IN RE RESIDEO TECHNOLOGIES, INC. DERIVATIVE LITIGATION

Background

Plaintiffs sought final approval of a settlement with Resideo Technologies, Inc.; Michael G. Nefkens; Joseph D. Ragan, III; Niccolo de Masi; Paul Deninger; Roger Fradin; Jack Lazar; Nina Richardson; Andrew Teichl; and Sharon Weinbar. The parties’ February 7, 2023 settlement agreement provided for complete dismissal with prejudice of the claims in the action and released claims on the agreement’s stated terms.

In exchange, Resideo agreed to corporate-governance reforms intended to improve board oversight, promote accurate market disclosures, and reduce legal and regulatory risks. The agreement provided that the company would spend $300,000 per year for five years on continuing risk-management and oversight improvements. Resideo also agreed to maintain the reforms for at least three years.

The court had preliminarily approved the settlement, certified the class on a preliminary basis, and approved the proposed notice plan. Notice packets were sent to potential class members, and summary notice was published in The Wall Street Journal and on PR Newswire. Two investors objected, but no investor requested exclusion from the Settlement Class. The court held a settlement hearing on June 22, 2023.

Final Approval

Under Federal Rule of Civil Procedure 23(e), a court must approve a class settlement and determine that it is fair, reasonable, and adequate. The court found that the lead plaintiffs and counsel adequately represented the class, had no conflicts, and had actively participated in the litigation and settlement process. The court also found that the negotiations were conducted at arm’s length, including through a full-day mediation before Magistrate Judge Becky Thorson.

The court concluded that the settlement provided adequate relief because continued litigation would involve risks concerning liability, causation, and damages, as well as additional cost and delay. The reforms were designed to reduce the likelihood of future violations of fiduciary duties and federal securities laws. The court also found that the settlement treated class members equitably. It overruled the two objections as procedurally deficient and stated that, in any event, board-diversity requirements were a proper component of the settlement.

Class Certification and Notice

For settlement purposes only, the court finally certified the Settlement Class under Rules 23(a) and 23(b)(3). It found the class sufficiently numerous, shared common legal and factual questions, had typical claims represented by adequate lead plaintiffs and counsel, and could be handled more efficiently as a class action. The court found that the notice satisfied Rule 23, due process, and the Private Securities Litigation Reform Act.

Fees and Service Awards

The court approved $1,600,000 in attorneys’ fees, plus accrued interest, after considering the benefit of the reforms, the risks and difficulty of the litigation, counsel’s work, and the class’s response. The record showed that counsel spent more than 2,457 hours on the case, including research, pleadings, discovery, mediation, and settlement negotiations. The court also approved service awards of $2,500 each for Riviera Beach Police Pension Fund, City of Hialeah Employees Retirement System, Jawad A. Ayaz, Daniel Sanclemente, Harry Frashier on behalf of Bud & Sue Frashier Family Trust, and Alice Burstein.

Disposition

Judge Wright granted the plaintiffs’ motion for final approval of the class-action settlement. The settlement agreement and Plan of Allocation were finally approved; the Settlement Class was finally certified for settlement purposes; nonexcluded class members were bound by the settlement; and judgment was entered dismissing the claims with prejudice. The court retained jurisdiction to resolve disputes involving the settlement’s interpretation, administration, implementation, effectuation, and enforcement.