Case 1:17-cv-01866-ER Document 136 Filed 10/02/19 Page 1 of 36 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK In re PATRIOT NATIONAL, INC. Case No. 1:17-cv-01866-ER SECURITIES LITIGATION Honorable Edgardo Ramos JOINT DECLARATION OF LAWRENCE DEUTSCH AND LIONEL Z. GLANCY IN SUPPORT OF: (I) PLAINTIFFS’ MOTION FOR FINAL APPROVAL OF CLASS ACTION SETTLEMENT AND PLAN OF ALLOCATION, AND (II) LEAD COUNSEL’S MOTION FOR AN AWARD OF ATTORNEYS’ FEES, REIMBURSEMENT OF EXPENSES, AND COMPENSATORY AWARDS TO CLASS REPRESENTATIVES 498672.1 Case 1:17-cv-01866-ER Document 136 Filed 10/02/19 Page 2 of 36 TABLE OF CONTENTS I. OVERVIEW IN SUPPORT OF GRANTING THE MOTIONS ....................................... 1 II. PROSECUTION OF THE ACTION .................................................................................. 4 A. Procedural History .................................................................................................. 4 B. Mediation and the Negotiation of the Settlement ................................................... 8 C. Amended Complaint and Further Consolidation .................................................... 9 D. Preliminary Approval ............................................................................................ 10 E. Due Diligence Discovery ...................................................................................... 11 III. RISKS OF CONTINUED LITIGATION ......................................................................... 12 A. The Risk that the Defendants Had No Ability to Pay a Larger Result ................. 13 B. Risks of Proving Liability, Loss Causation and Damages .................................... 14 C. Other Litigation Risks Inherent to a Class Action ................................................ 17 IV. LEAD PLAINTIFFS’ COMPLIANCE WITH THE COURT’S PRELIMINARY APPROVAL ORDER REQUIRING ISSUANCE OF NOTICE...................................... 18 V. ALLOCATION OF THE PROCEEDS OF THE SETTLEMENT ................................... 20 VI. THE FEE AND LITIGATION EXPENSE APPLICATION ........................................... 23 A. The Fee Application .............................................................................................. 24 1. The Work and Experience of Counsel ...................................................... 24 2. The Risks of Litigation and the Need to Ensure the Availability of Competent Counsel in High-Risk Contingent Securities Cases ............... 26 3. The Reaction of the Settlement Class to the Fee Application .................. 28 B. The Litigation Expense Application ..................................................................... 28 VII. CONCLUSION ................................................................................................................. 31 498672.1 i Case 1:17-cv-01866-ER Document 136 Filed 10/02/19 Page 3 of 36 TABLE OF EXHIBITS TO DECLARATION EX. TITLE 1 Declaration of Josephine Bravata Concerning (A) Mailing of the Notice and Claim Form; (B) Publication of the Summary Notice; and (C) Report of Requests for Exclusion 2 Declaration of Lawrence Deutsch, Esq. in Support of Lead Counsel’s Motion for an Award of Attorneys’ Fees and Reimbursement of Litigation Expenses Filed on Behalf of Berger Montague PC 3 Declaration of Lionel Z. Glancy, Esq. in Support of Lead Counsel’s Motion for an Award of Attorneys’ Fees and Reimbursement of Litigation Expenses Filed on Behalf of Glancy Prongay & Murray LLP 4 Declaration of Lynda J. Grant, Esq. in Support of Lead Counsel’s Motion for an Award of Attorneys’ Fees and Reimbursement of Litigation Expenses Filed on Behalf of TheGrantLawFirm, PLLC 5 Declaration of Peter Safirstein, Esq. in Support of Lead Counsel’s Motion for an Award of Attorneys’ Fees and Reimbursement of Litigation Expenses Filed on Behalf of Safirstein Metcalf LLP 6 Declaration of Peretz Bronstein, Esq. in Support of Lead Counsel’s Motion for an Award of Attorneys’ Fees and Reimbursement of Litigation Expenses Filed on Behalf of Bronstein Gewirtz & Grossman LLP 7 Stefan Boettrich and Svetlana Starykh, Recent Trends in Securities Class Action Litigation: 2018 Full-Year Review (NERA Jan. 29, 2019) (“2018 NERA Report”) 8 Declaration of Lead Plaintiff ODS Capital LLP in Support of Plaintiffs’ Motion for Final Approval of Class Action Settlement and Plan of Allocation 9 Declaration of Lead Plaintiff Barry A. Smith in Support of Plaintiffs’ Motion for Final Approval of Class Action Settlement and Plan of Allocation and Lead Counsel’s Motion for an Award of Attorneys’ Fee and Reimbursement of Litigation Expenses 10 Declaration of Lead Plaintiff Sunil Shah in Support of Plaintiffs’ Motion for Final Approval of Class Action Settlement and Plan of Allocation and Lead Counsel’s Motion for an Award of Attorneys’ Fee and Reimbursement of Litigation Expenses 11 Declaration of Plaintiff Adam Kayce 12 Chart of Law Firm Billing Rates 13 McIntire v. China Media Express Holdings, Inc., No. 1:11-cv-00804-VM-GWG, slip op. (S.D.N.Y. Sep. 18, 2015) 14 Sanders v. The CJS Solutions Group, LLC, No. 17-cv-3809, ECF No. 106 (S.D.N.Y June 22, 2018) (Ramos, J.) 498672.1 ii Case 1:17-cv-01866-ER Document 136 Filed 10/02/19 Page 4 of 36 15 In Van Der Moolen Holding N.V. Sec. Litig., No. 03 Civ. 8284, slip. op. (S.D.N.Y. Dec. 7, 2006) (ECF No. 45) 16 In re TeleTech Litig., No. 1:08-cv-00913-LTS, ECF No. 82 (S.D.N.Y. June 11, 2010) 498672.1 iii Case 1:17-cv-01866-ER Document 136 Filed 10/02/19 Page 5 of 36 LAWRENCE DEUTSCH and LIONEL Z. GLANCY, pursuant to 28 U.S.C. § 1746, declare as follows: I. OVERVIEW IN SUPPORT OF GRANTING THE MOTIONS 1. We, Lawrence Deutsch and Lionel Z. Glancy, are partners in the law firms of Berger Montague, and Glancy Prongay & Murray LLP (“GPM”), respectively.1 Berger Montague and GPM (together, “Lead Counsel”) represent the Court-appointed Co-Lead Plaintiffs, ODS Capital LLC, Barry A. Smith, and Sunil Shah (collectively, “Lead Plaintiffs”) and named Plaintiff Adam Kayce (together with Lead Plaintiffs, “Plaintiffs” or “Class Representatives”) in this consolidated securities class action lawsuit (the “Action”). We have personal knowledge of the matters set forth herein based on our supervision of, and participation in, the prosecution and settlement of the claims asserted in the Action. 2. We submit this Declaration in support of Plaintiffs’ motion, pursuant to Rule 23(e) of the Federal Rules of Civil Procedure, for final approval of the proposed settlement (the “Settlement”) that the Court preliminarily approved by its July 22, 2019 Order Preliminarily Approving Settlement and Providing for Notice (the “Preliminary Approval Order”). See ECF No. 124. We also submit this Declaration in support of: (a) Plaintiffs’ motion for approval of the proposed plan for allocating the proceeds of the Settlement to eligible Settlement Class Members (the “Plan of Allocation”); and (b) Lead Counsel’s motion on behalf of all Plaintiffs’ Counsel for an award of attorneys’ fees in the amount of 33% of the Settlement Fund, reimbursement of Plaintiffs’ Counsel’s expenses of $154,469.29, and awards pursuant to the Private Securities Litigation Reform Act of 1995 (“PSLRA”) totaling $6,000 for time spent by Co-Lead Plaintiffs 1 Unless otherwise defined herein, all capitalized terms have the meanings set forth in the Stipulation and Agreement of Settlement, dated December 20, 2018 (the “Stipulation”). ECF No. 101-1. 498672.1 1 Case 1:17-cv-01866-ER Document 136 Filed 10/02/19 Page 6 of 36 Barry A. Smith and Sunil Shah ($2,500 each) and named Plaintiff Adam Kayce ($1,000) in connection with their representation of the Settlement Class (the “Fee and Expense Application”).2 3. The proposed Settlement before the Court provides for the resolution of claims in the Action against Defendants, and the Defendants’ Releasees, in exchange for a cash payment of $6,500,000.3 Plaintiffs and Lead Counsel submit that the Settlement represents a favorable result for the Settlement Class in light of the significant risks in the Action, most notably the bankruptcy of Defendant Patriot National, Inc. (“Patriot National” or the “Company”), and the practical limits of recovery from the individual Defendants and their insurers. The Settlement provides valuable benefit to the Settlement Class by conferring a certain and immediate recovery while avoiding the significant risks of continued litigation concerning a bankrupt company, including the risk that the Settlement Class could recover less than the Settlement Amount (or nothing) after years of additional litigation. 4. The proposed Settlement is the result of significant efforts by Plaintiffs’ Counsel, which included: (a) conducting extensive investigations of the claims asserted in the Action, including detailed reviews of SEC filings, press releases, analyst reports, news reports and other public information; (b) consultation with forensic accounting and damages experts; (c) researching and filing the initial Gingello v. Patriot National, Inc., et al. class action complaint (“Gingello”), filed March 14, 2017 (ECF No. 1); (d) researching and filing the Kayce v. Patriot 2 Lead Plaintiff ODS Capital LLC is not requesting a PSLRA award. 3 The Settlement does not resolve claims against Defendants consolidated into the Action on July 22, 2019. See ECF No. 123; ¶¶ 32-33, infra. 498672.1 2 Case 1:17-cv-01866-ER Document 136 Filed 10/02/19 Page 7 of 36 National, Inc., et al. class action complaint (“Kayce”), filed on September 20, 2017;4 (e) researching and filing the 210-page Consolidated Amended Class