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Bushansky v. Remy International, Inc.

United States District Court, S.D. Indiana, Indianapolis Division

August 16, 2017

STEPHEN BUSHANSKY Individually and on behalf of himself and all others similarly situated, Plaintiff,
v.
REMY INTERNATIONAL, INC., JOHN H. WEBER, JOHN J. PITTAS, DOUGLAS K. AMMERMAN, KARL G. GLASSMAN, LAWRENCE F. HAGENBUCH, CHARLES G. MCCLURE, ARIK W. RUCHIM, GEORGE P. SCANLON, NORMAN STOUT, Defendants. MAXINE PHILLIPS Individually and on behalf of herself and all others similarly situated,
v.
REMY INTERNATIONAL, INC., et al., JASON GARCIA Individually and on behalf of himself and all others similarly situated,
v.
REMY INTERNATIONAL, INC., et al., Sean Griffith (Objector), Interested Party.

          ENTRY ON PLAINTIFFS' MOTION FOR FINAL APPROVAL OF CLASS ACTION FOR AWARD OF ATTORNEYS' FEES AND EXPENSES

          TANYA WALTON PRATT, JUDGE

         This matter is before the Court on a Motion for Final Approval of Class Action Settlement, Class Certification, and Application for Award of Attorneys' Fees and Expenses filed by Plaintiffs Case 1:15-cv-01343-TWP-TAB Document 41 Filed 08/16/17 Page 2 of 20 PageID #: 1488 Stephen Bushansky (“Bushansky”), Maxine Phillips (“Phillips”), and Jason Garcia (“Garcia”) (collectively “Plaintiffs”), (Filing No. 24).[1] The Plaintiffs, shareholders of Defendant Remy International, Inc. (“Remy”), each allege that Remy and Remy's Board of Directors (“Board”)[2](collectively “Defendants”) caused a materially incomplete and misleading Form Schedule 14A Proxy Statement to be filed with the Securities Exchange Commissioner (“SEC”) in violation of the Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C.A. §§ 78n(a), 78t(a), as well as 17 C.F.R. § 240.14a-9. Plaintiffs seek to represent a certain class of individuals who own public stock in Remy. On October 13, 2016, Sean Griffith (“Objector”), an interested party and shareholder of Remy, filed an objection in each of the three class actions. (Filing No. 27.) For the following reasons, Plaintiffs' Motion for Final Approval of Class Action Settlement, Class Certification, and Application for Award of Attorneys' Fees and Expenses is DENIED.

         I. BACKGROUND

         The following facts derive from the Plaintiffs' complaints, Plaintiffs' and Objector's briefs, and affidavits submitted in support of, and objection to, the request for final approval, as well as Plaintiffs' and Objector's findings of fact and conclusions of law.

         A. Factual Background

         Remy, a Delaware corporation, is a major manufacturer, remanufacturer, and supplier of automobile components. BorgWarner Inc. (BorgWarner) is an American worldwide automotive industry components and parts supplier. On July 13, 2015, Remy announced that it entered an acquisition agreement with BorgWarner and Remy's shareholders would receive $29.50 in exchange for each share of Remy common stock. (Filing No. 40 at 2.) On August 3, 2015, Remy filed a Preliminary Proxy Statement on Schedule 14A with the SEC (the “Preliminary Proxy”). Id. On August 18, 2015, Remy filed a Definitive Proxy Statement on Schedule 14A with the SEC (the “Definitive Proxy”). Id. Remy distributed the Definitive Proxy to its shareholders, which contained certain disclosures regarding Remy's acquisition, as well as summaries of Remy's financial projections from 2015 to 2019, among other things. The financial summaries included a discounted cash flow analysis[3] and an unlevered free cash flow calculation (“UFCF”)[4] conducted by UBS Securities LLC (“UBS Securities”), Remy's financial advisor.

         Shortly after Remy filed the Definitive Proxy with the SEC, Plaintiffs filed three putative, essentially identical, class action complaints. Phillips v. Remy International Inc., 1:15-cv-1343 (filed on August 25, 2015); Bushansky v. Remy International Inc., 1:15-cv-1361 (filed on August 27, 2015); Garcia v. Remy International Inc., 1:15-cv-1385 (filed on September 1, 2015). The primary purpose of all three class actions was to elicit disclosure from Defendants regarding the merger and Definitive Proxy materials in order to better inform shareholders prior to their vote. On August 31, 2015, less than one week after Phillips and Bushansky filed their Complaints and one day prior to Garcia's Complaint, Plaintiffs sent a written settlement demand to Defendants. On September 11, 2015, within two weeks after Plaintiffs filed their Complaints, the parties entered into a Memorandum of Understanding (“MOU”), which set forth a settlement agreement between Plaintiffs and Defendants. Id. As part of the MOU, Defendants agreed to file various supplemental disclosures with the SEC before September 22, 2015-the day Remy's shareholders met to approve the merger-in exchange for a release from liability for any other related claims on behalf of a proposed class of Remy's shareholders. Id. at 14.

         On September 14-15, 2015, Defendants filed supplemental disclosures with the SEC. One week later, on September 22, 2015, 99.1% of Remy's shareholders voted in favor[5] of the merger. (Filing No. 20 at 9.) The merger closed, and Remy became a wholly owned subsidiary of BorgWarner on November 10, 2015. (Filing No. 40 at 13.) Thereafter, Defendants provided Plaintiffs with discovery to confirm the fairness and adequacy of the settlement agreement, including a non-public financial presentation by UBS Securities to the Board, as well as the Board's meeting minutes. Id. On June 24, 2016, Plaintiffs conducted a confirmatory deposition of Vijay Kumra, a UBS Securities representative and financial advisor to Remy. Plaintiffs concluded that the class settlement was fair and adequate.

         B. Procedural Background

         On July 22, 2016, Plaintiffs sought preliminary approval of the disclosure settlement agreement, and on July 27, 2016, the Court granted Plaintiffs' request. (Filing No. 23.) In early October 2016, Plaintiffs requested final approval of the settlement, class certification, and an award of attorneys' fees and expenses in the amount of $409, 844.50. (Filing No. 24.) On October 13, 2016, Objector asked the Court to deny Plaintiffs' request for final approval of the settlement, class certification, and Plaintiffs' attorneys' fees and expenses, asserting the supplemental disclosures were not plainly material, and they provided no benefit to Remy's stockholders, among other things. (Filing No. 27.) Thereafter, on November 2, 2016, the Court conducted a Settlement Hearing regarding Plaintiffs' request for final approval of class action settlement, class certification, and award of attorney fees.

         The Court found the following class to be proper:

A non-opt-out class that includes: any and all record and beneficial holders of Remy common stock, their respective successors in interest, successors, predecessors in interest, predecessors, representatives, trustees, executors, administrators, heirs, assigns or transferees, immediate and remote, and any person or entity acting for or on behalf of, or claiming under, any of them, and each of them, together with their predecessors and successors and assigns, who held Remy common stock at any time between and including July 13, 2015 and November 10, 2015, but excluding Defendants, their subsidiaries or other affiliates, their assigns, members of their immediate families, officers of Remy, and the legal representatives, heirs, successors, or assigns of any such excluded person.

(Filing No. 40 at 31). In addition, the Court concluded Plaintiffs gave adequate notice.[6] Thereafter, Plaintiffs and Objector submitted proposed findings of fact and conclusions of law on the issues remaining before the Court-specifically whether the proposed settlement and Plaintiffs' attorneys' fees are adequate and fair.

         Having considered the papers submitted, including but not limited to the oral argument of counsel, and all other evidence of record, the Court DENIES the motion for final approval. In light of this denial, the motion for fees and an incentive award are also DENIED as moot.

         II. LEGAL STANDARD

         Class action lawsuits are governed by Federal Rule of Civil Procedure 23. Rule 23(e) governs the process for judicial approval of any compromise of claims brought on a class wide basis. “In deciding whether to approve a class settlement [or compromise], a court must consider whether the agreement benefits class members.” In re Walgreen Co. Stockholder Litig., 832 F.3d 718, 723-24 (7th Cir. 2016) (citing Crawford v. Equifax Payment Services, Inc., 201 F.3d 877, 882 (7th Cir. 2000)). Regarding disclosure only settlements, the Seventh Circuit adopted a standard outlined in Trulia. See Id. at 725; see also In re Trulia, Inc. Stockholder Litig., 129 A.3d 884, 898-99 (Del. Ch. 2016). Under the Trulia standard: 1) supplemental disclosures must address a plainly material misrepresentation or omission; 2) the subject matter of the proposed release must be narrowly circumscribed to encompass nothing more than disclosure claims and fiduciary duty claims concerning the sale process; and 3) the record must show that such claims have been investigated sufficiently. Id.

         III. DISCUSSION

         Plaintiffs move the Court to approve the proposed class settlement, as well as their attorneys' fees and expenses. Objector asks the Court to deny approval of the proposed settlement, asserting the supplemental disclosures are not plainly material, the release is overbroad, and the released claims have not been adequately investigated. Objector contends the supplemental disclosures provided no benefit to Remy's shareholders and objects to Plaintiffs' attorneys' fees.

         A. Settlement Agreement

         Defendants do not admit or concede to liability or wrongdoing in the Stipulation and Agreement of Compromise, Settlement and Release. (Filing No. 21-1 at 14.) Nevertheless, Defendants agree to pay the Plaintiffs up to $400, 000 in fees and up to $15, 000 in expenses. Id. at 17, 38. The Plaintiffs seek, and Defendants do not oppose, approval of $409, 844.50 in attorneys' fees and expenses. (Filing No. 25 at 37.) In exchange, the Plaintiffs agree to release all claims and any potential future claims “of any kind, nature, or description whatsoever, whether direct, derivative, individual class, …, based on state and local, foreign, federal…, or any other law or rule, that any or all Plaintiffs or any or all members of the Class…, ever had, now have, or may have…, against any Released Parties that relate to … the Merger Agreement.” (Filing No. 35 at 10-11.)

         Plaintiffs argue the Court should approve the proposed settlement agreement because they negotiated for supplemental disclosures, permitting shareholders to make a well-informed vote. Plaintiffs contend ...


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