Guyer v. MGT Capital Investments, Inc.

Background

Lead Plaintiffs, identified in the judgment as members of the Southern California Plaintiffs Group, entered into a settlement agreement with MGT Capital Investments, Inc. and Robert B. Ladd, referred to in the judgment as the Settling Defendants. The court had previously conditionally certified a class for settlement purposes and approved notice to potential class members. After notice was issued, the Lead Plaintiffs asked the court to give final approval to the settlement, and the court held a settlement fairness hearing.

The settlement class consisted of all persons or entities that purchased or otherwise acquired MGT shares between October 9, 2015, and September 7, 2018, inclusive, and that were allegedly damaged. The judgment excluded the defendants, certain current and former MGT officers and directors, specified investors and their immediate families and controlled entities, MGT’s parents, subsidiaries, and affiliates, certain legal successors, and anyone who timely and validly requested exclusion.

Court’s Findings

The court found that the requirements for settlement class certification under Federal Rule of Civil Procedure 23 were satisfied. It determined that the class was sufficiently numerous, that common legal or factual questions existed, that the Lead Plaintiffs’ claims were typical, and that the Lead Plaintiffs and their counsel had adequately represented the class. The court also found that common questions predominated and that a class action was the better method for resolving the controversy.

The court found that the postcard notice and its distribution were adequate and reasonable, complied with Rule 23 and the cited securities-law notice requirement, and satisfied due process. It also found that interested people had an opportunity to be heard at the fairness hearing or in writing.

Settlement Approval and Disposition

The court held that the proposed settlement was fair, reasonable, adequate, and in the best interests of the class. It considered the settlement-negotiation process and the substantive terms, including whether the negotiations were vigorous, at arm’s length, and non-collusive. It also evaluated the settlement under the factors identified by the Second Circuit concerning the complexity and likely duration of the litigation, the class’s reaction, the stage of the case and discovery, litigation risks, possible recovery, and related considerations.

The court expressly stated that it took no position on the merits of the Lead Plaintiffs’ claims or the Settling Defendants’ defenses. The judgment also states that the settlement and judgment were not admissions or concessions of liability or wrongdoing and were not findings that the claims or defenses were valid or invalid.

The court approved the settlement and directed that it be carried out under the settlement agreement. It dismissed the amended class-action complaint, filed May 14, 2019, with prejudice as to all Settling Defendants, without costs to any settling party except as provided in the settlement agreement. The court separately stated that it would enter another order addressing the application for attorneys’ fees and expenses.

Releases and Continuing Authority

When the settlement became effective, Lead Plaintiffs and class members who were bound by the settlement released the defined settled claims and were permanently barred from bringing or assisting claims covered by those releases. Settling Defendants and other released parties received corresponding releases of the defined defendants’ claims. Class members who did not properly request exclusion were bound by the settlement and its releases, while the judgment preserved the right to seek any additional recovery available through a Securities and Exchange Commission fair-fund or similar distribution process.

The court approved the plan for allocating the settlement fund and retained continuing authority over settlement administration, individual claims, distributions, attorneys’ fees and expenses, and enforcement and interpretation of the settlement and judgment. The judgment provided that it would become void and the case would proceed under the settlement agreement if the settlement were terminated, vacated, not approved, or failed to become effective.