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Better v. YRC Worldwide Inc.

United States District Court, Tenth Circuit

August 19, 2013

STAN BETTER and YRC INVESTORS GROUP, Individually and on behalf of all others similarly situated, Plaintiffs,
v.
YRC WORLDWIDE INC., WILLIAM D. ZOLLARS, MICHAEL SMID, TIMOTHY A. WICKS and STEPHEN L. BRUFFET, Defendants.

MEMORANDUM AND ORDER

KATHRYN H. VRATIL, District Judge.

Stan Better and the YRC Investors Group bring this securities class action on behalf of all who purchased common stock of YRC Worldwide Inc. ("YRC") between April 24, 2008 and November 2, 2009. They bring suit against YRC and four former YRC executives - William D. Zollars, Michael Smid, Timothy A. Wicks and Stephen L. Bruffet. Plaintiffs allege that all defendants violated Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5 (Count I). They allege that the individual defendants violated Section 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78t(a) (Count II). Plaintiffs say that by disseminating materially false and misleading statements and/or concealing material adverse facts, defendants participated in a fraudulent scheme and course of business that operated as a fraud or deceit on purchasers of YRC common stock. This matter comes before the Court on plaintiffs' Unopposed Motion For Preliminary Approval Of Class Action Settlement ("Motion For Preliminary Approval") (Doc. #76) filed May 31, 2013. They seek preliminary class certification, preliminary settlement approval, preliminary approval of the proposed class notice to the class and appointment of lead class counsel. On this record, plaintiffs have not satisfied their burden of showing that the class satisfies Rule 23, Fed. R. Civ. P., or that the settlement is fair and reasonable. The Court therefore overrules the motion.

Factual And Procedural Background

Plaintiffs bring class action claims that defendants engaged in a scheme to deceive the market regarding its purported success, which artificially inflated the stock of YRC. The amended complaint alleges that defendants made numerous materially false and misleading statements and omissions during the class period that related to the purported strength of YRC. Plaintiffs say that these statements deceived the investing public regarding the business, operations and management of YRC and the intrinsic value of its common stock, which caused them and class members to purchase YRC stock at artificially inflated prices. Plaintiffs allege that they were harmed when the stock price dropped after the truth came out. Defendants have vigorously contested, and continue to deny, plaintiffs' claims.

After extensive litigation and discovery, the parties mediated the case with retired Judge Edward A. Infante, in San Francisco, California. On April 15, 2013, during mediation, the parties agreed to settle. On May 31, 2013, the parties notified the Court that they had agreed in principle to a settlement.

Plaintiffs now ask the Court to preliminarily certify a settlement class, approve the settlement, and approve the proposed notice to the class. They request certification of the following class:

[A]ll Persons (including, as to all such Persons, their beneficiaries) who purchased or otherwise acquired the common stock of YRCW between April 24, 2008 and November 2, 2009, inclusive. Excluded from the Class are the Defendants; any officers or directors of YRCW during the Class Period and any current officers or directors of YRCW; any corporation, trust or other entity in which any Defendant has a controlling interest; and the members of the immediate families of William D. Zollars, Michael Smid, Timothy A. Wicks, and Stephen L. Bruffet and their successors, heirs, assigns, and legal representatives. Also excluded from the Class are those Persons who timely and validly request exclusion from the Class pursuant to the Notice of Pendency and Proposed Settlement of Class Action.

Motion For Preliminary Approval (Doc. #76) at 18-19; Stipulation Of Settlement (Doc. #77) filed May 31, 2013 at 3 ¶ 1.17.

Under the settlement, in exchange for a full release of any and all claims that could arise out of the facts alleged in this action, defendants will pay $11, 000, 000 into a settlement fund which an escrow agent will administer. See Stipulation Of Settlement (Doc. #77) at 5-6 ¶ 1.33 ("Released Claims"), 6 ¶ 1.36 ("Settlement Fund"). Once the fund is established, the escrow agent may allocate settlement funds to pay costs and expenses reasonably incurred in connection with providing notice to the Class, locating class members, administering the claims process and distributing the settlement fund to claimants. See id. at 17 ¶ 2.9, 26-27 ¶ 5.2. Paragraph 2.9 of the settlement agreement allows the agent to spend up to $300, 000 for effectuating notice while Paragraph 5.2 allows the agent to spend up to only $150, 000. Compare id. at 17 ¶ 2.9 with id. at 26-27 ¶ 5.2. The parties do not explain this discrepancy.

After deducting the costs of notice, taxes, attorney fees and payments to lead plaintiffs, the remaining proceeds of the settlement fund will be distributed to the class members who submit a valid claim in accordance with the proposed plan of allocation. The plan of allocation states as follows:

For shares purchased between April 24, 2008 and April 22, 2009, inclusive, and sold before April 23, 2009, recognized loss per share is $0.00.
For shares purchased between April 24, 2008 and April 23, 2009, inclusive, and held on January 30, 2010, recognized loss per share is the lesser of:
A. $1.94.
B. The price paid less $1.29.
For shares purchased between April 24, 2008 and April 23, 2009, inclusive, and sold between November 2, 2009 and January 30, 2010, inclusive, recognized loss per share is the lesser of:
A. $1.94.
B. The price paid less $1.29.
C. The price paid less the price received.
For shares purchased between April 24, 2008 and April 23, 2009, inclusive, and sold between April 24, 2009 and November 2, 2009, inclusive, recognized loss per share is the lesser of:
A. $.035.
B. The price paid less $3.46.
C. The price paid less the price received.
For shares purchased between April 24, 2009 and November 2, 2009, inclusive, and held on January 29, 2010, recognized loss per share is the lesser of:
A. $1.59.
B. 70% of (the price paid less $1.29).
C. The price paid less the price received.
For shares purchased between April 24, 2009 and November 2, 2009 and sold between November 2, 2009 and January 29, 2010, inclusive, recognized loss per share is the lesser of:
A. $1.59.
B. 70% of (the price paid ...

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