Declaration of James Johnson and Exhibits
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Case 1:07-cv-00312-GBD-MHD Document 262 Filed 06/23/15 Page 1 of 51 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK ––––––––––––––––––––––––––––––––––––––––––– x : Civil Action No.: 07-CV-00312-GBD : IN RE CELESTICA INC. SEC. LITIG. : (ECF CASE) : : Hon. George B. Daniels : ––––––––––––––––––––––––––––––––––––––––––– x DECLARATION OF JAMES W. JOHNSON IN SUPPORT OF CLASS REPRESENTATIVES’ MOTION FOR FINAL APPROVAL OF PROPOSED CLASS ACTION SETTLEMENT AND PLAN OF ALLOCATION AND CLASS COUNSEL’S MOTION FOR AWARD OF ATTORNEYS’ FEES AND PAYMENT OF LITIGATION EXPENSES Case 1:07-cv-00312-GBD-MHD Document 262 Filed 06/23/15 Page 2 of 51 TABLE OF CONTENTS I. PRELIMINARY STATEMENT: THE SIGNIFICANT RECOVERY ACHIEVED .........................................................................................................................2 II. FACTUAL SUMMARY OF THE CLAIMS ......................................................................4 III. RELEVANT PROCEDURAL HISTORY ..........................................................................6 A. Initial Complaints and Appointment of Lead Plaintiffs ...........................................6 B. The Complaint and Motions to Dismiss ..................................................................7 C. Appeal to the Second Circuit Court of Appeals .......................................................8 D. Extensive Fact Discovery ......................................................................................10 E. Discovery Propounded on Lead Plaintiffs .............................................................14 F. Non-Party Discovery .............................................................................................16 G. Discovery Disputes ................................................................................................16 H. Extensive Expert Discovery ...................................................................................17 I. Lead Plaintiffs’ Motion to Certify the Class ..........................................................19 J. Summary Judgment ...............................................................................................21 K. Trial Preparations ...................................................................................................25 IV. SETTLEMENT NEGOTIATIONS ...................................................................................25 V. RISKS OF CONTINUED LITIGATION ..........................................................................26 A. Risks Concerning Establishing Liability of Defendants ........................................27 1. Risks Concerning Falsity of Alleged Misstatements .................................27 2. Risks Concerning Materiality ....................................................................29 3. Risks Concerning Scienter .........................................................................30 B. Risks Concerning Loss Causation and Damages ...................................................31 C. Risks Concerning Delineation of the Class Period ................................................33 D. Jury and Trial Risk .................................................................................................33 i Case 1:07-cv-00312-GBD-MHD Document 262 Filed 06/23/15 Page 3 of 51 VI. CLASS REPRESENTATIVES’ COMPLIANCE WITH THE COURT’S PRELIMINARY APPROVAL ORDER AND CLASS REACTION TO DATE .............34 VII. PLAN OF ALLOCATION ................................................................................................36 VIII. CLASS COUNSEL’S APPLICATION FOR AN AWARD OF ATTORNEYS’ FEES ..................................................................................................................................37 A. Class Representatives Support the Fee and Expense Application .........................38 B. The Risks and Unique Complexities of the Action ...............................................38 C. The Significant Time and Labor Devoted to the Action ........................................40 D. The Quality of Class Counsel’s Representation and its Standing and Expertise ................................................................................................................43 E. Standing and Caliber of Defense Counsel .............................................................44 IX. REQUEST FOR PAYMENT OF LITIGATION EXPENSES ..........................................44 X. REIMBURSEMENT OF THE COSTS AND EXPENSES OF CLASS REPRESENTATIVES IS FAIR AND REASONABLE ...................................................46 XI. THE REACTION OF THE CLASS TO THE FEE AND EXPENSE APPLICATION .................................................................................................................47 XII. MISCELLANEOUS EXHIBITS .......................................................................................48 XIII. CONCLUSION ..................................................................................................................48 ii Case 1:07-cv-00312-GBD-MHD Document 262 Filed 06/23/15 Page 4 of 51 I, JAMES W. JOHNSON, declare as follows pursuant to 28 U.S.C. §1746: 1. I am a partner of the law firm of Labaton Sucharow LLP (Labaton Sucharow), court-appointed Class Counsel for New Orleans Employees’ Retirement System (“New Orleans”) and Drywall Acoustic Lathing and Insulation Local 675 Pension Fund (“DALI”) (collectively, “Class Representatives”) and the certified Class in this securities class action (the “Action”).1 I am familiar with the proceedings in this Action and have personal knowledge of the matters set forth herein based upon my firm’s close supervision and active participation in the Action. If called as a witness, I could and would testify competently thereto. 2. The purpose of this declaration is to set forth the background of the Action, its procedural history, and the negotiations that led to the proposed Settlement with Celestica Inc. (“Celestica,” or the “Company”), Stephen W. Delaney (“Delaney”), and Anthony P. Puppi (“Puppi”) (collectively, “Defendants”). This declaration demonstrates why the Settlement is fair, reasonable, and adequate and should be approved by the Court, why the proposed Plan of Allocation is reasonable, and why the application for attorneys’ fees and expenses is reasonable and should be approved by the Court. 3. The Settlement will resolve all claims asserted in the Action against Defendants on behalf of the Class previously certified by the Court, which consists of: all Persons who purchased or acquired Celestica common stock on a United States stock exchange during the period between January 27, 2005 and January 30, 2007, inclusive, and who were 1 All capitalized terms not otherwise defined herein have the same meaning as that set forth in the Stipulation and Agreement of Settlement, dated April 17, 2015 (the “Stipulation”). ECF No. 250-1. Citations to “Ex.___” herein refer to exhibits to this declaration. For clarity, exhibits that themselves have attached exhibits will be referenced as “Ex. __-__.” The first numerical reference refers to the designation of the entire exhibit attached hereto and the second reference refers to the exhibit designation within the exhibit itself. Case 1:07-cv-00312-GBD-MHD Document 262 Filed 06/23/15 Page 5 of 51 damaged thereby (the “Class”).2 ECF No. 222 at 8. The Court preliminarily approved the Settlement by Order entered May 6, 2015 (the “Preliminary Approval Order”). ECF No. 254. I. PRELIMINARY STATEMENT: THE SIGNIFICANT RECOVERY ACHIEVED 4. After more than seven years of vigorously contested litigation, Class Representatives and Class Counsel have succeeded in obtaining a recovery for the Class in the amount of $30 million, which has been deposited in an interest-bearing escrow account for the benefit of the Class. The Settlement provides a very favorable result for the Class, which faced the genuine possibility of a much smaller recovery or no recovery at all had the case continued to trial. As set forth in the Stipulation, in exchange for the Settlement Amount, the proposed Settlement resolves all claims asserted, or that could have been asserted, by Class Representatives and the Class against the Released Defendant Parties. 5. The Settlement recovers a significant portion of estimated damages for US purchasers. Based on expert analyses, damages for US purchases ranged from approximately $125 million to $272 million, under a best-case scenario where a jury credited all of Class Representatives’ loss causation evidence. The Settlement accordingly translates to an excellent recovery of approximately 11% to 24% of potentially provable damages. 6. As discussed below, Class Representatives obtained this recovery for the Class despite the significant challenges inherent in complex securities class actions generally, and the case-specific hurdles they faced in prosecuting the Action against Defendants. The Parties were 2 Excluded from the Class are: (i) the current or former Defendants; (ii) members of the immediate families of the current or former Individual Defendants; (iii) all subsidiaries and affiliates of the current or former Defendants; (iv) any person or entity who was a partner, executive officer, director, or controlling person of Celestica; (v) all entities in which any current or former Defendant has or had a controlling interest; (vi) the current or former Defendants’ directors’ and officers’ liability insurance carriers, and all affiliates or subsidiaries thereof; and (vii) the legal representatives, heirs, successors,