Case: 1:19-cv-07786 Document #: 66 Filed: 07/06/21 Page 1 of 51 PageID #:1934 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS Case No. 1:19-cv-07786 IN RE BAXTER INTERNATIONAL INC. District Judge Sara L. Ellis SECURITIES LITIGATION Magistrate Judge Jeffrey I. Cummings JOINT DECLARATION OF JAMES A. HARROD AND SHARAN NIRMUL IN SUPPORT OF (I) LEAD PLAINTIFFS’ MOTION FOR FINAL APPROVAL OF SETTLEMENT AND PLAN OF ALLOCATION AND (II) LEAD COUNSEL’S MOTION FOR ATTORNEYS’ FEES AND LITIGATION EXPENSES Case: 1:19-cv-07786 Document #: 66 Filed: 07/06/21 Page 2 of 51 PageID #:1935 TABLE OF CONTENTS GLOSSARY OF TERMS .............................................................................................................. iii I. INTRODUCTION .............................................................................................................. 1 II. PROSECUTION OF THE ACTION .................................................................................. 6 A. Background ................................................................................................................ 6 B. Appointment of Lead Plaintiffs and Lead Counsel.................................................... 8 C. Lead Plaintiffs’ Investigation and Preparation and Filing of the Complaint ............. 8 D. Defendants’ Motion to Dismiss the Complaint, the Court’s MTD Order, and Lead Plaintiffs’ Preparation of a Second Amended Complaint .......................... 9 III. MEDIATION AND SETTLEMENT ............................................................................... 12 IV. LEAD COUNSEL CONDUCT DISCOVERY ................................................................ 15 A. The Need for Due Diligence Discovery................................................................... 16 B. The Due Diligence Discovery Conducted by Lead Counsel ................................... 17 V. RISKS OF CONTINUED LITIGATION ......................................................................... 19 A. The Risks of Prosecuting Securities Actions in General ......................................... 20 B. The Court’s Dismissal of the Complaint ................................................................. 22 C. The Substantial Risks of Proving Defendants’ Liability and Damages in This Case ....................................................................................... 23 1. Risks of Proving Scienter .............................................................................. 24 2. Risks of Proving Loss Causation and Damages ............................................ 24 3. Risks of Proving Falsity and Materiality ....................................................... 25 4. Risks After Trial ............................................................................................ 26 i Case: 1:19-cv-07786 Document #: 66 Filed: 07/06/21 Page 3 of 51 PageID #:1936 VI. THE SETTLEMENT IS FAIR, REASONABLE, AND ADEQUATE IN LIGHT OF THE POTENTIAL RECOVERY IN THE ACTION ....................................................... 28 VII. ISSUANCE OF NOTICE OF THE SETTLEMENT TO THE SETTLEMENT CLASS AND THE REACTION OF THE SETTLEMENT CLASS TO DATE ........................... 29 VIII. PROPOSED ALLOCATION OF THE PROCEEDS OF THE SETTLEMENT ............. 32 IX. THE FEE AND LITIGATION EXPENSE APPLICATION ........................................... 35 A. The Fee Application ................................................................................................. 36 1. Lead Plaintiffs Have Authorized and Support the Fee Application ................. 36 2. The Time and Labor Devoted to the Action by Lead Counsel ........................ 37 3. The Experience and Standing of Lead Counsel ............................................... 39 4. The Standing and Caliber of Defendants’ Counsel .......................................... 39 5. The Risks of the Litigation and the Need to Ensure the Availability of Competent Counsel in High-Risk Contingent Securities Cases ..................... 39 6. The Reaction of the Settlement Class to the Fee Application .......................... 41 B. The Litigation Expense Application ........................................................................ 42 X. CONCLUSION ................................................................................................................. 46 ii Case: 1:19-cv-07786 Document #: 66 Filed: 07/06/21 Page 4 of 51 PageID #:1937 GLOSSARY OF TERMS All capitalized terms used in this declaration and the accompanying memoranda of law that are not otherwise defined have the meanings set forth in the Stipulation and Agreement of Settlement dated April 1, 2021, previously filed with the Court (ECF No. 57-1). For the Court’s convenience, some of the most frequently used terms are set forth here. Almeida José Almeida, Baxter’s Chief Executive Officer Baxter or Baxter International Inc. the Company Class Period The period from February 21, 2019 through October 23, 2019, inclusive Complaint Lead Plaintiffs’ Class Action Complaint and Demand for Jury Trial (ECF No. 34), filed June 25, 2020 FX Foreign exchange Individual José Almeida and James Saccaro Defendants Lead Counsel Bernstein Litowitz Berger & Grossmann LLP and Kessler Topaz Meltzer & Check, LLP Lead Plaintiffs Court-appointed Lead Plaintiffs LAMPERS and Varma LAMPERS Lead Plaintiff Louisiana Municipal Police Employees’ Retirement System MTD Order The Court’s January 12, 2021 Opinion and Order granting Defendants’ motion to dismiss Saccaro James Saccaro, Baxter’s Chief Financial Officer Settlement Class All persons and entities who, during the Class Period, purchased or otherwise acquired Baxter common stock, and were damaged thereby. Excluded from the Settlement Class are Defendants, any person who was an executive officer or director of Baxter during the Class Period, their Immediate Family members, any affiliates of Baxter, and any persons or entities who or which exclude themselves by submitting a timely and valid request for exclusion that is accepted by the Court. Stipulation Stipulation and Agreement of Settlement dated April 1, 2021 (ECF No. 57-1) iii Case: 1:19-cv-07786 Document #: 66 Filed: 07/06/21 Page 5 of 51 PageID #:1938 Varma Lead Plaintiff Varma Mutual Pension Insurance Company iv Case: 1:19-cv-07786 Document #: 66 Filed: 07/06/21 Page 6 of 51 PageID #:1939 JAMES A. HARROD and SHARAN NIRMUL declare as follows: I. INTRODUCTION 1. I, James A. Harrod, am a member of the bars of the State of New York, the U.S. District Courts for the Southern and Eastern Districts of New York, and the U.S. Courts of Appeals for the Second, Third, Sixth, and Seventh Circuits. I am a partner in the law firm of Bernstein Litowitz Berger & Grossmann LLP (“BLB&G”), one of the Court-appointed Lead Counsel in the above-captioned action (the “Action”). BLB&G represents one of the Court-appointed Lead Plaintiffs, Louisiana Municipal Police Employees’ Retirement System (“LAMPERS”). 2. I, Sharan Nirmul, am a member of the bars of Pennsylvania, New Jersey, New York, and Delaware, the U.S. District Courts of the Eastern District of Pennsylvania, Southern District of New York, District of New Jersey, and District of Delaware, and the U.S. Courts of Appeals for the Second, Third, and Seventh Circuits. I am a partner in the law firm of Kessler Topaz Meltzer & Check, LLP (“KTMC”), one of the Court-appointed Lead Counsel in the Action. KTMC represents one of the Court-appointed Lead Plaintiffs, Varma Mutual Pension Insurance Company (“Varma”). LAMPERS and Varma are collectively referred to herein as “Lead Plaintiffs” and BLB&G and KTMC are collectively referred to as “Lead Counsel.” 3. We have personal knowledge of the matters stated in this declaration based on our active supervision of and participation in the prosecution and settlement of the Action. We respectfully submit this declaration in support of Lead Plaintiffs’ motion, under Rule 23(e)(2) of the Federal Rules of Civil Procedure, for final approval of the proposed settlement of the Action with Defendant Baxter International Inc. (“Baxter” or the “Company”), and Defendants José E. Almeida and James K. Saccaro (the “Individual Defendants,” and together with Baxter, “Defendants”), for $16 million in cash (the “Settlement”). The Court preliminarily approved the Settlement in its Minute Order dated April 20, 2021, and set August 10, 2021 as the date for the Case: 1:19-cv-07786 Document #: 66 Filed: 07/06/21 Page 7 of 51 PageID #:1940 hearing on final approval of the Settlement. See ECF No. 58; see also ECF No. 59 (entering the Parties’ agreed-upon order preliminarily approving the Settlement). 4. We also respectfully submit this declaration in support of: (i) Lead Plaintiffs’ motion for approval of the proposed plan for allocating the proceeds of the Net Settlement Fund to eligible Settlement Class Members (the “Plan of Allocation” or “Plan”) and (ii) Lead Counsel’s motion for an award of attorneys’ fees in the amount of 22% of the Settlement Fund; payment of litigation expenses incurred by Lead Counsel in the amount of $96,538.37; and payment of $6,648.75 in reimbursement for the costs of Lead Plaintiffs directly related to their representation of the Settlement Class (the “Fee and Expense Application”).1 5. The proposed Settlement provides for the resolution of all claims in the Action in exchange for a cash payment of $16 million for the benefit of the Settlement Class. This beneficial Settlement was achieved as a direct result of Lead Plaintiffs’ and Lead Counsel’s efforts to diligently investigate,