robbins geller rudman by superior court of ca, & dowd llp ... · robbins geller rudman &...

MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF PLAINTIFF’S MOTION FOR FINAL

APPROVAL OF CLASS ACTION SETTLEMENT AND APPROVAL OF PLAN OF ALLOCATION 4847-0874-4861.v2

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ROBBINS GELLER RUDMAN & DOWD LLP RANDALL J. BARON (150796) A. RICK ATWOOD, JR. (156529) MAXWELL R. HUFFMAN (264687) 655 West Broadway, Suite 1900 San Diego, CA 92101 Telephone: 619/231-1058 619/231-7423 (fax)

Lead Counsel for Plaintiffs

[Additional counsel appear on signature page.]

SUPERIOR COURT OF THE STATE OF CALIFORNIA

COUNTY OF SANTA CLARA

In re McAFEE, INC. SHAREHOLDER LITIGATION

Consolidated action, including: Greenberg v. McAfee, Inc., Santa Clara County Superior Court, Case No. 1:10-cv-180413 Colwell v. McAfee, Inc., Santa Clara County Superior Court, Case No. 1:10-cv-180420 Faulkner v. McAfee, Inc., Santa Clara County Superior Court, Case No. 1:10-cv-180597 Korsinsky v. Bass, Santa Clara County Superior Court, Case No. 1:10-cv-180928

This Document Relates To:

ALL ACTIONS.

) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

Lead Case No. 1:10-cv-180413

CLASS ACTION

MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF PLAINTIFF’S MOTION FOR FINAL APPROVAL OF CLASS ACTION SETTLEMENT AND APPROVAL OF PLAN OF ALLOCATION

DATE: October 4, 2019 TIME: 9:00 a.m. DEPT: 5 DATE ACTION FILED: 08/19/2010

Judge: Hon. Thomas E. Kuhnle

Electronically Filedby Superior Court of CA,County of Santa Clara,on 7/29/2019 4:50 PMReviewed By: R. WalkerCase #2010-1-CV-180413Envelope: 3193055

2010-1-CV-180413Santa Clara – Civil

TABLE OF CONTENTS

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I. INTRODUCTION ................................................................................................................... 6

II. STANDARD OF REVIEW ..................................................................................................... 7

III. THE SETTLEMENT IS ENTITLED TO A PRESUMPTION OF FAIRNESS ..................... 8

IV. THE SETTLEMENT SATISFIES FACTORS FAVORING FINAL APPROVAL ............... 9

A. The Amount of the Settlement Favors Final Approval ................................................ 9

B. The Substantial Risks of Continued Litigation .......................................................... 10

1. Risks in Establishing Liability ....................................................................... 11

2. Other Risks Related to Affirmative Defenses ................................................ 12

3. Risks in Proving Damages ............................................................................. 12

4. Risks Relating to Appeal ............................................................................... 13

C. The Stage of Proceedings and Available Evidence Allowed the Parties to Make Informed Decisions Concerning the Settlement .............................................. 14

D. Balancing the Certainty of an Immediate Recovery Against Continued Litigation Favors the Settlement ................................................................................ 15

E. The Recommendation of Experienced Counsel Favors Approval of the Settlement .................................................................................................................. 16

F. Reaction of the Class Supports Approval of the Settlement ...................................... 16

V. THE PLAN OF ALLOCATION IS A FAIR METHOD OF DISTRIBUTING THE SETTLEMENT PROCEEDS ................................................................................................ 16

VI. CONCLUSION ...................................................................................................................... 17

TABLE OF AUTHORITIES

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CASES

Ally Fin. Inc. v. Lazrovich, No. H041197, 2016 WL 4766225 (Cal. App. Sept. 13, 2016) ........................................................................................................... 10

Beecher v. Able, 575 F.2d 1010 (2d Cir. 1978)....................................................................................................... 16

Bell v. Am. Title Ins. Co., 226 Cal. App. 3d 1589 (1991) ....................................................................................................... 7

Brotherton v. Cleveland, 141 F. Supp. 2d 894 (S.D. Ohio 2001) ........................................................................................ 16

Cellphone Termination Fee Cases, 186 Cal. App. 4th 1380 (2010) ...................................................................................................... 9

Cent. Laborers’ Pension Fund v. McAfee, Inc., 17 Cal. App. 5th 292 (2017) ........................................................................................................ 14

Class Plaintiffs v. Seattle, 955 F.2d 1268 (9th Cir. 1992) ..................................................................................................... 16

Corwin v. KKR Fin. Holdings LLC, 125 A.3d 304 (Del. 2015) ............................................................................................................ 12

Dunk v. Ford Motor Co., 48 Cal. App. 4th 1794 (1996) .......................................................................................... 7, 8, 9, 16

El Paso Pipeline GP Co., L.L.C. v. Brinckerhoff, 152 A.3d 1248 (Del. 2016) .......................................................................................................... 14

G. F. v. Contra Costa Cty., No. 13-cv-03667-MEJ, 2015 WL 4606078 (N.D. Cal. July 30, 2015) ............................................................................................................... 8

Glickenhaus & Co. v. Household Int’l, Inc., 787 F.3d 408 (7th Cir. 2015) ....................................................................................................... 13

Hubbard v. BankAtlantic Bancorp, Inc., 688 F.3d 713 (11th Cir. 2012) ..................................................................................................... 14

In re Activision Blizzard, Inc. Stockholder Litig., 124 A.3d 1025 (Del. Ch. 2015).......................................................................................... 9, 11, 12

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In re Datatec Sys., Inc. Sec. Litig., No. 04-CV-525 (GEB), 2007 U.S. Dist. LEXIS 87428 (D.N.J. Nov. 28, 2007) ................................................................................................................. 17

In re Dole Food Co., Inc. Stockholder Litig., No. 8703-VCL, 2015 WL 5052214 (Del. Ch. Aug. 27, 2015).......................................................................................................... 8, 17

In re Mfrs. Life Ins. Co. Premium Litig., MDL No. 1109, 1998 WL 1993385 (S.D. Cal. Dec. 21, 1998) ............................................................................................................. 13

In re Nine Systems Corp. S’holders Litig., No. 3940-VCN, 2014 WL 4383127 (Del. Ch. Sept. 4, 2014) ............................................................................................................... 12

In re Omnivision Techs., 559 F. Supp. 2d 1036 (N.D. Cal. 2007) ....................................................................................... 16

In re PLX Tech. Inc. Stockholders Litig., No. 9880-VCL, 2018 WL 5018535 (Del. Ch. Oct. 16, 2018) ................................................................................................................. 8

In re: Pool Prods. Dist. Market Antitrust Litig., MDL No. 2328, 2016 WL 235781 (E.D. La. Jan. 20, 2016) ............................................................................................................... 14

In re Rural/Metro Corp. Stockholders Litig., 102 A.3d 205 (Del. Ch. 2014).................................................................................................. 8, 17

In re Trados Inc. S’holder Litig., 73 A.3d 17 (Del. Ch. 2013).......................................................................................................... 13

In re Volcano Corp. Stockholder Litig., 143 A.3d 727 (Del. Ch. 2016)...................................................................................................... 12

In re Warner Commc’ns Sec. Litig., 618 F. Supp. 735 (S.D.N.Y. 1985) .............................................................................................. 15

Kullar v. Foot Locker Retail, Inc., 168 Cal. App. 4th 116 (2008) ...................................................................................................... 15

Milstein v. Huck, 600 F. Supp. 254 (E.D.N.Y. 1984) .............................................................................................. 15

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Munoz v. BCI Coca-Cola Bottling Co. of Los Angeles, 186 Cal. App. 4th 399 (2010) ...................................................................................................... 10

Nat’l Rural Telecomms. Coop. v. DIRECTV, Inc., 221 F.R.D. 523 (C.D. Cal. 2004) ............................................................................................. 7, 16

Officers for Justice v. Civil Serv. Comm’n, 688 F.2d 615 (9th Cir. 1982) ....................................................................................................... 15

Singh v. Attenborough, 137 A.3d 151 (Del. 2016) ...................................................................................................... 11, 12

Wershba v. Apple Computer, Inc., 91 Cal. App. 4th 224 (2001), overruled on other grounds by Hernandez v. Restoration Hardware, Inc., 4 Cal. 5th 260 (2018) ............................................................................................................... 9, 10

White v. NFL, 822 F. Supp. 1389 (D. Minn. 1993) ............................................................................................. 17

STATUTES, RULES AND REGULATIONS

California Civil Code §1781(f).......................................................................................................................................... 7

Delaware General Corporation Law §102(b)(7) .................................................................................................................................... 11 §141(e) ......................................................................................................................................... 11

SECONDARY AUTHORITIES

Herbert Newberg & Alba Conte, 2 Newberg on Class Actions (3d ed. 1992) §11.48........................................................................................................................................... 16

Ravi Sinha, Shareholder Litigation Involving Acquisitions of Public Companies – Review of 2015 and 1H 2016 M&A Litigation (Cornerstone Research 2016) ......................................................................................................... 6



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This is a shareholder class action brought on behalf of a class of former stockholders of

McAfee, Inc. (“McAfee” or the “Company”) in connection with the sale of McAfee to Intel

Corporation (“Intel”) for a price of $48.00 per share in cash (the “Transaction”). Plaintiff and Class

Representative Central Laborers’ Pension Fund (“Plaintiff”) respectfully submits this memorandum

in support of the motion for final approval of the Settlement of this Action and for approval of the

proposed distribution of proceeds (the “Plan of Allocation”) based on the terms set forth in the

Stipulation of Settlement dated March 13, 2019 (“Stipulation” or “Settlement”).1

I. INTRODUCTION

After more than eight years of hard-fought litigation – which included two demurrers, three

motions for summary judgment, a petition for writ of mandamus, 38 fact and expert depositions, the

production and review of over 195,000 pages of documents, three discovery motions and many more

informal discovery conferences with the Court, a successful appeal, the certification of the Class, and

three motions in limine – the Parties agreed to resolve this Action just six weeks before trial was

scheduled to begin. The Settlement represents a favorable outcome for the Class – an all-cash

recovery of $11.7 million.

Results like this are demonstrably uncommon. In a study concerning stockholder litigation over

corporate mergers and acquisitions of public companies, Cornerstone Research reported that, among

the hundreds of lawsuits filed during 2015 and the first half of 2016, only six of those cases resulted in

any monetary recovery for stockholders. See Ravi Sinha, Shareholder Litigation Involving Acquisitions

of Public Companies – Review of 2015 and 1H 2016 M&A Litigation, at 5 (Cornerstone Research 2016)

(Exhibit A).2 The study found that, in merger-related litigation, “[m]onetary consideration paid to

shareholders has remained relatively rare.” Id. Moreover, as discussed further below, the Settlement

compares favorably to other recent settlements in merger-related stockholder class actions.

1 Unless indicated otherwise, all capitalized terms and definitions have the same meaning as set forth in the Stipulation of Settlement filed on March 13, 2019. 2 All references to “Exhibits” are citations to the attachments to the Declaration of Maxwell R. Huffman in Support of Motions for: (1) Final Approval of Class Action Settlement and Approval of Plan of Allocation; and (2) an Award of Attorneys’ Fees and Expenses (the “Declaration”), submitted herewith.



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In weighing the clear benefits of the Settlement, Plaintiff also considered the risks that it faced

if this case was taken to trial, including the potentially dispositive defenses of stockholder ratification

and the business judgment rule. As discussed in detail below, the Settlement is favorable to the risks

posed by trial, where several recent cases have resulted in no recovery at all for stockholders. Based

on a well-informed assessment of the strengths and weaknesses of the underlying claims and defenses,

with the advice of experienced counsel, and following a mediation session before Robert A. Meyer,

Esq., a nationally-recognized, neutral mediator with extensive experience in mediating complex

actions, Plaintiff accepted the terms of the Settlement, which it believes to be in the best interests of

the Class.

For the reasons set forth herein and in the Declaration submitted concurrently herewith,

Plaintiff respectfully requests that the Court grant final approval of the Settlement and approve the

Plan of Allocation for being fair, reasonable, and adequate to Class Members.

II. STANDARD OF REVIEW

California Civil Code §1781(f) provides that “[a] class action shall not be dismissed, settled,

or compromised without the approval of the court.” The court’s role in approving a class action

settlement is to determine whether “‘the settlement, taken as a whole, is fair, reasonable and

adequate’” to class members. Dunk v. Ford Motor Co., 48 Cal. App. 4th 1794, 1801 (1996).3 For

complex class actions, there is a “strong public policy” in favor of settlements. Bell v. Am. Title Ins.

Co., 226 Cal. App. 3d 1589, 1607 (1991). The Court’s inquiry therefore “‘must be limited to the

extent necessary to reach a reasoned judgment that the agreement is not the product of fraud or

overreaching by, or collusion between, the negotiating parties, and that the settlement, taken as a

whole, is fair, reasonable and adequate to all concerned.’” Dunk, 48 Cal. App. 4th at 1801. “‘In most

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

lengthy and expensive litigation with uncertain results.’” Nat’l Rural Telecomms. Coop. v. DIRECTV,

Inc., 221 F.R.D. 523, 526 (C.D. Cal. 2004).

3 Citations are omitted unless otherwise indicated.



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III. THE SETTLEMENT IS ENTITLED TO A PRESUMPTION OF FAIRNESS

A presumption of fairness applies to a proposed settlement when: “(1) the settlement is

reached through arm’s-length bargaining; (2) investigation and discovery are sufficient to allow

counsel and the court to act intelligently; (3) counsel is experienced in similar litigation; and (4) the

percentage of objectors is small.” Dunk, 48 Cal. App. 4th at 1802.

First, the Settlement was the product of extensive arm’s-length negotiations by counsel, which

included the assistance of a neutral mediator with significant experience in merger-related class

actions. ¶34.4 The Parties exchanged opening and supplemental mediation statements, engaged in a

full-day session with the mediator, and then continued their negotiations for another two months

before reaching the Settlement. Id. Courts have recognized that “‘[t]he assistance of an experienced

mediator in the settlement process confirms that the settlement is non-collusive.’” G. F. v. Contra

Costa Cty., No. 13-cv-03667-MEJ, 2015 WL 4606078, at *13 (N.D. Cal. July 30, 2015).

Second, as discussed herein and in the Declaration, the Settlement came after eight years of

hard-fought litigation, including full fact and expert discovery. ¶¶7-35. In total, discovery in this

Action involved 38 depositions, as well as production and review of over 195,000 pages of

documents. ¶50. As a result of this thorough investigation, Plaintiff and its counsel were able to

fairly assess the strengths and weaknesses of the Class’ claims.

Third, Plaintiff’s Counsel has extensive experience and expertise in litigating not just complex

class actions, but also stockholders’ claims in the context of disputed mergers of public companies.

In fact, Plaintiff’s Counsel was lead counsel for plaintiffs in the last three merger-related stockholder

class actions to be taken to trial, which included the exact same claims of breach of fiduciary duty

and the aiding and abetting thereof that are asserted here. See In re Dole Food Co., Inc. Stockholder

Litig., No. 8703-VCL, 2015 WL 5052214 (Del. Ch. Aug. 27, 2015) (awarding damages in post-trial

ruling); In re Rural/Metro Corp. Stockholders Litig., 102 A.3d 205 (Del. Ch. 2014) (awarding

damages in post-trial ruling); In re PLX Tech. Inc. Stockholders Litig., No. 9880-VCL, 2018 WL

4 All references to “¶” and “¶¶” are citations to the Declaration.



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5018535 (Del. Ch. Oct. 16, 2018) (finding an activist investor knowingly participated in the board’s

breaches of fiduciary duty in post-trial ruling, but awarding no damages).

Fourth, although the date for filing of written objections has not yet passed, Plaintiff’s

Counsel is not aware of a single objection to any aspect of the Settlement.

Accordingly, the Settlement is presumptively fair.

IV. THE SETTLEMENT SATISFIES FACTORS FAVORING FINAL APPROVAL

When evaluating the fairness of a class action settlement, the trial court is to consider both the

“give” and the “get” for class members. In re Activision Blizzard, Inc. Stockholder Litig., 124 A.3d

1025, 1043 (Del. Ch. 2015) (approving a settlement in a merger-related stockholder action);

Cellphone Termination Fee Cases, 186 Cal. App. 4th 1380, 1388 (2010) (affirming approval of a

class action settlement and the trial court’s finding that “‘the total monetary and injunctive relief

obtained is reasonable in light of the claims released and the risks of further litigation’”). On one

hand, class members receive a benefit related to their claims – whether monetary compensation or a

therapeutic benefit. Id. On the other hand, class members give a release of claims that ends the

litigation against defendants. Id.

In weighing the fairness of this exchange, trial courts will consider certain factors, including:

(1) the settlement amount; (2) the risks of continued litigation; (3) the stage of proceedings; (4) the

complexity, expense, and likely duration of the litigation absent settlement; (5) the experience and

views of class counsel; and (6) the reaction of class members. Dunk, 48 Cal. App. 4th at 1801. The

trial court is “free to engage in a balancing and weighing of factors depending on the circumstances

of each case.” Wershba v. Apple Computer, Inc., 91 Cal. App. 4th 224, 245 (2001), overruled on

other grounds by Hernandez v. Restoration Hardware, Inc., 4 Cal. 5th 260 (2018). Here, even if there

were not a presumption of fairness, the Settlement satisfies this standard.

A. The Amount of the Settlement Favors Final Approval

“Compromise is inherent and necessary in the settlement process,” which can result in a

recovery that is “narrower” than if plaintiff ultimately prevailed at trial. Wershba, 91 Cal. App. 4th

at 250. As a result, a recovery that is less than the complete relief sought “is no bar to a class



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settlement because ‘the public interest may indeed be served by a voluntary settlement in which each

side gives ground in the interest of avoiding litigation.’” Ally Fin. Inc. v. Lazrovich, No. H041197,

2016 WL 4766225, at *9 (Cal. App. Sept. 13, 2016); Wershba, 91 Cal. App. 4th at 250 (“A settlement

need not obtain 100 percent of the damages sought in order to be fair and reasonable.”).

Here, the Settlement provides an $11.7 million all-cash recovery for the benefit of the Class –

a result which is demonstrably uncommon for cases of this nature. As explained in the Declaration,

monetary recoveries in merger-related stockholder class actions are exceedingly rare, let alone a

common fund of this magnitude. ¶5. The Settlement results in a pro rata recovery of approximately

$0.08 per share (based on just under 154 million shares owned by the Class), which is on top of the

premium that Intel paid to McAfee’s stock price prior to the announcement of the Transaction. ¶37.

Such recoveries are consistent with those recently approved in other merger-related class actions. See

In re Mavenir Systems, Inc. Stockholders Litig., C.A. No. 10757-VCMR, Stipulation and Agreement

of Compromise, Settlement, and Release (Del. Ch.) ($3 million common fund with approximately

29 million shares owned by the class, which equates to pro rata recovery of roughly $0.10 per share)

(Exhibit B); In re BMC Software, Inc. Stockholder Litig., C.A. No. 8544-VCG, Stipulation of

Settlement and Release (Del. Ch.) ($12.4 million common fund with approximately 127 million

shares owned by the class, which equates to a pro rata recovery of roughly $0.09 per share)

(Exhibit C). In preliminarily approving the Settlement, the Court found that “the settlement is fair”

based on such a recovery for the Class Members. See Order re: Continued Motion for Preliminary

Approval of Class Action Settlement at 3.

Accordingly, this factor favors the Court granting final approval of the Settlement.

B. The Substantial Risks of Continued Litigation

In evaluating the fairness of a proposed settlement, the trial court should consider “‘the

strengths and weaknesses of the claims and the risks of the particular litigation.’” Munoz v. BCI

Coca-Cola Bottling Co. of Los Angeles, 186 Cal. App. 4th 399, 410 (2010). As explained herein,

Plaintiff’s case presented unique and substantial risks with respect to both liability and damages.



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1. Risks in Establishing Liability

In weighing the clear benefits of the Settlement, Plaintiff – with the assistance of its counsel

– considered the many risks that it faced if this case was taken to trial, including “[a]rticulate

witnesses, skilled counsel, and polished experts” from Defendants who would be prepared to present

their best arguments for why neither Delaware substantive law nor the facts of this case would support

any claim for liability. Activision, 124 A.3d at 1064 (“The magnitude of the Settlement reflects that

Lead Counsel advanced strong claims for breach of the duty of loyalty. That does not mean that the

claims were without risk.”).

For example, McAfee’s certificate of incorporation contained an exculpatory provision

pursuant to §102(b)(7) of Delaware General Corporation Law that prohibited any liability for

breaches of fiduciary duty by Defendant David DeWalt (“DeWalt”) as a director except in the

instances of disloyal or bad faith conduct. DeWalt was also offered protection under §141(e), which

provides that directors are “fully protected” from liability when relying in good faith on the advice

and opinions of a company’s officers or outside advisors. Further, to establish Intel’s liability,

Plaintiff needed to prove it acted with “scienter” when knowingly participating in an underlying

breach of fiduciary duty, which the Delaware Supreme Court has been described as a “defendant-

friendly standard.” Singh v. Attenborough, 137 A.3d 151, 152 (Del. 2016).

In addition to these legal standards that Plaintiff would have faced at trial, Defendants were

prepared to argue that a number of facts precluded liability, including that: (1) DeWalt owned 225,000

shares of McAfee stock, as well as another 489,063 in stock options, which arguably gave him a

financial incentive to negotiate aggressively with Intel; (2) the Transaction price represented a 60%

premium over McAfee’s stock price on the day before the sale to Intel was publicly announced;

(3) McAfee’s financial advisors at Morgan Stanley opined that the Transaction was financially fair to

the Company’s stockholders; (4) no other potential buyer submitted a superior bid to acquire the



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Company; and (5) over 72% of McAfee’s outstanding shares were voted in favor of the Transaction.

See Defendants’ Motion for Summary Judgment at 6-15.5

Although Plaintiff was prepared to make counterarguments to each of these positions, the

Court may have found Defendants’ factual and legal arguments persuasive or even dispositive as to

the elements of liability for Plaintiff’s claims. Thus, a meaningful chance existed that the Class could

have walked away with nothing if this Action proceeded to trial.

2. Other Risks Related to Affirmative Defenses

After the initial filing of this Action, the Delaware Supreme Court issued a decision that

presented another risk for Plaintiff’s claims. See Corwin v. KKR Fin. Holdings LLC, 125 A.3d 304

(Del. 2015). Under Corwin and its recent progeny, where a disinterested and fully informed,

uncoerced majority of stockholders approve a transaction, whether through tender offer or vote, an

“irrebuttable” form of the business judgment rule applies. In re Volcano Corp. Stockholder Litig.,

143 A.3d 727, 737-38 (Del. Ch. 2016). In that scenario, all challenges to a merger are extinguished,

other than those predicated on waste. Id. at 740. The Delaware Supreme Court has indicated that

waste claims have “little real-world relevance” in sell-side actions where the merger paid a premium

to the target company’s stockholders, and the approval of fully-informed and disinterested

stockholders is therefore generally an absolute defense to stockholders’ claims. Singh, 137 A.3d at

152. While serious disclosure issues existed in this case, which would prevent a fully informed vote,

Plaintiff’s arguments were not unassailable.

3. Risks in Proving Damages

“In addition to the risks of losing on liability, there was risk associated with the possible

remedies.” Activision, 124 A.3d at 1065. Even if stockholders prove that a company’s directors or

officers breached their fiduciary duties, or a third party aided and abetted such misconduct, there is

no guarantee that any causally-related damages will be found. See, e.g., In re Nine Systems Corp.

5 Plaintiff also faced broader evidentiary concerns, as the Transaction took place over eight years ago and fact witnesses could have struggled to recall relevant events. In fact, at least one key witness – Intel’s Chief Executive Officer at the time of the merger – has passed away since this case was filed. See Exhibit D (Intel Press Release).



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S’holders Litig., No. 3940-VCN, 2014 WL 4383127, at *3 (Del. Ch. Sept. 4, 2014) (finding in a

stockholder class action that, “given the only reliable valuation evidence, . . . the Defendants who

breached their fiduciary duties or who aided and abetted those breaches are not liable for monetary

damages”); In re Trados Inc. S’holder Litig., 73 A.3d 17 (Del. Ch. 2013) (finding that the

consideration paid to common stockholders in the disputed merger was “fair” despite directors’ self-

dealing).

Here, the factual disputes related to the calculation of damages and the fair value of McAfee

at the time of the Transaction were fiercely contested and presented significant risk for Plaintiff at

trial. In support of a compensatory damages award, Plaintiff was prepared to argue that McAfee’s

fair value exceeded the Transaction price because future business opportunities were not accounted

for in the Company’s financial projections, and the Class was therefore entitled to damages equal the

difference between the Company’s true value and the $48.00 per share that stockholders received.

On the other hand, Defendants were prepared to argue that Intel paid a fair price to acquire the

Company, while emphasizing that the Transaction price represented a 60% premium to McAfee’s

unaffected stock price, McAfee’s financial advisors Morgan Stanley opined the consideration was

financially fair to stockholders, and no other potential buyer made a superior bid. See Defendants’

Motion in Limine to Exclude Expert Testimony.

Thus, Plaintiff faced the prospect of winning the liability phase at trial, but recovering nothing

for the Class.

4. Risks Relating to Appeal

Even if Plaintiff was to prevail at trial, the risks would not end there. See In re Mfrs. Life Ins.

Co. Premium Litig., MDL No. 1109, 1998 WL 1993385, at *5 (S.D. Cal. Dec. 21, 1998) (explaining

that “even if it is assumed that a successful outcome for plaintiffs at summary judgment or at trial

would yield a greater recovery than the Settlement – which is not at all apparent – there is easily

enough uncertainty in the mix to support settling the dispute rather than risking no recovery in future

proceedings”). There are many cases in the class action context in which a successful verdict has

been overturned either by motion after trial or an appeal. See, e.g., Glickenhaus & Co. v. Household



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Int’l, Inc., 787 F.3d 408 (7th Cir. 2015) (reversing a jury verdict in a securities fraud class action after

13 years of litigation on loss causation grounds and error in jury instructions); Hubbard v.

BankAtlantic Bancorp, Inc., 688 F.3d 713 (11th Cir. 2012) (finding trial court erred, but defendants

nevertheless entitled to judgment as a matter of law based on lack of loss causation in securities fraud

class action); El Paso Pipeline GP Co., L.L.C. v. Brinckerhoff, 152 A.3d 1248 (Del. 2016) (reversing

post-trial judgment that awarded $171 million in damages to shareholder class). In fact, a dispositive

judgment in this case has already been reversed by the Court of Appeal. Cent. Laborers’ Pension

Fund v. McAfee, Inc., 17 Cal. App. 5th 292 (2017). As a result, Plaintiff needed to evaluate the

immediate and certain benefits of the Settlement not just against the risks present at trial, but the

potential for a lengthy appellate process that could result in a reversal of a post-trial judgment in the

Class’ favor.

C. The Stage of Proceedings and Available Evidence Allowed the Parties to Make Informed Decisions Concerning the Settlement

This factor focuses on whether the parties had sufficient information to conduct an informed

negotiation for a settlement that adequately reflects the merits of the case. When applying this factor,

“[t]he question is not whether the parties have completed a particular amount of discovery, but whether

the parties have obtained sufficient information about the strengths and weaknesses of their respective

cases to make a reasoned judgment about the desirability of settling on the terms proposed or continuing

to litigate.” In re: Pool Prods. Dist. Market Antitrust Litig., MDL No. 2328, 2016 WL 235781, at *8

(E.D. La. Jan. 20, 2016). “If the settlement proponents have taken affirmative steps to gather data on

the claims at issue, and the terms of the settlement are not patently unfair, the Court may rely on

counsel’s judgment that the information gathered was enough to support a settlement.” Id.

As detailed above and in the Declaration, by the time the Parties reached the Settlement,

Plaintiff had thoroughly investigated and researched the merits of its claims and the potential defenses

to determine that the terms of the Settlement are fair, reasonable, and adequate and in the best interest

of the Class. ¶¶7-35. Plaintiff doggedly litigated the merits of this case for eight years and engaged

in full fact and expert discovery, which included over 195,000 pages of document discovery and 38

depositions. Id. The merits of the Parties’ respective positions were also extensively debated through



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Settlement discussions, including in mediation. ¶34. The knowledge and insight gained through

these activities provided Plaintiff with sufficient information to evaluate the strengths and weaknesses

of the Class’ claims and the range of potential outcomes at trial.

D. Balancing the Certainty of an Immediate Recovery Against Continued Litigation Favors the Settlement

“The expense and possible duration of the litigation should be considered in evaluating the

reasonableness of [a] settlement.” Milstein v. Huck, 600 F. Supp. 254, 267 (E.D.N.Y. 1984); Kullar

v. Foot Locker Retail, Inc., 168 Cal. App. 4th 116, 123 n.3 (2008) (discussing the “expense and delay

of continued lengthy proceedings that would be necessary to prosecute the action against defendant

through trial and appeals”). The benefit of an immediate recovery must therefore be balanced against

the time and expense required to potentially achieve a more favorable result in the future. Officers

for Justice v. Civil Serv. Comm’n, 688 F.2d 615, 624 (9th Cir. 1982). Accordingly, the fact that the

Class potentially could have achieved a greater recovery after trial does not preclude the Court from

balancing such a potential recovery against the risk and delay of trial, and finding that the Settlement

is within a “range of reasonableness” for approval. In re Warner Commc’ns Sec. Litig., 618 F. Supp.

735, 745 (S.D.N.Y. 1985).

Approval of the Settlement will mean prompt recovery for the Class. If not for this Settlement,

the case would have continued at great cost and duration. At the time the Parties agreed to settle the

Action, they were facing a lengthy bench trial. Although a post-trial judgment may have been not far

off, any outcome was virtually certain to be appealed. This process would have extended an already

lengthy litigation even further. Tellingly, the Parties litigated the prior appeal of the initial summary

judgment rulings for five years, with summary judgment initially being granted in November 2012

and the decision on the appeal being entered in November 2017. ¶¶26-28. Delay – not just at the

trial stage, but through post-trial motions and the appeals process as well – could therefore force Class

Members to wait even longer for any recovery, thereby further reducing its value. Settlement of this

Action ensures an immediate recovery while eliminating the risk of no recovery at all.



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E. The Recommendation of Experienced Counsel Favors Approval of the Settlement

While a court must independently review a proposed settlement, the judgment of experienced

counsel who is familiar with the factual and legal issues is entitled to “great weight.” See Nat’l Rural,

221 F.R.D. at 528. As one court recognized, “‘[t]he recommendations of plaintiffs’ counsel should

be given a presumption of reasonableness.’” In re Omnivision Techs., 559 F. Supp. 2d 1036, 1043

(N.D. Cal. 2007). As discussed above, Plaintiff’s Counsel is known for its experience and success in

complex and class action litigation and fully supports the Settlement as in the best interest of the

Class. This factor therefore favors this Court’s approval of the Settlement.

F. Reaction of the Class Supports Approval of the Settlement

A court may also consider the reaction of the class in determining whether to approve a

settlement. Dunk, 48 Cal. App. 4th at 1802 (one of the factors leading to a presumption that the

settlement is fair, reasonable and adequate is that “the percentage of objectors is small”). A “relatively

small number” of objections is “an indication of a settlement’s fairness.” Brotherton v. Cleveland,

141 F. Supp. 2d 894, 906 (S.D. Ohio 2001) (citing Herbert Newberg & Alba Conte, 2 Newberg on

Class Actions §11.48 (3d ed. 1992)).

Here, although the time for objections has not yet expired, to date, no Class Member has

objected to any aspect of the Settlement. Thus, the reaction of the Class weighs in favor of approving

the Settlement.

V. THE PLAN OF ALLOCATION IS A FAIR METHOD OF DISTRIBUTING THE SETTLEMENT PROCEEDS

The objective of a plan of allocation is to provide an equitable basis upon which to distribute

the settlement fund among eligible class members. See Beecher v. Able, 575 F.2d 1010, 1016 (2d Cir.

1978) (courts enjoy “broad supervisory powers over the administration of class-action settlements to

allocate the proceeds among the claiming class members . . . equitably”). Assessment of the plan of

allocation is governed by the same standards of review applicable to the settlement as a whole – the

plan must be fair, reasonable, and adequate. Class Plaintiffs v. Seattle, 955 F.2d 1268, 1284 (9th Cir.

1992). An allocation formula must only have a reasonable, rational basis, particularly if recommended



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by “experienced and competent” plaintiffs’ counsel. White v. NFL, 822 F. Supp. 1389, 1420-24

(D. Minn. 1993). Because they tend to mirror the complaints’ allegations, “plans that allocate money

depending on the timing of purchases and sales of the securities at issue are common.” In re Datatec

Sys., Inc. Sec. Litig., No. 04-CV-525 (GEB), 2007 U.S. Dist. LEXIS 87428, at *15 (D.N.J. Nov. 28, 2007).

Here, the Net Settlement Fund will be divided pro rata based upon the number of shares of

McAfee common stock that Class Members held at the closing of the Transaction. The Net Settlement

Fund will be disbursed by the Claims Administrator to the Settlement Payment Recipients and will

be allocated on a per-share basis amongst the Settlement Payment Recipients who have submitted to

the Claims Administrator a valid Proof of Claim by the deadline provided in the Notice based on the

number of shares of McAfee common stock held by the applicable Settlement Payment Recipient

upon the closing of the Transaction. The objective of this plan is to provide an equitable basis upon

which to distribute the Net Settlement Fund among eligible Class Members. This will result in a fair

distribution of the Net Settlement Fund among Class Members, as it is consistent with how post-trial

damages are calculated and distributed for cases of this nature that proceed through trial. See

Rural/Metro, 102 A.3d at 224 (explaining that monetary damages are “‘equal to the “fair” or

“intrinsic” value of their stock at the time of the merger, less the price per share that they actually

received’”); Dole, 2015 WL 5052214, at *2 (calculating damages on a “per share” basis).

Thus, the Plan of Allocation is appropriate and should be approved.

VI. CONCLUSION

For all the foregoing reasons, Plaintiff respectfully requests that the Court approve the

Settlement and the Plan of Allocation.

DATED: July 29, 2019 Respectfully submitted,

ROBBINS GELLER RUDMAN & DOWD LLP RANDALL J. BARON A. RICK ATWOOD, JR. MAXWELL R. HUFFMAN

MAXWELL R. HUFFMAN



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655 West Broadway, Suite 1900 San Diego, CA 92101 Telephone: 619/231-1058 619/231-7423 (fax)

Lead Counsel for Plaintiffs

CAVANAGH & O’HARA PATRICK J. O’HARA 407 East Adams Street Springfield, IL 62701 Telephone: 217/544-1771 217/544-9894 (fax)

Additional counsel for plaintiff Central Laborers’ Pension Fund

1 DECLARATION OF SERVICE BY E-MAIL

2 I, JACLYN WILLIAMS, not a party to the within action, hereby declare that on July 29, 2019, served the attached MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF

3 PLAINTIFF'S MOTION FOR FINAL APPROVAL OF CLASS ACTION SETTLEMENT AND APPROVAL OF PLAN OF ALLOCATION on the parties in the within action by e-mail addressed

4 as follows:

5 COUNSEL FOR PLAINTIFFS:

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NAME Randall J. Baron A. Rick Atwood, Jr. David T. Wissbroecker Maxwell R. Huffman Patrick J. O'Hara John T. Long

FIRM Robbins Geller Rudman & DowdLLP

Cavanagh & O'Hara, LLP

11 COUNSEL FOR DEFENDANTS:

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NAME FIRM

Paul J. Collins Gibson Dunn & Crutcher LLP

Rodney G. Strickland, Jr. Wilson Sonsini Goodrich & Rosati. P.C.

Robert L. Dell Angelo Munger, Tolles & Olson LLP Maria Jhai John W. Soiegel

EMAIL [email protected] [email protected] [email protected] mhuffmancal.r2:rdlaw.com [email protected] j [email protected]

EMAIL

[email protected]

[email protected]

[email protected] [email protected] John. [email protected]

Electronically filedby Superior Court of CA, County of Santa Clara,on 7/29/2019 4:50 PMReviewed By:R. WalkerCase #2010-1-CV-180413Env #3193055

robbins geller rudman by superior court of ca, & dowd llp ... · robbins geller rudman &...

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