You are on page 1of 32

Case 1:11-cv-02279-CM Document 117

Filed 11/05/13 Page 1 of 32

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

IN RE ADVANCED BATTERY TECHNOLOGIES, INC. SECURITIES LITIGATION

) ) ) ) ) )

Consolidated Civil Action No. 11 Civ. 2279 (CM)

PLAINTIFFS’ MEMORANDUM OF LAW IN SUPPORT OF MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT AND CERTIFICATION OF SETTLEMENT CLASS

POMERANTZ GROSSMAN HUFFORD DAHLSTROM & GROSS LLP Marc I. Gross Murielle J. Steven Walsh 600 Third Avenue New York, NY 10016 Tel: (212) 661-1100 Fax: (212) 661-8665 migross@pomaw.com mjsteven@pomlaw.com Lead Counsel and Proposed Lead Class Counsel

Case 1:11-cv-02279-CM Document 117

Filed 11/05/13 Page 2 of 32

TABLE OF CONTENTS Page TABLE OF AUTHORITIES ...................................................................................................... iv I. II. INTRODUCTION ............................................................................................................1 SUMMARY OF THE LITIGATION AND SETTLEMENT ...........................................2 A. B. C. The Litigation........................................................................................................2 Settlement Discussions .........................................................................................4 Summary of Key Terms of The Proposed Settlement and Proposed Schedule of Events ................................................................................................4 1. 2. Relief Available to Settlement Class Members ........................................4 Class Notice and Settlement Administration ............................................6 a. b. c. 3. 4. 5. III. Notice ............................................................................................6 Administration ..............................................................................7 Costs of Notice and Administration..............................................8

Opt-Out and Exclusionary Provisions ......................................................8 Release Provisions ....................................................................................9 Reimbursement Award for Attorneys’ Expenses and Compensatory Award for the Lead Plaintiff .............................................9

PRELIMINARY APPROVAL OF THE PROPOSED SETTLEMENT IS APPROPRIATE. ...............................................................................................................9 A. The Settlement of a Class Action Is Favored and Should Be Preliminarily Approved If It Falls Within the Range of Reasonableness. ....................................................................................................9 The Proposed Settlement Negotiated By Arms-Length Negotiations Between the Parties Enjoys a Presumption of Fairness. ..............................................................................................................11 The Settlement Benefit Falls Within the Range of Possible Recovery. ............................................................................................................12

B.

C.

ii

Case 1:11-cv-02279-CM Document 117

Filed 11/05/13 Page 3 of 32

1. 2. 3. 4. 5. 6. IV.

The Complexity, Expense and Likely Duration of the Litigation .................................................................................................13 Collectability and Ability of the Defendants to Withstand a Greater Judgment ....................................................................................14 Stage of Proceedings and Amount of Discovery Completed..................15 The Risks of Establishing Liability and Damages ..................................16 The Risks of Maintaining the Class Action Through Trial.....................17 Reasonableness of the Settlement Fund in Light of the Best Possible Recovery ...................................................................................17

THE PROPOSED SETTLEMENT CLASS SHOULD BE CERTIFIED FOR SETTLEMENT PURPOSES. ...............................................................................19 A. The Proposed Settlement Class Meets The Requirements Of Rule 23(a) And 23(b)(3). .............................................................................................19

V.

THE COURT SHOULD APPROVE THE PROPOSED FORM AND METHOD OF CLASS NOTICE. ...................................................................................22 A. B. Notice By Direct Mail and Posting Online is Sufficient When a Large, Nationwide Class is Present. ...................................................................22 The Proposed Form of Notice Adequately Informs Settlement Class Members of Their Rights in This Litigation. ............................................23

VI.

CONCLUSION ...............................................................................................................24

iii

Case 1:11-cv-02279-CM Document 117

Filed 11/05/13 Page 4 of 32

TABLE OF AUTHORITIES CASES Page(s) Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (1997) .......................................................................................................... 19, 20 Aponte v. Comprehensive Health Mgmt., Inc., No. 10 CIV. 4825 JLC, 2013 WL 1364147 (S.D.N.Y. Apr. 2, 2013)....................................................................... 9, 11 Aramburu v. Healthcare Fin. Services, Inc., No. 02-CV-6535MDG, 2009 WL 1086938 (E.D.N.Y. Apr. 22, 2009) ........................................................................ 14 Boyd v. Bechtel Corp., 485 F. Supp. 610 (N.D. Cal. 1979) ......................................................................................... 18 Carson v. Am. Brands, Inc., 450 U.S. 79 (1981) .................................................................................................................. 10 China Tire Holdings Ltd. v. Goodyear Tire & Rubber Co., 91 F. Supp. 2d 1106 (N.D. Ohio 2000) ................................................................................... 17 City of Detroit v. Grinnell Corp., 495 F.2d 448 (2d Cir. 1974).................................................................................................... 12 Clark v. Ecolab Inc., No. 07 Civ. 8623, 2010 WL 1948198 (S.D.N.Y. May 11, 2010) ........................................................................ 11 Cordes & Co. Fin. Servs., Inc. v. A.G. Edwards & Sons, Inc., 502 F.3d 91 (2d Cir. 2007)...................................................................................................... 22 Cutler v. Perales, 128 F.R.D. 39 (S.D.N.Y. 1989) .............................................................................................. 20 D'Amato v. Deutsche Bank, 236 F.3d 78 (2d Cir. 2001)...................................................................................................... 12 Holden v. Burlington N., Inc., 665 F. Supp. 1398 (D. Minn. 1987) ........................................................................................ 18 In re Am. Bank Note Holographics, Inc. Sec. Litig., 127 F. Supp. 2d 418 (S.D.N.Y. 2001)....................................................................................... 5 In re AT & T Mobility Wireless Data Servs. Sales Tax Litig., 789 F. Supp. 2d 935 (N.D. Ill. 2011) ........................................................................................ 7

iv

Case 1:11-cv-02279-CM Document 117

Filed 11/05/13 Page 5 of 32

In re China Sunergy Sec. Litig., No. 07 Civ. 7895 (DAB), 2011 WL 1899715 (S.D.N.Y. May 13, 2011) .................................................................. 13, 17 In re Domestic Air Transp. Antitrust Litig., 148 F.R.D. 297 (N.D. Ga. 1993) ............................................................................................. 14 In re EVCI Career Colleges Holding Corp. Sec. Litig., No. 05 CIV 10240(CM), 2007 WL 2230177 (S.D.N.Y. Jul. 27, 2007) .......................................................................... 10 In re Flag Telecom Holdings, Ltd. Sec. Litig., 574 F.3d 29 (2d Cir. 2009)...................................................................................................... 20 In re Genta Sec. Litig., No. 04-2123, 2008 WL 2229843 (D.N.J. May 28, 2008) ............................................................................. 16 In re Gilat Satellite Networks, Ltd., No. CV-02-1510 CPS, 2007 WL 1191048 (E.D.N.Y. Apr. 19, 2007) .......................................................................... 5 In re Global Crossing Securities and ERISA Litigation, 225 F.R.D. 436 (S.D.N.Y. 2004) ........................................................................................ 6, 20 In re Merrill Lynch & Co., Inc. Research Reports Sec. Litig., No. 02, MDL 1484JFK, 2007 WL 4526593 (S.D.N.Y. Dec. 20, 2007) .......................................................................... 6 In re Mutual Funds Investment Litig., MDL No. 1586, 2010 WL 2342413 (D. Md. May 19, 2010) .............................................................................. 7 In re Oxford Health Plans, Inc., 191 F.R.D. 369 (S.D.N.Y. 2000) ............................................................................................ 20 In re Prudential Ins. Co. of Am. Sales Practices Litig., 962 F. Supp. 450 (D.N.J. 1997), ............................................................................................. 14 In re Salomon Analyst Metromedia Litig., 544 F.3d 474 (2d Cir. 2008).................................................................................................... 21 In re Vivendi Universal, S.A., 242 F.R.D. 76 (S.D.N.Y. 2007) .............................................................................................. 20 Louie v. Kaiser Found. Health Plan, Inc., No. 08cv0795 IEG RBB, 2008 WL 4473183 (S.D. Cal. Oct. 6, 2008) .................................... 5 Maley v. Del Global Tech. Corp., 186 F. Supp. 2d 358 (S.D.N.Y. 2002)............................................................................... 14, 18 Mangone v. First USA Bank, 206 F.R.D. 222 (S.D. Ill. 2001) .............................................................................................. 23

v

Case 1:11-cv-02279-CM Document 117

Filed 11/05/13 Page 6 of 32

Marisol A. v. Giuliani, 126 F.3d 372 (2d Cir. 1997).................................................................................................... 19 Menkes v. Stolt-Nielsen S.A., 270 F.R.D. 80 (D. Conn. 2010)......................................................................................... 19, 22 Merck-Medco Managed Care, LLC, 504 F.3d 229 (2d Cir. 2007).................................................................................................... 19 Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306 (1950) .............................................................................................................. 6, 7 Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985) ................................................................................................................ 22 Robidoux v. Celani, 987 F.2d 931 (2d Cir. 1993).................................................................................................... 20 Schwartz v. Novo Industri A/S, 119 F.R.D. 359 (S.D.N.Y. 1988) ............................................................................................ 13 Slayton v. Am. Express Co., 604 F.3d 758 (2d Cir. 2010).................................................................................................... 16 Soberal-Perez v. Heckler, 717 F.2d 36 (2d Cir. 1983)........................................................................................................ 7 Spann v. AOL Time Warner, Inc., No. 02 Civ. 8238 (DLC), 2005 WL 1330937 (S.D.N.Y. Jun. 7, 2005) ........................................................................... 10 Thompson v. Metro. Life Ins. Co., 216 F.R.D. 55 (S.D.N.Y. 2003) .............................................................................................. 12 Torres v. Gristede's Operating Corp., No. 04-CV-3316 (PAC), 2010 WL 5507892 (S.D.N.Y. Dec. 21, 2010) ........................................................................ 11 Wal-Mart Stores, Inc. v. Visa U.S.A. Inc., 396 F.3d 96 (2d Cir. 2005)........................................................................................................ 9 Weinberger v. Kendrick, 698 F.2d 61 (2d Cir. 1982)...................................................................................................... 19 STATUTES 15 U.S.C. § 78j(b) ........................................................................................................................... 2 15 U.S.C. § 78t(a) ........................................................................................................................... 2 15 U.S.C. § 78u-4(a)(7) ................................................................................................................ 24 vi

Case 1:11-cv-02279-CM Document 117

Filed 11/05/13 Page 7 of 32

RULES Fed. R. Civ. P. 23(a) .............................................................................................................. passim Fed. R. Civ. P. 23(b) .............................................................................................................. passim Fed. R. Civ. P. 23(c) ..................................................................................................................... 23 Fed. R. Civ. P. 23(e) ..................................................................................................................... 22 Fed. R. Civ. P. 23(g) ..................................................................................................................... 21 REGULATIONS 17 C.F.R. § 240.10b-5 ..................................................................................................................... 2 OTHER AUTHORITIES Enforcing and Collecting Money Judgments in China from A U.S. Judgment Creditor's Perspective, 36 Geo. Wash. Int'l L. Rev. 757 (2004) .................................................... 5 Manual for Complex Litigation (4th ed. 2013) ...................................................................... passim Newberg on Class Actions (4th ed. 2002).............................................................................. passim The Problem of Selective or Sporadic Recognition: A New Economic Rationale for the Law of Foreign Country Judgments, 10 Chi. J. Int'l L. 505 (2010) .................................... 5

vii

Case 1:11-cv-02279-CM Document 117

Filed 11/05/13 Page 8 of 32

Lead Plaintiff, individually and on behalf of himself and all others similarly situated respectfully submits this memorandum in support of Plaintiffs’ Motion seeking: (i) preliminary approval of the proposed Settlement (the “Settlement”); (ii) certification of the Settlement Class; (iii) approval of the Notice to the Settlement Class and method for giving notice; and (iv) setting of a date for a Settlement Hearing and deadlines for disseminating the Notices, filing Settlement Class Member objections, filing opt-out notices, and filing Lead Counsel’s application for reimbursement of attorneys’ expenses.1 I. INTRODUCTION Lead Plaintiff, Advanced Battery Technologies, Inc. (“ABAT” or the “Company”), Zhiguo Fu, and Guohua Wan (“ABAT Defendants”) (collectively, with Lead Plaintiff, the “Settling Parties”) have reached an agreement to settle this case (the “Litigation”) regarding the ABAT Defendants’ alleged violations of the Securities Exchange Act (the “Exchange Act”). The terms of the settlement are contained in the Stipulation of Settlement (the “Stipulation”) attached as Appendix 1 hereto (“App. 1”). Lead Plaintiff seeks entry of an order:   Granting preliminary approval of the Stipulation; Certifying a Settlement Class for settlement purposes only, appointing Lead Plaintiff as the Class Representative, and certifying Pomerantz Grossman Hufford Dahlstrom & Gross LLP as Lead Counsel for the Settlement Class; Approving the parties’ proposed form and method of giving Settlement Class Members notice of the action and proposed Settlement; Directing that notice be given to Settlement Class Members in the proposed form and manner; and Setting a hearing on whether the Court should grant final approval of the Settlement, dismiss claims against the ABAT Defendants, approve the

  

1

All capitalized terms used herein have the meanings set forth and defined in the Stipulation of Settlement.

Case 1:11-cv-02279-CM Document 117

Filed 11/05/13 Page 9 of 32

release of claims against the ABAT Defendants, enter judgment, award attorneys’ expenses to Lead Counsel, and approve a compensatory award to Lead Plaintiff. Plaintiffs propose a Settlement Hearing date of no less than 100 days from preliminary approval in order to afford sufficient time for notice to class members and for class members to make determinations of whether to participate. The Settlement provides fair and reasonable benefits to the Settlement Class. As consideration for the Stipulation, the ABAT Defendants agree to pay $275,000 in cash (the “Settlement Amount”) into an interest-bearing escrow account for distribution to Settlement Class Members in settlement of all active and potential claims against the ABAT Defendants arising from their alleged conduct underlying the Litigation. The proposed Settlement falls within the range of reasonable settlement outcomes given the high likelihood that any judgment would not be collectible. The Settlement was negotiated by lawyers experienced in complex litigation through exhaustive arms-length negotiations and mediation. For these reasons, the Settlement enjoys a presumption of fairness and the attached proposed order (the “Preliminary Approval Order”) should be entered by this Court (App. 1, Exhibit A), and notice should be provided to Class Members (App. 1, Exhibits A-1 and A-2). II. SUMMARY OF THE LITIGATION AND SETTLEMENT A. The Litigation

On April 1, 2011 and thereafter, several securities class action complaints were filed in the United States District Court for the Southern District of New York against the ABAT Defendants and others. (See Dkt. No. 1; Burns v. Adv. Battery Techs., Inc., No. 11 Civ. 2354CM; Cohen v. Adv. Battery Techs., Inc., No. 11 Civ. 2849-CM (the “Cohen Action”); and Connors v. Advanced Battery Techs., Inc., No. 11 Civ. 3098-CM.) The complaints asserted claims under Sections 10(b) and 20(a) of the Exchange Act, 15 U.S.C. §§ 78j(b), and 78t(a), and Rule 10b-5 promulgated thereunder by the Securities and Exchange Commission, 17 C.F.R. 2

Case 1:11-cv-02279-CM Document 117

Filed 11/05/13 Page 10 of 32

§ 240.10b-5, alleging that the ABAT Defendants, among others, made material misstatements and omissions concerning the Company’s financial results, and specifically, that the Company reported inflated gross profits, net income, and profit margins, and further, misrepresented the related party nature of certain business transactions. (See, e.g., Dkt. No. 1, ¶¶ 1-2, 22-36; Cohen Action, Dkt. No. 1, ¶¶ 1-5, 7, 18-46.) On September 9, 2011, the Court consolidated the related securities class actions, appointed Mr. Ruble Sanderson as Lead Plaintiff and approved Lead Plaintiff’s choice of Pomerantz Grossman Hufford Dahlstrom & Gross LLP as Lead Counsel (“Lead Counsel”). (Dkt. No. 50.) On September 29, 2011, Lead Plaintiff filed the Corrected First Amended Consolidated Class Action Complaint (“First Amended Complaint”), naming as defendants the ABAT Defendants, as well as ABAT’s outside auditors, Bagell, Josephs, Levine & Co., LLC and Friedman LLP (collectively, “Bagell Josephs”), and EFP Rotenberg, LLP (“EFP”) (collectively, the “Auditor Defendants”). (Dkt. No. 52.) By Decision and Order dated August 29, 2012, the Court denied the ABAT Defendants’ motion to dismiss the First Amended Complaint, but granted the motions to dismiss filed by the Auditor Defendants. (Dkt. No. 90.) On September 25, 2012, Lead Plaintiff filed a Motion for Leave to File a Second Amended Consolidated Class Action Complaint (Dkt. No. 96), which the Auditor Defendants opposed. (Dkt Nos. 100 and 101.)2 On September 18, 2012, Lead Plaintiff filed a Motion for Class Certification. (Dkt. No. 94.) On October 5, 2012, the ABAT Defendants filed an Answer to the First Amended Complaint. (Dkt. No. 98.)

2

The Court denied the motion to amend.

3

Case 1:11-cv-02279-CM Document 117

Filed 11/05/13 Page 11 of 32

Thereafter, the Settling Parties commenced settlement negotiations, ultimately resulting in the Stipulation presently before the Court. On October 11, 2012, the Court entered a stay of all proceedings. (Dkt. No. 99.) B. Settlement Discussions

Counsel for Plaintiffs and the ABAT Defendants have engaged in extensive negotiations concerning the possible resolution of this Litigation. Such negotiations included extensive correspondence, an exchange of information relevant to the Settlement, telephonic negotiations and in-person negotiation sessions. These negotiations included discussions not only about the merits of the claims, but also about the Company’s financial condition and assets. After difficult negotiations, the Settling Parties reached an agreement to settle this lawsuit. In the course of settlement discussions, the ABAT Defendants produced documents reflecting minimal insurance coverage applied to Lead Plaintiff’s claims and that their U.S. assets are not significant enough to withstand a multimillion dollar judgment, that the majority of the Company’s assets are located in the People’s Republic of China (“China”) and that recovery of any judgment against them is unlikely. C. Summary of Key Terms of The Proposed Settlement and Proposed Schedule of Events 1. Relief Available to Settlement Class Members

The Settlement calls for a cash payment by the ABAT Defendants of $275,000 (the “Settlement Amount”). Lead Plaintiff submits that this is a fair and reasonable result for Settlement Class Members, in consideration of the ABAT Defendants’ limited insurance coverage applicable to Lead Plaintiff’s claims and the high risk that any judgment against the ABAT Defendants will be uncollectible. The ABAT Defendants have provided Lead Counsel with documents reflecting that their U.S. assets are not sufficient to withstand a multimillion 4

Case 1:11-cv-02279-CM Document 117

Filed 11/05/13 Page 12 of 32

dollar judgment, and the majority of their assets are in China. Chinese courts do not enforce U.S. judgments against China-based defendants, such as the ABAT Defendants.3 In addition, the Plan of Allocation, which is set forth in the proposed Notice of Pendency and Proposed Settlement of Class Action (“Long Notice”), substantially in the form attached to the Stipulation as Exhibit A-2, fully comports with the criteria set forth in case law governing the approval of such allocations. The proposed Plan of Allocation provides formulas for calculating the recognized claim of each Settlement Class member, based on each such person’s purchases and sales of ABAT common stock during the Settlement Class Period. Even at the final approval stage, “[a]n allocation formula need only have a reasonable, rational basis [to warrant approval], particularly if recommended by ‘experienced and competent’ class counsel.” In re Am. Bank Note Holographics, Inc. Sec. Litig., 127 F. Supp. 2d 418, 429-30 (S.D.N.Y. 2001) (citation omitted). Significantly, nothing about the Settlement or Plan of Allocation gives preferential treatment to Lead Plaintiff. See Louie v. Kaiser Found. Health Plan, Inc., No. 08cv0795 IEG RBB, 2008 WL 4473183, at *6-7 (S.D. Cal. Oct. 6, 2008). Furthermore, the minimum claim amount set in the Plan of Allocation—$100—is necessary in order to “save the settlement fund from being depleted by the administrative costs associated with claims unlikely to exceed those costs….” In re Gilat Satellite Networks, Ltd., No.

3

See Weil, Gotshal & Manges, LLP, Globalizing the Battleground Between U.S. and Chinese Companies, at 2 (Dec. 2011), available at, http://www.weil.com/files/upload/Weil_Asia_Alert_December_2011.pdf (“[A]ttempting to enforce a U.S. judgment in China has proven futile.”); Yaad Rotem, The Problem of Selective or Sporadic Recognition: A New Economic Rationale for the Law of Foreign Country Judgments , 10 Chi. J. Int’l L. 505, 508 (2010) (“China’s laws formally entertain the possibility of recognizing foreign judgments, but in reality foreign judgments have rarely been recognized by its courts.”); Arthur Anyuan Yuan, Enforcing and Collecting Money Judgments in China from A U.S. Judgment Creditor's Perspective, 36 Geo. Wash. Int'l L. Rev. 757, 758 (2004) (getting U.S. judgments enforced in China has been “notoriously difficult in recent years” and “a large percentage of judgments, both domestic and foreign, are never enforced.”). 5

Case 1:11-cv-02279-CM Document 117

Filed 11/05/13 Page 13 of 32

CV-02-1510 CPS, 2007 WL 1191048, at *9 (E.D.N.Y. Apr. 19, 2007); see In re Merrill Lynch & Co., Inc. Research Reports Sec. Litig., No. 02 MDL 1484JFK, 2007 WL 4526593, at *12 (S.D.N.Y. Dec. 20, 2007) (approving a $50 minimum cut-off amount “in order to foster the efficient administration of the settlement”); In re Global Crossing Securities and ERISA Litigation, 225 F.R.D. 436, 463 (S.D.N.Y. 2004) (“Class counsel are entitled to use their discretion to conclude that, at some point, the need to avoid excessive expense to the class as a whole outweighs the minimal loss to the claimants who are not receiving their de minimis amounts of relief.”). 2. Class Notice and Settlement Administration a. Notice

Lead Plaintiff recommends that notice to Settlement Class Members occur within twentyfive days of the entry of the preliminary approval order. A third party claims administrator, Berdon LLP (“Berdon” or the “Claims Administrator”), will provide individual notice via mail, substantially in the form attached to the Stipulation as Exhibit A-1 (the “Post Card Notice”), to each Settlement Class Member identified by records maintained by the Company or its transfer agent. Given the small size of the Settlement, Lead Counsel has sought to minimize notice costs by utilizing a Post Card Notice, which provides the basic settlement information and instructions for class members to access the detailed Long Notice on the internet or request that a Long Notice be mailed to them. A Summary Notice, substantially in the form attached to the Stipulation as Exhibit A-3, will also be published on two national Internet business newswires. Lead Plaintiff submits that the Notices warrant Court approval because they are “reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.” Mullane v. Cent.

6

Case 1:11-cv-02279-CM Document 117

Filed 11/05/13 Page 14 of 32

Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950) (citations omitted); see also Soberal-Perez v. Heckler, 717 F.2d 36, 43 (2d Cir. 1983). Moreover, the use of a combination of a mailed post card directing class members to a more detailed online notice has been approved by courts. See, e.g., In re Mutual Funds Investment Litig., MDL No. 1586, 2010 WL 2342413, at *6-7 (D. Md. May 19, 2010); In re AT & T Mobility Wireless Data Servs. Sales Tax Litig., 789 F. Supp. 2d 935, 973 (N.D. Ill. 2011) (holding that postcard notice was “more than sufficient” despite not providing detailed information about class members’ options and deadlines because website and claims administrator via phone did). As noted above, the proposed Post Card Notice, which will be sent by first class mail, and the Long Notice, while will be posted online, describe in plain English the terms of the Settlement, the considerations that led Lead Counsel to conclude that the Settlement is fair and adequate, and the maximum attorneys’ expenses that are being sought. The Long Notice sets forth the procedure for objecting to or being excluded from the Settlement as well as the date and place of the Settlement Hearing. This proposed notice will fairly apprise Settlement Class Members of the Settlement and their options with respect thereto, and fully satisfies due process requirements. b. Administration

Berdon will administer distribution of benefits pursuant to the Stipulation. Within five (5) days after the Court enters the attached Preliminary Approval Order (App. 1, Exhibit A), and after receipt of wiring instructions, the ABAT Defendants shall pay or cause to be paid by wire transfer the Settlement Amount to an interest-bearing escrow account at Huntington National Bank (the “Escrow Account”), to be controlled by said bank as the Escrow Agent for the benefit

7

Case 1:11-cv-02279-CM Document 117

Filed 11/05/13 Page 15 of 32

of the Settlement Class, with all interest to accrue for the benefit of the Settlement Class. Complete wire transfer instructions shall be provided to the ABAT Defendants’ counsel. Until such time as the Settlement and Order and Final Judgment becomes Final, the Settlement Amount may be invested in instruments backed by the full faith and credit of the government of the United States of America, including, but not limited to, those issued by the Certificate of Deposit Account Registry Service or the Governmental National Mortgage Association. The Escrow Account will be a “qualified settlement fund.” Distribution to the class will not be made until further Order of the Court. The Settling Parties have agreed that the distribution will not occur earlier than: (1) the Effective Date (described below) occurs; and (2) if the claims against the Auditor Defendants are dismissed, then the time for appeal has expired or any appeal has been decided. (App. 1, Exhibit A ¶ 5.3.) c. Costs of Notice and Administration

Within five (5) business days after deposit in the Escrow Account of the Settlement Amount, the Escrow Agent may transfer up to $50,000 from the Escrow Account to an account (the “Notice and Administration Fund”) in order to pay reasonable and necessary notice and administration costs. No other disbursements from the Escrow Account will occur until the Judgment becomes Final absent approval from the Court. Under no circumstances shall Lead Plaintiff or Lead Counsel have any responsibility for such costs. 3. Opt-Out and Exclusionary Provisions

Any Settlement Class Member who wishes to object to the fairness of the Stipulation must, by the objection deadline, file any such objection with the Court, and provide copies of the objection to Lead Counsel, Defendants’ Counsel, and the Court. Any Settlement Class Member who does not file a timely written objection to the Stipulation shall be foreclosed from seeking any adjudication or review of the Stipulation by appeal or otherwise. 8

Case 1:11-cv-02279-CM Document 117

Filed 11/05/13 Page 16 of 32

Any Settlement Class Member who wishes to be excluded as a Settlement Class Member may submit a written exclusion request to the Claims Administrator, postmarked no later than the opt-out deadline, with copies of the request for exclusion to Lead Counsel, Defendants’ Counsel, and the Claims Administrator. 4. Release Provisions

Any Settlement Class Member who does not timely request exclusion shall be deemed to have released and discharged the Released Persons from the Released Claims as defined in the Stipulation, and expressly waived and relinquished the Released Claims. 5. Reimbursement Award for Attorneys’ Expenses and Compensatory Award for the Lead Plaintiff

Lead Counsel is not seeking any attorneys’ fee due to the small settlement amount, and will only seek a portion of their expenses that were reasonably incurred in prosecuting the action, in an amount not to exceed $115,000. In addition, Lead Counsel will seek a compensatory award for the Lead Plaintiff, not to exceed $3,000, to compensate him for time and effort he expended on behalf of the putative class, including travel and appearing for his deposition in New York. III. PRELIMINARY APPROVAL OF THE PROPOSED SETTLEMENT IS APPROPRIATE. A. The Settlement of a Class Action Is Favored and Should Be Preliminarily Approved If It Falls Within the Range of Reasonableness.

The law favors settlement, particularly in class actions and other complex cases where substantial resources can be conserved by avoiding the time, cost, and rigor of prolonged litigation. Thus, the procedural and substantive fairness of a settlement should be examined “in light of the ‘strong judicial policy in favor of settlement[]’ of class action suits.” Aponte v. Comprehensive Health Mgmt., Inc., No. 10 CIV. 4825 JLC, 2013 WL 1364147, at *2 (S.D.N.Y. Apr. 2, 2013) (quoting Wal-Mart Stores, Inc. v. Visa U.S.A. Inc., 396 F.3d 96, 116 (2d Cir. 9

Case 1:11-cv-02279-CM Document 117

Filed 11/05/13 Page 17 of 32

2005)) (brackets in original); see also Spann v. AOL Time Warner, Inc., No. 02 Civ. 8238(DLC), 2005 WL 1330937, at *6 (S.D.N.Y. Jun. 7, 2005) (“[P]ublic policy favors settlement, especially in the case of class actions.”); Newberg on Class Actions § 11.41 (4th ed. 2002) (“The compromise of complex litigation is encouraged by the courts and favored by public policy.”). Due to the presumption in favor of settlement, and “[a]bsent fraud or collusion, courts should be hesitant to substitute [their] judgment for that of the parties who negotiated the settlement.” In re EVCI Career Colleges Holding Corp. Sec. Litig., No. 05 CIV 10240(CM), 2007 WL 2230177, at *4 (S.D.N.Y. Jul. 27, 2007). More explicitly, the Supreme Court has cautioned that, in reviewing a proposed settlement, courts should “not decide the merits of the case or resolve unsettled legal questions.” Carson v. Am. Brands, Inc., 450 U.S. 79, 88 n.14 (1981). The typical process for court approval of class action settlements is as follows: 1. 2. 3. Preliminary approval of the proposed settlement at an informal hearing; Dissemination of mailed and/or published notice of the settlement and fairness hearing to all affected Class members; and A “formal fairness hearing,” or final approval hearing, at which Class members may be heard regarding the settlement, and at which evidence and argument concerning the fairness, adequacy, and reasonableness of the settlement is presented.

See Manual for Complex Litigation, §§ 21.632-21.634 (4th ed. 2013). By this motion, Lead Plaintiff asks that the Court take the first step in the settlement approval process and grant preliminary approval. Lead Plaintiff further requests that the Court provisionally certify the proposed Settlement Class, for settlement purposes only. Provisional class certification is appropriate at the preliminary approval stage where, as here, the proposed Settlement Class has not previously been certified. The practical purpose of provisional class certification is to facilitate dissemination of Notice to the Settlement Class of the terms of the

10

Case 1:11-cv-02279-CM Document 117

Filed 11/05/13 Page 18 of 32

proposed settlement and the date and time of the final approval hearing. See Newberg, supra, § 11.27. B. The Proposed Settlement Negotiated By Arms-Length Negotiations Between the Parties Enjoys a Presumption of Fairness.

‘“In evaluating the settlement, the Court should keep in mind the unique ability of class and defense counsel to assess the potential risks and rewards of litigation; a presumption of fairness, adequacy and reasonableness may attach to a class settlement reached in arms-length negotiations between experienced, capable counsel after meaningful discovery.’” Clark v. Ecolab Inc., No. 07 Civ. 8623, 2010 WL 1948198, at *4 (S.D.N.Y. May 11, 2010) (citation omitted). Moreover, courts routinely “give[] weight to the parties’ judgment that the settlement is fair and reasonable.” Aponte, 2013 WL 1364147, at *2 (citing Torres v. Gristede’s Operating Corp., No. 04-CV-3316 (PAC), 2010 WL 5507892, at *3 (S.D.N.Y. Dec. 21, 2010)); Clark, 2010 WL 1948198, at *4. Here, the Stipulation is presumed fair and falls within the range of possible approval. The settlement was reached through arm’s length negotiation over an extended period. There was no collusion between the parties in reaching the Settlement. Throughout the negotiations, the parties extensively discussed the merits of the claims and defenses and the relief available to the Settlement Class. After reaching a settlement agreement in principle, the parties turned their attention to documenting the Settlement and engaging in due diligence of the ABAT Defendants’ assets. As explained above, the Settlement is the result of an arm’s length and adversarial negotiation process. As the record demonstrates, all counsel vigorously advocated the interests of their respective clients and devoted a considerable amount of time, effort, and resources to securing the terms of the Settlement. 11

Case 1:11-cv-02279-CM Document 117

Filed 11/05/13 Page 19 of 32

By settling the Litigation at this point, Lead Plaintiff does not admit that the Litigation lacked merit or that the Settlement Class’s ultimate recovery would not have been greater than the Settlement Amount, but instead acknowledges the practical reality that collectability of any judgment against the ABAT Defendants is highly unlikely. In particular, documents produced by the ABAT Defendants indicate that they have minimal insurance coverage applying to Lead Plaintiff’s claims, and that, in all likelihood, any judgment against the ABAT Defendants would be uncollectible because a majority of their assets are outside of the United States. The current settlement affords some recovery to class members, versus no recovery at all even if this case were successfully litigated to judgment. Accordingly, the Settlement here is fair and worthy of preliminary approval. C. The Settlement Benefit Falls Within the Range of Possible Recovery.

When determining whether a settlement is fair, reasonable, and adequate, the Court should consider the following so-called “Grinnell factors:” (1) the complexity, expense and likely duration of the litigation; (2) the reaction of the class to the settlement; (3) the stage of the proceedings and the amount of discovery completed; (4) the risks of establishing liability; (5) the risks of establishing damages; (6) the risks of maintaining the class action through the trial; (7) the ability of the defendants to withstand a greater judgment; (8) the range of reasonableness of the settlement fund in light of the best possible recovery; and (9) the range of reasonableness of the settlement fund to a possible recovery in light of all the attendant risks of litigation. City of Detroit v. Grinnell Corp., 495 F.2d 448, 463 (2d Cir. 1974), abrogated on other grounds by, Goldberger v. Integrated Resources, Inc., 209 F.3d 43, 48 (2d Cir. 2000). “All nine factors need not be satisfied, rather, the court should consider the totality of these factors in light of the particular circumstances.” Thompson v. Metro. Life Ins. Co., 216 F.R.D. 55, 61 (S.D.N.Y. 2003) (citing D’Amato v. Deutsche Bank, 236 F.3d 78, 86 (2d Cir. 2001)). 12

Case 1:11-cv-02279-CM Document 117

Filed 11/05/13 Page 20 of 32

If the Court finds the settlement “within the range of possible approval,” it should then order that the Settlement Class be notified of the Settlement and of a formal fairness hearing to be held on the question of settlement approval. See Manual, supra, § 40.42 (model preliminary approval order). Because this is a preliminary approval stage, factor number two, the reaction of the class to the settlement, is inapplicable at this stage. Here, the Settlement substantially satisfies the test announced by Grinnell. Therefore, the Stipulation warrants preliminary approval. 1. The Complexity, Expense and Likely Duration of the Litigation

The Settlement provides the Settlement Class with fair relief, given the delay and expenses of trial and post-trial proceedings, and the likelihood that any judgment recovered would be uncollectible. Due to the inherent complexity of securities litigation, and particularly the stringent requirements imposed by the Private Securities Litigation Reform Act of 1995 ’s (“PSLRA”) amendments to the Exchange Act, as well as supervening case law developments, a securities class action is an inherently complex and lengthy litigation to prosecute. If the parties did not agree to settle this case, further litigation – particularly a trial – would be risky, lengthy and expensive. For example, the ABAT Defendants and key witnesses are located in China, which would add tremendous complication and cost to pursue discovery. See In re China Sunergy Sec. Litig., No. 07 Civ. 7895 (DAB), 2011 WL 1899715, at *5 (S.D.N.Y. May 13, 2011) (expense and protracted nature of discovery of Chinese defendants favored settlement); see also Schwartz v. Novo Industri A/S, 119 F.R.D. 359, 363 (S.D.N.Y.1988) (weighing the complications of discovery with a foreign defendant in favor of settlement). Moreover, even though the ABAT Defendants have answered the First Amended Complaint, they have asserted fifteen separate affirmative defenses in doing so. (See Dkt. No. 98.) The ABAT Defendants also continue to vigorously deny liability. (Id.) 13

Case 1:11-cv-02279-CM Document 117

Filed 11/05/13 Page 21 of 32

Put simply, were the current proposed Settlement taken off the table, it would all but guarantee a substantial delay in resolving these claims, and the costs necessary to further pursue litigation are likely subsume any recovery by the Settlement Class. 2. Collectability and Ability of the Defendants to Withstand a Greater Judgment

The solvency of the defendants and the likelihood of recovery on a litigated judgment weighs heavily in favor of approving the Settlement. See Aramburu v. Healthcare Fin. Services, Inc., No. 02-CV-6535MDG, 2009 WL 1086938, at *4 (E.D.N.Y. Apr. 22, 2009) (approval favored where “defendant’s ‘dire financial condition,’ [made] ‘obtaining a greater recovery than provided by the [s]ettlement ... difficult”); Maley v. Del Global Tech. Corp., 186 F. Supp. 2d 358, 365 (S.D.N.Y. 2002) (considering contribution of insurance policies to be minimal because the policies would be significantly depleted by defense costs or possibility of carrier disclaiming coverage); In re Prudential Ins. Co. of Am. Sales Practices Litig., 962 F. Supp. 450, 540 (D.N.J. 1997) (finding that evidence that a greater judgment would adversely affect defendant’s credit rating and ability to conduct business weighed in favor of approving settlement), aff'd sub nom, In re Prudential Ins. Co. Am. Sales Practice Litig. Agent Actions, 148 F.3d 283 (3d Cir. 1998); In re Domestic Air Transp. Antitrust Litig., 148 F.R.D. 297, 323-25 (N.D. Ga. 1993) (holding that class does not benefit from securing a jury award greater than the proposed settlement if the class could not collect because the defendant would declare bankruptcy). Lead Counsel has negotiated a fair and reasonable settlement for the Settlement Class in light of documents produced by Defendants reflecting that they have no significant collectible assets in the United States. In particular, Lead Counsel has reviewed (1) the ABAT Defendants’ insurance documents, which indicate that the amount of coverage is extremely limited; and (2)

14

Case 1:11-cv-02279-CM Document 117

Filed 11/05/13 Page 22 of 32

documents provided by the ABAT Defendants reflecting that their assets in the United States are of limited value. This fundamental collectability issue could easily result in no recovery at all. Thus, this factor weighs heavily in favor of approving the Settlement. 3. Stage of Proceedings and Amount of Discovery Completed

At the time the parties agreed to settle the action, the Settling Parties stood on the precipice of a costly and time-consuming class certification and discovery phase. The Court denied the ABAT Defendants’ motion to dismiss on August 29, 2012, and Plaintiffs promptly filed their motion for class certification on September 18, 2012. Discovery of class certification issues immediately ensued and continued until the court stayed the action on October 11, 2012 upon notification that the case had been settled between Plaintiffs and the ABAT Defendants.4 Plaintiffs’ motion to amend their pleadings against the Auditor Defendants, who had been previously dismissed from the case, was denied by the Court. Plaintiffs have filed a notice of appeal. In the event that the Auditor Defendants are ultimately brought back into the case, Plaintiffs may be able to obtain additional recoveries against the Auditor Defendants. The proceedings in this Litigation were sufficiently advanced to provide Plaintiffs with a thorough understanding of the strengths and weaknesses of the Settlement Class’s claims. In particular, Lead Counsel conducted an extensive investigation into the factual underpinnings of the case, including utilizing the services of a private investigator in China who interviewed

4

The ABAT Defendants and Auditor Defendants requested documents and noticed depositions for Lead Plaintiff and other proposed class representatives, and Dr. Jane D. Nettesheim, whose analysis was submitted in support of Lead Plaintiff’s Motion for Class Certification. (See Dkt. No. 95-2.) Lead Plaintiff and Federico Schmid (a potential class representative) responded to the document requests and produced documents, and Lead Plaintiff was deposed on September 13, 2012. 15

Case 1:11-cv-02279-CM Document 117

Filed 11/05/13 Page 23 of 32

ABAT’s customers and former employees, visited certain of ABAT’s production facilities in China, and obtained the Company’s Chinese regulatory filings. Furthermore, as described above, the ABAT Defendant’s motion to dismiss was briefed by the parties and adjudicated by the Court. See, e.g., In re Genta Sec. Litig., No. 04-2123, 2008 WL 2229843, at *2 (D.N.J. May 28, 2008) (“The motion to dismiss resolved many of the issues raised in the Amended Complaint, leaving Lead Plaintiffs and Defendants … with a solid understanding of the strengths and weaknesses of their respective positions.”). As such, the settlement was reached only after Lead Counsel had a thorough understanding of the strengths and vulnerabilities of the Settlement Class’s claims. 4. The Risks of Establishing Liability and Damages

Lead Plaintiff acknowledges that there were substantial risks in prosecuting this Litigation and that further prosecution of this Litigation to trial may have yielded limited or no recovery. “Under the law of this Circuit, to state a claim under Rule 10b-5, a plaintiff must allege that, in connection with the purchase or sale of securities, the defendant made material misstatements or omissions of material fact, with scienter, and that the plaintiff’s reliance on the defendant’s actions caused injury to the plaintiff.” Slayton v. Am. Express Co., 604 F.3d 758, 765 (2d Cir. 2010). The ABAT Defendants argued in their motion to dismiss that Lead Plaintiff failed to establish the type of conscious misbehavior and recklessness implicating scienter. Specifically, the ABAT Defendants submitted documentary evidence to support their argument that one of the transactions challenged in the complaint as an undisclosed related party deal was not, in fact, related. (See Dkt. Nos. 70-24 and 70-25.) The Court refused to consider these documents when deciding the ABAT Defendants’ motion to dismiss; however, it is far from clear that Plaintiffs would have prevailed on this issue at trial. 16

Case 1:11-cv-02279-CM Document 117

Filed 11/05/13 Page 24 of 32

Moreover, the fact that most of the documentary evidence and witnesses are located in China presents significant barriers to discovery, given that it could be impossible to collect discovery from China necessary to prove Lead Plaintiff’s claims. See In re China Sunergy Sec. Litig., 2011 WL 1899715, at *5; see also China Tire Holdings Ltd. v. Goodyear Tire & Rubber Co., 91 F. Supp. 2d 1106, 1111 (N.D. Ohio 2000) (“[D]iscovery by American attorneys in the [People’s Republic of China] may prove to be impossible.”). Thus, while the Court found Plaintiffs’ allegations sufficient to defeat the ABAT Defendants’ motion to dismiss at the pleading stage, and while Plaintiffs continue to believe in the merits of their case, it is far from certain that Plaintiffs would have been able to marshal sufficient evidence to prove their claims at trial. 5. The Risks of Maintaining the Class Action Through Trial

The settlement in principle was reached prior to any decision by the Court on Plaintiffs’ motion for class certification, which is pending. Were the action to proceed, the class would face risks on class certification, including arguments by the ABAT Defendants that ABAT securities did not trade on an efficient market and therefore Plaintiffs are unable to avail themselves of the “fraud on the market” presumption that is necessary to satisfy the 10b -5 reliance element on a class wide basis. Moreover, if a Class were certified over the ABAT Defendants’ objection, the Class would face multiple risks in proving the class-wide nature of the ABAT Defendants’ securities laws violations at trial. Thus, this factor also weighs in favor of approval of the Settlement. 6. Reasonableness of the Settlement Fund in Light of the Best Possible Recovery

The Settlement Stipulation provides for a Settlement Amount of nearly $275,000 to be paid into the Settlement Fund. This is fair and reasonable in light of the Settlement Class 17

Case 1:11-cv-02279-CM Document 117

Filed 11/05/13 Page 25 of 32

Members’ best possible recovery against the ABAT Defendants, which is severely limited by the inability of the ABAT Defendants to pay the judgment. “The ‘best possible’ recovery necessarily assumes Plaintiffs’ success on both liability and damages covering the full Class Period alleged in the Complaint as well as the ability to Defendants to pay the judgment.” Maley, 186 F. Supp. 2d at 365 (finding that the settlement provided maximum available cash in light of the “limited insurance coverage and poor cash position of the Company”) (emphasis added). The settlement amount is sufficient when limited insurance coverage, minimal domestic assets, and significant risk of being unable to collect any judgment against the ABAT Defendants are taken into account. See, e.g., Holden v. Burlington N., Inc., 665 F. Supp. 1398, 1414 (D. Minn. 1987) (‘“In fact there is no reason, at least in theory, why a satisfactory settlement could not amount to a hundredth or even a thousandth part of a single percent of the potential recovery.’”); Boyd v. Bechtel Corp., 485 F. Supp. 610, 618 (N.D. Cal. 1979) (“[S]imply because a settlement may amount to only a fraction of the potential recovery does not in itself render it unfair or inadequate. Compromise is the very nature of settlement.”). Furthermore, as discussed above, the Settlement is reasonable in light of the substantial resources that can be conserved by avoiding the time, cost, rigor, and risk of prolonged litigation. Securities litigation is a complex and evolving area of law requiring the devotion of significant resources. There is a high likelihood that the costs involved in shepherding a securities action like this one through the discovery process, pre-trial motions, and trial will far outweigh – and indeed subsume – any recovery that might be realized by Plaintiffs and the Settlement Class. Moreover, because the ABAT Defendants continue to deny any liability while asserting numerous defenses, the potential for any recovery remains highly uncertain.

18

Case 1:11-cv-02279-CM Document 117

Filed 11/05/13 Page 26 of 32

IV.

THE PROPOSED SETTLEMENT CLASS SHOULD BE CERTIFIED FOR SETTLEMENT PURPOSES. A. The Proposed Settlement Class Meets The Requirements Of Rule 23(a) And 23(b)(3).

The Second Circuit has long acknowledged the propriety of certifying a class solely for settlement purposes. See Weinberger v. Kendrick, 698 F.2d 61, 72-73 (2d Cir. 1982). Before granting preliminary approval of a class action settlement, however, the Court should determine that the proposed Settlement Class is a proper class for settlement purposes. See Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 620 (1997); see also Manual, supra, § 21.632. To certify a class, the Court must determine whether four threshold requirements of Federal Rule 23(a) are met, namely, (1) numerosity, (2) commonality, (3) typicality, and (4) adequacy of representation. Amchem, 521 U.S. at 613. Additionally, the action must be maintainable under Fed. R. Civ. P. 23(b)(1), (2), or (3). Id. at 614. In certifying a Settlement Class, however, the Court is not required to determine whether the action, if tried, would present intractable management problems, “for the proposal is that there be no trial.” Id. at 620; see also Fed. R. Civ. P. 23(b)(3)(D). Here, the proposed Settlement Class meets all of the requirements of Rule 23(a) and satisfies the requirements of Rule 23(b)(3). A class must be “so numerous that joinder of all members is impracticable.” Fed. R. Civ. P. 23 (a)(1). “Joinder is generally presumed to be impracticable when a putative class exceeds 40 members.” Menkes v. Stolt-Nielsen S.A., 270 F.R.D. 80, 90 (D. Conn. 2010) (citing Marisol A. v. Giuliani, 126 F.3d 372, 376 (2d Cir. 1997)). Impracticable does not mean impossible, but “only that the difficulty or inconvenience of joining all members of the class make use of the class action appropriate.” Central States Se. & Sw. Areas Health & Welfare Fund v. Merck-Medco Managed Care, LLC, 504 F.3d 229, 244-45 (2d Cir. 2007). During the Settlement Class Period, approximately 3.4 million shares of ABAT common stock on average were traded on the 19

Case 1:11-cv-02279-CM Document 117

Filed 11/05/13 Page 27 of 32

NASDAQ per week during the time that ABAT was listed on that exchange. Thus, individual joinder is impracticable, and the numerosity requirement is clearly satisfied. The proposed Settlement Class also meets the commonality requirement of Rule 23(a). Commonality is generally easily satisfied, as it is established so long as the plaintiffs can “identify some unifying thread among the [class] members’ claims….” In re Vivendi Universal, S.A., 242 F.R.D. 76, 84 (S.D.N.Y. 2007) (citing Cutler v. Perales, 128 F.R.D. 39, 44 (S.D.N.Y. 1989)). The requirement is met “if there are questions of fact and law which are common to the class.” Fed. R. Civ. P. 23(a)(2). “Securities-fraud cases generally meet Rule 23(a)(2)’s commonality requirement.” In re Global Crossing Sec. & ERISA Litig., 225 F.R.D. 436, 451-52 (S.D.N.Y. 2004) (citation omitted). Securities fraud class actions are ‘“essentially course of conduct cases’ because ‘the nub of plaintiffs’ claims is that material information was withheld from the entire putative class in each action, either by written or oral communication.’” In re Oxford Health Plans, Inc., 191 F.R.D. 369, 374 (S.D.N.Y. 2000) (citation omitted). Plaintiffs also meet Rule 23(a)’s typicality requirement. A plaintiff’s claim is typical if it ‘“arises from the same course of events and each class member makes similar legal arguments to prove the defendant’s liability.’” In re Flag Telecom Holdings, Ltd. Sec. Litig., 574 F.3d 29, 35 (2d Cir. 2009) (citing Robidoux v. Celani, 987 F.2d 931, 936 (2d Cir. 1993)). Like all other Settlement Class members, Lead Plaintiffs were subject to the ABAT Defendants’ alleged false and misleading statements in violation of Sections 10(b) and 20(a) of the Exchange Act. Rule 23 (a)’s last requirement is that the class representative must “fairly and adequately protect the interests of the class.” Fed. R. Civ. P. 23(a)(4). This inquiry focuses “on uncovering ‘conflicts of interest between named parties and the class they seek to represent.’” In re Flag Telecom Holdings, 574 F.3d at 35 (quoting Amchem Prods., 521 U.S. at 625). Lead Plaintiff

20

Case 1:11-cv-02279-CM Document 117

Filed 11/05/13 Page 28 of 32

adequately represents the Settlement Class since he has no individual interests or claims that are antagonistic to the Class and has zealously represented the interests of the Class to date. Additionally, Rule 23(g) states that the adequacy of Plaintiff’s counsel is determined by four factors: (1) the work counsel has done in identifying or investigating potential claims; (2) counsel’s experience in handling class actions; (3) counsel’s knowledge of the applicable law; and (4) the resources counsel commit to representing the class. Fed. R. Civ. P. 23(g)(1)(A). Lead Counsel Pomerantz Grossman Hufford Dahlstrom & Gross LLP has extensive experience and a stellar reputation in the field of class action and securities litigation. See App. 2. They have been appointed as lead or co-lead counsel in many complex securities class actions and have recovered substantial monies for their clients and class members. Lead Counsel will continue to commit adequate resources to ensure that the Settlement Class is properly represented in this Litigation. Finally, the proposed Settlement Class meets the requirements of Rule 23(b)(3). To satisfy predominance, “a plaintiff must show that those issues in the proposed action that are subject to generalized proof outweigh those issues that are subject to individualized proof.’” In re Salomon Analyst Metromedia Litig., 544 F.3d 474, 480 (2d Cir. 2008) (citation omitted). This inquiry “tests whether a proposed class is sufficiently cohesive to warrant adjudication by representation.” Id. (citation omitted). There are questions of law and fact common to the Settlement Class that predominate over any individual questions, specifically whether the ABAT Defendants’ alleged actions, which were centralized and uniform, violated federal securities laws and whether those violations were knowing or reckless. These common issues predominate over any individual issues.

21

Case 1:11-cv-02279-CM Document 117

Filed 11/05/13 Page 29 of 32

“Together with predominance, the superiority requirement ‘ensures that the class will be certified only when it would achieve economies of time, effort, and expense, and promote uniformity of decision as to persons similarly situated, without sacrificing procedural fairness or bringing about other undesirable results.’’” Menkes, 270 F.R.D. at 100 (quoting Cordes & Co. Fin. Servs., Inc. v. A.G. Edwards & Sons, Inc., 502 F.3d 91, 104 (2d Cir. 2007)) (other citations omitted). “[C]lass treatment is often deemed superior in ‘negative value’ cases, in which ‘each individual class member’s interest in the litigation is less than the anticipated cost of litigating individually.’” Menkes, 270 F.R.D. at 100 (citation omitted). A class action is also superior to other methods available for the fair and efficient adjudication of this controversy. Members of the Settlement Class are not likely to and many do not have an interest or means to prosecute an individual case against the Settling Defendants. Additionally, concerns of efficiency and economy tip the scales in favor of litigating the issues in one suit before this Court. V. THE COURT SHOULD APPROVE THE PROPOSED FORM AND METHOD OF CLASS NOTICE. A. Notice By Direct Mail and Posting Online is Sufficient When a Large, Nationwide Class is Present.

“Rule 23(e)(1)(B) requires the court to ‘direct notice in a reasonable manner to all class members who would be bound by a proposed settlement, voluntary dismissal, or compromise,’ regardless of whether the class was certified under Rule 23(b)(1), (b)(2), or (b)(3).” See Manual, supra, §§ 21.632, 21.633. In order to protect the rights of absent Settlement Class Members, the Court must provide the best notice practicable to Settlement Class Members. See Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 812 (1985). Notice by mail is practical when the names and addresses of most of the Class members are known. See Manual, supra, § 30.2111. “Neither Rule 23 nor due process require receipt of 22

Case 1:11-cv-02279-CM Document 117

Filed 11/05/13 Page 30 of 32

actual notice by all Class Members; rather, ‘notice should be mailed to the last known addresses of those who can be identified and publication used to notify others….’” Mangone v. First USA Bank, 206 F.R.D. 222, 231-232 (S.D. Ill. 2001) (citing Newberg, supra, § 8.02) (approving mailed notice to last known addresses of a settlement class with nearly 18.5 million members). Plaintiffs propose a direct mail Notice, as well as notice via a press release through the issuance of the Summary Notice through a national news wire. A proposed Post Card Notice to be mailed, Long Notice and Proof of Claim and Release form to be posted online, and a proposed Summary Notice to be issued via a press release, are attached to the Stipulation as Exhibits A-1, A-2, A-3, and A-4, and should be approved by the Court. B. The Proposed Form of Notice Adequately Informs Settlement Class Members of Their Rights in This Litigation.

In an action proceeding under Rule 23(b)(3), the notice must inform each Settlement Class Member that “the court will exclude anyone from the class if he so requests [by a specified date]; the judgment will include all members who do not request exclusion and any member not requesting exclusion may, if he desires, enter an appearance through counsel.” Fed. R. Civ. P. 23(c)(2). Here, the proposed Post Card Notice directs class members to the Long Notice, which clearly and accurately discloses the information material to a Settlement Class Member’s decision whether to accept, object to, or opt out of the settlement. (App. 1, Exhibits A-1 and A2.) The proposed Long Notice provides information on, inter alia, the proposed Settlement Class; the terms and provisions of the Stipulation; the relief the settlement will provide; the date, time and place of the final approval hearing; and the procedures and deadlines for opting out of the settlement or submitting comments or objections.

23

Case 1:11-cv-02279-CM Document 117

Filed 11/05/13 Page 31 of 32

The Long Notice also meets the requirements of the PSLRA, 15 U.S.C. § 78u-4(a)(7). The Long Notice provides:   a cover page summarizing the information contained in the Long Notice; a statement of the Settlement Class Members’ recovery, estimating a recovery of $0.0041 per damaged share before deduction of Courtapproved expenses and costs of notice and claims administration; the Long Notice further explains that under the Plan of Allocation, the actual amount recovered will vary greatly across the Settlement Class; the general terms of the Stipulation; a statement of the potential outcome of the case including a statement concerning the issues on which the Settling Parties disagree; a statement of attorney’s costs sought, including a summary of this information on the cover page; information on how to contact the Claims Administrator and/or Lead Counsel (including names, addresses, telephone numbers, and websites); and a discussion of the reasons for the proposed Settlement, including the factors Lead Plaintiff and the ABAT Defendants considered in reaching the proposed Settlement.

   

Thus, the proposed Post Card Notice and Long Notice to be sent to the Settlement Class provide all of the information required by the PSLRA. The Court should approve the proposed form of Notice and direct that notice be given to the Settlement Class as proposed by the parties. VI. CONCLUSION In light of the foregoing, Lead Plaintiff respectfully requests that the Court enter an Order: (1) preliminarily approving the Settlement; (2) certifying the Settlement Class; (3) approving the form and method for giving notice as provided in the Stipulation; (4) certifying Lead Plaintiff as Class Representative and Lead Counsel as Lead Counsel for the Settlement Class; and (5) setting a date for a Settlement Hearing and deadlines for the mailing and posting of the Notices, the filing of Settlement Class Member objections, the filing of Settlement Class 24

Case 1:11-cv-02279-CM Document 117

Filed 11/05/13 Page 32 of 32

Member opt-out notices, and the filing of Lead Counsel’s application for final approval of the Settlement and reimbursement of attorneys’ expenses. Dated: November 5, 2013 Respectfully submitted, POMERANTZ GROSSMAN HUFFORD DAHLSTROM & GROSS LLP /s/ Murielle J. Steven Walsh Marc I. Gross Murielle J. Steven Walsh 600 Third Avenue – 20th Floor New York, NY 10016 Tel: (212) 661-1100 Fax: (212) 661-8665 migross@pomlaw.com mjsteven@pomlaw.com Lead Counsel

25