Case Name:???? Allan v. Micrel Incorporated, et al.
Case No.:??????? 1-15-CV-280762 (Consolidated Action)
On June 5th, 2015, Plaintiffs filed a Consolidated Amended Stockholder Class Action Complaint following the consolidation of four putative class action lawsuits filed in May of 2015.? The lawsuit arises out of the acquisition of Micrel by Microchip Technology Incorporated (?Microchip?) and is brought on behalf of Plaintiffs, individually, and on behalf of the public stockholders of Micrel against members of Micrel?s board of directors for breach of fiduciary duties arising out of their attempt to sell the company to Microchip.? The Complaint alleges that the respective defendants breached their fiduciary duties by failing to provide the stockholders with certain material information related to casting an informed vote on the proposed transaction.? Among other things, the Complaint alleges that certain ?insider? defendants received information about Microchip during the process of evaluating the Proposed Transaction that was not disclosed to all stockholders and that such information was material given the requirement that 42% of the shares would be in Microchip stock.? The Complaint alleges a flawed process which resulted in the Board failing to attain an adequate price for the company and further alleges unfair deal protection devices that are designed to favor the transaction and deter alternative bids.? Plaintiffs allege that the S-4 Registration Statement filed with the SEC on May 27, 2015, which included Micrel?s preliminary proxy statement failed to disclose material information and materially misled the voting stockholders about the proposed acquisition.
Following some expedited discovery including document production and depositions of certain Board Members, the respective parties engaged in settlement discussions in late June of 2015, and reached an agreement in principal which was memorialized in a Memorandum of Understanding on June 30, 2015.? Pursuant to the terms of the Settlement, Defendants have made additional disclosures about the Merger Agreement as part of an amended S-4 Form and subsequently filed a Schedule 14A Definitive Proxy Statement with the SEC on July 6, 2015.? The Micrel shareholders voted to approve the Merger on August 3, 2015 and the Merger was consummated on August 3, 2015.
On or about January 22, 2016, this Court issued its Order Granting Preliminary Approval of the Class Action Settlement.? At that time, the Court conditionally certified the Settlement Class and requested that further briefing be submitted prior to the Final Fairness Hearing relating to the strengths and weaknesses of the Plaintiffs? case as well as information about the overall benefit bestowed to the Class Members.? This Court also requested further information to support the request for attorney?s fees in the sum of $450,000.
Plaintiffs now move for Final Approval of Class Action Settlement.
Legal Standard
Generally, ?questions whether a settlement was fair and reasonable, whether notice to the class was adequate, whether certification of the class was proper, and whether the attorney fee award was proper are matters addressed to the trial court?s broad discretion.?? (Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 234-235, citing Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794.)
In determining whether a class settlement is fair, adequate and reasonable, the trial court should consider relevant factors, such as the strength of plaintiffs? case, the risk, expense, complexity and likely duration of further litigation, the risk of maintaining class action status through trial, the amount offered in settlement, the extent of discovery completed and the stage of the proceedings, the experience and views of counsel, the presence of a governmental participant, and the reaction of the class members to the proposed settlement.
(Wershba v. Apple Computer, Inc., supra, 91 Cal.App.4th at pp.?244-245, internal citations and quotations omitted.)
The list of factors is not exclusive and the court is free to engage in a balancing and weighing of factors depending on the circumstances of each case.? (Wershba v. Apple Computer, Inc., supra, 91 Cal.App.4th at p. 245.)? The court must examine the ?proposed settlement agreement 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.?? (Ibid., quoting Dunk v. Ford Motor Co., supra, 48 Cal.App.4th at p. 1801, internal quotation marks omitted.)
The burden is on the proponent of the settlement to show that it is fair and reasonable.? However ?a presumption of fairness exists where: (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.?
(Wershba v. Apple Computer, Inc., supra, 91 Cal.App.4th at p. 245, quoting Dunk v. Ford Motor Co., supra, 48 Cal.App.4th at p. 1802.)? The presumption does not permit the Court to ?give rubber-stamp approval? to a settlement; in all cases, it must ?independently and objectively analyze the evidence and circumstances before it in order to determine whether the settlement is in the best interests of those whose claims will be extinguished,? based on a sufficiently developed factual record.? (Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116, 130.)
?A court reviewing a settlement agreement considers whether the proposed settlement is fair and reasonable in light of all relevant factors. ?[Citations.] ?A court reviews the settlement of a derivative suit as a means of protecting the interests of those who are not directly represented in the settlement negotiations.? ?(Robbins v. Alibrandi (2005) 127 Cal.App.4th 438, 445.) ??The duty of a court reviewing a settlement of a class action provides a useful analogy because the court in such cases seeks to protect the members of the class who, like the corporation and non-named shareholders in a derivative suit, may have no independent representation and little control over the action.? ?(Id., at p. 449, fn. 2.) ?Thus, in evaluating the fairness of this derivative settlement, the Court?s analysis is guided by relevant legal authorities regarding approval of class action settlements.
?The well-recognized factors that the trial court should consider in evaluating the reasonableness of a class action settlement agreement include ?the strength of plaintiffs? case, the risk, expense, complexity and likely duration of further litigation, the risk of maintaining class action status through trial, the amount offered in settlement, the extent of discovery completed and the stage of the proceedings, the experience and views of counsel, the presence of a governmental participant, and the reaction of the class members to the proposed settlement.? [Citations.] ?This list ?is not exhaustive and should be tailored to each case.? [Citation.]? ?(Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116, 128.) ??[A] presumption of fairness exists where: (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. ?[Citation.]? ?(Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794, 1802.)
As set forth in the Preliminary Approval Order, the immediate settlement was reached through arms-length bargaining by experienced counsel after some expedited discovery relating to the information not originally provided to the Micrel shareholders.? A detailed description of the factual and procedural history is set forth in the Declaration of David E. Azar (?Azar Declaration?) which is submitted in support of the Final Approval moving papers.? According to the Azar Declaration, Plaintiffs? conducted an investigation of Defendants conduct in connection with the sale of the outstanding shares of Micrel which included reviewing and analyzing all relevant filings with the SEC, press releases and analysts? reports about the merger between Micrel and Microchip.? Plaintiffs retained an independent financial and valuation expert and with the assistance of that expert, Counsel concluded that the disclosures being made to the Company?s stockholders were inadequate.? Counsel made immediate efforts to make sure that Supplemental Disclosures were made to the stockholders in order for them to make informed decisions as to whether to vote their Micrel shares in favor of the merger.? Specifically, the Amended FormS-4 provided Micrel shareholders with material information concerning the voting agreements entered into by Micrel Directors and executive officers, the influence that Micrel stockholder, Starboard, had on the decision to sell the company, a summary of the fairness analyses prepared by Credit Suisse in support of its opinion to Micrel?s Board concerning the financial fairness of the merger and other material information to fully inform the stockholders prior to the time they were required to vote. ?The Azar Declaration indicates that the Stipulation of Settlement was the result of the pending litigation and outlines the risk of continuing the litigation if the matter had not been resolved.? Furthermore, the amount of the attorney?s fees and costs was not negotiated until the settlement was reached regarding the content of the Supplemental Disclosures.? The Azar Declaration further outlines the experience of counsel (Firm resumes are attached) and the Court is satisfied that Class counsel has the experience and expertise in handling this type of litigation.
The Final Fairness moving papers describe the overall benefit to the Class as the Supplemental Disclosures enabled the Micrel stockholders to make informed decisions on whether the merger was in their best interests and whether to elect cash or Microchip stock as their consideration.? The Court is satisfied that the moving papers reflect the materiality of the information made available in the Supplemental Disclosures and the benefit it bestowed to the Class Members.? The Court is further satisfied that the moving party has addressed the respective strengths and weaknesses of the litigation that resulted in the Stipulation of Settlement. The Declaration of Julie Swanson (Senior Project Manager at Kurtzman Carson LLC) indicates that a total of 16,688 Notices have been sent out and that as of May 6th, 2016, no objections have been received.? In addition, the Supplemental Declaration of David E. Azar indicates that the April 29, 2016 objection deadline has passed and there were no objections to the Settlement.? This is further evidence that the settlement is fair and reasonable.
The Court also has an independent right and responsibility to review the attorney fee provision of the settlement agreement and award only so much as it determines reasonable. ?(Garabedian v. Los Angeles Cellular Telephone Co. (2004) 118 Cal.App.4th 123, 127-128.) ?Plaintiff seeks attorney?s fees in the amount of $450,000 and the Preliminary Approval Order requested further information to support the request for attorney?s fees.? The Court has reviewed the Memorandum in Support of Plaintiffs? Motion for Award of Attorney?s Fees and Expenses and has reviewed the Declaration of David E. Azar in support of the Motion for Fees and Expenses.? The Azar Declaration provides a breakdown of the fees and expenses incurred by the five law firms that were involved in the prosecution of the lawsuit.? The total number of hours spent in the litigation by the firms representing Plaintiffs was 782.55.? The total lodestar amount for attorney time based on each respective firm?s current rate is $433,113.? Furthermore, each firm has provided a Declaration breaking down the attorneys? fees and expenses and the hourly rates charged.? In addition to the lodestar figure above, the total amount of expenses incurred by the five firms is $40,931.86.? After a full and thorough review of the moving papers including the Declarations submitted by representatives of the five firms, the Court finds that the amount of fees and expenses requested ($450,000) is supported by a lodestar cross-check and is fair and reasonable.
For the reasons set forth above, the Motion for Final Approval of Class Action Settlement is GRANTED.