In re Resideo Technologies, Inc. Securities Litigation

Background

Plaintiffs sought final approval of a proposed class-action settlement involving claims against Resideo Technologies, Inc.; Michael G. Nefkens; Joseph D. Ragan, III; and Niccolo de Masi. The parties’ August 17, 2021 settlement agreement provided for a $55 million cash payment, a complete dismissal with prejudice of the claims against the defendants, and a release of claims that could have been asserted against the defendants and other released parties.

The court had previously granted preliminary approval of the settlement, preliminarily certified the settlement class, and approved the proposed notice plan. The claims administrator mailed at least 468,104 notice packets. Two investors requested exclusion from the settlement class, and no objections were received. Plaintiffs also requested attorneys’ fees, reimbursement of litigation expenses, and service awards for the lead plaintiffs.

Final Approval of Settlement

Applying Federal Rule of Civil Procedure 23(e), the court determined that a class-action settlement may be approved only if it is fair, reasonable, and adequate. The court found that the lead plaintiffs and class counsel adequately represented the settlement class, had no conflicts with class members, and had extensively litigated the case.

The court found that the settlement was negotiated at arm’s length after months of negotiations and a full-day mediation before retired United States District Judge Layn R. Phillips. The court also found that the settlement provided adequate relief because continued litigation would involve risks concerning liability, causation, and damages, as well as additional costs and delay. The $55 million settlement represented approximately 10 percent of the maximum recoverable damages that plaintiffs expected could be established at trial.

The court approved the Plan of Allocation as fair, reasonable, and adequate. Under that plan, eligible claimants—including the lead plaintiffs—would receive a pro rata share based on their purchases or acquisitions of Resideo common stock during the class period. The court also finally certified the settlement class for settlement purposes under Rule 23(a) and Rule 23(b)(3), finding that the class met the requirements for numerosity, commonality, typicality, adequate representation, and superiority.

The court concluded that the notice process satisfied Rule 23, due process, and the Private Securities Litigation Reform Act. The notice informed potential class members about the settlement, their rights to opt out or object, and the process for submitting a claim.

Fees, Expenses, and Service Awards

The court approved attorneys’ fees of $13,750,000, equal to 25 percent of the settlement fund, plus any accrued interest. In evaluating the request, the court considered the benefit to the class, the risks faced by counsel, the complexity of the legal and factual issues, the more than 11,700 hours counsel spent, and the absence of objections. The court found the requested percentage consistent with awards in similar class actions.

The court granted plaintiffs’ request for $349,575.75 in litigation expenses. The expenses included expert fees, online research, mediation fees, electronic document production and storage, court reporting, and transcripts. The court found these expenses reasonably related to the litigation.

The court also granted service awards of $12,500 to the Gabelli Group and $10,000 to the Naya Group, for a total of $22,500. The court found that the lead plaintiffs had spent significant time communicating with counsel, reviewing filings, responding to discovery, discussing settlement negotiations, and evaluating settlement offers.

Disposition

The court granted plaintiffs’ unopposed motion for final approval of the class-action settlement and granted plaintiffs’ unopposed motion for attorneys’ fees, reimbursement of litigation expenses, and awards. The settlement and Plan of Allocation were finally approved; the settlement class was finally certified for settlement purposes; timely opt-outs were excluded; and class members who did not timely opt out were bound by the settlement. The court entered final judgment and retained jurisdiction over disputes concerning the settlement’s interpretation, administration, implementation, effectuation, and enforcement.