Case 1:17-cv-03463-TWT Document 176 Filed 05/22/20 Page 1 of 88 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION IN RE EQUIFAX INC. SECURITIES Consolidated Case No. LITIGATION 1:17-cv-03463-TWT DECLARATION OF JAMES A. HARROD IN SUPPORT OF (I) LEAD PLAINTIFF’S MOTION FOR FINAL APPROVAL OF CLASS ACTION SETTLEMENT AND PLAN OF ALLOCATION AND (II) LEAD COUNSEL’S MOTION FOR ATTORNEYS’ FEES AND LITIGATION EXPENSES Case 1:17-cv-03463-TWT Document 176 Filed 05/22/20 Page 2 of 88 TABLE OF CONTENTS I. INTRODUCTION ........................................................................................... 1 II. PROSECUTION OF THE ACTION .............................................................11 A. Background ............................................................................................11 B. Commencement of the Action and Organization of the Case ...............12 C. Lead Plaintiff’s Preparation and Filing of the Consolidated Class Action Complaint .........................................................................19 D. Defendants’ Joint Motion to Dismiss the Consolidated Class Action Complaint .........................................................................21 E. Defendant Equifax’s Motion for Clarification of the Court’s January 28, 2019 Opinion and Order ........................................27 F. Defendants’ Joint Motion to Certify Questions Presented by the Court’s January 28, 2019 Order for Interlocutory Review Pursuant to 28 U.S.C. § 1292(b) ...............................................29 G. Lead Plaintiff’s Discovery Efforts .........................................................32 H. Lead Plaintiff’s Motion for Class Certification .....................................36 I. Settlement Negotiations .................................................................................................... 38 III. THE SETTLEMENT STIPULATION AND PRELIMINARY APPROVAL OF THE SETTLEMENT ........................................................40 IV. RISKS OF CONTINUED LITIGATION .....................................................41 A. The Risks of Prosecuting Securities Actions .........................................41 B. The Substantial Risks in Proving Defendants’ Liability and Damages in This Case .....................................................................44 C. The Risks of Proving Falsity and Materiality ........................................45 D. The Risks of Proving Scienter ...............................................................49 E. The Risks of Establishing Loss Causation and Damages ......................51 F. The Risks of Certifying the Class and Maintaining Class Certification ..................................................................................57 G. The Risk of Appeal ................................................................................58 i Case 1:17-cv-03463-TWT Document 176 Filed 05/22/20 Page 3 of 88 V. THE SETTLEMENT IS FAIR, REASONABLE, AND ADEQUATE IN LIGHT OF THE POTENTIAL RECOVERY IN THE ACTION ...........59 VI. LEAD PLAINTIFF’S COMPLIANCE WITH THE COURT’S PRELIMINARY APPROVAL ORDER REQUIRING ISSUANCE OF NOTICE ..............................................................................61 VII. PROPOSED ALLOCATION OF THE PROCEEDS OF THE SETTLEMENT ..............................................................................................64 VIII. THE FEE AND EXPENSE APPLICATION ................................................68 A. The Fee Application ...............................................................................69 1. Lead Plaintiff Has Authorized and Supports the Fee Application ...............................................................................70 2. The Time and Labor Devoted to the Action by Plaintiff’s Counsel ...........................................................................71 3. The Experience and Standing of Lead Counsel ..............................75 4. The Standing and Caliber of Defendants’ Counsel .........................75 5. The Need to Ensure the Availability of Competent Counsel in High-Risk Contingent Securities Cases ........................76 6. The Reaction of the Settlement Class to the Fee Application .........78 B. The Litigation-Expense Application ......................................................79 IX. CONCLUSION ..............................................................................................84 ii Case 1:17-cv-03463-TWT Document 176 Filed 05/22/20 Page 4 of 88 JAMES A. HARROD declares 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, and Seventh Circuits and am admitted pro hac vice in the above-captioned action (the “Action”). I am a Member of the law firm of Bernstein Litowitz Berger & Grossmann LLP (“BLB&G” or “Lead Counsel”), the Court-appointed Lead Counsel in the Action.1 BLB&G represents the Court-appointed Lead Plaintiff Union Asset Management AG (“Union” or “Lead Plaintiff”). I have personal knowledge of the matters stated in this Declaration based on my active supervision of and participation in the prosecution and settlement of the Action. 2. I respectfully submit this Declaration in support of Lead Plaintiff’s motion, under Rule 23(e) of the Federal Rules of Civil Procedure, for final approval of the proposed settlement of the Action (the “Settlement”), which the 1 Unless otherwise defined in this Declaration, all capitalized terms have the meanings defined in the Stipulation and Agreement of Settlement, dated February 13, 2020 (the “Stipulation” or “Settlement Stipulation”), and previously filed with the Court. See ECF No. 159. 1 Case 1:17-cv-03463-TWT Document 176 Filed 05/22/20 Page 5 of 88 Court preliminarily approved by its Order dated February 25, 2020 (the “Preliminary Approval Order”). ECF No. 163. 3. I also respectfully submit this Declaration in support of: (i) Lead Plaintiff’s 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, on behalf of all Plaintiff’s Counsel,2 for an award of attorneys’ fees in the amount of 20% of the Settlement Fund, net of expenses; payment of Litigation Expenses incurred by Plaintiff’s Counsel’s in the amount of $659,925.13; and payment of $121,375.00 to Union in reimbursement of its costs and expenses directly related to its representation of the Settlement Class (the “Fee and Expense Application”).3 4. The proposed Settlement provides for the resolution of all claims in the Action in exchange for a cash payment of $149 million for the benefit of the 2 Plaintiff’s Counsel are: Lead Counsel BLB&G and Bondurant Mixson & Elmore LLP, local counsel for Lead Plaintiff and the Class. 3 In conjunction with this Declaration, Lead Plaintiff and Lead Counsel are also submitting the Memorandum of Law in Support of Lead Plaintiff’s Motion for Final Approval of Class Action Settlement and Plan of Allocation (the “Settlement Memorandum”) and the Memorandum of Law in Support of Lead Counsel’s Motion for an Award of Attorneys’ Fees and Litigation Expenses (the “Fee Memorandum”). 2 Case 1:17-cv-03463-TWT Document 176 Filed 05/22/20 Page 6 of 88 Settlement Class. The proposed Settlement represents an excellent result for the Settlement Class, considering the significant risks in the Action and the amount of the potential recovery. The Settlement provides a considerable benefit to the Settlement Class by conferring a substantial, certain, and immediate recovery while avoiding the significant risks and expense of continued litigation, including the risk that the Settlement Class could recover nothing or substantially less than the Settlement Amount after years of additional litigation and delay. 5. This beneficial Settlement was achieved as a direct result of Lead Plaintiff’s and Lead Counsel’s efforts to diligently investigate, vigorously prosecute, and aggressively negotiate a settlement of this Action against highly skilled opposing counsel. 6. Notably, the maximum potential damages that could be realistically established at trial in this Action were approximately $588 million. The proposed Settlement of $149 million thus represents a recovery of approximately 25% of the likely recoverable damages for the Settlement Class (before an award of attorneys’ fees and reimbursement of Litigation Expenses). This is an outstanding result for Class Members given the risks of the litigation. Indeed, this percentage recovery is particularly noteworthy in comparison to the finding that, from 2010-19, in all securities class actions with estimated damages in the range of $500-999 million, 3 Case 1:17-cv-03463-TWT Document 176 Filed 05/22/20 Page 7 of 88 the median settlements recovered only 3.7% of damages (before reductions for attorneys’ fees and litigation expenses). See Cornerstone Research, Securities Class Action Settlements 2019 Review and Analysis (2020), attached as Exhibit 5, at 6. 7. When viewed in this context, the percentage recovery achieved in this case is extremely favorable, even putting aside the substantial liability, loss- causation and damages risks in this case. It is also significant in absolute dollars relative to other securities-class-action recoveries nationwide. The inflation adjusted median securities-class-action settlement in the Eleventh Circuit