Preview
FILED: NEW YORK COUNTY CLERK 07/31/2014 06:57 PM INDEX NO. 653084/2013
NYSCEF DOC. NO. 8 RECEIVED NYSCEF: 07/31/2014
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
X
:
NATALIE GORDON, On Behalf Of Herself and Others :
Similarly Situated, Index No. 653084/2013
:
Plaintiff, :
vs. : CLASS ACTION
:
:
VERIZON COMMUNICATIONS, INC., LOWELL C. Motion Seq. # 001
MCADAM, RICHARD L. CARRIÓN REXACH, :
MELANIE L. HEALEY, MARTHA FRANCES :
KEETH, ROBERT W. LANE, M.D., SANDRA O. :
MOOSE, M.D., JOSEPH NEUBAUER, DONALD T. :
NICOLAISEN, CLARENCE OTIS, JR., HUGH B.
PRICE, RODNEY EARL SLATER, KATHRYN A. :
TESIJA, and GREGORY D. WASSON, :
Defendants. :
:
:
X
MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFF’S UNOPPOSED MOTION
FOR PRELIMINARY APPROVAL OF SETTLEMENT
TABLE OF CONTENTS
I. INTRODUCTION ...............................................................................................................1
II. STATEMENT OF FACTS ..................................................................................................1
III. KEY SUBSTANTIVE TERMS OF THE SETTLEMENT .................................................5
IV. THE PROPOSED SETTLEMENT WARRANTS PRELIMINARY APPROVAL............7
V. CONDITIONAL CLASS CERTIFICATION FOR PURPOSES OF SETTLEMENT
IS APPROPRIATE ..............................................................................................................9
A. The Numerosity Requirement Is Satisfied .............................................................11
B. The Commonality Requirement Is Satisfied ..........................................................12
C. The Typicality Requirement Is Satisfied ...............................................................12
D. The Adequacy Requirement Is Satisfied................................................................13
1. Relationship Between Interests of Class Representative and Other
Class Members ...........................................................................................13
2. The Ability of the Representatives to Assist Counsel ...............................13
3. Qualification of Counsel ............................................................................14
E. The Superiority Requirement Is Satisfied ..............................................................14
F. The Factors of N.Y. C.P.L.R. Section 902 Support Certification..........................14
G. Certification of a Non-Opt Out Class for Injunctive Relief Claims Is
Appropriate ............................................................................................................16
VI. THE FORM AND METHOD OF CLASS NOTICE ARE REASONABLE AND IN
COMPLIANCE WITH N.Y. C.P.L.R. 908 .......................................................................17
VII. PROPOSED SCHEDULE OF EVENTS ...........................................................................18
VIII. CONCLUSION ..................................................................................................................18
- ii -
TABLE OF AUTHORITIES
Cases Page(s)
Alix v. Wal-Mart Stores, Inc.,
No. 7121-01,
2010 N.Y. Misc. LEXIS 1402 (Sup. Ct. Albany Cnty. May 26, 2010) .....................................7
Amchem Prods., Inc. v. Windsor,
521 U.S. 591 (1997) .................................................................................................................16
Brandon v. Chefetz,
106 A.D.2d 162, 485 N.Y.S.2d 55 (1st Dep’t 1985) ...............................................................12
City of New York v. Maul,
14 N.Y.3d 499, 929 N.E.2d 366 (2010) .............................................................................10, 12
City of New York v. Maul,
59 A.D.3d 187, 873 N.Y.S.2d 540 (1st Dep’t 2009),
aff’d, 14 N.Y.3d 499, 929 N.E.2d 366 (2010) .........................................................................11
In re Colt Indus. S’holder Litig.,
155 A.D.2d 154, 553 N.Y.S.2d 138 (Sup. Ct. N.Y. Cnty. 1990).............................................17
In re Colt Indus. S’holder Litig.,
77 N.Y.2d 185, 566 N.E.2d 1160 (1991) .............................................................................9, 16
Danieli v. Int’l Bus. Machs. Corp.,
No. 08 CV 3688 (SHS),
2009 U.S. Dist. LEXIS 106938 (S.D.N.Y. Nov. 16, 2009) .......................................................7
Davis v. J.P. Morgan Chase & Co.,
775 F. Supp. 2d 601 (W.D.N.Y. 2011) ......................................................................................7
Diakonikolas v. New Horizons Worldwide Inc.,
No. 112565/09,
2011 N.Y. Misc. LEXIS 5682 (Sup. Ct. N.Y. Cnty. Nov. 28, 2011) ......................................17
Dugan v. London Terrace Gardens, L.P.,
No. 603468/2009,
2013 N.Y. Misc. LEXIS 4017 (Sup. Ct. N.Y. Cnty. Sept. 10, 2013) ......................................11
Freeport Partners, L.L.C. v. Allbritton,
No. 04-2030 (GK), 2006 U.S. Dist. LEXIS 9710 (D.D.C. Mar. 13, 2006) .............................16
Globe Surgical Supply v. GEICO Ins. Co.,
59 A.D.3d 129, 871 N.Y.S.2d 263 (2d Dep’t 2008) ................................................................13
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Michels v. Phoenix Home Life Mut. Ins. Co.,
No. 5318-95,
1997 N.Y. Misc. LEXIS 171 (Sup. Ct. Albany Cnty. Jan. 3, 1997) ............................13, 14, 15
Mills v. Elec. Auto-Lite Co.,
396 U.S. 375 (1970) ...................................................................................................................9
Noerr v. Greenwood,
No. 14320-NC, 2002 Del. Ch. LEXIS 134 (Del. Ch. Nov. 22, 2002) .....................................16
O’Hara v. Del Bello,
47 N.Y.2d 363, 391 N.E.2d 1311 (1979) ...................................................................................7
Pludeman v. N. Leasing Sys., Inc.,
74 A.D.3d 420, 904 N.Y.S.2d 372 (1st Dep’t 2010) ...............................................................12
Pruitt v. Rockefeller Ctr. Props., Inc.,
167 A.D.2d 14, 574 N.Y.S.2d 672 (1st Dep’t 1991) ...............................................................14
Ryan v. Volume Servs. Am., Inc.,
No. 652970/2012,
2012 N.Y. Misc. LEXIS 5513 (Sup. Ct. N.Y. Cnty. Dec. 7, 2012) .....................................7, 10
Taylor v. Am. Bankers Ins. Grp., Inc.,
267 A.D.2d 178, 700 N.Y.S.2d 458 (1st Dep’t 1999) .............................................................15
Turner v. Bernstein,
768 A.2d 24 (Del. Ch. 2000)....................................................................................................16
Willson v. N.Y. Life Ins. Co.,
No. 94/127804,
1995 N.Y. Misc. LEXIS 652 (Sup. Ct. N.Y. Cnty. Nov. 8, 1995) ..........................................15
Other Authorities
Article 9 of the N.Y. C.P.L.R. .........................................................................................................7
N.Y. C.P.L.R. § 902 .............................................................................................................. passim
N.Y. C.P.L.R. § 901 .............................................................................................................9, 10, 11
N.Y. C.P.L.R. 908 ..........................................................................................................................17
- iv -
I. INTRODUCTION
Plaintiff Natalie Gordon (“Plaintiff”) respectfully requests that the Court grant
preliminary approval of the proposed settlement of this litigation. Specifically, Plaintiff
seeks entry of the [Proposed] Scheduling Order for Approval of Settlement of Class Action
(the “Scheduling Order”)1 that will: (i) preliminarily approve the settlement set forth in the
Stipulation and Agreement of Compromise, Settlement, and Release dated July 31, 2014
(the “Stipulation” or “Settlement”)2; (ii) conditionally certify a settlement class (the “Class”
or “Settlement Class”) consisting of all persons who held common stock of Verizon
Communications, Inc. (“Verizon” or the “Company”) at any time from March 1, 2013
through and including February 21, 2014; (iii) approve as to form and content the notice of
the settlement to the Settlement Class (the “Notice”)3 and order the direct mailing of the
Notice; and (iv) schedule a hearing at which the Court will consider final approval of the
Settlement.
Plaintiff and her counsel believe that the Settlement is in the best interests of the
proposed Class and respectfully request that the Court preliminarily approve the Settlement
and enter the Scheduling Order as submitted.
II. STATEMENT OF FACTS
On September 2, 2013, Verizon publicly announced that ithad entered into a definitive
agreement (the “Stock Purchase Agreement”) with Vodafone Group Plc (“Vodafone”) to acquire
1
A copy of the Scheduling Order is attached as Exhibit 1 to the Affirmation of Juan E.
Monteverde in Support of Plaintiff’s Unopposed Motion for Preliminary Approval of Settlement
(“Monteverde Aff.”) filed herewith.
2
A copy of the Stipulation is attached as Exhibit 2 to the Monteverde Aff.
3
A copy of the Notice is attached as Exhibit 3 to the Monteverde Aff.
-1-
Vodafone subsidiaries holding as its principal assets a 45% interest in Cellco Partnership d/b/a/
Verizon Wireless (“Verizon Wireless”) for a purchase price of approximately $130 billion,
consisting primarily of cash and Verizon shares (the “Transaction”). Stipulation, at 2.
On September 5, 2013, Plaintiff filed the above-captioned action (the “Action”)
challenging the Transaction. Id. The gravamen of the Action was the allegation that the
Individual Defendants4 breached their fiduciary duties to Verizon’s shareholders in connection
with the Transaction by, among other things, causing Verizon to pay an allegedly excessive and
dilutive price in the Transaction in order to acquire the Vodafone subsidiaries. Id.
On October 8, 2013, Verizon filed with the Securities and Exchange Commission (the
“SEC”) a Preliminary Proxy Statement on Schedule 14A (the “Preliminary Proxy”) detailing the
terms and background of the Transaction and certain analyses performed by JPMorgan in
support of the Transaction. Id.
After carefully reviewing the Preliminary Proxy, Plaintiff determined that Defendants
failed to disclose material information in the Preliminary Proxy necessary for Verizon
shareholders to cast an informed vote. As a result, on October 22, 2013, Plaintiff filed the
Amended Class Action Complaint and asserted additional claims for breaches of fiduciary duty
resulting from Defendants’ failure to disclose material information concerning the Transaction in
the Preliminary Proxy. Id.
Also on October 22, 2013, Gordon served her First Request for the Production of
Documents to All Defendants. Id. On November 5, 2013, Plaintiff filed with the Court a
4
The Individual Defendants are Lowell C. McAdam, Richard L. Carrión Rexach, Melanie
L. Healey, Martha Frances Keeth, Robert W. Lane, Sandra O. Moose, Joseph Neubauer, Donald
T. Nicolaisen, Clarence Otis, Jr., Hugh B. Price, Rodney Earl Slater, Kathryn A. Tesija, and
Gregory D. Wasson (collectively the “Board”, and with Verizon, “Defendants”).
-2-
proposed Stipulation and Order for the Production and Exchange of Confidential Information
(the “Confidentiality Stipulation”). Id. at 3 The Court so ordered the Confidentiality Stipulation
on November 19, 2013.
Beginning on November 13, 2013, subject to the Confidentiality Stipulation, Defendants
produced to Plaintiff certain non-public, confidential documents, including, but not limited to:
board minutes; e-mail communications; complex financial presentations created by Morgan
Stanley & Co. LLC (“Morgan Stanley”), J.P. Morgan Securities LLC (“JP Morgan”), and
Guggenheim Securities, LLC; and management presentations to the Board. Id.
Plaintiff’s counsel then reviewed and analyzed over 13,000 pages of documents produced
by Defendants, including consultation with a financial expert regarding the Transaction on the
merits of the claims asserted in the Action. Id.
Thereafter, the parties engaged in extensive arm’s-length negotiations in the effort to
reach a resolution of the actions without the need for further litigation. As a result of these
negotiations, on December 6, 2013, counsel reached an agreement-in-principle to settle the
Action wherein Defendants would (1) agree to disseminate to Verizon shareholders certain
additional disclosures that Plaintiff believed were material and necessary for an informed
shareholder vote and (2) that the Board agree to certain prospective actions wherein Defendants
agreed that upon such a time as this Settlement becomes final, and for a period of three (3) years
thereafter, in the event that Verizon engages in a transaction involving the sale to a third party
purchaser or spin-off of assets of Verizon Wireless having a book value of in excess of $14.4
billion (i.e., approximately 5% of $288.9 billion, which is the implied equity value of 100% of
Verizon Wireless that is referenced under the heading “Transaction Overview” on page 38 of the
Proxy Statement), Verizon shall obtain a fairness opinion from an independent financial advisor
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(or in the case of a spin-off, financial advice from an independent financial advisor). The choice
of the independent financial advisor shall be approved or ratified by a majority of the
independent directors then serving on the Board, and such approval and/or ratification shall be
duly reflected in the minutes of the corporation. Id. at 8-9. The parties memorialized their
agreement-in-principle to settle Plaintiff’s claims, subject to additional confirmatory discovery,
in a Memorandum of Understanding (the “MOU”), dated December 6, 2013. Id. at 3-4.
On December 10, 2013, Defendants filed a definitive Proxy Statement on Schedule 14A
with the SEC (the “Definitive Proxy”) to solicit shareholders to vote in favor of the Transaction
and scheduling a shareholder vote for January 28, 2014. Id. at 4. The Definitive Proxy included
a number of additional disclosures not contained in the Preliminary Proxy (the “Supplemental
Disclosures”), many of which were made in response to the Complaint and efforts of Plaintiff’s
counsel. Verizon then voted to approve the issuance of shares for the Company to acquire
Vodafone’s 45% interest in Verizon Wireless on January 28, 2014. Id.
Subsequently, pursuant to the MOU, Plaintiff’s counsel conducted confirmatory
discovery and took depositions of John Fitzgerald, Verizon’s Vice President of Corporate
Development and Robert T. Friedsam, Managing Director at Morgan Stanley, on February 14,
2014 and February 18, 2014, respectively. Id.
The Transaction closed on February 21, 2014.
To date, Plaintiff and her counsel have conducted a thorough investigation into the facts
and law relating to the Action. For instance, Plaintiff retained and consulted with a financial
expert and reviewed with the expert the Preliminary Proxy, the Stock Purchase Agreement,
discovery materials, and relevant public information. Id. at 3. After fully analyzing the merits of
all parties’ contentions, including the impact of the proposed settlement on Plaintiff and absent
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Class members, Plaintiff and her counsel entered into the Stipulation providing for the
Settlement described below. Importantly, during the negotiations, all parties had a clear view of
the strengths and weaknesses of their respective claims and defenses, and the Settlement is a
product of arm’s-length negotiations between the parties who were all represented by counsel
with extensive experience and expertise in shareholder litigation.
III. KEY SUBSTANTIVE TERMS OF THE SETTLEMENT
The Settlement required Verizon to disclose certain information to members of the Class
that Plaintiff believed were material and critical to their ability to make a fully-informed decision
about whether to vote in favor of the share issuance to fund the Transaction. The Supplemental
Disclosures, which were set forth in the Definitive Proxy (and detailed in blackline in Exhibit A
to the Stipulation), provided information to Verizon’s shareholders concerning, in part, the
following:
That the $130 billion value for 45% of Verizon Wireless implied an equity value
for 100% of Verizon Wireless of approximately $288.9 billion;
That Verizon’s shareholders would own approximately 70.3% of Verizon pro
forma for the issuance of Verizon common stock in connection with the
Transaction. Assuming a price per share in the midpoint of the collar of $49.00,
this calculation also assumed that approximately 1.228 billion shares of Verizon
common stock would be issued in the Transaction, resulting in a total pro forma
diluted share count of approximately 4.134 billion;
All financial and operating metrics for Verizon Wireless, Sprint, T-Mobile,
Vodafone, and AT&T’s wireless division in the Public Trading Benchmark-
Wireless Pure Play section of Analyses of Verizon Wireless in JP Morgan’s and
Morgan Stanley’s Fairness Opinion;
That the Large Cap Companies 2014E P/E multiples represents the average of the
multiples for the selected companies in the Public Trading Benchmark-Illustrative
Fully Distributed Equity Valuation section of the Analyses of Verizon Wireless in
JP Morgan’s and Morgan Stanley’s Fairness Opinion;
The date, target, acquirer, transaction value, percent acquired, and premium for
each transaction discussed in the Illustrative Minority Buy-in Premium Precedents
-5-
section of the Analyses of Verizon Wireless in JP Morgan’s and Morgan Stanley’s
Fairness Opinion;
The EBITDA, EBITDA less capital expenditures, and the enterprise value of
Verizon Corporate and Wireless in the Public Trading Benchmarks section of the
Verizon Corporate and Wireline Analyses in JP Morgan’s and Morgan Stanley’s
Fairness Opinion;
Each segment’s cash and debt in the Public Trading Benchmarks section of the
Verizon Corporate and Wireline Analyses in JP Morgan’s and Morgan Stanley’s
Fairness Opinion;
That Verizon’s Omnitel interest was determined based on the parties’ respective
financial analyses and represented a negotiated compromise by each party in
connection with the overall negotiations between Verizon and Vodafone; and
Various background information about the evolution of the Transaction between
Vodafone and Verizon.
In addition, in consideration of the Settlement and dismissal with prejudice of the Action,
and as a direct result of the filing and prosecution of the Action and arm’s-length negotiations
between and among the parties, Defendants have agreed that upon such a time as this Settlement
becomes final, and for a period of three (3) years thereafter, in the event that Verizon engages in
a transaction involving the sale to a third party purchaser or spin-off of assets of Verizon
Wireless having a book value of in excess of $14.4 billion (i.e.,approximately 5% of $288.9
billion, which is the implied equity value of 100% of Verizon Wireless that is referenced under
the heading “Transaction Overview” on page 38 of the Definitive Proxy), Verizon shall obtain a
fairness opinion from an independent financial advisor (or in the case of a spin-off, financial
advice from an independent financial advisor). The choice of the independent financial advisor
shall be approved or ratified by a majority of the independent directors then serving on the
Board, and such approval and/or ratification shall be duly reflected in the minutes of the
corporation.
-6-
In exchange, Plaintiff, on behalf of the proposed Class, agreed to release the claims
asserted against Defendants.
IV. THE PROPOSED SETTLEMENT WARRANTS PRELIMINARY APPROVAL
Although under New York law there is no express requirement for preliminary approval
of class action settlements (see Article 9 of the N.Y. C.P.L.R.), New York courts often grant
preliminary approval of a proposed class action settlement according to the procedures and
standards developed by federal courts pursuant to the Federal Rules of Civil Procedure. See
O’Hara v. Del Bello, 47 N.Y.2d 363, 368, 391 N.E.2d 1311, 1313-14 (1979) (noting that the
“explicit design” of article 9 incorporates rule 23 of the Federal Rules of Civil Procedure); see
also Davis v. J.P. Morgan Chase & Co., 775 F. Supp. 2d 601, 607–08 (W.D.N.Y. 2011)
(granting preliminary approval of a class settlement); Danieli v. Int’l Bus. Machs. Corp., No. 08
CV 3688 (SHS), 2009 U.S. Dist. LEXIS 106938, at *12-13 (S.D.N.Y. Nov. 16, 2009) (same);
Ryan v. Volume Servs. Am., Inc., No. 652970/2012, 2012 N.Y. Misc. LEXIS 5513, at *1–2 (Sup.
Ct. N.Y. Cnty. Dec. 7, 2012) (same); Alix v. Wal-Mart Stores, Inc., No. 7121-01, 2010 N.Y.
Misc. LEXIS 1402 (Sup. Ct. Albany Cnty. May 26, 2010) (same).
Preliminary approval of a class action settlement requires the court to consider whether
the plaintiff negotiated the settlement at arm’s-length, conducted sufficient discovery, and has a
basis for believing that the settlement was appropriate. See, e.g., Ryan, 2012 N.Y. Misc. LEXIS
5513, at *2; Alix, 2010 N.Y. Misc. LEXIS 1402, at *2.5 Preliminary approval should be granted
5
Importantly, preliminary approval does not require the trial court to answer the ultimate
question of whether a proposed settlement is fair, reasonable, and adequate. Rather, the
determination is made only after notice of the settlement has been given to the members of the
class, and after they have been given the opportunity to comment on the settlement. E.g., Davis,
775 F. Supp. 2d at 608 (“Preliminary approval of a class action settlement, in contrast to final
approval, is at most a determination that there is what might be termed probable cause to submit
-7-
where the settlement appears sufficiently reasonable and offers class members an opportunity to
object. Here, these considerations support preliminary approval of the Settlement.
The Transaction was announced on September 2, 2013 and closed on February 21, 2014.
Despite the short period of time in which to develop evidence to support Plaintiff’s claims,
including whether the Transaction should be enjoined, Plaintiff vigorously pursued this case and
discovery was expedited and robust. Plaintiff sought and received document productions in
excess of 13,000 pages from Verizon that included the documents most critical to the Action.
Plaintiff’s counsel also consulted extensively with an independent financial analyst with prior
experience in valuing companies such as Verizon and deposed and interviewed the Company’s
Vice President most involved in the Transaction and a Morgan Stanley representative.
During the course of discovery, Plaintiff was able to fully ascertain the strengths and
weaknesses of her claims. For example, only after a review of non-public documents in
consultation with a financial expert did Plaintiff decide that proving the Transaction price fell
outside a range of fairness would be very difficult. Similarly, at depositions, Plaintiff’s counsel
was able to assure itself of the process undertaken by the Individual Defendants to purchase
Vodafone’s 45% interest in Verizon Wireless and how they valued the Transaction. Plaintiff,
only after a full evaluation of the strengths and weaknesses of her claims balanced against the
benefits of the proposed settlement, believed that the case favored settlement.
Further, the ensuing settlement negotiations were extensive and adversarial. The parties
exchanged proposals and counter-proposals concerning the nature and scope of the Supplemental
Disclosures, the Settlement releases, and the Board’s prospective measures. Ultimately,
the proposal to class members and hold a full-scale hearing as to its fairness.”) (internal
quotation marks omitted).
-8-
Defendants agreed to provide shareholders with more specific information about the critical
assumptions made by Morgan Stanley when itanalyzed the Transaction and determined that it
was fair, and agreed to prospectively seek for a period of three years an independent fairness
opinion on any sale of Verizon Wireless assets above $14.4 billion. These disclosures and
prospective actions addressed many of the issues raised by Plaintiff’s claims.
At the conclusion of these negotiations, Plaintiff and her counsel (who have substantial
experience in this type of litigation) unanimously agreed to enter into the Settlement. Although
it did not vindicate all of Plaintiff’s allegations, it ensured that Verizon shareholders were given
the material information necessary for them to make fully-informed decisions about whether to
vote in favor of the Transaction. See Mills v. Elec. Auto-Lite Co., 396 U.S. 375, 395–96 (1970)
(observing that “an increasing number of lower courts have acknowledged that a corporation
may receive a ‘substantial benefit’ from a [stockholders’ action] . . .” and that “regardless of the
relief granted, private stockholders’ actions of this sort ‘involve corporate therapeutics,’ and
furnish a benefit to all shareholders by providing an important means of enforcement of the
proxy statute”) (internal quotation marks omitted).
For these reasons, the Court should preliminarily approve the Settlement so that notice of
it can be provided to Verizon shareholders.6
V. CONDITIONAL CLASS CERTIFICATION FOR PURPOSES OF SETTLEMENT
IS APPROPRIATE
The standards governing class action settlements are governed by Sections 901 and 902
of the N.Y. C.P.L.R. See In re Colt Indus. S’holder Litig., 77 N.Y.2d 185, 194, 196, 566 N.E.2d
6
If preliminary approval is granted, Class Members will receive formal notice of the
Settlement and be given an opportunity to lodge any objections.
-9-
1160, 1165, 1166 (1991); Ryan, 2012 N.Y. Misc. LEXIS 5513, at *2 (preliminarily certifying a
settlement class because it satisfied “all of the prerequisites of [the N.Y. C.P.L.R.] § 901, and
that consideration of the C.P.L.R. § 902 factors support conditional certification”).
Section 901(a) of the N.Y. C.P.L.R. authorizes a class action if:
(1) [T]he class is so numerous that joinder of all members, whether otherwise
required or permitted, is impracticable; (2) there are questions of law or fact
common to the class which predominate over any questions affecting only
individual members; (3) the claims or defenses of the representative parties are
typical of the claims or defenses of the class; (4) the representative parties will
fairly and adequately protect the interests of the class; and (5) a class action is
superior to other available methods for the fair and efficient adjudication of the
controversy.
Id. Thus, the Class should be certified once Plaintiff establishes that her claims satisfy the five
prerequisites of the N.Y. C.P.L.R. Section 901, commonly referred to as: (i) numerosity,
(ii) commonality, (iii) typicality, (iv) adequacy of representation, and (v) superiority. City of
New York v. Maul, 14 N.Y.3d 499, 508, 929 N.E.2d 366, 371 (2010).
Additionally, Section 902 of the N.Y. C.P.L.R. states the following:
Within sixty days after the time to serve a responsive pleading has expired for all
persons named as defendants in an action brought as a class action, the plaintiff
shall move for an order to determine whether it is to be so maintained. An order
under this section may be conditional, and may be altered or amended before the
decision on the merits on the court’s own motion or on motion of the parties. The
action may be maintained as a class action only if the court finds that the
prerequisites under section 901 have been satisfied. Among the matters which the
court shall consider in determining whether the action may proceed as a class
action are:
1. [T]he interest of members of the class in individually controlling the
prosecution or defense of separate actions;
2. [T]he impracticability or inefficiency of prosecuting or defending
separate actions;
3. [T]he extent and nature of any litigation concerning the controversy
already commenced by or against members of the class;
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4. [T]he desirability or undesirability of concentrating the litigation of the
claim in the particular forum;
5. [T]he difficulties likely to be encountered in the management of a class
action.
Id.
Here, the proposed Class easily satisfies each of the prerequisites of N.Y. C.P.L.R. 901
and the factors of N.Y. C.P.L.R. 902 support conditional certification.7
A. The Numerosity Requirement Is Satisfied
At commencement of the Action, Verizon had approximately 2.86 billion shares of
common stock outstanding. It would have been difficult, if not impossible, to join all Verizon
shareholders before this Court. Accordingly, Plaintiff satisfies 901(a)(1)’s numerosity
requirement. City of New York v. Maul, 59 A.D.3d 187, 189–90, 873 N.Y.S.2d 540, 543 (1st
Dep’t 2009), aff’d, 14 N.Y.3d 499, 929 N.E.2d 366 (2010) (numerosity satisfied where there
were at least 150 class members); Dugan v. London Terrace Gardens, L.P., No. 603468/2009,
2013 N.Y. Misc. LEXIS 4017, at *25 (Sup. Ct. N.Y. Cnty. Sept. 10, 2013) (numerosity satisfied
where there were at least 558 class members).
7
As part of the Settlement here, the parties have agreed to the certification of a non-opt out
Settlement Class defined as:
[A]ny and all persons or entities who held shares of Verizon common stock, either
of record or beneficially, at any time between and including March 1, 2013,
through and including February 21, 2014, including any and all of their respective
successors in interest, predecessors, representatives, trustees, executors,
administrators, heirs, assigns or transferees, immediate and remote, and any
person or entity acting for or on behalf of, or claiming under any of them, and
each of them, record and beneficial holders of common stock of the Company, but
excluding Defendants in the Action, their immediate families, and their respective
affiliates.
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B. The Commonality Requirement Is Satisfied
The commonality requirement is satisfied where there are factual or legal issues common
to all or a substantial portion of the class, and the common issues “predominate” over any
questions affecting individual members. Pludeman v. N. Leasing Sys., Inc., 74 A.D.3d 420, 422–
23, 904 N.Y.S.2d 372, 376-77 (1st Dep’t 2010). “[T]he fact that questions peculiar to each
individual may remain after resolution of the common questions is not fatal to the class action.”
Maul, 14 N.Y.3d at 514, 929 N.E.2d at 376 (internal quotation marks omitted).
Here, issues common to the Class include, inter alia, whether Defendants, through the
conduct complained of in the Action, violated their fiduciary duties owed to the Class. See
Brandon v. Chefetz, 106 A.D.2d 162, 166, 485 N.Y.S.2d 55, 58 (1st Dep’t 1985) (affirming
lower court’s finding of commonality because of “[t]he existence of sufficient common questions
of law and fact . . . based upon a finding that [defendants’] breaches of fiduciary duty were the
prevalent issue in the case”). Therefore, Plaintiff’s claims meet the commonality requirement.
C. The Typicality Requirement Is Satisfied
The typicality requirement is met when the claims of plaintiff and other class members
derive from the same course of conduct and are based on the same legal theory. Pludeman, 74
A.D.3d at 423, 904 N.Y.S.2d at 377 (quoting Friar v. Vanguard Holding Corp., 78 A.D.2d 83,
99 (2d Dep’t 1980)). “Typicality does not require identity of issues and the typicality
requirement is met even if the claims asserted by class members differ from those asserted by
other class members.” Id. (citing Pruitt v. Rockefeller Ctr. Props., Inc., 167 A.D.2d 14, 22, 574
N.Y.S.2d 672, 676-77 (1st Dep’t 1991)).
Here, the typicality requirement is satisfied by Plaintiff because the claims of all Class
members she seeks to represent derive from the same legal theories (i.e.,breaches of fiduciary
- 12 -
duties) and the same set of operative facts (i.e., facts surrounding the Transaction). Thus,
Plaintiff’s claims are typical of the Class.
D. The Adequacy Requirement Is Satisfied
“The three essential factors to consider in determining adequacy of representation are
potential conflicts of interests between the representative and the class members, personal
characteristics of the proposed class representative . . . , and the quality of the class counsel.”
Globe Surgical Supply v. GEICO Ins. Co., 59 A.D.3d 129, 144, 871 N.Y.S.2d 263, 274 (2d Dep’t
2008). Plaintiff easily satisfies the three components of the “adequacy” test.
1. Relationship Between Interests of Class Representative and Other
Class Members
“So long as they have a sufficient interest in the outcome of the litigation and have no
conflict with the interests of the class, class representatives can adequately represent the class.”
Michels v. Phoenix Home Life Mut. Ins. Co., No. 5318-95, 1997 N.Y. Misc. LEXIS 171, at *33
(Sup. Ct. Albany Cnty. Jan. 3, 1997) (citing Pruitt, 167 A.D.2d at 24, 574 N.Y.S.2d at 678). In
this case, Plaintiff’s interests are fully aligned with those of the proposed Settlement Class she
seeks to represent and no conflicts between Plaintiff and the Class have been posited. The
Supplemental Disclosures and the Board’s prospective actions are also the same for all members
of the proposed Class and vindication of Plaintiff’s claims advances the interests of the Class as a
whole. Accordingly, no conflict exists between Plaintiff and the Class.
2. The Ability of the Representatives to Assist Counsel
Plaintiff retained experienced counsel and maintained an interest in prosecuting the
actions. See infra Part V.D.3. As such, Plaintiff is clearly able to assist her attorneys in the
litigation. See, e.g., Michels, 1997 N.Y. Misc. LEXIS 171, at *32–33.
- 13 -
3. Qualificati
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FILED: NEW YORK COUNTY CLERK 07/31/2014 06:57 PM INDEX NO. 653084/2013 NYSCEF DOC. NO. 8 RECEIVED NYSCEF: 07/31/2014 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK X : NATALIE GORDON, On Behalf Of Herself and Others : Similarly Situated, Index No. 653084/2013 : Plaintiff, : vs. : CLASS ACTION : : VERIZON COMMUNICATIONS, INC., LOWELL C. Motion Seq. # 001 MCADAM, RICHARD L. CARRIÓN REXACH, : MELANIE L. HEALEY, MARTHA FRANCES : KEETH, ROBERT W. LANE, M.D., SANDRA O. : MOOSE, M.D., JOSEPH NEUBAUER, DONALD T. : NICOLAISEN, CLARENCE OTIS, JR., HUGH B. PRICE, RODNEY EARL SLATER, KATHRYN A. : TESIJA, and GREGORY D. WASSON, : Defendants. : : : X MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFF’S UNOPPOSED MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT TABLE OF CONTENTS I. INTRODUCTION ...............................................................................................................1 II. STATEMENT OF FACTS ..................................................................................................1 III. KEY SUBSTANTIVE TERMS OF THE SETTLEMENT .................................................5 IV. THE PROPOSED SETTLEMENT WARRANTS PRELIMINARY APPROVAL............7 V. CONDITIONAL CLASS CERTIFICATION FOR PURPOSES OF SETTLEMENT IS APPROPRIATE ..............................................................................................................9 A. The Numerosity Requirement Is Satisfied .............................................................11 B. The Commonality Requirement Is Satisfied ..........................................................12 C. The Typicality Requirement Is Satisfied ...............................................................12 D. The Adequacy Requirement Is Satisfied................................................................13 1. Relationship Between Interests of Class Representative and Other Class Members ...........................................................................................13 2. The Ability of the Representatives to Assist Counsel ...............................13 3. Qualification of Counsel ............................................................................14 E. The Superiority Requirement Is Satisfied ..............................................................14 F. The Factors of N.Y. C.P.L.R. Section 902 Support Certification..........................14 G. Certification of a Non-Opt Out Class for Injunctive Relief Claims Is Appropriate ............................................................................................................16 VI. THE FORM AND METHOD OF CLASS NOTICE ARE REASONABLE AND IN COMPLIANCE WITH N.Y. C.P.L.R. 908 .......................................................................17 VII. PROPOSED SCHEDULE OF EVENTS ...........................................................................18 VIII. CONCLUSION ..................................................................................................................18 - ii - TABLE OF AUTHORITIES Cases Page(s) Alix v. Wal-Mart Stores, Inc., No. 7121-01, 2010 N.Y. Misc. LEXIS 1402 (Sup. Ct. Albany Cnty. May 26, 2010) .....................................7 Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (1997) .................................................................................................................16 Brandon v. Chefetz, 106 A.D.2d 162, 485 N.Y.S.2d 55 (1st Dep’t 1985) ...............................................................12 City of New York v. Maul, 14 N.Y.3d 499, 929 N.E.2d 366 (2010) .............................................................................10, 12 City of New York v. Maul, 59 A.D.3d 187, 873 N.Y.S.2d 540 (1st Dep’t 2009), aff’d, 14 N.Y.3d 499, 929 N.E.2d 366 (2010) .........................................................................11 In re Colt Indus. S’holder Litig., 155 A.D.2d 154, 553 N.Y.S.2d 138 (Sup. Ct. N.Y. Cnty. 1990).............................................17 In re Colt Indus. S’holder Litig., 77 N.Y.2d 185, 566 N.E.2d 1160 (1991) .............................................................................9, 16 Danieli v. Int’l Bus. Machs. Corp., No. 08 CV 3688 (SHS), 2009 U.S. Dist. LEXIS 106938 (S.D.N.Y. Nov. 16, 2009) .......................................................7 Davis v. J.P. Morgan Chase & Co., 775 F. Supp. 2d 601 (W.D.N.Y. 2011) ......................................................................................7 Diakonikolas v. New Horizons Worldwide Inc., No. 112565/09, 2011 N.Y. Misc. LEXIS 5682 (Sup. Ct. N.Y. Cnty. Nov. 28, 2011) ......................................17 Dugan v. London Terrace Gardens, L.P., No. 603468/2009, 2013 N.Y. Misc. LEXIS 4017 (Sup. Ct. N.Y. Cnty. Sept. 10, 2013) ......................................11 Freeport Partners, L.L.C. v. Allbritton, No. 04-2030 (GK), 2006 U.S. Dist. LEXIS 9710 (D.D.C. Mar. 13, 2006) .............................16 Globe Surgical Supply v. GEICO Ins. Co., 59 A.D.3d 129, 871 N.Y.S.2d 263 (2d Dep’t 2008) ................................................................13 - iii - Michels v. Phoenix Home Life Mut. Ins. Co., No. 5318-95, 1997 N.Y. Misc. LEXIS 171 (Sup. Ct. Albany Cnty. Jan. 3, 1997) ............................13, 14, 15 Mills v. Elec. Auto-Lite Co., 396 U.S. 375 (1970) ...................................................................................................................9 Noerr v. Greenwood, No. 14320-NC, 2002 Del. Ch. LEXIS 134 (Del. Ch. Nov. 22, 2002) .....................................16 O’Hara v. Del Bello, 47 N.Y.2d 363, 391 N.E.2d 1311 (1979) ...................................................................................7 Pludeman v. N. Leasing Sys., Inc., 74 A.D.3d 420, 904 N.Y.S.2d 372 (1st Dep’t 2010) ...............................................................12 Pruitt v. Rockefeller Ctr. Props., Inc., 167 A.D.2d 14, 574 N.Y.S.2d 672 (1st Dep’t 1991) ...............................................................14 Ryan v. Volume Servs. Am., Inc., No. 652970/2012, 2012 N.Y. Misc. LEXIS 5513 (Sup. Ct. N.Y. Cnty. Dec. 7, 2012) .....................................7, 10 Taylor v. Am. Bankers Ins. Grp., Inc., 267 A.D.2d 178, 700 N.Y.S.2d 458 (1st Dep’t 1999) .............................................................15 Turner v. Bernstein, 768 A.2d 24 (Del. Ch. 2000)....................................................................................................16 Willson v. N.Y. Life Ins. Co., No. 94/127804, 1995 N.Y. Misc. LEXIS 652 (Sup. Ct. N.Y. Cnty. Nov. 8, 1995) ..........................................15 Other Authorities Article 9 of the N.Y. C.P.L.R. .........................................................................................................7 N.Y. C.P.L.R. § 902 .............................................................................................................. passim N.Y. C.P.L.R. § 901 .............................................................................................................9, 10, 11 N.Y. C.P.L.R. 908 ..........................................................................................................................17 - iv - I. INTRODUCTION Plaintiff Natalie Gordon (“Plaintiff”) respectfully requests that the Court grant preliminary approval of the proposed settlement of this litigation. Specifically, Plaintiff seeks entry of the [Proposed] Scheduling Order for Approval of Settlement of Class Action (the “Scheduling Order”)1 that will: (i) preliminarily approve the settlement set forth in the Stipulation and Agreement of Compromise, Settlement, and Release dated July 31, 2014 (the “Stipulation” or “Settlement”)2; (ii) conditionally certify a settlement class (the “Class” or “Settlement Class”) consisting of all persons who held common stock of Verizon Communications, Inc. (“Verizon” or the “Company”) at any time from March 1, 2013 through and including February 21, 2014; (iii) approve as to form and content the notice of the settlement to the Settlement Class (the “Notice”)3 and order the direct mailing of the Notice; and (iv) schedule a hearing at which the Court will consider final approval of the Settlement. Plaintiff and her counsel believe that the Settlement is in the best interests of the proposed Class and respectfully request that the Court preliminarily approve the Settlement and enter the Scheduling Order as submitted. II. STATEMENT OF FACTS On September 2, 2013, Verizon publicly announced that ithad entered into a definitive agreement (the “Stock Purchase Agreement”) with Vodafone Group Plc (“Vodafone”) to acquire 1 A copy of the Scheduling Order is attached as Exhibit 1 to the Affirmation of Juan E. Monteverde in Support of Plaintiff’s Unopposed Motion for Preliminary Approval of Settlement (“Monteverde Aff.”) filed herewith. 2 A copy of the Stipulation is attached as Exhibit 2 to the Monteverde Aff. 3 A copy of the Notice is attached as Exhibit 3 to the Monteverde Aff. -1- Vodafone subsidiaries holding as its principal assets a 45% interest in Cellco Partnership d/b/a/ Verizon Wireless (“Verizon Wireless”) for a purchase price of approximately $130 billion, consisting primarily of cash and Verizon shares (the “Transaction”). Stipulation, at 2. On September 5, 2013, Plaintiff filed the above-captioned action (the “Action”) challenging the Transaction. Id. The gravamen of the Action was the allegation that the Individual Defendants4 breached their fiduciary duties to Verizon’s shareholders in connection with the Transaction by, among other things, causing Verizon to pay an allegedly excessive and dilutive price in the Transaction in order to acquire the Vodafone subsidiaries. Id. On October 8, 2013, Verizon filed with the Securities and Exchange Commission (the “SEC”) a Preliminary Proxy Statement on Schedule 14A (the “Preliminary Proxy”) detailing the terms and background of the Transaction and certain analyses performed by JPMorgan in support of the Transaction. Id. After carefully reviewing the Preliminary Proxy, Plaintiff determined that Defendants failed to disclose material information in the Preliminary Proxy necessary for Verizon shareholders to cast an informed vote. As a result, on October 22, 2013, Plaintiff filed the Amended Class Action Complaint and asserted additional claims for breaches of fiduciary duty resulting from Defendants’ failure to disclose material information concerning the Transaction in the Preliminary Proxy. Id. Also on October 22, 2013, Gordon served her First Request for the Production of Documents to All Defendants. Id. On November 5, 2013, Plaintiff filed with the Court a 4 The Individual Defendants are Lowell C. McAdam, Richard L. Carrión Rexach, Melanie L. Healey, Martha Frances Keeth, Robert W. Lane, Sandra O. Moose, Joseph Neubauer, Donald T. Nicolaisen, Clarence Otis, Jr., Hugh B. Price, Rodney Earl Slater, Kathryn A. Tesija, and Gregory D. Wasson (collectively the “Board”, and with Verizon, “Defendants”). -2- proposed Stipulation and Order for the Production and Exchange of Confidential Information (the “Confidentiality Stipulation”). Id. at 3 The Court so ordered the Confidentiality Stipulation on November 19, 2013. Beginning on November 13, 2013, subject to the Confidentiality Stipulation, Defendants produced to Plaintiff certain non-public, confidential documents, including, but not limited to: board minutes; e-mail communications; complex financial presentations created by Morgan Stanley & Co. LLC (“Morgan Stanley”), J.P. Morgan Securities LLC (“JP Morgan”), and Guggenheim Securities, LLC; and management presentations to the Board. Id. Plaintiff’s counsel then reviewed and analyzed over 13,000 pages of documents produced by Defendants, including consultation with a financial expert regarding the Transaction on the merits of the claims asserted in the Action. Id. Thereafter, the parties engaged in extensive arm’s-length negotiations in the effort to reach a resolution of the actions without the need for further litigation. As a result of these negotiations, on December 6, 2013, counsel reached an agreement-in-principle to settle the Action wherein Defendants would (1) agree to disseminate to Verizon shareholders certain additional disclosures that Plaintiff believed were material and necessary for an informed shareholder vote and (2) that the Board agree to certain prospective actions wherein Defendants agreed that upon such a time as this Settlement becomes final, and for a period of three (3) years thereafter, in the event that Verizon engages in a transaction involving the sale to a third party purchaser or spin-off of assets of Verizon Wireless having a book value of in excess of $14.4 billion (i.e., approximately 5% of $288.9 billion, which is the implied equity value of 100% of Verizon Wireless that is referenced under the heading “Transaction Overview” on page 38 of the Proxy Statement), Verizon shall obtain a fairness opinion from an independent financial advisor -3- (or in the case of a spin-off, financial advice from an independent financial advisor). The choice of the independent financial advisor shall be approved or ratified by a majority of the independent directors then serving on the Board, and such approval and/or ratification shall be duly reflected in the minutes of the corporation. Id. at 8-9. The parties memorialized their agreement-in-principle to settle Plaintiff’s claims, subject to additional confirmatory discovery, in a Memorandum of Understanding (the “MOU”), dated December 6, 2013. Id. at 3-4. On December 10, 2013, Defendants filed a definitive Proxy Statement on Schedule 14A with the SEC (the “Definitive Proxy”) to solicit shareholders to vote in favor of the Transaction and scheduling a shareholder vote for January 28, 2014. Id. at 4. The Definitive Proxy included a number of additional disclosures not contained in the Preliminary Proxy (the “Supplemental Disclosures”), many of which were made in response to the Complaint and efforts of Plaintiff’s counsel. Verizon then voted to approve the issuance of shares for the Company to acquire Vodafone’s 45% interest in Verizon Wireless on January 28, 2014. Id. Subsequently, pursuant to the MOU, Plaintiff’s counsel conducted confirmatory discovery and took depositions of John Fitzgerald, Verizon’s Vice President of Corporate Development and Robert T. Friedsam, Managing Director at Morgan Stanley, on February 14, 2014 and February 18, 2014, respectively. Id. The Transaction closed on February 21, 2014. To date, Plaintiff and her counsel have conducted a thorough investigation into the facts and law relating to the Action. For instance, Plaintiff retained and consulted with a financial expert and reviewed with the expert the Preliminary Proxy, the Stock Purchase Agreement, discovery materials, and relevant public information. Id. at 3. After fully analyzing the merits of all parties’ contentions, including the impact of the proposed settlement on Plaintiff and absent -4- Class members, Plaintiff and her counsel entered into the Stipulation providing for the Settlement described below. Importantly, during the negotiations, all parties had a clear view of the strengths and weaknesses of their respective claims and defenses, and the Settlement is a product of arm’s-length negotiations between the parties who were all represented by counsel with extensive experience and expertise in shareholder litigation. III. KEY SUBSTANTIVE TERMS OF THE SETTLEMENT The Settlement required Verizon to disclose certain information to members of the Class that Plaintiff believed were material and critical to their ability to make a fully-informed decision about whether to vote in favor of the share issuance to fund the Transaction. The Supplemental Disclosures, which were set forth in the Definitive Proxy (and detailed in blackline in Exhibit A to the Stipulation), provided information to Verizon’s shareholders concerning, in part, the following: That the $130 billion value for 45% of Verizon Wireless implied an equity value for 100% of Verizon Wireless of approximately $288.9 billion; That Verizon’s shareholders would own approximately 70.3% of Verizon pro forma for the issuance of Verizon common stock in connection with the Transaction. Assuming a price per share in the midpoint of the collar of $49.00, this calculation also assumed that approximately 1.228 billion shares of Verizon common stock would be issued in the Transaction, resulting in a total pro forma diluted share count of approximately 4.134 billion; All financial and operating metrics for Verizon Wireless, Sprint, T-Mobile, Vodafone, and AT&T’s wireless division in the Public Trading Benchmark- Wireless Pure Play section of Analyses of Verizon Wireless in JP Morgan’s and Morgan Stanley’s Fairness Opinion; That the Large Cap Companies 2014E P/E multiples represents the average of the multiples for the selected companies in the Public Trading Benchmark-Illustrative Fully Distributed Equity Valuation section of the Analyses of Verizon Wireless in JP Morgan’s and Morgan Stanley’s Fairness Opinion; The date, target, acquirer, transaction value, percent acquired, and premium for each transaction discussed in the Illustrative Minority Buy-in Premium Precedents -5- section of the Analyses of Verizon Wireless in JP Morgan’s and Morgan Stanley’s Fairness Opinion; The EBITDA, EBITDA less capital expenditures, and the enterprise value of Verizon Corporate and Wireless in the Public Trading Benchmarks section of the Verizon Corporate and Wireline Analyses in JP Morgan’s and Morgan Stanley’s Fairness Opinion; Each segment’s cash and debt in the Public Trading Benchmarks section of the Verizon Corporate and Wireline Analyses in JP Morgan’s and Morgan Stanley’s Fairness Opinion; That Verizon’s Omnitel interest was determined based on the parties’ respective financial analyses and represented a negotiated compromise by each party in connection with the overall negotiations between Verizon and Vodafone; and Various background information about the evolution of the Transaction between Vodafone and Verizon. In addition, in consideration of the Settlement and dismissal with prejudice of the Action, and as a direct result of the filing and prosecution of the Action and arm’s-length negotiations between and among the parties, Defendants have agreed that upon such a time as this Settlement becomes final, and for a period of three (3) years thereafter, in the event that Verizon engages in a transaction involving the sale to a third party purchaser or spin-off of assets of Verizon Wireless having a book value of in excess of $14.4 billion (i.e.,approximately 5% of $288.9 billion, which is the implied equity value of 100% of Verizon Wireless that is referenced under the heading “Transaction Overview” on page 38 of the Definitive Proxy), Verizon shall obtain a fairness opinion from an independent financial advisor (or in the case of a spin-off, financial advice from an independent financial advisor). The choice of the independent financial advisor shall be approved or ratified by a majority of the independent directors then serving on the Board, and such approval and/or ratification shall be duly reflected in the minutes of the corporation. -6- In exchange, Plaintiff, on behalf of the proposed Class, agreed to release the claims asserted against Defendants. IV. THE PROPOSED SETTLEMENT WARRANTS PRELIMINARY APPROVAL Although under New York law there is no express requirement for preliminary approval of class action settlements (see Article 9 of the N.Y. C.P.L.R.), New York courts often grant preliminary approval of a proposed class action settlement according to the procedures and standards developed by federal courts pursuant to the Federal Rules of Civil Procedure. See O’Hara v. Del Bello, 47 N.Y.2d 363, 368, 391 N.E.2d 1311, 1313-14 (1979) (noting that the “explicit design” of article 9 incorporates rule 23 of the Federal Rules of Civil Procedure); see also Davis v. J.P. Morgan Chase & Co., 775 F. Supp. 2d 601, 607–08 (W.D.N.Y. 2011) (granting preliminary approval of a class settlement); Danieli v. Int’l Bus. Machs. Corp., No. 08 CV 3688 (SHS), 2009 U.S. Dist. LEXIS 106938, at *12-13 (S.D.N.Y. Nov. 16, 2009) (same); Ryan v. Volume Servs. Am., Inc., No. 652970/2012, 2012 N.Y. Misc. LEXIS 5513, at *1–2 (Sup. Ct. N.Y. Cnty. Dec. 7, 2012) (same); Alix v. Wal-Mart Stores, Inc., No. 7121-01, 2010 N.Y. Misc. LEXIS 1402 (Sup. Ct. Albany Cnty. May 26, 2010) (same). Preliminary approval of a class action settlement requires the court to consider whether the plaintiff negotiated the settlement at arm’s-length, conducted sufficient discovery, and has a basis for believing that the settlement was appropriate. See, e.g., Ryan, 2012 N.Y. Misc. LEXIS 5513, at *2; Alix, 2010 N.Y. Misc. LEXIS 1402, at *2.5 Preliminary approval should be granted 5 Importantly, preliminary approval does not require the trial court to answer the ultimate question of whether a proposed settlement is fair, reasonable, and adequate. Rather, the determination is made only after notice of the settlement has been given to the members of the class, and after they have been given the opportunity to comment on the settlement. E.g., Davis, 775 F. Supp. 2d at 608 (“Preliminary approval of a class action settlement, in contrast to final approval, is at most a determination that there is what might be termed probable cause to submit -7- where the settlement appears sufficiently reasonable and offers class members an opportunity to object. Here, these considerations support preliminary approval of the Settlement. The Transaction was announced on September 2, 2013 and closed on February 21, 2014. Despite the short period of time in which to develop evidence to support Plaintiff’s claims, including whether the Transaction should be enjoined, Plaintiff vigorously pursued this case and discovery was expedited and robust. Plaintiff sought and received document productions in excess of 13,000 pages from Verizon that included the documents most critical to the Action. Plaintiff’s counsel also consulted extensively with an independent financial analyst with prior experience in valuing companies such as Verizon and deposed and interviewed the Company’s Vice President most involved in the Transaction and a Morgan Stanley representative. During the course of discovery, Plaintiff was able to fully ascertain the strengths and weaknesses of her claims. For example, only after a review of non-public documents in consultation with a financial expert did Plaintiff decide that proving the Transaction price fell outside a range of fairness would be very difficult. Similarly, at depositions, Plaintiff’s counsel was able to assure itself of the process undertaken by the Individual Defendants to purchase Vodafone’s 45% interest in Verizon Wireless and how they valued the Transaction. Plaintiff, only after a full evaluation of the strengths and weaknesses of her claims balanced against the benefits of the proposed settlement, believed that the case favored settlement. Further, the ensuing settlement negotiations were extensive and adversarial. The parties exchanged proposals and counter-proposals concerning the nature and scope of the Supplemental Disclosures, the Settlement releases, and the Board’s prospective measures. Ultimately, the proposal to class members and hold a full-scale hearing as to its fairness.”) (internal quotation marks omitted). -8- Defendants agreed to provide shareholders with more specific information about the critical assumptions made by Morgan Stanley when itanalyzed the Transaction and determined that it was fair, and agreed to prospectively seek for a period of three years an independent fairness opinion on any sale of Verizon Wireless assets above $14.4 billion. These disclosures and prospective actions addressed many of the issues raised by Plaintiff’s claims. At the conclusion of these negotiations, Plaintiff and her counsel (who have substantial experience in this type of litigation) unanimously agreed to enter into the Settlement. Although it did not vindicate all of Plaintiff’s allegations, it ensured that Verizon shareholders were given the material information necessary for them to make fully-informed decisions about whether to vote in favor of the Transaction. See Mills v. Elec. Auto-Lite Co., 396 U.S. 375, 395–96 (1970) (observing that “an increasing number of lower courts have acknowledged that a corporation may receive a ‘substantial benefit’ from a [stockholders’ action] . . .” and that “regardless of the relief granted, private stockholders’ actions of this sort ‘involve corporate therapeutics,’ and furnish a benefit to all shareholders by providing an important means of enforcement of the proxy statute”) (internal quotation marks omitted). For these reasons, the Court should preliminarily approve the Settlement so that notice of it can be provided to Verizon shareholders.6 V. CONDITIONAL CLASS CERTIFICATION FOR PURPOSES OF SETTLEMENT IS APPROPRIATE The standards governing class action settlements are governed by Sections 901 and 902 of the N.Y. C.P.L.R. See In re Colt Indus. S’holder Litig., 77 N.Y.2d 185, 194, 196, 566 N.E.2d 6 If preliminary approval is granted, Class Members will receive formal notice of the Settlement and be given an opportunity to lodge any objections. -9- 1160, 1165, 1166 (1991); Ryan, 2012 N.Y. Misc. LEXIS 5513, at *2 (preliminarily certifying a settlement class because it satisfied “all of the prerequisites of [the N.Y. C.P.L.R.] § 901, and that consideration of the C.P.L.R. § 902 factors support conditional certification”). Section 901(a) of the N.Y. C.P.L.R. authorizes a class action if: (1) [T]he class is so numerous that joinder of all members, whether otherwise required or permitted, is impracticable; (2) there are questions of law or fact common to the class which predominate over any questions affecting only individual members; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; (4) the representative parties will fairly and adequately protect the interests of the class; and (5) a class action is superior to other available methods for the fair and efficient adjudication of the controversy. Id. Thus, the Class should be certified once Plaintiff establishes that her claims satisfy the five prerequisites of the N.Y. C.P.L.R. Section 901, commonly referred to as: (i) numerosity, (ii) commonality, (iii) typicality, (iv) adequacy of representation, and (v) superiority. City of New York v. Maul, 14 N.Y.3d 499, 508, 929 N.E.2d 366, 371 (2010). Additionally, Section 902 of the N.Y. C.P.L.R. states the following: Within sixty days after the time to serve a responsive pleading has expired for all persons named as defendants in an action brought as a class action, the plaintiff shall move for an order to determine whether it is to be so maintained. An order under this section may be conditional, and may be altered or amended before the decision on the merits on the court’s own motion or on motion of the parties. The action may be maintained as a class action only if the court finds that the prerequisites under section 901 have been satisfied. Among the matters which the court shall consider in determining whether the action may proceed as a class action are: 1. [T]he interest of members of the class in individually controlling the prosecution or defense of separate actions; 2. [T]he impracticability or inefficiency of prosecuting or defending separate actions; 3. [T]he extent and nature of any litigation concerning the controversy already commenced by or against members of the class; - 10 - 4. [T]he desirability or undesirability of concentrating the litigation of the claim in the particular forum; 5. [T]he difficulties likely to be encountered in the management of a class action. Id. Here, the proposed Class easily satisfies each of the prerequisites of N.Y. C.P.L.R. 901 and the factors of N.Y. C.P.L.R. 902 support conditional certification.7 A. The Numerosity Requirement Is Satisfied At commencement of the Action, Verizon had approximately 2.86 billion shares of common stock outstanding. It would have been difficult, if not impossible, to join all Verizon shareholders before this Court. Accordingly, Plaintiff satisfies 901(a)(1)’s numerosity requirement. City of New York v. Maul, 59 A.D.3d 187, 189–90, 873 N.Y.S.2d 540, 543 (1st Dep’t 2009), aff’d, 14 N.Y.3d 499, 929 N.E.2d 366 (2010) (numerosity satisfied where there were at least 150 class members); Dugan v. London Terrace Gardens, L.P., No. 603468/2009, 2013 N.Y. Misc. LEXIS 4017, at *25 (Sup. Ct. N.Y. Cnty. Sept. 10, 2013) (numerosity satisfied where there were at least 558 class members). 7 As part of the Settlement here, the parties have agreed to the certification of a non-opt out Settlement Class defined as: [A]ny and all persons or entities who held shares of Verizon common stock, either of record or beneficially, at any time between and including March 1, 2013, through and including February 21, 2014, including any and all of their respective successors in interest, predecessors, representatives, trustees, executors, administrators, heirs, assigns or transferees, immediate and remote, and any person or entity acting for or on behalf of, or claiming under any of them, and each of them, record and beneficial holders of common stock of the Company, but excluding Defendants in the Action, their immediate families, and their respective affiliates. - 11 - B. The Commonality Requirement Is Satisfied The commonality requirement is satisfied where there are factual or legal issues common to all or a substantial portion of the class, and the common issues “predominate” over any questions affecting individual members. Pludeman v. N. Leasing Sys., Inc., 74 A.D.3d 420, 422– 23, 904 N.Y.S.2d 372, 376-77 (1st Dep’t 2010). “[T]he fact that questions peculiar to each individual may remain after resolution of the common questions is not fatal to the class action.” Maul, 14 N.Y.3d at 514, 929 N.E.2d at 376 (internal quotation marks omitted). Here, issues common to the Class include, inter alia, whether Defendants, through the conduct complained of in the Action, violated their fiduciary duties owed to the Class. See Brandon v. Chefetz, 106 A.D.2d 162, 166, 485 N.Y.S.2d 55, 58 (1st Dep’t 1985) (affirming lower court’s finding of commonality because of “[t]he existence of sufficient common questions of law and fact . . . based upon a finding that [defendants’] breaches of fiduciary duty were the prevalent issue in the case”). Therefore, Plaintiff’s claims meet the commonality requirement. C. The Typicality Requirement Is Satisfied The typicality requirement is met when the claims of plaintiff and other class members derive from the same course of conduct and are based on the same legal theory. Pludeman, 74 A.D.3d at 423, 904 N.Y.S.2d at 377 (quoting Friar v. Vanguard Holding Corp., 78 A.D.2d 83, 99 (2d Dep’t 1980)). “Typicality does not require identity of issues and the typicality requirement is met even if the claims asserted by class members differ from those asserted by other class members.” Id. (citing Pruitt v. Rockefeller Ctr. Props., Inc., 167 A.D.2d 14, 22, 574 N.Y.S.2d 672, 676-77 (1st Dep’t 1991)). Here, the typicality requirement is satisfied by Plaintiff because the claims of all Class members she seeks to represent derive from the same legal theories (i.e.,breaches of fiduciary - 12 - duties) and the same set of operative facts (i.e., facts surrounding the Transaction). Thus, Plaintiff’s claims are typical of the Class. D. The Adequacy Requirement Is Satisfied “The three essential factors to consider in determining adequacy of representation are potential conflicts of interests between the representative and the class members, personal characteristics of the proposed class representative . . . , and the quality of the class counsel.” Globe Surgical Supply v. GEICO Ins. Co., 59 A.D.3d 129, 144, 871 N.Y.S.2d 263, 274 (2d Dep’t 2008). Plaintiff easily satisfies the three components of the “adequacy” test. 1. Relationship Between Interests of Class Representative and Other Class Members “So long as they have a sufficient interest in the outcome of the litigation and have no conflict with the interests of the class, class representatives can adequately represent the class.” Michels v. Phoenix Home Life Mut. Ins. Co., No. 5318-95, 1997 N.Y. Misc. LEXIS 171, at *33 (Sup. Ct. Albany Cnty. Jan. 3, 1997) (citing Pruitt, 167 A.D.2d at 24, 574 N.Y.S.2d at 678). In this case, Plaintiff’s interests are fully aligned with those of the proposed Settlement Class she seeks to represent and no conflicts between Plaintiff and the Class have been posited. The Supplemental Disclosures and the Board’s prospective actions are also the same for all members of the proposed Class and vindication of Plaintiff’s claims advances the interests of the Class as a whole. Accordingly, no conflict exists between Plaintiff and the Class. 2. The Ability of the Representatives to Assist Counsel Plaintiff retained experienced counsel and maintained an interest in prosecuting the actions. See infra Part V.D.3. As such, Plaintiff is clearly able to assist her attorneys in the litigation. See, e.g., Michels, 1997 N.Y. Misc. LEXIS 171, at *32–33. - 13 - 3. Qualificati