 1, 2019, Judge Phillips issued a mediator’s proposal on March 3, 

2019, and the Parties continued their negotiations in the weeks immediately following the 

mediation. On March 21, 2019, the Parties executed a Term Sheet setting forth their agreement in 

principle to settle the Action in return for Defendants causing payment of $50,000,000 in cash to 

be paid for the benefit of the Class. 

On May 6, 2019, the Parties executed the Stipulation setting forth the full terms and 

conditions of the Settlement. 

II. THE PROPOSED SETTLEMENT 

A. The Terms Of The Settlement 

The Settlement provides that Defendants will cause $50 million in cash to be paid into an 

interest-bearing escrow account for the Class. The Settlement Amount, plus accrued interest, after 

the deduction of attorneys’ fees and Litigation Expenses awarded by the Court, Notice and 

Case 4:17-cv-00554-YGR Document 135 Filed 05/06/19 Page 14 of 30
MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT 

Case No. 4:17-00554-YGR -7- 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Administration Costs, and Taxes and related expenses (the “Net Settlement Fund”), will be 

distributed among Class Members who submit valid Claim Forms (“Authorized Claimants”), in 

accordance with a plan of allocation to be approved by the Court. 

The Settlement, if approved by the Court, will apply to the Class that was certified by the 

Court in its October 11, 2018 Order – “all persons and entities who purchased or otherwise 

acquired the common stock of RH during the period from March 26, 2015 through June 8, 2016, 

inclusive” – with only minor refinements. See Stipulation ¶ 1(h).2

In exchange for the payment of the Settlement Amount, Class Members will release the 

“Released Plaintiffs’ Claims.” Stipulation ¶ 1(pp). The Settlement’s release provision is 

consistent with release provisions approved by courts in this District and elsewhere.3 Of note, the 

Settlement’s release is reasonable as it is limited to claims that relate to transactions in or 

retentions of RH common stock during the same Class Period and that relate to the same factual 

allegations as set forth in the Action (or that relate to the conduct of the Action itself). Id. In 

addition, the Settlement’s release provision does not release the pending derivative claims against 

Defendants arising out the same factual predicate. Id. 

Lead Plaintiffs support the proposed Settlement and believe it represents an excellent 

recovery on the claims asserted in this Action, and is fair, adequate, reasonable, and in the best 

interests of the Class. 

2

 The only differences between the definition of the Class proposed under the Settlement and the 

class that was put forth in Lead Plaintiffs’ class certification motion are minor refinements in the 

list of persons and entities excluded from the class by definition because of their affiliation with 

Defendants. Specifically, the Class set forth in the Stipulation excludes “any person who is alleged 

to have participated in the wrongdoing alleged” and clarifies that this exclusion applies only to the 

two Individual Defendants. See Stipulation ¶ 1(h)(v) & n.1. In addition, the insurance carriers and 

affiliates of RH are no longer excluded from the definition of the Class in the Stipulation. See

Stipulation ¶ 1(h). 

3

See, e.g., Hatamian v. Advanced Micro Devices, Inc., Case No. 4:14-cv-00226-YGR, slip op. at 7 

(N.D. Cal. Mar. 6, 2018), ECF No. 367 (approving similar release); In re Sunpower Sec. Litig., 

Case No. 3:09-cv-5473-RS, slip op. at 3 (N.D. Cal. July 3, 2013), ECF No. 268 (same); see 

generally Reyn’s Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 748 (9th Cir. 2006) (a class 

release may release claims not asserted in the action as long as they arise from the same set of 

factual allegations); Class Plaintiffs v. Seattle, 955 F.2d 1268, 1287-88 (9th Cir. 1992) (same). 

Case 4:17-cv-00554-YGR Document 135 Filed 05/06/19 Page 15 of 30
MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT 

Case No. 4:17-00554-YGR -8- 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

B. The Plan Of Allocation 

The proposed Plan of Allocation, which is set forth in the Notice to be mailed to Class 

Members, is similar to plans of allocation approved in numerous other securities class actions in this 

District and elsewhere.4 The Plan allocates the Net Settlement Fund among Class Members who 

submit valid Claim Forms on a pro rata basis based on the amount of each claimant’s Recognized Claim. 

The formula for determining each claimant’s Recognized Claim is properly based on Lead 

Plaintiffs’ damages expert’s calculations of the amounts by which the price of RH common stock 

was artificially inflated at various points during the Class Period. The formula properly takes into 

consideration when the claimant purchased the shares and, if the claimant sold the shares, when it 

sold them. Lead Plaintiffs support the Plan of Allocation and believe it is fair and reasonable, and 

should be approved together with the Settlement at the Settlement Hearing. 

III. ARGUMENT 

A. The Court Should Grant Preliminary 

Approval Of The Proposed Settlement 

Strong judicial policy favors settlement of class actions. See, e.g., Class Plaintiffs, 955 

F.2d at 1276; Linney v. Cellular Alaska P’ship, 151 F.3d 1234, 1238 (9th Cir. 1998); West v. Circle 

K Stores, Inc., 2006 WL 1652598, at *1 (E.D. Cal. June 13, 2006). Settlements of complex cases 

greatly contribute to the efficient utilization of scarce judicial resources and achieve the speedy 

resolution of justice. 

A district court’s review of a proposed class action settlement is a two-step process. First, 

the court performs a preliminary review of the terms of the proposed settlement to determine 

whether to send notice of the proposed settlement to the class, see Fed. R. Civ. P. 23(e)(1); and 

second, after notice has been provided and a hearing has been held, determines whether to grant 

final approval of the settlement, see Fed. R. Civ. P. 23(e)(2); see also Huddlestun v. Harrison 

4

See, e.g., Hefler v. Wells Fargo & Co., Case No. 3:16-cv-05479-JST, slip op. at 2 (N.D. Cal. Dec. 

20, 2018), ECF No. 253 (approving similar Plan of Allocation); Hatamian v. Advanced Micro 

Devices, Inc., Case No. 4:14-cv-00226-YGR, slip op. at 2 (N.D. Cal. Mar. 2, 2018), ECF No. 363 

(same). 

Case 4:17-cv-00554-YGR Document 135 Filed 05/06/19 Page 16 of 30
MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT 

Case No. 4:17-00554-YGR -9- 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Glob., LLC, 2018 WL 3752368, at *2 (S.D. Cal. Aug. 7, 2018); Nat’l Rural Telecomms. Coop. v. 

DIRECTV, Inc., 221 F.R.D. 523, 525 (C.D. Cal. 2004). A court grants preliminary approval to 

authorize notice to the Class upon a finding that it “will likely be able” to approve the Settlement 

as fair, reasonable, and adequate at the final approval hearing. Fed. R. Civ. P. 23(e)(1)(B).5

The Settlement here merits preliminary approval.6

1. The Proposed Settlement Is The Product Of Good Faith, 

Arm’s-Length Negotiations Among Experienced 

Counsel Mediated By An Experienced Private Mediator 

The fact that the Parties reached the Settlement after arm’s-length negotiations between 

experienced counsel and with the assistance of an experienced mediator 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”); see also Linney v. Cellular Alaska P’ship, 1997 WL 450064, 

at *4-5 (N.D. Cal. July 18, 1997). 

During the two mediation sessions, the Parties fully explored the strengths and weaknesses 

of their respective claims and defenses. The negotiations focused on the complex and heavily 

disputed issues of whether RH or the Individual Defendants made misstatements and acted with the 

requisite scienter, as well as on loss causation issues. Representatives of Lead Plaintiffs attended 

both mediation sessions and actively participated in, and were informed of, the progress of settlement 

negotiations. 

5

 This standard for preliminary approval of class action settlements was newly established by 

amendments to Rule 23(e) that became effective on December 1, 2018. Prior to those 

amendments, courts had developed a standard for preliminary approval through case law that was 

substantively similar to the current standard but phrased differently. A common formulation was 

that the court should grant preliminary approval if “[1] the proposed settlement appears to be the 

product of serious, informed, non-collusive negotiations, [2] has no obvious deficiencies, [3] does 

not improperly grant preferential treatment to class representatives or segments of the class, and 

[4] falls within the range of possible approval.” In re Yahoo! Inc. Customer Data Sec. Breach 

Litig., 2019 WL 387322, at *4 (N.D. Cal. Jan. 30, 2019); In re Tableware Antitrust Litig., 484 F. 

Supp. 2d 1078, 1079 (N.D. Cal. 2007) (same). 

6

 Lead Plaintiffs will more fully address the reasonableness of the Settlement at final approval. 

Case 4:17-cv-00554-YGR Document 135 Filed 05/06/19 Page 17 of 30
MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT 

Case No. 4:17-00554-YGR -10- 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

The mediation process demonstrates that the Settlement was hard-fought and negotiated at 

arm’s length. Judge Phillips, a former federal judge with more than 25 years of experience in 

mediating complex civil litigation, facilitated the mediation process. As courts in this District and 

elsewhere have found, “[t]he assistance of an experienced mediator in the settlement process 

confirms that the settlement is non-collusive.” Satchell v. Fed. Express Corp., 2007 WL 1114010, 

at *4 (N.D. Cal. Apr. 13, 2007); In re Indep. Energy Holdings PLC Sec. Litig., 2003 WL 

22244676, at *4 (S.D.N.Y. Sept. 29, 2003) (“the fact that the Settlement was reached after 

exhaustive arm’s-length negotiations, with the assistance of a private mediator experienced in 

complex litigation, is further proof that it is fair and reasonable”). 

Courts have also given considerable weight to the opinion of experienced and informed 

counsel who support settlement. In deciding whether to approve a proposed settlement of a class 

action, “[t]he recommendations of plaintiffs’ counsel should be given a presumption of 

reasonableness.” Stewart v. Applied Materials, Inc., 2017 WL 3670711, at *6 (N.D. Cal. Aug. 25, 

2017); accord In re Omnivision Techs., Inc., 559 F. Supp. 2d 1036, 1043 (N.D. Cal. 2008) (same). 

Here, Lead Counsel has a thorough understanding of the merits and risks of the Action and 

extensive experience in securities litigation. Lead Counsel’s and Lead Plaintiffs’ beliefs in the 

fairness and reasonableness of this Settlement warrant a presumption of reasonableness. 

In addition, the Parties reached the agreement to settle only after conducting extensive 

discovery, which included obtaining and reviewing 10 million pages of documents from 

Defendants and third parties and taking or defending 15 depositions, including the depositions of a 

number of high-level employees of RH. The extensive discovery conducted provided Lead 

Plaintiffs and Lead Counsel with ample information to ascertain the strengths and risks of the 

claims asserted in the Action and for their conclusion that the $50 million Settlement was fair and 

reasonable given the risks of the case. 

In sum, the substantial recovery to the Class, the arm’s-length nature of the negotiations, 

and the participation of sophisticated counsel throughout the Action support a finding that the 

proposed Settlement is fair, reasonable, and adequate to justify notice to the Class and a hearing on 

final approval. 

Case 4:17-cv-00554-YGR Document 135 Filed 05/06/19 Page 18 of 30
MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT 

Case No. 4:17-00554-YGR -11- 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2. The Proposed Settlement Has No Obvious Deficiencies 

And Does Not Improperly Grant Preferential Treatment 

To Class Representatives Or Segments Of The Class 

The Settlement “has no obvious deficiencies [and] does not improperly grant preferential 

treatment to class representatives or segments of the class[.]” Young v. Polo Retail, LLC, 2006 WL 

3050861, at *5 (N.D. Cal. Oct. 25, 2006). The $50 million recovery constitutes a significant and 

certain benefit for Class Members. Subject to Court approval, and pursuant to Lead Plaintiffs’ 

approval, Lead Counsel will seek attorneys’ fees of 15% of the Settlement Fund, and 

reimbursement of no more than $950,000 in Litigation Expenses. Lead Plaintiffs will receive 

distributions from the Net Settlement Fund in accordance with the Plan of Allocation in the same 

manner as all other Class Members, and will also seek reimbursement of costs incurred as a result 

of their representation of the Class, as authorized by the PSLRA, in an amount not to exceed 

$10,000 in aggregate. As discussed below, the proposed Plan of Allocation for allocating the Net 

Settlement Fund among Class Members who submit valid Claim Forms is fair and reasonable. 

3. The Proposed Settlement Falls Well Within 

The Range Of Reasonableness And Warrants 

Notice And A Hearing On Final Approval 

At the preliminary approval stage, the Court need only determine whether it “will likely be 

able” to approve the Settlement, Fed. R. Civ. P. 23(e)(1), or, in other words, whether the 

Settlement “falls within the range of possible approval.” Reynolds v. Direct Flow Med., Inc., 2019 

WL 1084179, at *4 (N.D. Cal. Mar. 7, 2019) (citation omitted). Because the proposed $50 million 

Settlement represents a favorable recovery for the Class in light of the risks of the litigation and the 

potential outcomes at trial, Lead Plaintiffs believe that the Settlement falls well within the range of 

possible approval. 

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

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

their claims, including risks of proving falsity, Defendants’ scienter, loss causation, and recoverable 

damages, as well as the expense and likely duration of the Action. See Churchill Vill., L.L.C. v. 

Gen. Elec., 361 F.3d 566, 576 (9th Cir. 2004) (citing risk, expense, complexity, and likely duration 

of further litigation as factors supporting final approval of settlement). 

Case 4:17-cv-00554-YGR Document 135 Filed 05/06/19 Page 19 of 30
MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT 

Case No. 4:17-00554-YGR -12- 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Lead Plaintiffs agreed to settle this Action on these terms based on their careful 

investigation and evaluation of the facts and law relating to the allegations in the Complaint and 

consideration of the substantial evidence developed in discovery, and the positions and views 

expressed by the mediator and Defendants during the settlement negotiations. See Louie v. Kaiser 

Found. Health Plan, Inc., 2008 WL 4473183, at *6 (S.D. Cal. Oct. 6, 2008) (“Class counsels’ 

extensive investigation, discovery, and research weighs in favor of preliminary settlement 

approval.”). 

Lead Plaintiffs and Lead Counsel believe the $50 million Settlement is an excellent result 

in light of the substantial challenges that Lead Plaintiffs and the Class would face in proving that 

the Defendants’ alleged misstatements were false and that Defendants made the misstatements 

with scienter. Defendants contended that, contrary to Lead Plaintiffs’ allegations, the Company 

had suffered unexpected short-term supply chain issues relating principally to one supplier of RH 

Modern products and, accordingly, the statements they made about the launch of RH Modern and 

the Company’s inventory levels were accurate at the time they were made. Defendants also 

argued that the alleged misstatements only applied to a small percentage of RH’s business and, 

accordingly, were not material. Defendants further contended that, even if any of their statements 

were false or misleading, they did not have any intent to mislead investors and did not make the 

statements with deliberate recklessness. Defendants would further assert that they had no motive 

to commit fraud and that the Individual Defendants did not benefit from the alleged fraud by 

selling shares during the Class Period. 

Thus, while Lead Plaintiffs’ allegations were sufficiently supported to survive Defendants’ 

motion to dismiss, proving the claims at trial through admissible evidence was far from certain. 

This was not a case in which the SEC or other government entity brought a related investigation or 

asserted a parallel enforcement action, and RH never restated its financial statements.

Lead Plaintiffs would also have faced substantial challenges in proving that the revelations 

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

RH common stock and establishing the amount of Class-wide damages. Defendants had 

Case 4:17-cv-00554-YGR Document 135 Filed 05/06/19 Page 20 of 30
MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT 

Case No. 4:17-00554-YGR -13- 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

substantial arguments that the price declines on many of Lead Plaintiffs’ alleged corrective 

disclosure dates were not due to revelation of the alleged misstatements or omissions. 

A comparison of the $50 million recovery to the potential damages that might be recovered 

for the Class at trial, given the risks of the litigation, supports the reasonableness of the Settlement. 

Lead Plaintiffs’ damages expert has estimated that the maximum damages that could be 

realistically established at trial, assuming complete success in proving liability and 100% valid 

claims from the Class post-trial, and accounting only for loss causation risks, would range from 

$117.1 million to $306.5 million. Accordingly, the $50 million Settlement represents a recovery 

of approximately 43% to 16% of the maximum realistic damages for the Class. However, if certain 

other of Defendants’ loss causation and damages arguments were accepted, the maximum damages 

that could be established at trial might have been even lower than that range and, of course, Lead 

Plaintiffs may have lost at summary judgment, trial, or an appeal on some or all of their claims, 

resulting in a recovery of little or nothing. Lead Plaintiffs submit that the Settlement is a very 

favorable outcome given the substantial risks of continuing with this complex litigation, and the 

uncertainty inherent in establishing liability, as well as the advantages of obtaining an immediate 

cash benefit for Class Members and avoiding the substantial expenses and delays of further 

litigation.7

Lead Plaintiffs, having considered the serious risks of continued litigation, respectfully 

submit that if the Court preliminarily approves the Settlement, the Court ultimately will find that 

the Settlement is fair, reasonable, and adequate and is deserving of final approval. 

7

See, e.g., Destefano v. Zynga, Inc., 2016 WL 537946, at *11 (N.D. Cal. Feb. 11, 2016) 

(“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) (settlement representing “approximately 8% of the maximum recoverable damages ... 

equals or surpasses the recovery in many other securities class actions”); Omnivision, 559 F. Supp. 

2d at 1042 (settlement representing 9% of maximum damages fair and reasonable and “higher than 

the median percentage of investor losses recovered in recent shareholder class action settlements”). 

Also, as set forth in the proposed Notice, the estimated average recovery (before the deduction of 

Court-approved fees, expenses and costs) per eligible share is $1.22. 

Case 4:17-cv-00554-YGR Document 135 Filed 05/06/19 Page 21 of 30
MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT 

Case No. 4:17-00554-YGR -14- 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

IV. THE PLAN OF ALLOCATION IS FAIR AND REASONABLE 

Lead Plaintiffs also seek preliminary approval of the proposed Plan of Allocation of the 

settlement proceeds, which is set forth in the Notice to be mailed to Class Members. The Court’s 

review of the proposed Plan of Allocation for a class action settlement under Rule 23 is governed 

by the same standards of review applicable to the settlement itself – the plan must be fair and 

reasonable. See Class Plaintiffs, 955 F.2d at 1284. The Plan of Allocation, which Lead Counsel 

developed with the assistance of Lead Plaintiffs’ damages expert, provides a fair, reasonable and 

equitable basis to allocate the Net Settlement Fund among all Class Members who submit an 

acceptable Claim Form. 

In developing the Plan of Allocation, Lead Plaintiffs’ expert calculated the estimated 

amount of artificial inflation in the per-share closing price of RH common stock that was allegedly 

caused by Defendants’ alleged false and misleading statements and omissions. See Notice ¶ 58. In 

so doing, he considered the price changes in RH common stock in reaction to the public 

disclosures that allegedly corrected the alleged misrepresentations and omissions and adjusted for 

market and 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 stock was purchased and sold and the purchase and sales 

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 ¶¶ 60, 

70. 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 ¶¶ 70(C), 70(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 

Case 4:17-cv-00554-YGR Document 135 Filed 05/06/19 Page 22 of 30
MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT 

Case No. 4:17-00554-YGR -15- 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

alleged fraud. Notice ¶ 60. The sum of a claimant’s Recognized Loss Amounts for all of his, her, 

or its Class Period purchases is the Claimant’s “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 ¶¶ 71, 79. 

One hundred percent of the Net Settlement Fund will be distributed to Eligible Claimants. 

Moreover, if any funds remain after an initial distribution to Eligible Claimants, as a result of 

uncashed or returned checks or other reasons, subsequent distributions will also be conducted as 

long as they are cost effective. Notice ¶ 82. The Plan of Allocation also identifies the Investor 

Protection Trust as the proposed cy pres recipient for any residual funds that may remain after all 

cost-effective distributions of the Net Settlement Fund to Eligible Claimants have been completed. 

Id. The Investor Protection Trust, a 501(c)(3) nonprofit organization devoted to investor 

education, is an appropriate cy pres recipient because 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 

similar actions in recent years, including Hefler v. Wells Fargo & Company, Case No. 3:16-cv05479-JST (N.D. Cal.) (Tigar, J.), In re Geron Corp. Securities Litigation, Case No. 3:14-CV01224-CRB (N.D. Cal.) (Breyer, J.), and In re HP Securities Litigation, Case No. 3:12-CV-05980-

CRB (N.D. Cal.) (Breyer, J.). 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, where the administrative costs of conducting the additional distribution 

would largely subsume the funds available). 

Lead Counsel believes that the Plan of Allocation will result in a fair and equitable 

distribution of the Settlement proceeds among Class Members who submit valid claims. 

V. THE COURT SHOULD APPROVE THE PROPOSED 

FORM OF NOTICE AND THE PROPOSED PLAN FOR 

PROVIDING NOTICE TO THE CLASS AND PROCESSING CLAIMS 

A. Retention of A.B. Data 

Lead Plaintiffs propose that the notice and claims process be administered by A.B. Data, 

Ltd. (“A.B. Data”), an independent settlement and claims administrator with extensive experience 

Case 4:17-cv-00554-YGR Document 135 Filed 05/06/19 Page 23 of 30
MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT 

Case No. 4:17-00554-YGR -16- 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

handling the administration of securities class actions. A copy of A.B. Data’s firm resume is 

attached hereto as Exhibit 3. 

A.B. Data was selected after a competitive bidding process in which four firms submitted 

proposals to be selected as administrator. All of the proposals received involved comparable 

methods of providing notice and claims processing, including use of first-class mail and 

identifying potential Class Members through brokers and nominee owners. Lead Counsel has 

engaged A.B. Data to serve as settlement administrator in five other cases in the past two years and 

has found A.B. Data to be a reliable administrator for these types of cases. 

B. Proposed Notice Procedures 

Lead Plaintiffs respectfully submit that the Court should approve the form and content of 

the proposed Notice and Summary Notice. See Stipulation, Exs. A-1 and A-3. The Notice is 

written in plain language and clearly sets out the relevant information and answers to most questions 

that Class Members will have. Consistent with Rules 23(c)(2)(B) and 23(e)(1), the Notice 

objectively and neutrally apprises all Class Members of (among many other disclosures) the nature 

of the Action, the definition of the Class, the claims and issues, that the Court will exclude from the 

Class any Class Member who requests exclusion (and sets forth the procedures and deadlines for 

doing so), and the binding effect of a class judgment on Class Members under Rule 23(c)(3)(B). 

With respect to items relating to the Settlement, the Notice also satisfies the separate 

disclosure requirements imposed by the PSLRA. See 15 U.S.C. § 78u-4(a)(7). It states the amount 

of the Settlement on an absolute and per-share basis; provides a statement concerning the issues 

about which the Parties disagree; states the amount of attorneys’ fees and Litigation Expenses that 

Lead Counsel will seek; provides the names, address, and telephone number of Lead Counsel, who 

will be available to answer questions from Class Members; and provides a brief statement 

explaining the reasons why the Parties are proposing the Settlement. Id. 

The Notice also meets the Northern District of California Procedural Guidance for Class 

Action Settlements in that it includes, among other things, (1) “contact information for class 

counsel to answer questions”; (2) the address for the settlement website; and (3) “instructions on 

how to access the case docket.” N.D. Cal. Proc. Guidelines ¶ 3. The Notice will also disclose the 

Case 4:17-cv-00554-YGR Document 135 Filed 05/06/19 Page 24 of 30
MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT 

Case No. 4:17-00554-YGR -17- 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

date, time, and location of the Settlement Hearing and the procedures and deadlines for the 

submission of Claim Forms, requests for exclusion from the Class, and objections to any aspect of 

the Settlement, the Plan of Allocation, or attorneys’ fees and expenses.8

The proposed method for disseminating notice, which is set forth in the Preliminary Approval 

Order submitted herewith, also readily meets the standards under the Federal Rules and due 

process. Rule 23(c)(2)(B) requires the court to direct to a class certified under Rule 23(b)(3) “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). Similarly, Rule 

23(e)(1) requires the court to “direct notice in a reasonable manner to all class members who would 

be bound” by a proposed settlement, voluntary dismissal, or compromise. Fed. R. Civ. P. 23(e)(1). 

If the Court preliminarily approves the Settlement, RH will provide the names and addresses 

of the record holders or purchasers of RH common stock during the Class Period, to the extent 

reasonably available to RH for the purpose of identifying and giving notice to the Class. See

Stipulation ¶ 24. A.B. Data will mail the Notice and Claim Form (the “Notice Packet”) to all such 

identified potential Class Members. A.B. Data will also send notice to brokerage firms and other 

nominees who purchased RH common stock during the Class Period on behalf of other beneficial 

owners. These nominee purchasers will be required to either forward the Notice Packet to their 

customers or provide the names and addresses of the beneficial owners to A.B. Data, which will 

then promptly send the Notice Packet by first-class mail to such identified beneficial owners (or by 

email if provided). A.B. Data will also cause the Summary Notice, which provides an abbreviated 

description of the Action and the proposed Settlement and explains how to obtain the more 

detailed Notice, to be published once in The Wall Street Journal and transmitted over the PR 

Newswire, a national business-oriented wire service, and will publish the Notice and Claim Form 

and other materials on a website to be developed for the Settlement. 

8

 The Parties have also agreed that, no later than ten calendar days following the filing of the 

Stipulation with the Court, Defendants shall serve the notice required under the Class Action 

Fairness Act, 28 U.S.C. § 1715 (2005), et seq. (“CAFA”). See Stipulation ¶ 25. 

Case 4:17-cv-00554-YGR Document 135 Filed 05/06/19 Page 25 of 30
MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT 

Case No. 4:17-00554-YGR -18- 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

The proposed plan for providing notice is the same method that has been used in numerous 

other security class actions. Courts routinely find that comparable notice programs, combining 

individual notice by first-class mail to all class members who can reasonably identified, 

supplemented with publication notice, meet all the requirements of Rule 23 and due process. See 

In re Portal Software, Inc. Sec. Litig., 2007 WL 1991529, at *7 (N.D. Cal. June 30, 2007) (holding 

that “notice by mail and publication is the ‘best notice practicable under the circumstances,’ as 

mandated by FRCP 23(c)(2)(B)”); In re Sorbates Direct Purchaser Antitrust Litig., 2002 WL 

31655191, at *1 (N.D. Cal. Nov. 15, 2002). 

C. Claims Processing 

The net proceeds of the Settlement will be distributed to Class Members who submit 

eligible Claim Forms with required documentation to A.B. Data. A.B. Data will review and 

process the claims under the supervision of Lead Counsel, will provide claimants with an 

opportunity to cure any deficiencies in their claim(s) or request review of the denial of their 

claim(s) by the Court, and will 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.9

A.B. Data estimates that a total of 75,000 Notice Packets will be mailed and that 

approximately 15,000 claims will be received (a 20% response rate is estimated). These estimates 

are based on the experience of A.B. Data and Lead Counsel in comparable securities class action 

settlements. Summary information for three recent cases in which BLB&G acted as lead counsel 

and A.B. Data was retained as the settlement administrator is attached hereto as Exhibit 4. 

D. Estimated Notice and Administrative Costs 

A.B. Data’s fees for administration of the Settlement are charged on a per-claim basis and 

its expenses will be billed separately (including expenses for printing and mailing the Notice 

Packet, publishing the Summary Notice, establishing and maintaining the settlement website, and 

establishing and operating the toll-free telephone helpline). Because the costs are dependent on 

9

 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 Fund based on the number or value of 

Claims submitted. See Stipulation ¶¶ 16, 18. 

Case 4:17-cv-00554-YGR Document 135 Filed 05/06/19 Page 26 of 30
MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT 

Case No. 4:17-00554-YGR -19- 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

how many Notice Packets are ultimately mailed and how many claims are ultimately received and 

processed, at this time only an estimate of the total Notice and Administration Costs can be 

provided. Based on the estimates of Notice Packets to be mailed and claims received discussed 

above, A.B. Data estimates that the total Notice and Administration Costs for the Action will be 

approximately $275,000 to $300,000. These costs are necessary in order to effectuate the 

Settlement and are reasonable in relation to the value of the Settlement (the estimated 

administrative costs represent 0.6% of the Settlement Amount). If the Settlement is approved, the 

Notice and Administration Costs will be paid from the Settlement Fund. See Stipulation ¶¶ 12, 17. 

VI. ATTORNEYS’ FEES, LITIGATION EXPENSES AND PLAINTIFFS’ EXPENSES 

As explained in the Notice (Stipulation, Ex. A-1, at pages 1-2 & ¶ 39), Lead Counsel 

intends to seek an award of attorneys’ fees of 15% of the Settlement Fund (i.e., 15% of the 

Settlement Amount, or $7,500,000, plus interest earned thereon at the same rate as the Settlement 

Fund), and payment of Litigation Expenses not to exceed $950,000. Lead Counsel will provide 

detailed information in support of its application in its motion for attorneys’ fees and expenses, to 

be filed with the Court 35 days before the final Settlement Hearing. However, for purposes of the 

Court’s preliminary review in connection with this motion for preliminary approval of the 

Settlement, Lead Counsel notes that the fee that Lead Counsel will request, 15%, is the result of an 

ex ante negotiation with a sophisticated Lead Plaintiff, is far below the 25% benchmark percentage 

for attorneys’ fees in the Ninth Circuit, see Paul, Johnson, Alston & Hunt v. Graulty, 886 F.2d 

268, 272 (9th Cir. 1989), and is on the low end of the range of percentage fees awarded in 

comparable class securities class actions with significant contingency fee risks, see, e.g., Hatamian 

v. Advanced Micro Devices, Inc., Case No. 4:14-cv-00226-YGR, slip op. at 3 (N.D. Cal. Mar. 2, 

2018), ECF No. 364 (awarding 25% of $29.5 million settlement); In re Int’l Rectifier Corp. Sec. 

Litig., Case No. 2:07-cv-02544-JFW, slip op. at 1 (C.D. Cal. Feb. 8, 2010), ECF No. 316 

(awarding 25% of $90 million settlement). 

Moreover, based on its review of its time records, Lead Counsel anticipates that the 

requested attorney fee will represent a multiplier on counsel’s lodestar of less than one. Such a 

multiplier is below the range of multipliers commonly awarded in class actions and other similar 

Case 4:17-cv-00554-YGR Document 135 Filed 05/06/19 Page 27 of 30
MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT 

Case No. 4:17-00554-YGR -20- 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

cases. See, e.g., Hefler v. Wells Fargo & Co., 2018 WL 6619983, at *14 (N.D. Cal. Dec. 18, 2018) 

(awarding fee representing a 3.22 multiplier); In re N.C.A.A. Athletic Grant-in-Aid Cap Antitrust 

Litig., 2017 WL 6040065, at *7 (N.D. Cal. Dec. 6, 2017) (awarding fee representing a 3.66 

multiplier), aff’d, 2019 WL 1752610 (9th Cir. Apr. 17, 2019); St. Louis Police Ret. Sys. v. 

Severson, 2014 WL 3945655, at *6 (N.D. Cal. Aug. 11, 2014) (awarding 1.5 lodestar multiplier in 

shareholder derivative action); see generally Vizcaino v. Microsoft Corp., 290 F.3d 1043, 1050-52 

& n.6 (9th Cir. 2002) (affirming 3.65 multiplier on appeal and finding that multipliers ranged as 

high as 19.6, with the most common range from 1.0 to 4.0). If preliminary approval is granted, 

Lead Counsel will present its total lodestar in connection with its fee application at final approval.

Lead Counsel also intends to seek reimbursement of Litigation Expenses in an amount not 

to exceed $950,000, which include costs for retention of experts, document management, 

mediation fees and travel, among other costs. As part of this request, Lead Counsel intends to seek 

awards for Lead Plaintiffs, pursuant to 15 U.S.C. §78u-4(a)(4), as reimbursement for their time and 

expenses in representing the Class in an amount up to an aggregate of $10,000. Lead Counsel 

believes this amount is fully supported by the substantial work that Lead Plaintiffs performed 

throughout the Action which will be presented to the Court in connection with Lead Plaintiffs’ 

request for reimbursement. N.D. Cal. Proc. Guidelines ¶ 7. 

VII. PROPOSED SCHEDULE OF EVENTS 

In connection with preliminary approval of the Settlement, the Court must set a final 

approval hearing date, dates for mailing and publication of the Notice and Summary Notice, and 

deadlines for submitting claims or for objecting to the Settlement.10 The Parties respectfully 

propose the following schedule for the Court’s consideration, as agreed to by the Parties and set 

forth in the proposed Preliminary Approval Order: 

10 The blanks for certain deadlines currently contained in the agreed-upon form of Notice will be 

filled in once the Court sets those dates and prior to mailing to Class Members.

Case 4:17-cv-00554-YGR Document 135 Filed 05/06/19 Page 28 of 30
MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT 

Case No. 4:17-00554-YGR -21- 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Event Time for Compliance 

Deadline to commence

mailing the Notice and Proof 

of Claim to potential 

Class Members (“Notice 

Date”)

15 business days after entry of 

Preliminary Approval Order 

Deadline for publishing 

Summary Notice

10 business days after Notice 

Date

Deadline for filing final 

approval papers

35 calendar days prior to 

Settlement Hearing

Deadline for receipt of 

exclusion requests or 

objections

21 calendar days prior to 

Settlement Hearing 

Deadline for submitting claim 

forms

14 calendar days prior to 

Settlement Hearing

Deadline for filing reply 

papers (including a report on 

claims received)

7 calendar days prior to 

Settlement Hearing 

Settlement Hearing 120 days after entry of 

Preliminary Approval Order, or 

at the Court’s earliest 

convenience thereafter

Lead Plaintiffs request that the Court schedule the Settlement Hearing for a date 120 

calendar days after entry of the Preliminary Approval Order, or at the Court’s earliest convenience 

thereafter. As this motion is unopposed, Lead Plaintiffs request that the Court consider this motion 

for preliminary approval on the papers at this time. If the Court decides this motion on the papers 

and enters the Preliminary Approval Order on or before May 13, the Settlement Hearing could be 

scheduled for September 10, 2019 or as soon thereafter as the Court can schedule. 

VIII. CONCLUSION 

For the foregoing reasons, Lead Plaintiffs respectfully request that this Court grant the 

unopposed motion for preliminary approval of the Settlement, approve the forms and methods of 

notice, and enter the proposed Preliminary Approval Order. 

Case 4:17-cv-00554-YGR Document 135 Filed 05/06/19 Page 29 of 30
MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT 

Case No. 4:17-00554-YGR -22- 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Dated: May 6, 2019 Respectfully Submitted, 

BERNSTEIN LITOWITZ BERGER 

 & GROSSMANN LLP 

/s Jonathan D. Uslaner 

JONATHAN D. USLANER 

jonathanu@blbglaw.com 

12481 High Bluff Drive, Suite 300 

San Diego, CA 92130 

Tel: (858) 793-0070 

Fax: (858) 793-0323 

 --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 

Case 4:17-cv-00554-YGR Document 135 Filed 05/06/19 Page 30 of 30