In Re: Cadence Design Systems, Inc. Securities Litigation 08-CV-04966
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1 THE WEISER LAW FIRM, P.C. KATHLEEN A. HERKENHOFF (168562) 2 12707 High Bluff Drive, Suite 200 San Diego, CA 92130 3 Telephone: 858/794-1441 Facsimile: 858/794-1450 4 [email protected] 5 THE WEISER LAW FIRM, P.C. ROBERT B. WEISER 6 BRETT D. STECKER JEFFREY J. CIARLANTO 7 121 N. Wayne Avenue, Suite 100 Wayne, PA 19087 8 Telephone: 610/225-2677 Facsimile: 610/225-2678 9 Attorneys for Plaintiff Walter Hamilton 10 (Additional counsel listed on signature page) 11 12 UNITED STATES DISTRICT COURT 13 NORTHERN DISTRICT OF CALIFORNIA 14 SAN FRANCISCO DIVISION 15 In re CADENCE DESIGN SYSTEMS, INC. ) No. C-08-4966 SC SECURITIES AND DERIVATIVE ) 16 LITIGATION ) DECLARATION OF KATHLEEN A. ) HERKENHOFF IN SUPPORT OF MOTION 17 ) FOR FINAL APPROVAL OF DERIVATIVE This Document Relates To: ) SETTLEMENT 18 ) Nos. CV-10-01849-SC, CV-10-03607- ) DATE: February 24, 2012 19 SC, and CV-10-03627-SC ) TIME: 10:00 a.m. CTRM: The Honorable Samuel Conti 20 Courtroom 1, 17th Floor 21 22 23 24 25 26 27 28 1 I, Kathleen A. Herkenhoff, declare: 2 1. I am of counsel to The Weiser Law Firm, P.C. (the “Weiser Law Firm”). The Weiser 3 Law Firm serves as counsel for plaintiff Walter Hamilton (“Hamilton”) in Hamilton v. Fister, et. al., 4 Case No. CV-10-01849-SC (the “Hamilton Action”), one of the three shareholder derivative actions 5 (the “Federal Actions”)1 pending in this Court on behalf of nominal party Cadence Design Systems, 6 Inc. (“Cadence” or the “Company”) referenced in the caption set forth above. I submit this 7 declaration in support of Plaintiffs’ Motion for Final Approval of Derivative Settlement (the 8 “Motion”), which seeks an order granting final approval of the settlement embodied in the June 7, 9 2011 Stipulation of Settlement (the “Stipulation” or “Settlement”).2 A true and correct copy of the 10 Stipulation is attached as Exhibit A hereto. The Stipulation also resolves claims asserted in the 11 Federal Actions, as well as related shareholder derivative claims on behalf of Cadence filed by 12 plaintiffs Ury Priel (“Priel”) and Mark Levine (“Levine”) in the Superior Court of the State of 13 California, Santa Clara County (the “State Court”) in the action entitled In re Cadence Design 14 Systems, Inc. Derivative Litig., Case No. 1:08-CV-127922 (the “State Action”) (together, the Federal 15 Actions and the State Action are referred to as the “Actions”). Subject to this Court’s approval of 16 the Settlement, the State Action will be voluntarily dismissed with prejudice, subject to the terms and 17 conditions of the Stipulation. 18 2. Robert B. Weiser, a principal of the Weiser Law Firm, and I have maintained daily 19 control of the Hamilton Action and have monitored the work provided by Plaintiffs’ Counsel in the 20 Federal Actions and have worked cooperatively with Plaintiffs’ Counsel in the State Action. Robert 21 Weiser and I have communicated with counsel for State Plaintiffs throughout the litigation of the 22 Actions. Unless otherwise indicated, the statements in this declaration are made based on my 23 personal knowledge, and if called to do so, I could and would competently testify to them. 24 1 25 The other two federal shareholder derivative actions pending in this Court on behalf of Cadence are: Samani v. Fister, et al., Case No. CV-10-03607-SC; and Powers v. Fister, et al., Case 26 No. CV-10-03627-SC. 2 Unless otherwise stated herein, capitalized terms have the same meaning as set forth in the 27 Stipulation. 28 DECLARATION OF KATHLEEN A. HERKENHOFF IN SUPPORT OF MOTION FOR FINAL APPROVAL OF DERIVATIVE SETTLEMENT - C-08-4966 SC - 1 - 1 3. The purpose of this declaration is to set forth the background of the Actions, their 2 procedural history, the factual investigations and prosecution of the Actions, the negotiations that led 3 to the Settlement and the results achieved. This declaration, along with the other materials submitted 4 herewith, demonstrate why the Settlement is “fair and reasonable’ and in the best interest of Cadence 5 and Current Cadence Stockholders, and why the separately negotiated amount of attorneys’ fees and 6 expenses (the “Fee Award”) and modest special awards (the “Special Awards”) to the Plaintiffs are 7 fair and reasonable and should be finally approved. 8 4. The Settlement negotiations in the Actions were at arms-length and hard-fought, with 9 all sides making significant concessions to finally resolve the Actions. But for the skill and tenacity 10 of the JAMS mediator Edward A. Infante, Chief Magistrate Judge of the United States District Court 11 for the Northern District of California (Ret.) (“Judge Infante”), the Actions would not have settled. 12 5. As set forth in the Motion, the Stipulation provides for significant reforms to 13 Cadence’s corporate governance practices. These governance changes (defined in the Stipulation as 14 the “Corporate Governance Enhancements”) are designed to deter occurrences of the type of 15 misconduct alleged in the Actions, and will “bring about significant, beneficial changes in the 16 Company’s governance practices and confer substantial benefits, including financial value, on its 17 current stockholders.” See Declaration of Professor Daniel J. Morrissey in Support of Amended 18 Motion for Preliminary Approval of Derivative Settlement (Dkt. No. 164 at Ex. B) (the “Morrissey 19 Decl.”), ¶11. For the Court’s convenience, a true and correct copy of the Morrissey Decl. is also 20 attached hereto as Exhibit B. 21 6. I respectfully submit that the Settlement is an outstanding result for Cadence and 22 Current Cadence Stockholders, and is fair, reasonable and adequate and risks involved in light of the 23 substantial benefits conferred upon the Company despite the risks of no recovery at all proving 24 liability and damages. Additionally, as set forth in the Stipulation, the members of the Cadence 25 Board of Directors (the “Board”), agree that the Settlement that the commencement and litigation of 26 the Actions “is a material and substantial factor causing Cadence to agree to implement the 27 Corporate Governance Enhancements.” See Stipulation, ¶2.1. 28 DECLARATION OF KATHLEEN A. HERKENHOFF IN SUPPORT OF MOTION FOR FINAL APPROVAL OF DERIVATIVE SETTLEMENT - C-08-4966 SC - 2 - 1 7. After the parties agreed to the Settlement terms, counsel for the Settling Parties, 2 through Judge Infante, separately negotiated the Fee Award to be paid to Plaintiffs’ Counsel in light 3 of the substantial benefits conferred upon Cadence. See Stipulation, ¶6.1. The negotiations of the 4 Fee Award were carefully overseen by Judge Infante, who ultimately recommended the amount of 5 the Fee Award to be paid to Plaintiffs’ Counsel based upon his extensive participation in the 6 discussions leading up to the Settlement, the information made available to him, and his substantial 7 experience in shareholder derivative litigation. See Declaration of Edward A. Infante in Support of 8 Amended Motion for Preliminary Approval of Derivative Settlement (Dkt. No. 164 at Ex. C) 9 (“Infante Decl.”), ¶7.3 I respectfully submit that the negotiated Fee Award in the amount of $1.75 10 million is fair and reasonable given the outstanding result achieved by Plaintiffs’ Counsel for 11 Cadence and Current Cadence Stockholders. 12 I. PRELIMINARY STATEMENT 13 8. The Settlement is an example of the considerable benefits that committed 14 shareholders and their counsel can confer upon publicly corporations and their shareholders. From 15 the outset, and continuing thereafter, Plaintiffs conducted an extensive investigation of the 16 allegations asserted in the Actions. Plaintiffs’ Counsel, on behalf of the Plaintiffs, analyzed 17 documents, including financial reports, press releases, and SEC filings concerning Cadence, 18 prepared detailed complaints, researched the applicable law with respect to the claims asserted in the 19 Actions and the potential defenses thereto, interviewing several confidential witnesses, reviewing 20 certain of the Company’s internal documents through confirmatory discovery, reviewing and 21 analyzing the record in the Securities Action4; researching various corporate governance issues; 22 preparing multiple mediation statements; participating in numerous telephonic conferences with 23 Judge Infante, and Cadence’s and the Individual Defendants’ counsel, as well as attending two 24 25 3 For the Court’s convenience, a true and correct copy of the Infante Decl. is attached as 26 Exhibit C hereto. 4 27 The related securities class action is captioned In re Cadence Design Systems, Inc. Securities Litigation, No. C-08-4966-SC (the “Securities Action”). 28 DECLARATION OF KATHLEEN A. HERKENHOFF IN SUPPORT OF MOTION FOR FINAL APPROVAL OF DERIVATIVE SETTLEMENT - C-08-4966 SC - 3 - 1 formal mediations with Cadence’s and the Individual Defendants’ counsel and Judge Infante. Thus, 2 Plaintiffs’ Counsel developed a high degree of knowledge that allowed them to gauge the relative 3 strengths and weaknesses of the Settling Parties’ respective positions during the course of the 4 negotiations leading up to the Settlement. 5 9. The Settlement is a notable achievement. The Settlement is an outstanding result for 6 the Company and Current Cadence Stockholders, and is fair, reasonable and adequate based on the 7 numerous impediments to recovery, the legal hurdles and risks involved in proving liability and 8 damages as well as the further risk, delay and expense had the Actions continued to trial. The 9 Corporate Governance Enhancements provided for by the Settlement are extremely beneficial for 10 Cadence and resulted from the steadfast efforts of Plaintiffs and Plaintiffs’ Counsel. 11 10. As Judge Infante has himself attested, the Settlement is the result of extensive arm’s- 12 length settlement negotiations and was conducted in good faith.