Hu v. BAKER

Background

These were shareholder derivative actions, meaning lawsuits brought by shareholders asserting claims on behalf of a company. The plaintiffs alleged violations of the Securities Exchange Act of 1934, breaches of fiduciary duty, aiding and abetting those breaches, and related stockholder claims under Delaware law. The allegations concerned, among other things, statements and omissions about Ginkgo’s revenue and sources of revenue and other alleged misconduct connected to the merger that formed Ginkgo.

The two Northern District of California cases and a consolidated derivative action in the Delaware Chancery Court were resolved through a global settlement. The settlement required the Individual Defendants to pay $4.125 million to Ginkgo, terminate certain contracts, and implement governance reforms and enhanced oversight. Subject to court approval, Ginkgo also agreed to pay $2,750,000 in attorneys’ fees and costs. The proposed $8,000 in service awards would be paid from that fee award.

Notice and Settlement Approval

The court had previously granted preliminary approval, approved a notice plan, provisionally certified a settlement class for settlement purposes, and appointed Dr. Hu and Mr. Bowers as lead plaintiffs. The notice plan required Ginkgo to post the settlement materials on its investor-relations webpage, publish notice through a wire service, and file a Form 8-K with the Securities and Exchange Commission.

The court found that Ginkgo followed the approved notice plan. No shareholders objected, including institutional investors that collectively held more than 60% of Ginkgo’s outstanding shares. After reviewing the required fairness factors and considering the lack of objections, the court found the settlement fair, reasonable, and adequate.

Attorneys’ Fees and Costs

The court explained that the usual Ninth Circuit benchmark for attorneys’ fees in a successful class action is 25% of the common fund, although courts may adjust that amount based on the results achieved, litigation risks and burdens, counsel’s performance, market rates, and other factors. The court approved $2,750,000 in fees and costs because the settlement provided both monetary and corporate-governance benefits, the fee negotiations occurred only after the substantive settlement terms were agreed upon, and no institutional investor objected. The court concluded that the governance reforms created a substantial financial benefit for Ginkgo and justified an award above the 25% benchmark.

Service Awards and Disposition

The court approved $2,000 service awards for each of Dr. Hu, Mr. Bowers, Mr. Newman, and Mr. Moskowitz. The awards total $8,000 and must be paid from Plaintiffs’ Counsel’s fee award.

Judge Westmore granted Plaintiffs’ motion for final approval of the derivative settlement. The court awarded Plaintiffs’ Counsel $2,750,000 in attorneys’ fees and costs and approved the $8,000 in service awards. It retained jurisdiction to supervise implementation of the settlement and to construe, enforce, and administer the settlement agreement. The Clerk was directed to close the cases, and the court stated that separate judgment would be entered.