IN THE UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF ILLINOIS 

EASTERN DIVISION

WARREN BEELER, individually and on behalf ) 

of all others similarly situated, ) 

 ) 

 Plaintiff, ) 

 ) 

 v. ) No. 04 C 3658 

 ) 

 ) Judge Milton I. Shadur 

SALTON, INC., LEONHARD DREIMANN, ) 

and DAVID M. MULDER, ) 

 ) 

 Defendants. ) 

MEMORANDUM OF LAW IN SUPPORT OF FINAL 

APPROVAL OF PROPOSED SETTLEMENT AND PLAN OF ALLOCATION

Lead Plaintiff, Warren Beeler (“Lead Plaintiff”), on behalf of the certified Class, 

respectfully submits this memorandum of law, pursuant to Rule 23(e) of the Federal Rules of 

Civil Procedure, in support of final approval of the proposed settlement (the “Settlement”) of this 

class action litigation (the “Litigation”) and Plan of Allocation of the Net Settlement Fund.

PRELIMINARY STATEMENT

 The Settlement provides for the payment of $3 million by Defendants to the Class. 

Under the circumstances of this case, the amount reflects an excellent recovery to the Class. The 

parties sharply disputed the merits of the claims and defenses since the inception of this 

Litigation. This Settlement culminates two years of extensive investigation, discovery, and 

settlement negotiations, as well as a settlement conference before the Court. 

The “fairness factors” considered by courts in the Seventh Circuit support approval of the 

Settlement. See Isby v. Bayh, 75 F.3d 1191, 1198 (7th Cir. 1996)(strength of plaintiff’s case, 

complexity of the litigation, opposition to settlement, opinion of competent counsel, stage of 
2

proceedings, and amount of discovery conducted to be considered). These factors are examined 

below. Briefly, Defendants strenuously contested liability in this Litigation and would have 

asserted a multitude of defenses (regarding existence of misrepresentations, causation, damages, 

and other issues) on summary judgment or at trial. Hence, a judgment for the Class would have 

been uncertain. More importantly, given Salton’s dire financial condition, even if the Class were 

to obtain a favorable judgment, Salton’s ability to pay the judgment would have been highly 

questionable. This fact is underscored by Salton’s current financial condition, which has left the 

Company without significant cash or liquid assets. Even if the Class’ claims had ultimately 

proved successful in litigation, by forcing Defendants through extensive and costly litigation, the 

Class effectively would have been working against itself because any available insurance 

proceeds would have been depleted. The fact that the Class supports this Settlement is another 

strong indicator of its fairness. Not a single Class member has objected to the Settlement or Plan 

of Allocation of Settlement proceeds. 

FACTUAL BACKGROUND1

 Lead Plaintiff moved for preliminary approval of the Settlement on December 19, 2005 

and submitted a supporting memorandum on the same day. On December 27, 2005, the Court 

issued an Order preliminarily approving the Settlement (the “Preliminary Approval Order”) and 

setting certain procedures and deadlines. 

Pursuant to the Preliminary Approval Order, the Court-approved administrator caused the 

Notice of Class Action Settlement and Proof of Claim to be mailed to 7,205 potential members 

 

1

 A review of the claims asserted, the procedural history of the Litigation, and the substantial 

efforts of Lead Counsel is set forth in the accompanying Joint Declaration of Marvin A. Miller 

and Samuel H. Rudman In Support of (1) Final Approval of Settlement and Plan of Allocation of 

Settlement Proceeds; and (2) Award of Attorneys’ Fees and Reimbursement of Expenses (“Joint 

Declaration of Lead Counsel”), which is being filed contemporaneously herewith. The Court is 

respectfully referred to the Joint Declaration of Lead Counsel, which is incorporated by reference 

herein. 
3

of the Class. See Declaration of Christl Hansman regarding A) Mailing of The Notice of 

Pendency And Proposed Settlement of Class Action, and The Proof of Claim And Release Form; 

And B) Publication of The Summary Notice (“Hansman Declaration”) ¶ 7.2 See also Joint 

Declaration of Lead Counsel ¶ 37. Lead Plaintiff also published the Notice on February 10, 

2006 in Investor’s Business Daily and also published a copy of the Notice on the claim’s 

administrator’s website, www.gilardi.com, beginning February 7, 2006. See Hansman 

Declaration ¶¶ 8-9. 

ARGUMENT

I. STANDARDS FOR APPROVAL OF CLASS ACTION SETTLEMENTS.

 Rule 23 requires court approval for any settlement in a class action following reasonable 

notice and a hearing. Fed. R. Civ. P. 23(e)(1)(A)-(B). Whether to approve a settlement is within 

the court’s discretion. See Isby, 75 F.3d at 1198. “Federal courts naturally favor the settlement 

of class action litigation.” Id. at 1196 (citations omitted). See also Wal-Mart Stores, Inc. v. Visa 

U.S.A., Inc., 396 F.3d 96, 116 (2d Cir. 2005) (courts should be “mindful of the strong judicial 

policy in favor of settlements, particularly in the class action context”). 

In the Seventh Circuit, the standard for approval is whether the settlement is lawful, fair, 

reasonable and adequate. See General Elec. Capital Corp. v. Lease Resolution Corp., 128 F.3d 

1074, 1082 (7th Cir. 1997); Isby v. Bahy, 75 F.3d 1191, 1196 (7th Cir. 1996); see also Abrams v. 

Van Kampen Funds, Inc., No. 01 C 7538, 2006 WL 163023, *1 (N.D. Ill. Jan. 18, 2006). In 

determining whether a settlement satisfies those criteria,courts consider the following factors: 

(1) the strength of the plaintiffs’ case balanced against the settlement offer; (2) the 

defendant’s ability to pay; (3) the burdens of further litigation: (4) the amount of 

opposition to the settlement; (5) the presence of collusion; (6) the opinion of 

competent counsel; and (7) the stage of the proceedings and the amount of 

discovery that has been completed. 

 

2

 The Hansman Declaration is being filed contemporaneously hereweith. 
4

See EEOC v. Hiram Walker & Sons, Inc., 768 F.2d 884, 889 (7th Cir. 1985); see also Isby, 75 

F.3d at 1198; Abrams, 2006 WL 163023 at *1. 

 In applying these factors, courts recognize that the “essence of settlement is 

compromise.” Isby, 75 F.3d at 1200 (quoting Armstrong v. Board of Sch. Dirs., 616 F.2d 305, 

315 (7th Cir. 1980)). “[T]the court is not called upon to determine whether the settlement 

reached by the parties is the best possible deal nor whether class members will receive as much 

from a settlement as they might have recovered from victory at trial.” In re Mexico Money 

Transfer Litig., 164 F. Supp. 2d 1002, 1014 (N.D. Ill. 2000); see also Weinberger v. Kendrick, 

698 F.2d 61, 74 (2d Cir. 1982) (court should not conduct a “mini-trial” of the merits of the 

action). Courts are not to substitute their own judgment as to optimal settlement terms for the 

judgment of the litigants and their counsel.” Great Neck Capital Appreciation Inv. P’Ship, L.P. 

v. PricewaterhouseCoopers, L.L.P., 212 F.R.D. 400, 409 (E.D. Wis. 2002). 

 Lead Plaintiff respectfully submits that the Settlement is eminently fair, reasonable and 

adequate. The parties, through experienced counsel, have thoroughly weighed the strengths and 

weaknesses of their respective positions and, after extensive negotiations, have reached an 

informed compromise. 

II. THE PROPOSED SETTLEMENT IS LAWFUL, FAIR, REASONABLE AND 

ADEQUATE IN LIGHT OF THE PERTINENT FACTORS. 

A. THE STRENGTH OF PLAINTIFFS’ CASE, DEFENDANTS’ ABILITY TO PAY, AND 

THE BURDENS OF FURTHER LITIGATION STRONGLY SUPPORT FINAL 

APPROVAL. 

Without settlement, the anticipated complexity, cost, and duration of continued litigation 

in securities fraud cases such as this is considerable. See Retsky Family Ltd. P’ship v. Price 

Waterhouse LLP, No. 97 C 7694, 2001 WL 1568856, *2 (N.D. Ill. Dec. 10, 2001) (“Securities 
5

fraud litigation is long, complex and uncertain.”). Many issues in securities fraud cases such as 

this are dependent on the testimony of economic experts, and such complexities will only be 

magnified if the action proceeds to trial. See Denney v. Jenkens & Gilchrist, No. 03 Civ. 5460 

(SAS), 2005 WL 388562, *14 (S.D.N.Y. Feb. 18, 2005) (“If this case were to be tried, both sides 

would be heavily dependent on...experts, further compounding the expense and complexity of 

this case. The burden on the parties would be significant.”); Retsky, 2001 WL 1568856 at *2 

(expectation that five experts would testify at trial, among other things, “supports the conclusion 

that the case is very complex”). Settlement before trial is favored. Great Neck Capital, 212 

F.R.D. at 410 (“Given the prospects for a long and arduous trial and appeal process, settlement at 

this stage is beneficial to class members.”); Maley v. Del Global Techs. Corp., 186 F. Supp. 2d 

358, 362 (S.D.N.Y. 2002) (“Settlement at this juncture results in a substantial and tangible 

present recovery, without the attendant risk and delay of trial. These factors weigh in favor of 

the proposed settlement.”). Taking a class action through trial is a costly and time consuming 

proposition. See In re Prudential Ins. Co. of Am. Sales Practices Litig., 148 F.3d 283, 318 (3d 

Cir. 1998) (settlement favored where “trial of this class action would be a long, arduous process 

requiring great expenditures of time and money on behalf of both parties and the court”); Mexico 

Money, 164 F. Supp. 2d at 1019 (“Continued litigation would require resolution of complex 

issues at considerable expense and would absorb many days of trial time.”) (citing Isby, 75 F.3d 

at 1199). The possibility of appeals only adds to potential costs. Moreover, the ability to collect 

on any judgment (before or after trial, or after appeals) is a factor that must be taken into 

consideration. See EEOC v. Hiram Walker & Sons, Inc., 768 F.2d at 889; Abrams, 2006 WL 

163023 at *1. 
6

 Here, the $3 million Settlement is a reasonable result for the Class given the unique 

circumstances in this Litigation. Proving the Class’ claims either on summary judgment or at 

trial would have been a difficult proposition given the complexity of the legal issues, factual 

dispute and the multitude of defenses anticipated by Defendants in this Litigation. Specifically, 

Defendants continually maintained that they did not make any material misrepresentations and 

that all information regarding the George Foreman line of products was adequately disclosed. 

Taking the case through trial would have involved additional practical uncertainties. Following 

trial, the appeals process could have further drained financial resources and time. By settling 

now, the Class is securing a definite $3 million benefit, which would have been difficult to 

obtain by way of judgment following further litigation or trial (in light of the myriad, complex 

factual and legal issues). If the Court declines to approve the Settlement and the Class fails to 

obtain a favorable judgment or verdict following further litigation, the Class will be left with no 

recovery. 

Most importantly, there is a great risk that Defendants would be unable to satisfy any 

judgment significantly greater than $3 million. By taking Defendants through an extensive 

litigation process, the Class would have effectively been working against itself. Even if 

successful following extensive litigation, it may have been impossible for the Class to collect on 

any judgment from Defendants because of Salton’s dire financial condition and limited insurance 

policy proceeds. If the Court declines to approve the Settlement and the Class obtains a judgment 

following further litigation or trial, the Class might still be left with no recovery because 

collection may prove impossible. 
7

Accordingly, the $3 million Settlement will provide tangible and certain relief to the 

Class now, without subjecting it to the risks of litigation and collection. This factor alone 

militates in favor of final approval of the Settlement. 

 B. THE LACK OF SIGNIFICANT OPPOSITION TO THE SETTLEMENT STRONGLY 

SUPPORTS FINAL APPROVAL. 

 The reaction of the Class to the Settlement strongly supports final approval. As noted 

above, in accordance with the December 27, 2005 Preliminary Approval Order, Lead Plaintiff 

caused the Notice of Settlement to be mailed to 7,205 potential members of the Class and 

published in the Investor’s Business Daily as well as on the claims administrator’s website, 

www.gilardi.com. The time for filing objections to the Settlement, Plan of Allocation or 

application for attorney’s fees and expenses expires on March 10, 2005. As of this filing, not a 

single Class member has objected to the Settlement.3

 Under these circumstances, there can be 

little doubt that the Class strongly supports (and does not oppose) the Settlement. See Abrams, 

2006 WL 163023 at *2 (“Although the number of class members is large ... class members have 

presented only a few objections.”). 

C. THE ABSENCE OF COLLUSION, THE OPINIONS OF COMPETENT COUNSEL, AND 

THE PARTICIPATION OF THIS COURT IN THE SETTLEMENT PROCESS 

STRONGLY SUPPORT FINAL APPROVAL. 

 The active facilitation and oversight of the settlement negotiations by this Court supports 

the reasonableness of an ensuing settlement. See In re AMF Bowling Sec. Litig., 334 F. Supp. 2d 

462, 465 (S.D.N.Y. 2004) (“The participation of Judge Sweet and retired Judge Politan in the 

settlement process gives me confidence that they were conducted in an arms-length, noncollusive manner.”); see also Abrams, 2006 WL 163023 at *2 (referencing court’s participation 

 

3

 Should any objections be received by Lead Counsel prior to the March 17, 2006 hearing on 

final approval of the Settlement, Lead Counsel will promptly file a brief addressing any such 

objection(s) prior to the hearing. 
8

in settlement process in approving settlement). Furthermore, the opinions of competent counsel 

also support final approval. See Abrams, 2006 WL 163023 at *2 (“It is also taken into 

consideration that the settlement is being recommended by experienced plaintiff securities 

litigators.”) 

In this case, the parties engaged in the Settlement without a trace of collusion. In October 

and November 2005, the parties engaged in arms-length settlement conversations. Having 

refined their positions, they participated in a settlement conference with the Court on November 

15, 2005. The result was a $3 million settlement, which took into consideration the various 

circumstances in this Litigation, the strength of Defendants’ defenses, and the great uncertainty 

surrounding Defendants’ ability to pay an amount exceeding $3 million. After careful 

consideration, both sides agreed to the Settlement and thus reached an agreement in principle to 

settle the Litigation. Under these circumstances, there is a complete absence of collusion. The 

Court was actively involved in the process leading to the Settlement. 

D. THE SIGNIFICANT INVESTIGATION AND DISCOVERY COMPLETED BEFORE 

SETTLEMENT STRONGLY SUPPORT FINAL APPROVAL. 

Both the knowledge of Lead Counsel and the proceedings themselves have reached a 

stage where an intelligent evaluation of the Litigation and propriety of settlement can be made. 

See Joint Declaration of Lead Counsel ¶ 51. At the time the Settlement was reached, Lead 

Plaintiff had investigated and prosecuted the Class’ claims for nearly one and a half years. Lead 

Plaintiff served several document requests and interrogatories upon Defendants, and received 

voluminous documents and information from Defendants in response thereto. Lead Plaintiff also 

served subpoenas upon third parties and received voluminous responsive documents. Prior to 

reaching a settlement, Lead Counsel reviewed more than 30,000 pages of documents that had 

been produced by Defendants and third parties with business relationships with Defendants, 
9

including banks and retailers. In addition, Defendants propounded discovery on the Lead 

Plaintiff. Thus, the parties reached an agreement to settle at a point when they had “full 

understanding of the legal and factual issues surrounding [the] case.” Manchaca v. Chater, 927 

F. Supp. 692, 697 (E.D. Tex. 1996). Nothing more is required. 

 The comprehensiveness of efforts of Lead Counsel in this case provided Lead Plaintiff 

not only with a clear picture of the strengths of his own case, but also of the legal and factual 

defenses that Defendants would likely raise at trial. Having completed an extensive investigation 

which allowed them to evaluate the case, Lead Counsel have succeeded in obtaining a very good 

settlement without unduly prolonging the Litigation and without undertaking an expensive trial. 

See In re Xcel Energy Inc., 364 F. Supp. 2d 980, 992 (D. Minn. 2005)(“The Federal Rules of 

Civil Procedure ‘shall be construed and administered to ensure the just, speedy, and inexpensive 

determination of every action.’”)(quoting Fed. R. Civ. Proc. 1)(emphasis omitted)). “Under Rule 

1, as officers of the court, attorneys share the responsibility with the court of ensuring that cases 

are ‘resolved not only fairly, but without undue cost or delay.’” Id. (citing Fed. R. Civ. Proc. 1, 

Advisory Committee Notes, 1993 Amendments). Lead Plaintiff is satisfied that the Settlement 

was reached after lengthy investigation, research and discovery to enable him and his counsel to 

knowledgeably settle the case. 

III. THE PLAN OF ALLOCATION OF THE NET SETTLEMENT FUND 

 IS FAIR, REASONABLE AND ADEQUATE.

 A plan of allocation of net settlement proceeds to the class must similarly be fair, 

reasonable and adequate. See Retsky, 2001 WL 1568856 at *3. “When formulated by competent 

and experienced counsel,” a plan for allocation “need only have a reasonable, rational basis.” In 

re Global Crossing Ltd. Sec. & ERISA Litig., 225 F.R.D. 436, 462 (S.D.N.Y. 2004) (citation 
10

omitted). “Pro-rata distribution of settlement funds based on investment loss is clearly a 

reasonable approach.” Id. 

 The Settlement will be distributed to members of the Class who sign and return a timely 

and valid proof of claim form in accordance with the plan of allocation described in the Notice. 

The claims administrator has been directed to distribute the Settlement proceeds (net of 

attorneys’ fees, costs and claims expenses) in the following manner: 

• For Class members that purchased or otherwise acquired Salton common stock between 

November 11, 2002 through May 10, 2004 and retained the stock at the end of May 10, 

2004, the claim per share is the smaller of the following two numbers: (i) the purchase 

price less $3.35 (Closing Price on May 11, 2004); or (ii) $3.34. Joint Declaration of Lead 

Counsel ¶ 55(A)(2). 

• For Class members that purchased or otherwise acquired Salton common stock between 

November 11, 2002 through May 10, 2004 but who sold the stock prior to May 11, 2004 

the claim per share is $0.00. Joint Declaration of Lead Counsel ¶ 55(A)(1). 

• For Class members that purchased or otherwise acquired the 10.75% Notes Due 

December 15, 2005 from November 11, 2002 through May 10, 2004 and retained the 

same at the end of May 10, 2004, the claim per $1,000 par value 10.75% Note is the 

smaller of the following two numbers: (i) the purchase price less $605.00 (Closing Price 

on May 11, 2004); or (ii) $245.00. Joint Declaration of Lead Counsel ¶ 55(B)(2). 

• For Class members that purchased or otherwise acquired the 10.75% Note Due December 

15, 2005 from November 11, 2002 through May 10, 2004, but who sold prior to May 11, 

2004, the claim per $1,000 par value 10.75% Note is $0.00. Joint Declaration of Lead 

Counsel ¶ 55(B)(1). 
11

• For Class members that purchased or otherwise acquired the 12.25% Note Due April 15, 

2008 from November 11, 2002 through May 10, 2004 and retained the same at the end of 

May 10, 2004, the claim per $1,000 par value 12.25% Note is the smaller of the 

following two numbers: (i) the purchase price less $650.00 (Closing Price on May 11, 

2004); or (ii) $150.00. Joint Declaration of Lead Counsel ¶ 55(C)(2). 

• For Class members that purchased or otherwise acquired the 12.25% Note Due April 15, 

2008 from November 11, 2002 through May 10, 2004 but who sold prior to May 11, 

2004, the claim per $1,000 par value 12.25% Note is $0.00. Joint Declaration of Lead 

Counsel ¶ 55(C)(1). 

The payment Class members receive will reflect their pro rata share after deduction of Courtapproved fees and expenses. Joint Lead Counsel Declaration ¶ 55. This Plan of Allocation was 

formulated after consultation with experts in order to calculate a fair method of dividing the Net 

Settlement Fund for distribution among the Class. Id. ¶ 56 

CONCLUSION

 For the foregoing reasons, Lead Plaintiff and the Class respectfully request that the Court 

grant final approval to the Settlement and enter final judgment in this matter. 

 Respectfully submitted, 

 LEAD PLAINTIFF

DATED: March 10, 2006 By: s/ Marvin A. Miller 

 Marvin A. Miller 

 Jennifer Winter Sprengel 

 Anthony F. Fata 

 MILLER FAUCHER AND CAFFERTY LLP 

 30 North LaSalle Street, Suite 3200 

 Chicago, Illinois 60602 

 (312) 782-4880 
12

 Samuel H. Rudman 

 Ellen Gusikoff 

 Evan Kaufman 

 LERACH COUGHLIN STOIA GELLER 

RUDMAN & ROBBINS LLP 

 58 South Service Road, Suite 200 

 Melville, New York 11747 

 Tel: (631) 367-7100 

 Lead Counsel