Motion to Settle ABAT Case for Peanuts.pdf

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

)

IN RE ADVANCED BATTERY )

TECHNOLOGIES, INC. ) Consolidated Civil

SECURITIES LITIGATION ) Action No. 11 Civ. 2279 (CM)

)

)

PLAINTIFFS’ MEMORANDUM OF LAW IN SUPPORT OF

MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT AND

CERTIFICATION OF SETTLEMENT CLASS

POMERANTZ GROSSMAN HUFFORD

DAHLSTROM & GROSS LLP

Marc I. Gross

Murielle J. Steven Walsh

600 Third Avenue

New York, NY 10016

Tel: (212) 661-1100

Fax: (212) 661-8665

[email protected]

[email protected]

Lead Counsel and Proposed Lead

Class Counsel

Case 1:11-cv-02279-CM Document 117 Filed 11/05/13 Page 1 of 32

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TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES ...................................................................................................... iv

I. INTRODUCTION ............................................................................................................1

II. SUMMARY OF THE LITIGATION AND SETTLEMENT ...........................................2

A. The Litigation........................................................................................................2

B. Settlement Discussions .........................................................................................4

C. Summary of Key Terms of The Proposed Settlement and Proposed

Schedule of Events ................................................................................................4

1. Relief Available to Settlement Class Members ........................................4

2. Class Notice and Settlement Administration ............................................6

a. Notice ............................................................................................6

b. Administration ..............................................................................7

c. Costs of Notice and Administration ..............................................8

3. Opt-Out and Exclusionary Provisions ......................................................8

4. Release Provisions ....................................................................................9

5. Reimbursement Award for Attorneys’ Expenses and

Compensatory Award for the Lead Plaintiff .............................................9

III. PRELIMINARY APPROVAL OF THE PROPOSED SETTLEMENT IS

APPROPRIATE. ...............................................................................................................9

A. The Settlement of a Class Action Is Favored and Should Be

Preliminarily Approved If It Falls Within the Range of

Reasonableness. ....................................................................................................9

B. The Proposed Settlement Negotiated By Arms-Length

Negotiations Between the Parties Enjoys a Presumption of

Fairness. ..............................................................................................................11

C. The Settlement Benefit Falls Within the Range of Possible

Recovery. ............................................................................................................12


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1. The Complexity, Expense and Likely Duration of the

Litigation .................................................................................................13

2. Collectability and Ability of the Defendants to Withstand a

Greater Judgment ....................................................................................14

3. Stage of Proceedings and Amount of Discovery Completed..................15

4. The Risks of Establishing Liability and Damages ..................................16

5. The Risks of Maintaining the Class Action Through Trial .....................17

6. Reasonableness of the Settlement Fund in Light of the Best

Possible Recovery ...................................................................................17

IV. THE PROPOSED SETTLEMENT CLASS SHOULD BE CERTIFIED

FOR SETTLEMENT PURPOSES. ...............................................................................19

A. The Proposed Settlement Class Meets The Requirements Of Rule

23(a) And 23(b)(3). .............................................................................................19

V. THE COURT SHOULD APPROVE THE PROPOSED FORM AND

METHOD OF CLASS NOTICE. ...................................................................................22

A. Notice By Direct Mail and Posting Online is Sufficient When a

Large, Nationwide Class is Present. ...................................................................22

B. The Proposed Form of Notice Adequately Informs Settlement

Class Members of Their Rights in This Litigation. ............................................23

VI. CONCLUSION ...............................................................................................................24


iv

TABLE OF AUTHORITIES

CASES

Page(s)

Amchem Prods., Inc. v. Windsor,

521 U.S. 591 (1997) .......................................................................................................... 19, 20

Aponte v. Comprehensive Health Mgmt., Inc., No. 10 CIV. 4825 JLC,

2013 WL 1364147 (S.D.N.Y. Apr. 2, 2013)....................................................................... 9, 11

Aramburu v. Healthcare Fin. Services, Inc., No. 02-CV-6535MDG,

2009 WL 1086938 (E.D.N.Y. Apr. 22, 2009) ........................................................................ 14

Boyd v. Bechtel Corp.,

485 F. Supp. 610 (N.D. Cal. 1979) ......................................................................................... 18

Carson v. Am. Brands, Inc.,

450 U.S. 79 (1981) .................................................................................................................. 10

China Tire Holdings Ltd. v. Goodyear Tire & Rubber Co.,

91 F. Supp. 2d 1106 (N.D. Ohio 2000) ................................................................................... 17

City of Detroit v. Grinnell Corp.,

495 F.2d 448 (2d Cir. 1974).................................................................................................... 12

Clark v. Ecolab Inc., No. 07 Civ. 8623,

2010 WL 1948198 (S.D.N.Y. May 11, 2010) ........................................................................ 11

Cordes & Co. Fin. Servs., Inc. v. A.G. Edwards & Sons, Inc.,

502 F.3d 91 (2d Cir. 2007)...................................................................................................... 22

Cutler v. Perales,

128 F.R.D. 39 (S.D.N.Y. 1989) .............................................................................................. 20

D'Amato v. Deutsche Bank,

236 F.3d 78 (2d Cir. 2001)...................................................................................................... 12

Holden v. Burlington N., Inc.,

665 F. Supp. 1398 (D. Minn. 1987) ........................................................................................ 18

In re Am. Bank Note Holographics, Inc. Sec. Litig.,

127 F. Supp. 2d 418 (S.D.N.Y. 2001)....................................................................................... 5

In re AT & T Mobility Wireless Data Servs. Sales Tax Litig.,

789 F. Supp. 2d 935 (N.D. Ill. 2011) ........................................................................................ 7


v

In re China Sunergy Sec. Litig., No. 07 Civ. 7895 (DAB),

2011 WL 1899715 (S.D.N.Y. May 13, 2011) .................................................................. 13, 17

In re Domestic Air Transp. Antitrust Litig.,

148 F.R.D. 297 (N.D. Ga. 1993) ............................................................................................. 14

In re EVCI Career Colleges Holding Corp. Sec. Litig., No. 05 CIV 10240(CM),

2007 WL 2230177 (S.D.N.Y. Jul. 27, 2007) .......................................................................... 10

In re Flag Telecom Holdings, Ltd. Sec. Litig.,

574 F.3d 29 (2d Cir. 2009)...................................................................................................... 20

In re Genta Sec. Litig., No. 04-2123,

2008 WL 2229843 (D.N.J. May 28, 2008) ............................................................................. 16

In re Gilat Satellite Networks, Ltd., No. CV-02-1510 CPS,

2007 WL 1191048 (E.D.N.Y. Apr. 19, 2007) .......................................................................... 5

In re Global Crossing Securities and ERISA Litigation,

225 F.R.D. 436 (S.D.N.Y. 2004) ........................................................................................ 6, 20

In re Merrill Lynch & Co., Inc. Research Reports Sec. Litig., No. 02, MDL 1484JFK,

2007 WL 4526593 (S.D.N.Y. Dec. 20, 2007) .......................................................................... 6

In re Mutual Funds Investment Litig., MDL No. 1586,

2010 WL 2342413 (D. Md. May 19, 2010) .............................................................................. 7

In re Oxford Health Plans, Inc.,

191 F.R.D. 369 (S.D.N.Y. 2000) ............................................................................................ 20

In re Prudential Ins. Co. of Am. Sales Practices Litig.,

962 F. Supp. 450 (D.N.J. 1997), ............................................................................................. 14

In re Salomon Analyst Metromedia Litig.,

544 F.3d 474 (2d Cir. 2008).................................................................................................... 21

In re Vivendi Universal, S.A.,

242 F.R.D. 76 (S.D.N.Y. 2007) .............................................................................................. 20

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

No. 08cv0795 IEG RBB, 2008 WL 4473183 (S.D. Cal. Oct. 6, 2008) .................................... 5

Maley v. Del Global Tech. Corp.,

186 F. Supp. 2d 358 (S.D.N.Y. 2002)............................................................................... 14, 18

Mangone v. First USA Bank,

206 F.R.D. 222 (S.D. Ill. 2001) .............................................................................................. 23


vi

Marisol A. v. Giuliani,

126 F.3d 372 (2d Cir. 1997).................................................................................................... 19

Menkes v. Stolt-Nielsen S.A.,

270 F.R.D. 80 (D. Conn. 2010)......................................................................................... 19, 22

Merck-Medco Managed Care, LLC,

504 F.3d 229 (2d Cir. 2007).................................................................................................... 19

Mullane v. Cent. Hanover Bank & Trust Co.,

339 U.S. 306 (1950) .............................................................................................................. 6, 7

Phillips Petroleum Co. v. Shutts,

472 U.S. 797 (1985) ................................................................................................................ 22

Robidoux v. Celani,

987 F.2d 931 (2d Cir. 1993).................................................................................................... 20

Schwartz v. Novo Industri A/S,

119 F.R.D. 359 (S.D.N.Y. 1988) ............................................................................................ 13

Slayton v. Am. Express Co.,

604 F.3d 758 (2d Cir. 2010).................................................................................................... 16

Soberal-Perez v. Heckler,

717 F.2d 36 (2d Cir. 1983)........................................................................................................ 7

Spann v. AOL Time Warner, Inc., No. 02 Civ. 8238 (DLC),

2005 WL 1330937 (S.D.N.Y. Jun. 7, 2005) ........................................................................... 10

Thompson v. Metro. Life Ins. Co.,

216 F.R.D. 55 (S.D.N.Y. 2003) .............................................................................................. 12

Torres v. Gristede's Operating Corp., No. 04-CV-3316 (PAC),

2010 WL 5507892 (S.D.N.Y. Dec. 21, 2010) ........................................................................ 11

Wal-Mart Stores, Inc. v. Visa U.S.A. Inc.,

396 F.3d 96 (2d Cir. 2005)........................................................................................................ 9

Weinberger v. Kendrick,

698 F.2d 61 (2d Cir. 1982)...................................................................................................... 19

STATUTES

15 U.S.C. § 78j(b) ........................................................................................................................... 2

15 U.S.C. § 78t(a) ........................................................................................................................... 2

15 U.S.C. § 78u-4(a)(7) ................................................................................................................ 24


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RULES

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

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

Fed. R. Civ. P. 23(c) ..................................................................................................................... 23

Fed. R. Civ. P. 23(e) ..................................................................................................................... 22

Fed. R. Civ. P. 23(g) ..................................................................................................................... 21

REGULATIONS

17 C.F.R. § 240.10b-5 ..................................................................................................................... 2

OTHER AUTHORITIES

Enforcing and Collecting Money Judgments in China from A U.S. Judgment

Creditor's Perspective, 36 Geo. Wash. Int'l L. Rev. 757 (2004) .................................................... 5

Manual for Complex Litigation (4th ed. 2013) ...................................................................... passim

Newberg on Class Actions (4th ed. 2002) .............................................................................. passim

The Problem of Selective or Sporadic Recognition: A New Economic Rationale

for the Law of Foreign Country Judgments, 10 Chi. J. Int'l L. 505 (2010) .................................... 5


Lead Plaintiff, individually and on behalf of himself and all others similarly situated

respectfully submits this memorandum in support of Plaintiffs’ Motion seeking: (i) preliminary

approval of the proposed Settlement (the “Settlement”); (ii) certification of the Settlement Class;

(iii) approval of the Notice to the Settlement Class and method for giving notice; and (iv) setting

of a date for a Settlement Hearing and deadlines for disseminating the Notices, filing Settlement

Class Member objections, filing opt-out notices, and filing Lead Counsel’s application for

reimbursement of attorneys’ expenses.1

I. INTRODUCTION

Lead Plaintiff, Advanced Battery Technologies, Inc. (“ABAT” or the “Company”),

Zhiguo Fu, and Guohua Wan (“ABAT Defendants”) (collectively, with Lead Plaintiff, the

“Settling Parties”) have reached an agreement to settle this case (the “Litigation”) regarding the

ABAT Defendants’ alleged violations of the Securities Exchange Act (the “Exchange Act”).

The terms of the settlement are contained in the Stipulation of Settlement (the “Stipulation”)

attached as Appendix 1 hereto (“App. 1”). Lead Plaintiff seeks entry of an order:

Granting preliminary approval of the Stipulation;

Certifying a Settlement Class for settlement purposes only, appointing

Lead Plaintiff as the Class Representative, and certifying Pomerantz

Grossman Hufford Dahlstrom & Gross LLP as Lead Counsel for the

Settlement Class;

Approving the parties’ proposed form and method of giving Settlement

Class Members notice of the action and proposed Settlement;

Directing that notice be given to Settlement Class Members in the

proposed form and manner; and

Setting a hearing on whether the Court should grant final approval of the

Settlement, dismiss claims against the ABAT Defendants, approve the

1 All capitalized terms used herein have the meanings set forth and defined in the Stipulation of

Settlement.


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release of claims against the ABAT Defendants, enter judgment, award

attorneys’ expenses to Lead Counsel, and approve a compensatory award

to Lead Plaintiff. Plaintiffs propose a Settlement Hearing date of no less

than 100 days from preliminary approval in order to afford sufficient time

for notice to class members and for class members to make determinations

of whether to participate.

The Settlement provides fair and reasonable benefits to the Settlement Class. As

consideration for the Stipulation, the ABAT Defendants agree to pay $275,000 in cash (the

“Settlement Amount”) into an interest-bearing escrow account for distribution to Settlement

Class Members in settlement of all active and potential claims against the ABAT Defendants

arising from their alleged conduct underlying the Litigation.

The proposed Settlement falls within the range of reasonable settlement outcomes given

the high likelihood that any judgment would not be collectible. The Settlement was negotiated by

lawyers experienced in complex litigation through exhaustive arms-length negotiations and

mediation. For these reasons, the Settlement enjoys a presumption of fairness and the attached

proposed order (the “Preliminary Approval Order”) should be entered by this Court (App. 1,

Exhibit A), and notice should be provided to Class Members (App. 1, Exhibits A-1 and A-2).

II. SUMMARY OF THE LITIGATION AND SETTLEMENT

A. The Litigation

On April 1, 2011 and thereafter, several securities class action complaints were filed in

the United States District Court for the Southern District of New York against the ABAT

Defendants and others. (See Dkt. No. 1; Burns v. Adv. Battery Techs., Inc., No. 11 Civ. 2354-

CM; Cohen v. Adv. Battery Techs., Inc., No. 11 Civ. 2849-CM (the “Cohen Action”); and

Connors v. Advanced Battery Techs., Inc., No. 11 Civ. 3098-CM.) The complaints asserted

claims under Sections 10(b) and 20(a) of the Exchange Act, 15 U.S.C. §§ 78j(b), and 78t(a), and

Rule 10b-5 promulgated thereunder by the Securities and Exchange Commission, 17 C.F.R.


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§ 240.10b-5, alleging that the ABAT Defendants, among others, made material misstatements

and omissions concerning the Company’s financial results, and specifically, that the Company

reported inflated gross profits, net income, and profit margins, and further, misrepresented the

related party nature of certain business transactions. (See, e.g., Dkt. No. 1, ¶¶ 1-2, 22-36; Cohen

Action, Dkt. No. 1, ¶¶ 1-5, 7, 18-46.) On September 9, 2011, the Court consolidated the related

securities class actions, appointed Mr. Ruble Sanderson as Lead Plaintiff and approved Lead

Plaintiff’s choice of Pomerantz Grossman Hufford Dahlstrom & Gross LLP as Lead Counsel

(“Lead Counsel”). (Dkt. No. 50.)

On September 29, 2011, Lead Plaintiff filed the Corrected First Amended Consolidated

Class Action Complaint (“First Amended Complaint”), naming as defendants the ABAT

Defendants, as well as ABAT’s outside auditors, Bagell, Josephs, Levine & Co., LLC and

Friedman LLP (collectively, “Bagell Josephs”), and EFP Rotenberg, LLP (“EFP”) (collectively,

the “Auditor Defendants”). (Dkt. No. 52.) By Decision and Order dated August 29, 2012, the

Court denied the ABAT Defendants’ motion to dismiss the First Amended Complaint, but

granted the motions to dismiss filed by the Auditor Defendants. (Dkt. No. 90.)

On September 25, 2012, Lead Plaintiff filed a Motion for Leave to File a Second

Amended Consolidated Class Action Complaint (Dkt. No. 96), which the Auditor Defendants

opposed. (Dkt Nos. 100 and 101.)2 On September 18, 2012, Lead Plaintiff filed a Motion for

Class Certification. (Dkt. No. 94.)

On October 5, 2012, the ABAT Defendants filed an Answer to the First Amended

Complaint. (Dkt. No. 98.)

2 The Court denied the motion to amend.


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Thereafter, the Settling Parties commenced settlement negotiations, ultimately resulting

in the Stipulation presently before the Court. On October 11, 2012, the Court entered a stay of all

proceedings. (Dkt. No. 99.)

B. Settlement Discussions

Counsel for Plaintiffs and the ABAT Defendants have engaged in extensive negotiations

concerning the possible resolution of this Litigation. Such negotiations included extensive

correspondence, an exchange of information relevant to the Settlement, telephonic negotiations

and in-person negotiation sessions. These negotiations included discussions not only about the

merits of the claims, but also about the Company’s financial condition and assets.

After difficult negotiations, the Settling Parties reached an agreement to settle this

lawsuit. In the course of settlement discussions, the ABAT Defendants produced documents

reflecting minimal insurance coverage applied to Lead Plaintiff’s claims and that their U.S.

assets are not significant enough to withstand a multimillion dollar judgment, that the majority of

the Company’s assets are located in the People’s Republic of China (“China”) and that recovery

of any judgment against them is unlikely.

C. Summary of Key Terms of The Proposed Settlement and Proposed Schedule

of Events

1. Relief Available to Settlement Class Members

The Settlement calls for a cash payment by the ABAT Defendants of $275,000 (the

“Settlement Amount”). Lead Plaintiff submits that this is a fair and reasonable result for

Settlement Class Members, in consideration of the ABAT Defendants’ limited insurance

coverage applicable to Lead Plaintiff’s claims and the high risk that any judgment against the

ABAT Defendants will be uncollectible. The ABAT Defendants have provided Lead Counsel

with documents reflecting that their U.S. assets are not sufficient to withstand a multimillion


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dollar judgment, and the majority of their assets are in China. Chinese courts do not enforce U.S.

judgments against China-based defendants, such as the ABAT Defendants.3

In addition, the Plan of Allocation, which is set forth in the proposed Notice of Pendency

and Proposed Settlement of Class Action (“Long Notice”), substantially in the form attached to

the Stipulation as Exhibit A-2, fully comports with the criteria set forth in case law governing the

approval of such allocations. The proposed Plan of Allocation provides formulas for calculating

the recognized claim of each Settlement Class member, based on each such person’s purchases

and sales of ABAT common stock during the Settlement Class Period. Even at the final approval

stage, “[a]n allocation formula need only have a reasonable, rational basis [to warrant approval],

particularly if recommended by ‘experienced and competent’ class counsel.” In re Am. Bank

Note Holographics, Inc. Sec. Litig., 127 F. Supp. 2d 418, 429-30 (S.D.N.Y. 2001) (citation

omitted). Significantly, nothing about the Settlement or Plan of Allocation gives preferential

treatment to Lead Plaintiff. See Louie v. Kaiser Found. Health Plan, Inc., No. 08cv0795 IEG

RBB, 2008 WL 4473183, at *6-7 (S.D. Cal. Oct. 6, 2008).

Furthermore, the minimum claim amount set in the Plan of Allocation—$100—is

necessary in order to “save the settlement fund from being depleted by the administrative costs

associated with claims unlikely to exceed those costs….” In re Gilat Satellite Networks, Ltd., No.

3 See Weil, Gotshal & Manges, LLP, Globalizing the Battleground Between U.S. and Chinese

Companies, at 2 (Dec. 2011), available at,

http://www.weil.com/files/upload/Weil_Asia_Alert_December_2011.pdf (“[A]ttempting to

enforce a U.S. judgment in China has proven futile.”); Yaad Rotem, The Problem of Selective or

Sporadic Recognition: A New Economic Rationale for the Law of Foreign Country Judgments,

10 Chi. J. Int’l L. 505, 508 (2010) (“China’s laws formally entertain the possibility of

recognizing foreign judgments, but in reality foreign judgments have rarely been recognized by

its courts.”); Arthur Anyuan Yuan, Enforcing and Collecting Money Judgments in China from A

U.S. Judgment Creditor's Perspective, 36 Geo. Wash. Int'l L. Rev. 757, 758 (2004) (getting U.S.

judgments enforced in China has been “notoriously difficult in recent years” and “a large

percentage of judgments, both domestic and foreign, are never enforced.”).


6

CV-02-1510 CPS, 2007 WL 1191048, at *9 (E.D.N.Y. Apr. 19, 2007); see In re Merrill Lynch &

Co., Inc. Research Reports Sec. Litig., No. 02 MDL 1484JFK, 2007 WL 4526593, at *12

(S.D.N.Y. Dec. 20, 2007) (approving a $50 minimum cut-off amount “in order to foster the

efficient administration of the settlement”); In re Global Crossing Securities and ERISA

Litigation, 225 F.R.D. 436, 463 (S.D.N.Y. 2004) (“Class counsel are entitled to use their

discretion to conclude that, at some point, the need to avoid excessive expense to the class as a

whole outweighs the minimal loss to the claimants who are not receiving their de minimis

amounts of relief.”).

2. Class Notice and Settlement Administration

a. Notice

Lead Plaintiff recommends that notice to Settlement Class Members occur within twenty-

five days of the entry of the preliminary approval order. A third party claims administrator,

Berdon LLP (“Berdon” or the “Claims Administrator”), will provide individual notice via mail,

substantially in the form attached to the Stipulation as Exhibit A-1 (the “Post Card Notice”), to

each Settlement Class Member identified by records maintained by the Company or its transfer

agent. Given the small size of the Settlement, Lead Counsel has sought to minimize notice costs

by utilizing a Post Card Notice, which provides the basic settlement information and instructions

for class members to access the detailed Long Notice on the internet or request that a Long

Notice be mailed to them. A Summary Notice, substantially in the form attached to the

Stipulation as Exhibit A-3, will also be published on two national Internet business newswires.

Lead Plaintiff submits that the Notices warrant Court approval because they are

“reasonably calculated, under all the circumstances, to apprise interested parties of the pendency

of the action and afford them an opportunity to present their objections.” Mullane v. Cent.


7

Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950) (citations omitted); see also Soberal-Perez

v. Heckler, 717 F.2d 36, 43 (2d Cir. 1983).

Moreover, the use of a combination of a mailed post card directing class members to a

more detailed online notice has been approved by courts. See, e.g., In re Mutual Funds

Investment Litig., MDL No. 1586, 2010 WL 2342413, at *6-7 (D. Md. May 19, 2010); In re

AT & T Mobility Wireless Data Servs. Sales Tax Litig., 789 F. Supp. 2d 935, 973 (N.D. Ill. 2011)

(holding that postcard notice was “more than sufficient” despite not providing detailed

information about class members’ options and deadlines because website and claims

administrator via phone did).

As noted above, the proposed Post Card Notice, which will be sent by first class mail,

and the Long Notice, while will be posted online, describe in plain English the terms of the

Settlement, the considerations that led Lead Counsel to conclude that the Settlement is fair and

adequate, and the maximum attorneys’ expenses that are being sought. The Long Notice sets

forth the procedure for objecting to or being excluded from the Settlement as well as the date and

place of the Settlement Hearing.

This proposed notice will fairly apprise Settlement Class Members of the Settlement and

their options with respect thereto, and fully satisfies due process requirements.

b. Administration

Berdon will administer distribution of benefits pursuant to the Stipulation. Within five (5)

days after the Court enters the attached Preliminary Approval Order (App. 1, Exhibit A), and

after receipt of wiring instructions, the ABAT Defendants shall pay or cause to be paid by wire

transfer the Settlement Amount to an interest-bearing escrow account at Huntington National

Bank (the “Escrow Account”), to be controlled by said bank as the Escrow Agent for the benefit


8

of the Settlement Class, with all interest to accrue for the benefit of the Settlement Class.

Complete wire transfer instructions shall be provided to the ABAT Defendants’ counsel.

Until such time as the Settlement and Order and Final Judgment becomes Final, the

Settlement Amount may be invested in instruments backed by the full faith and credit of the

government of the United States of America, including, but not limited to, those issued by the

Certificate of Deposit Account Registry Service or the Governmental National Mortgage

Association. The Escrow Account will be a “qualified settlement fund.”

Distribution to the class will not be made until further Order of the Court. The Settling

Parties have agreed that the distribution will not occur earlier than: (1) the Effective Date

(described below) occurs; and (2) if the claims against the Auditor Defendants are dismissed,

then the time for appeal has expired or any appeal has been decided. (App. 1, Exhibit A ¶ 5.3.)

c. Costs of Notice and Administration

Within five (5) business days after deposit in the Escrow Account of the Settlement

Amount, the Escrow Agent may transfer up to $50,000 from the Escrow Account to an account

(the “Notice and Administration Fund”) in order to pay reasonable and necessary notice and

administration costs. No other disbursements from the Escrow Account will occur until the

Judgment becomes Final absent approval from the Court. Under no circumstances shall Lead

Plaintiff or Lead Counsel have any responsibility for such costs.

3. Opt-Out and Exclusionary Provisions

Any Settlement Class Member who wishes to object to the fairness of the Stipulation

must, by the objection deadline, file any such objection with the Court, and provide copies of the

objection to Lead Counsel, Defendants’ Counsel, and the Court. Any Settlement Class Member

who does not file a timely written objection to the Stipulation shall be foreclosed from seeking

any adjudication or review of the Stipulation by appeal or otherwise.


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Any Settlement Class Member who wishes to be excluded as a Settlement Class Member

may submit a written exclusion request to the Claims Administrator, postmarked no later than

the opt-out deadline, with copies of the request for exclusion to Lead Counsel, Defendants’

Counsel, and the Claims Administrator.

4. Release Provisions

Any Settlement Class Member who does not timely request exclusion shall be deemed to

have released and discharged the Released Persons from the Released Claims as defined in the

Stipulation, and expressly waived and relinquished the Released Claims.

5. Reimbursement Award for Attorneys’ Expenses and Compensatory

Award for the Lead Plaintiff

Lead Counsel is not seeking any attorneys’ fee due to the small settlement amount, and

will only seek a portion of their expenses that were reasonably incurred in prosecuting the action,

in an amount not to exceed $115,000. In addition, Lead Counsel will seek a compensatory award

for the Lead Plaintiff, not to exceed $3,000, to compensate him for time and effort he expended

on behalf of the putative class, including travel and appearing for his deposition in New York.

III. PRELIMINARY APPROVAL OF THE PROPOSED SETTLEMENT IS

APPROPRIATE.

A. The Settlement of a Class Action Is Favored and Should Be Preliminarily

Approved If It Falls Within the Range of Reasonableness.

The law favors settlement, particularly in class actions and other complex cases where

substantial resources can be conserved by avoiding the time, cost, and rigor of prolonged

litigation. Thus, the procedural and substantive fairness of a settlement should be examined “in

light of the ‘strong judicial policy in favor of settlement[]’ of class action suits.” Aponte v.

Comprehensive Health Mgmt., Inc., No. 10 CIV. 4825 JLC, 2013 WL 1364147, at *2 (S.D.N.Y.

Apr. 2, 2013) (quoting Wal-Mart Stores, Inc. v. Visa U.S.A. Inc., 396 F.3d 96, 116 (2d Cir.


10

2005)) (brackets in original); see also Spann v. AOL Time Warner, Inc., No. 02 Civ. 8238(DLC),

2005 WL 1330937, at *6 (S.D.N.Y. Jun. 7, 2005) (“[P]ublic policy favors settlement, especially

in the case of class actions.”); Newberg on Class Actions § 11.41 (4th ed. 2002) (“The

compromise of complex litigation is encouraged by the courts and favored by public policy.”).

Due to the presumption in favor of settlement, and “[a]bsent fraud or collusion, courts should be

hesitant to substitute [their] judgment for that of the parties who negotiated the settlement.” In re

EVCI Career Colleges Holding Corp. Sec. Litig., No. 05 CIV 10240(CM), 2007 WL 2230177, at

*4 (S.D.N.Y. Jul. 27, 2007). More explicitly, the Supreme Court has cautioned that, in reviewing

a proposed settlement, courts should “not decide the merits of the case or resolve unsettled legal

questions.” Carson v. Am. Brands, Inc., 450 U.S. 79, 88 n.14 (1981).

The typical process for court approval of class action settlements is as follows:

1. Preliminary approval of the proposed settlement at an informal hearing;

2. Dissemination of mailed and/or published notice of the settlement and fairness

hearing to all affected Class members; and

3. A “formal fairness hearing,” or final approval hearing, at which Class members

may be heard regarding the settlement, and at which evidence and argument

concerning the fairness, adequacy, and reasonableness of the settlement is

presented.

See Manual for Complex Litigation, §§ 21.632-21.634 (4th ed. 2013).

By this motion, Lead Plaintiff asks that the Court take the first step in the settlement

approval process and grant preliminary approval. Lead Plaintiff further requests that the Court

provisionally certify the proposed Settlement Class, for settlement purposes only. Provisional

class certification is appropriate at the preliminary approval stage where, as here, the proposed

Settlement Class has not previously been certified. The practical purpose of provisional class

certification is to facilitate dissemination of Notice to the Settlement Class of the terms of the


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proposed settlement and the date and time of the final approval hearing. See Newberg, supra,

§ 11.27.

B. The Proposed Settlement Negotiated By Arms-Length Negotiations Between

the Parties Enjoys a Presumption of Fairness.

‘“In evaluating the settlement, the Court should keep in mind the unique ability of class

and defense counsel to assess the potential risks and rewards of litigation; a presumption of

fairness, adequacy and reasonableness may attach to a class settlement reached in arms-length

negotiations between experienced, capable counsel after meaningful discovery.’” Clark v.

Ecolab Inc., No. 07 Civ. 8623, 2010 WL 1948198, at *4 (S.D.N.Y. May 11, 2010) (citation

omitted). Moreover, courts routinely “give[] weight to the parties’ judgment that the settlement is

fair and reasonable.” Aponte, 2013 WL 1364147, at *2 (citing Torres v. Gristede’s Operating

Corp., No. 04-CV-3316 (PAC), 2010 WL 5507892, at *3 (S.D.N.Y. Dec. 21, 2010)); Clark,

2010 WL 1948198, at *4.

Here, the Stipulation is presumed fair and falls within the range of possible approval.

The settlement was reached through arm’s length negotiation over an extended period. There was

no collusion between the parties in reaching the Settlement. Throughout the negotiations, the

parties extensively discussed the merits of the claims and defenses and the relief available to the

Settlement Class. After reaching a settlement agreement in principle, the parties turned their

attention to documenting the Settlement and engaging in due diligence of the ABAT Defendants’

assets.

As explained above, the Settlement is the result of an arm’s length and adversarial

negotiation process. As the record demonstrates, all counsel vigorously advocated the interests of

their respective clients and devoted a considerable amount of time, effort, and resources to

securing the terms of the Settlement.


12

By settling the Litigation at this point, Lead Plaintiff does not admit that the Litigation

lacked merit or that the Settlement Class’s ultimate recovery would not have been greater than

the Settlement Amount, but instead acknowledges the practical reality that collectability of any

judgment against the ABAT Defendants is highly unlikely. In particular, documents produced by

the ABAT Defendants indicate that they have minimal insurance coverage applying to Lead

Plaintiff’s claims, and that, in all likelihood, any judgment against the ABAT Defendants would

be uncollectible because a majority of their assets are outside of the United States. The current

settlement affords some recovery to class members, versus no recovery at all even if this case

were successfully litigated to judgment. Accordingly, the Settlement here is fair and worthy of

preliminary approval.

C. The Settlement Benefit Falls Within the Range of Possible Recovery.

When determining whether a settlement is fair, reasonable, and adequate, the Court

should consider the following so-called “Grinnell factors:” (1) the complexity, expense and

likely duration of the litigation; (2) the reaction of the class to the settlement; (3) the stage of the

proceedings and the amount of discovery completed; (4) the risks of establishing liability; (5) the

risks of establishing damages; (6) the risks of maintaining the class action through the trial;

(7) the ability of the defendants to withstand a greater judgment; (8) the range of reasonableness

of the settlement fund in light of the best possible recovery; and (9) the range of reasonableness

of the settlement fund to a possible recovery in light of all the attendant risks of litigation. City of

Detroit v. Grinnell Corp., 495 F.2d 448, 463 (2d Cir. 1974), abrogated on other grounds by,

Goldberger v. Integrated Resources, Inc., 209 F.3d 43, 48 (2d Cir. 2000). “All nine factors need

not be satisfied, rather, the court should consider the totality of these factors in light of the

particular circumstances.” Thompson v. Metro. Life Ins. Co., 216 F.R.D. 55, 61 (S.D.N.Y. 2003)

(citing D’Amato v. Deutsche Bank, 236 F.3d 78, 86 (2d Cir. 2001)).


13

If the Court finds the settlement “within the range of possible approval,” it should then

order that the Settlement Class be notified of the Settlement and of a formal fairness hearing to

be held on the question of settlement approval. See Manual, supra, § 40.42 (model preliminary

approval order). Because this is a preliminary approval stage, factor number two, the reaction of

the class to the settlement, is inapplicable at this stage. Here, the Settlement substantially

satisfies the test announced by Grinnell. Therefore, the Stipulation warrants preliminary

approval.

1. The Complexity, Expense and Likely Duration of the Litigation

The Settlement provides the Settlement Class with fair relief, given the delay and

expenses of trial and post-trial proceedings, and the likelihood that any judgment recovered

would be uncollectible. Due to the inherent complexity of securities litigation, and particularly

the stringent requirements imposed by the Private Securities Litigation Reform Act of 1995’s

(“PSLRA”) amendments to the Exchange Act, as well as supervening case law developments, a

securities class action is an inherently complex and lengthy litigation to prosecute. If the parties

did not agree to settle this case, further litigation – particularly a trial – would be risky, lengthy

and expensive. For example, the ABAT Defendants and key witnesses are located in China,

which would add tremendous complication and cost to pursue discovery. See In re China

Sunergy Sec. Litig., No. 07 Civ. 7895 (DAB), 2011 WL 1899715, at *5 (S.D.N.Y. May 13, 2011)

(expense and protracted nature of discovery of Chinese defendants favored settlement); see also

Schwartz v. Novo Industri A/S, 119 F.R.D. 359, 363 (S.D.N.Y.1988) (weighing the complications

of discovery with a foreign defendant in favor of settlement). Moreover, even though the ABAT

Defendants have answered the First Amended Complaint, they have asserted fifteen separate

affirmative defenses in doing so. (See Dkt. No. 98.) The ABAT Defendants also continue to

vigorously deny liability. (Id.)


14

Put simply, were the current proposed Settlement taken off the table, it would all but

guarantee a substantial delay in resolving these claims, and the costs necessary to further pursue

litigation are likely subsume any recovery by the Settlement Class.

2. Collectability and Ability of the Defendants to Withstand a Greater

Judgment

The solvency of the defendants and the likelihood of recovery on a litigated judgment

weighs heavily in favor of approving the Settlement. See Aramburu v. Healthcare Fin. Services,

Inc., No. 02-CV-6535MDG, 2009 WL 1086938, at *4 (E.D.N.Y. Apr. 22, 2009) (approval

favored where “defendant’s ‘dire financial condition,’ [made] ‘obtaining a greater recovery than

provided by the [s]ettlement ... difficult”); Maley v. Del Global Tech. Corp., 186 F. Supp. 2d

358, 365 (S.D.N.Y. 2002) (considering contribution of insurance policies to be minimal because

the policies would be significantly depleted by defense costs or possibility of carrier disclaiming

coverage); In re Prudential Ins. Co. of Am. Sales Practices Litig., 962 F. Supp. 450, 540 (D.N.J.

1997) (finding that evidence that a greater judgment would adversely affect defendant’s credit

rating and ability to conduct business weighed in favor of approving settlement), aff'd sub nom,

In re Prudential Ins. Co. Am. Sales Practice Litig. Agent Actions, 148 F.3d 283 (3d Cir. 1998); In

re Domestic Air Transp. Antitrust Litig., 148 F.R.D. 297, 323-25 (N.D. Ga. 1993) (holding that

class does not benefit from securing a jury award greater than the proposed settlement if the class

could not collect because the defendant would declare bankruptcy).

Lead Counsel has negotiated a fair and reasonable settlement for the Settlement Class in

light of documents produced by Defendants reflecting that they have no significant collectible

assets in the United States. In particular, Lead Counsel has reviewed (1) the ABAT Defendants’

insurance documents, which indicate that the amount of coverage is extremely limited; and (2)


15

documents provided by the ABAT Defendants reflecting that their assets in the United States are

of limited value.

This fundamental collectability issue could easily result in no recovery at all. Thus, this

factor weighs heavily in favor of approving the Settlement.

3. Stage of Proceedings and Amount of Discovery Completed

At the time the parties agreed to settle the action, the Settling Parties stood on the

precipice of a costly and time-consuming class certification and discovery phase. The Court

denied the ABAT Defendants’ motion to dismiss on August 29, 2012, and Plaintiffs promptly

filed their motion for class certification on September 18, 2012. Discovery of class certification

issues immediately ensued and continued until the court stayed the action on October 11, 2012

upon notification that the case had been settled between Plaintiffs and the ABAT Defendants.4

Plaintiffs’ motion to amend their pleadings against the Auditor Defendants, who had been

previously dismissed from the case, was denied by the Court. Plaintiffs have filed a notice of

appeal. In the event that the Auditor Defendants are ultimately brought back into the case,

Plaintiffs may be able to obtain additional recoveries against the Auditor Defendants.

The proceedings in this Litigation were sufficiently advanced to provide Plaintiffs with a

thorough understanding of the strengths and weaknesses of the Settlement Class’s claims. In

particular, Lead Counsel conducted an extensive investigation into the factual underpinnings of

the case, including utilizing the services of a private investigator in China who interviewed

4 The ABAT Defendants and Auditor Defendants requested documents and noticed depositions

for Lead Plaintiff and other proposed class representatives, and Dr. Jane D. Nettesheim, whose

analysis was submitted in support of Lead Plaintiff’s Motion for Class Certification. (See Dkt.

No. 95-2.) Lead Plaintiff and Federico Schmid (a potential class representative) responded to the

document requests and produced documents, and Lead Plaintiff was deposed on September 13,

2012.


16

ABAT’s customers and former employees, visited certain of ABAT’s production facilities in

China, and obtained the Company’s Chinese regulatory filings.

Furthermore, as described above, the ABAT Defendant’s motion to dismiss was briefed

by the parties and adjudicated by the Court. See, e.g., In re Genta Sec. Litig., No. 04-2123, 2008

WL 2229843, at *2 (D.N.J. May 28, 2008) (“The motion to dismiss resolved many of the issues

raised in the Amended Complaint, leaving Lead Plaintiffs and Defendants … with a solid

understanding of the strengths and weaknesses of their respective positions.”). As such, the

settlement was reached only after Lead Counsel had a thorough understanding of the strengths

and vulnerabilities of the Settlement Class’s claims.

4. The Risks of Establishing Liability and Damages

Lead Plaintiff acknowledges that there were substantial risks in prosecuting this

Litigation and that further prosecution of this Litigation to trial may have yielded limited or no

recovery. “Under the law of this Circuit, to state a claim under Rule 10b-5, a plaintiff must allege

that, in connection with the purchase or sale of securities, the defendant made material

misstatements or omissions of material fact, with scienter, and that the plaintiff’s reliance on the

defendant’s actions caused injury to the plaintiff.” Slayton v. Am. Express Co., 604 F.3d 758, 765

(2d Cir. 2010).

The ABAT Defendants argued in their motion to dismiss that Lead Plaintiff failed to

establish the type of conscious misbehavior and recklessness implicating scienter. Specifically,

the ABAT Defendants submitted documentary evidence to support their argument that one of the

transactions challenged in the complaint as an undisclosed related party deal was not, in fact,

related. (See Dkt. Nos. 70-24 and 70-25.) The Court refused to consider these documents when

deciding the ABAT Defendants’ motion to dismiss; however, it is far from clear that Plaintiffs

would have prevailed on this issue at trial.


17

Moreover, the fact that most of the documentary evidence and witnesses are located in

China presents significant barriers to discovery, given that it could be impossible to collect

discovery from China necessary to prove Lead Plaintiff’s claims. See In re China Sunergy Sec.

Litig., 2011 WL 1899715, at *5; see also China Tire Holdings Ltd. v. Goodyear Tire & Rubber

Co., 91 F. Supp. 2d 1106, 1111 (N.D. Ohio 2000) (“[D]iscovery by American attorneys in the

[People’s Republic of China] may prove to be impossible.”).

Thus, while the Court found Plaintiffs’ allegations sufficient to defeat the ABAT

Defendants’ motion to dismiss at the pleading stage, and while Plaintiffs continue to believe in

the merits of their case, it is far from certain that Plaintiffs would have been able to marshal

sufficient evidence to prove their claims at trial.

5. The Risks of Maintaining the Class Action Through Trial

The settlement in principle was reached prior to any decision by the Court on Plaintiffs’

motion for class certification, which is pending. Were the action to proceed, the class would face

risks on class certification, including arguments by the ABAT Defendants that ABAT securities

did not trade on an efficient market and therefore Plaintiffs are unable to avail themselves of the

“fraud on the market” presumption that is necessary to satisfy the 10b-5 reliance element on a

class wide basis.

Moreover, if a Class were certified over the ABAT Defendants’ objection, the Class

would face multiple risks in proving the class-wide nature of the ABAT Defendants’ securities

laws violations at trial. Thus, this factor also weighs in favor of approval of the Settlement.

6. Reasonableness of the Settlement Fund in Light of the Best Possible

Recovery

The Settlement Stipulation provides for a Settlement Amount of nearly $275,000 to be

paid into the Settlement Fund. This is fair and reasonable in light of the Settlement Class


18

Members’ best possible recovery against the ABAT Defendants, which is severely limited by the

inability of the ABAT Defendants to pay the judgment. “The ‘best possible’ recovery necessarily

assumes Plaintiffs’ success on both liability and damages covering the full Class Period alleged

in the Complaint as well as the ability to Defendants to pay the judgment.” Maley, 186 F. Supp.

2d at 365 (finding that the settlement provided maximum available cash in light of the “limited

insurance coverage and poor cash position of the Company”) (emphasis added).

The settlement amount is sufficient when limited insurance coverage, minimal domestic

assets, and significant risk of being unable to collect any judgment against the ABAT Defendants

are taken into account. See, e.g., Holden v. Burlington N., Inc., 665 F. Supp. 1398, 1414 (D.

Minn. 1987) (‘“In fact there is no reason, at least in theory, why a satisfactory settlement could

not amount to a hundredth or even a thousandth part of a single percent of the potential

recovery.’”); Boyd v. Bechtel Corp., 485 F. Supp. 610, 618 (N.D. Cal. 1979) (“[S]imply because

a settlement may amount to only a fraction of the potential recovery does not in itself render it

unfair or inadequate. Compromise is the very nature of settlement.”).

Furthermore, as discussed above, the Settlement is reasonable in light of the substantial

resources that can be conserved by avoiding the time, cost, rigor, and risk of prolonged litigation.

Securities litigation is a complex and evolving area of law requiring the devotion of significant

resources. There is a high likelihood that the costs involved in shepherding a securities action

like this one through the discovery process, pre-trial motions, and trial will far outweigh – and

indeed subsume – any recovery that might be realized by Plaintiffs and the Settlement Class.

Moreover, because the ABAT Defendants continue to deny any liability while asserting

numerous defenses, the potential for any recovery remains highly uncertain.


19

IV. THE PROPOSED SETTLEMENT CLASS SHOULD BE CERTIFIED FOR

SETTLEMENT PURPOSES.

A. The Proposed Settlement Class Meets The Requirements Of

Rule 23(a) And 23(b)(3).

The Second Circuit has long acknowledged the propriety of certifying a class solely for

settlement purposes. See Weinberger v. Kendrick, 698 F.2d 61, 72-73 (2d Cir. 1982). Before

granting preliminary approval of a class action settlement, however, the Court should determine

that the proposed Settlement Class is a proper class for settlement purposes. See Amchem Prods.,

Inc. v. Windsor, 521 U.S. 591, 620 (1997); see also Manual, supra, § 21.632. To certify a class,

the Court must determine whether four threshold requirements of Federal Rule 23(a) are met,

namely, (1) numerosity, (2) commonality, (3) typicality, and (4) adequacy of representation.

Amchem, 521 U.S. at 613. Additionally, the action must be maintainable under Fed. R. Civ. P.

23(b)(1), (2), or (3). Id. at 614. In certifying a Settlement Class, however, the Court is not

required to determine whether the action, if tried, would present intractable management

problems, “for the proposal is that there be no trial.” Id. at 620; see also Fed. R. Civ. P.

23(b)(3)(D). Here, the proposed Settlement Class meets all of the requirements of Rule 23(a) and

satisfies the requirements of Rule 23(b)(3).

A class must be “so numerous that joinder of all members is impracticable.” Fed. R. Civ.

P. 23 (a)(1). “Joinder is generally presumed to be impracticable when a putative class exceeds 40

members.” Menkes v. Stolt-Nielsen S.A., 270 F.R.D. 80, 90 (D. Conn. 2010) (citing Marisol A. v.

Giuliani, 126 F.3d 372, 376 (2d Cir. 1997)). Impracticable does not mean impossible, but “only

that the difficulty or inconvenience of joining all members of the class make use of the class

action appropriate.” Central States Se. & Sw. Areas Health & Welfare Fund v. Merck-Medco

Managed Care, LLC, 504 F.3d 229, 244-45 (2d Cir. 2007). During the Settlement Class Period,

approximately 3.4 million shares of ABAT common stock on average were traded on the


20

NASDAQ per week during the time that ABAT was listed on that exchange. Thus, individual

joinder is impracticable, and the numerosity requirement is clearly satisfied.

The proposed Settlement Class also meets the commonality requirement of Rule 23(a).

Commonality is generally easily satisfied, as it is established so long as the plaintiffs can

“identify some unifying thread among the [class] members’ claims….” In re Vivendi Universal,

S.A., 242 F.R.D. 76, 84 (S.D.N.Y. 2007) (citing Cutler v. Perales, 128 F.R.D. 39, 44 (S.D.N.Y.

1989)). The requirement is met “if there are questions of fact and law which are common to the

class.” Fed. R. Civ. P. 23(a)(2). “Securities-fraud cases generally meet Rule 23(a)(2)’s

commonality requirement.” In re Global Crossing Sec. & ERISA Litig., 225 F.R.D. 436, 451-52

(S.D.N.Y. 2004) (citation omitted). Securities fraud class actions are ‘“essentially course of

conduct cases’ because ‘the nub of plaintiffs’ claims is that material information was withheld

from the entire putative class in each action, either by written or oral communication.’” In re

Oxford Health Plans, Inc., 191 F.R.D. 369, 374 (S.D.N.Y. 2000) (citation omitted).

Plaintiffs also meet Rule 23(a)’s typicality requirement. A plaintiff’s claim is typical if it

‘“arises from the same course of events and each class member makes similar legal arguments to

prove the defendant’s liability.’” In re Flag Telecom Holdings, Ltd. Sec. Litig., 574 F.3d 29, 35

(2d Cir. 2009) (citing Robidoux v. Celani, 987 F.2d 931, 936 (2d Cir. 1993)). Like all other

Settlement Class members, Lead Plaintiffs were subject to the ABAT Defendants’ alleged false

and misleading statements in violation of Sections 10(b) and 20(a) of the Exchange Act.

Rule 23 (a)’s last requirement is that the class representative must “fairly and adequately

protect the interests of the class.” Fed. R. Civ. P. 23(a)(4). This inquiry focuses “on uncovering

‘conflicts of interest between named parties and the class they seek to represent.’” In re Flag

Telecom Holdings, 574 F.3d at 35 (quoting Amchem Prods., 521 U.S. at 625). Lead Plaintiff


21

adequately represents the Settlement Class since he has no individual interests or claims that are

antagonistic to the Class and has zealously represented the interests of the Class to date.

Additionally, Rule 23(g) states that the adequacy of Plaintiff’s counsel is determined by

four factors: (1) the work counsel has done in identifying or investigating potential claims;

(2) counsel’s experience in handling class actions; (3) counsel’s knowledge of the applicable

law; and (4) the resources counsel commit to representing the class. Fed. R. Civ. P. 23(g)(1)(A).

Lead Counsel Pomerantz Grossman Hufford Dahlstrom & Gross LLP has extensive experience

and a stellar reputation in the field of class action and securities litigation. See App. 2. They have

been appointed as lead or co-lead counsel in many complex securities class actions and have

recovered substantial monies for their clients and class members. Lead Counsel will continue to

commit adequate resources to ensure that the Settlement Class is properly represented in this

Litigation.

Finally, the proposed Settlement Class meets the requirements of Rule 23(b)(3). To

satisfy predominance, “a plaintiff must show that those issues in the proposed action that are

subject to generalized proof outweigh those issues that are subject to individualized proof.’” In

re Salomon Analyst Metromedia Litig., 544 F.3d 474, 480 (2d Cir. 2008) (citation omitted). This

inquiry “tests whether a proposed class is sufficiently cohesive to warrant adjudication by

representation.” Id. (citation omitted). There are questions of law and fact common to the

Settlement Class that predominate over any individual questions, specifically whether the ABAT

Defendants’ alleged actions, which were centralized and uniform, violated federal securities laws

and whether those violations were knowing or reckless. These common issues predominate over

any individual issues.


22

“Together with predominance, the superiority requirement ‘ensures that the class will be

certified only when it would achieve economies of time, effort, and expense, and promote

uniformity of decision as to persons similarly situated, without sacrificing procedural fairness or

bringing about other undesirable results.’’” Menkes, 270 F.R.D. at 100 (quoting Cordes & Co.

Fin. Servs., Inc. v. A.G. Edwards & Sons, Inc., 502 F.3d 91, 104 (2d Cir. 2007)) (other citations

omitted). “[C]lass treatment is often deemed superior in ‘negative value’ cases, in which ‘each

individual class member’s interest in the litigation is less than the anticipated cost of litigating

individually.’” Menkes, 270 F.R.D. at 100 (citation omitted).

A class action is also superior to other methods available for the fair and efficient

adjudication of this controversy. Members of the Settlement Class are not likely to and many do

not have an interest or means to prosecute an individual case against the Settling Defendants.

Additionally, concerns of efficiency and economy tip the scales in favor of litigating the issues in

one suit before this Court.

V. THE COURT SHOULD APPROVE THE PROPOSED FORM AND METHOD

OF CLASS NOTICE.

A. Notice By Direct Mail and Posting Online is Sufficient When a Large,

Nationwide Class is Present.

“Rule 23(e)(1)(B) 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,’

regardless of whether the class was certified under Rule 23(b)(1), (b)(2), or (b)(3).” See Manual,

supra, §§ 21.632, 21.633. In order to protect the rights of absent Settlement Class Members, the

Court must provide the best notice practicable to Settlement Class Members. See Phillips

Petroleum Co. v. Shutts, 472 U.S. 797, 812 (1985).

Notice by mail is practical when the names and addresses of most of the Class members

are known. See Manual, supra, § 30.2111. “Neither Rule 23 nor due process require receipt of


23

actual notice by all Class Members; rather, ‘notice should be mailed to the last known addresses

of those who can be identified and publication used to notify others….’” Mangone v. First USA

Bank, 206 F.R.D. 222, 231-232 (S.D. Ill. 2001) (citing Newberg, supra, § 8.02) (approving

mailed notice to last known addresses of a settlement class with nearly 18.5 million members).

Plaintiffs propose a direct mail Notice, as well as notice via a press release through the

issuance of the Summary Notice through a national news wire. A proposed Post Card Notice to

be mailed, Long Notice and Proof of Claim and Release form to be posted online, and a

proposed Summary Notice to be issued via a press release, are attached to the Stipulation as

Exhibits A-1, A-2, A-3, and A-4, and should be approved by the Court.

B. The Proposed Form of Notice Adequately Informs Settlement Class

Members of Their Rights in This Litigation.

In an action proceeding under Rule 23(b)(3), the notice must inform each Settlement

Class Member that “the court will exclude anyone from the class if he so requests [by a specified

date]; the judgment will include all members who do not request exclusion and any member not

requesting exclusion may, if he desires, enter an appearance through counsel.” Fed. R. Civ. P.

23(c)(2).

Here, the proposed Post Card Notice directs class members to the Long Notice, which

clearly and accurately discloses the information material to a Settlement Class Member’s

decision whether to accept, object to, or opt out of the settlement. (App. 1, Exhibits A-1 and A-

2.) The proposed Long Notice provides information on, inter alia, the proposed Settlement

Class; the terms and provisions of the Stipulation; the relief the settlement will provide; the date,

time and place of the final approval hearing; and the procedures and deadlines for opting out of

the settlement or submitting comments or objections.


24

The Long Notice also meets the requirements of the PSLRA, 15 U.S.C. § 78u-4(a)(7).

The Long Notice provides:

a cover page summarizing the information contained in the Long Notice;

a statement of the Settlement Class Members’ recovery, estimating a

recovery of $0.0041 per damaged share before deduction of Court-

approved expenses and costs of notice and claims administration; the Long

Notice further explains that under the Plan of Allocation, the actual

amount recovered will vary greatly across the Settlement Class;

the general terms of the Stipulation;

a statement of the potential outcome of the case including a statement

concerning the issues on which the Settling Parties disagree;

a statement of attorney’s costs sought, including a summary of this

information on the cover page;

information on how to contact the Claims Administrator and/or Lead

Counsel (including names, addresses, telephone numbers, and websites);

and

a discussion of the reasons for the proposed Settlement, including the

factors Lead Plaintiff and the ABAT Defendants considered in reaching

the proposed Settlement.

Thus, the proposed Post Card Notice and Long Notice to be sent to the Settlement Class provide

all of the information required by the PSLRA. The Court should approve the proposed form of

Notice and direct that notice be given to the Settlement Class as proposed by the parties.

VI. CONCLUSION

In light of the foregoing, Lead Plaintiff respectfully requests that the Court enter an

Order: (1) preliminarily approving the Settlement; (2) certifying the Settlement Class;

(3) approving the form and method for giving notice as provided in the Stipulation; (4) certifying

Lead Plaintiff as Class Representative and Lead Counsel as Lead Counsel for the Settlement

Class; and (5) setting a date for a Settlement Hearing and deadlines for the mailing and posting

of the Notices, the filing of Settlement Class Member objections, the filing of Settlement Class


25

Member opt-out notices, and the filing of Lead Counsel’s application for final approval of the

Settlement and reimbursement of attorneys’ expenses.

Dated: November 5, 2013

Respectfully submitted,

POMERANTZ GROSSMAN HUFFORD

DAHLSTROM & GROSS LLP

/s/ Murielle J. Steven Walsh

Marc I. Gross

Murielle J. Steven Walsh

600 Third Avenue – 20th Floor

New York, NY 10016

Tel: (212) 661-1100

Fax: (212) 661-8665

[email protected]

[email protected]

Lead Counsel


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