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UNITED STATES DISTRICT COURT NORTHERN DISTRICT of ILLINOIS EASTERN DIVISION LEONARD SOKOLOW, Individually and on Behalf of All O

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UNITED STATES DISTRICT COURT NORTHERN DISTRICT of ILLINOIS EASTERN DIVISION LEONARD SOKOLOW, Individually and on Behalf of All O Case: 1:18-cv-01039 Document #: 209 Filed: 11/13/19 Page 1 of 25 PageID #:3098 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION LEONARD SOKOLOW, Individually and on ) Case No. 1:18-cv-01039 Behalf of All Others Similarly Situated, ) ) Hon. Judge Robert M. Dow, Jr. Plaintiff, ) ) vs. ) ) LJM FUNDS MANAGEMENT, LTD., et al., ) ) Defendants. ) ) DECLARATION OF JAMES W. JOHNSON IN SUPPORT OF (I) LEAD PLAINTIFFS’ MOTION FOR FINAL APPROVAL OF PARTIAL CLASS ACTION SETTLEMENT AND PLAN OF ALLOCATION AND (II) LEAD COUNSEL’S MOTION FOR AWARD OF ATTORNEYS’ FEES AND PAYMENT OF LITIGATION EXPENSES 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”). Labaton Sucharow and Robbins Geller Rudman & Dowd LLP (“Robbins Geller”) serve as Court-appointed Lead Counsel for Lead Plaintiffs Justin and Jenny Kaufman, Joseph N. Wilson, Dr. Larry and Marilyn Cohen, Tradition Capital Management LLC (“Tradition”), and SRS Capital Advisors, Inc. (“SRS”) (collectively, “Lead Plaintiffs”), and the proposed Settlement Class in the Action.1 I have been actively involved in prosecuting and resolving the Action, am 1 All capitalized terms used herein that are not otherwise defined shall have the meanings provided in the Stipulation and Agreement of Partial Settlement, dated as of August 19, 2019 (ECF No. 192) (the “Stipulation”), which was entered into by and among (a) Lead Plaintiffs, on behalf of themselves and the Settlement Class; and (b) defendants Two Roads Shared Trust (the “Trust”), Northern Lights Distributors, LLC (“NLD”), NorthStar Financial Services Group, LLC (“NorthStar”), and Mark D. Gersten, Mark Garbin, Neil M. Kaufman, Anita K. Krug, Andrew B. Rogers, and James Colantino (collectively, the “Individual Settling Defendants” and, with the Case: 1:18-cv-01039 Document #: 209 Filed: 11/13/19 Page 2 of 25 PageID #:3098 familiar with its proceedings, and have personal knowledge of the matters set forth herein based upon my supervision and participation in all material aspects of the Action. 2. I respectfully submit this declaration in support of Lead Plaintiffs’ motion for approval of the proposed Settlement of the claims against the Settling Defendants, approval of the proposed Plan of Allocation for the proceeds of the Settlement, as well as Lead Counsel’s motion for an award of attorneys’ fees, payment of Litigation Expenses, and reimbursement to Lead Plaintiffs, pursuant to the Private Securities Litigation Reform Act of 1995, 15 U.S.C. §77z-1(a)(4) (the “PSLRA”). Both motions have the support of Lead Plaintiffs, who supervised Lead Counsel, participated in all aspects of the litigation, and remained informed throughout the settlement negotiations. See Joint Declaration of the Individual Lead Plaintiffs; Declaration on Behalf of SRS Capital Advisors, Inc.; and Declaration on Behalf of Tradition Capital Management LLC, attached hereto as Exhibits 1 to 3.2 3. This declaration provides the Court with details about the litigation, the events leading to the Settlement, and the basis upon which Lead Plaintiffs and Lead Counsel recommend their approval of the Settlement and seek an award of attorneys’ fees and payment of expenses. 4. The Court is also referred to the accompanying Declaration of James E. Barz in Support of: (1) Lead Plaintiffs’ Motion for Final Approval of Partial Class Action Settlement and Approval of Plan of Allocation; and (2) Lead Counsel’s Motion for an Award of Attorneys’ Fees Trust, NLD, and NorthStar, the “Settling Defendants”). Defendants LJM Funds Management, Ltd., Anthony J. Caine, and Anish Parvataneni (the “Non-Settling Defendants”) are not parties to the Settlement. 2 Citations to “Exhibit” or “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 is to the designation of the entire exhibit attached hereto and the second numerical reference is to the exhibit designation within the exhibit itself. 2 Case: 1:18-cv-01039 Document #: 209 Filed: 11/13/19 Page 3 of 25 PageID #:3098 and Expenses and an Award to Lead Plaintiffs Pursuant to 15 U.S.C. §77z-1(a)(4) (“Barz Declaration”), for additional information relevant to the Court’s consideration of the motions. I. PRELIMINARY STATEMENT 5. Subject to Court approval, Lead Plaintiffs and Lead Counsel have obtained a guaranteed and substantial recovery for the Settlement Class of $12,850,000 in cash (the “Settlement Amount”), which avoids the uncertainty of continued litigation against the Settling Defendants, including the risk of recovering less than the Settlement Amount, after significant delay and litigation efforts, or nothing at all. 6. In entering into the Settlement with the Settling Defendants, Lead Plaintiffs and Lead Counsel were fully informed about the strengths and weaknesses of the claims and defenses in the Action. The Parties reached an agreement in principle to settle in August 2019—more than one year after the commencement of the Action. As set forth more fully below, Lead Counsel: (i) conducted a thorough investigation; (ii) filed a comprehensive Consolidated Complaint for Violations of the Federal Securities Laws (the “Complaint”) based on counsel’s investigation; (iii) opposed a motion to dismiss filed by Defendants; and (iv) engaged in mediation and extensive follow-on negotiations with all Defendants in an effort to resolve the Action. 7. As discussed in further detail below, given the facts, the applicable law, and the challenges and expense of continued litigation against the Settling Defendants, the proposed Settlement is fair, reasonable, and adequate, represents a favorable result under the circumstances of this case, and is in the best interests of the Settlement Class. Lead Plaintiffs may not have achieved such a recovery for the class following continued litigation and, even if they ultimately prevailed on the pending motion to dismiss and at trial, any judgment would be inevitably subject to an appeal, with any potential recovery for the class substantially delayed. The Settling Defendants asserted defenses that presented numerous risks concerning Lead 3 Case: 1:18-cv-01039 Document #: 209 Filed: 11/13/19 Page 4 of 25 PageID #:3098 Plaintiffs’ ability to prove liability, particularly with respect to falsity, loss causation, and the amount of damages suffered by Lead Plaintiffs and the Settlement Class. In spite of these obstacles, Lead Counsel obtained a highly favorable Settlement that will result in a certain recovery for the Settlement Class. 8. In addition to seeking approval of the Settlement, Lead Plaintiffs seek approval of the proposed Plan of Allocation, which was prepared in consultation with Robbins Geller’s internal damages consultant. As described below, the Plan of Allocation’s objective is to equitably distribute the Net Settlement Fund among Settlement Class Members who suffered economic losses allegedly as a result of the asserted violations of the federal securities laws during the Class Period (February 28, 2015 through February 7, 2018). The Plan of Allocation is intended to be generally consistent with an assessment of, among other things, the damages that Lead Plaintiffs and Lead Counsel believe were recoverable in the Action under the Securities Act of 1933 (the “Securities Act”). Under the proposed Plan of Allocation, the Net Settlement Fund will be distributed on a pro rata basis to members of the Settlement Class who submit timely and valid Claim Forms, based on their “Recognized Claim” amounts as calculated pursuant to the Plan of Allocation. 9. Additionally, Lead Counsel, on behalf of their law firms, Labaton Sucharow and Robbins Geller, request an award of attorneys’ fees and payment of Litigation Expenses. Specifically, Lead Counsel are applying for a fee award of 28% of the Settlement Fund, or $3,598,000.00, and payment of Litigation Expenses in the amount of $25,869.93, plus accrued interest. 10. The requests for attorneys’ fees and expenses are reasonable in light of the significant benefits conferred on the Settlement Class, the quality of the representation, and the 4 Case: 1:18-cv-01039 Document #: 209 Filed: 11/13/19 Page 5 of 25 PageID #:3098 nature and extent of the legal services provided. Lead Plaintiffs support the Fee and Expense Request. See Exs. 1 to 3. II. HISTORY OF THE ACTION A. Appointment of Lead Plaintiffs and the Consolidated Complaint 11. On February 9, 2018, a securities class action complaint captioned Sokolow v. LJM Funds Management, Ltd, et al., Civil No. 1:18-cv-01039, was filed in the U.S. District Court for the Northern District of Illinois (the “Court”) asserting claims under Sections 11, 12(a)(2) and 15 of the Securities Act for alleged misstatements and omissions in the Registration Statement, dated February 28, 2015 and related documents set forth in paragraph 51 of the Complaint, (ECF No. 114), (the “Offering Materials”) for the continuous offering of shares in the LJM Preservation and Growth Fund (the “Fund”). The Fund was an open-ended mutual fund and its shares were sold pursuant to the aforementioned Offering Materials. 12. Thereafter, seven movant groups moved for appointment as lead plaintiff. See generally ECF No. 111. 13. On June 26, 2018, the Court issued an Order: (a) appointing Justin and Jenny Kaufman, Joseph N. Wilson, Dr. Larry and Marilyn Cohen, Traditional and SRS as Lead Plaintiffs; (b) approving Labaton Sucharow and Robbins Geller as Lead Counsel; and (c) consolidating the Sokolow action with all subsequently filed actions related to the same subject matter under the caption: Sokolow v. LJM Funds Management, Ltd., No. 18-cv-01039 (the “Action”). ECF No. 111. 14. Following their appointment, Lead Counsel conducted a comprehensive investigation into the facts, circumstances, and claims asserted in the initial complaint which included, among other things, a review and analysis of: (i) filings made by the Trust, an open- ended investment company with several investment funds, including the Fund, with the U.S.
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