Vataj v. Johnson

Background

Plaintiffs brought a securities class action against PG&E Corporation and certain of its officers and directors. They alleged that the defendants made materially false or misleading statements about PG&E’s wildfire-prevention measures after PG&E’s bankruptcy and after California wildfires caused by PG&E equipment. The measures included temporary power shutoffs during dangerous weather, inspections of utility poles, and removal of vegetation near power lines.

The complaint alleged that PG&E failed to disclose that its safety protocols were inadequate and that it was unprepared for rolling power outages. Plaintiffs contended that PG&E’s handling of outages in September and October 2019 revealed the truth, leading to criticism, a regulatory investigation, and declines in PG&E’s stock price. They asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5.

The proposed class included people and entities that purchased or otherwise acquired PG&E common stock on the New York Stock Exchange between December 13, 2018, and October 28, 2019, inclusive. The parties reached a settlement after mediation and further negotiations. The Court had previously granted preliminary approval.

Settlement Terms and Notice

The settlement required a $10 million non-reversionary payment. Class-member payments would be calculated using a recognized-loss formula that considered when and how much stock a class member bought, whether the stock was sold, and the timing and proceeds of any sale. Class members had to submit valid claims to receive payment.

After the initial proposed recipient became unavailable because its clinic was on pause, the parties proposed the Investor Justice and Education Clinic at Howard University School of Law as the cy pres recipient. The Court found a sufficient connection between that clinic and the class. Remaining funds would first be redistributed to certain class members and, if funds still remained, contributed to the clinic.

The settlement released claims related to the allegations and transactions in the case, including claims concerning the purchase, acquisition, sale, disposition, or holding of PG&E common stock during the class period. The parties clarified that the release did not cover claims based on purchases made before the class period involving alleged misrepresentations or omissions made before that period.

The settlement administrator mailed notices to class members who could be identified with reasonable effort, published a summary notice through a nationally distributed newswire, and maintained a settlement website. As of September 2, 2021, the administrator had received 24,083 claims, approximately three requests for exclusion, and no objections. The Court found that the notice plan provided the best practicable notice under the circumstances, even though some potential class members received notices near or after the claims deadline.

Final Settlement Approval

Under Federal Rule of Civil Procedure 23, a court may approve a class settlement only after a hearing and a finding that the settlement is fair, reasonable, and adequate. The Court considered the strength of the plaintiffs’ case, litigation risks, the settlement amount, the information available to class counsel, counsel’s experience, and the class members’ response.

The Court found that plaintiffs faced significant litigation risks, including difficulty proving that the defendants acted knowingly or recklessly and difficulty proving their theory concerning the power shutoffs. Plaintiffs also faced uncertainty because of PG&E’s volatile stock price. The Court found that the $10 million settlement was within a reasonable range given the estimated $468 million in damages, representing slightly more than a 2% aggregate recovery. The Court also found that counsel had sufficient information to evaluate the case and that the limited number of exclusions and absence of objections supported approval.

The Court therefore found that the settlement was fair, adequate, and reasonable and that class members received adequate notice. It granted plaintiffs’ motion for final approval of the class action settlement.

Attorneys’ Fees, Costs, and Incentive Awards

Class counsel requested $2.5 million in attorneys’ fees, $82,046.46 in costs, and $5,000 for each of the three named plaintiffs. The requested fee equaled 25% of the $10 million settlement fund, which the Court treated as the applicable benchmark while also reviewing the results achieved, litigation risks, counsel’s work, the contingent nature of the representation, and comparable awards.

The Court found that the settlement was an excellent result in light of the risks and complexity of the case. It reviewed counsel’s billing records, which showed 1,278.58 hours of work and a lodestar of approximately $984,179. A lodestar is an estimate based on reasonable hours multiplied by reasonable hourly rates. The requested fee represented a multiplier of approximately 2.5 times the lodestar, which the Court found reasonable. The Court also found the requested costs reasonable.

The Court found that the named plaintiffs’ participation and efforts justified the requested incentive awards. Judge Haywood S. Gilliam, Jr. granted the motion for attorneys’ fees and incentive awards and awarded class counsel $2.5 million in fees and $82,046.46 in costs. The order also directed the parties and settlement administrator to carry out the agreement and directed the parties to file a short stipulated final judgment within 21 days.