SUPERIOR COURT OF CALIFORNIA

COUNTY OF SANTA CLARA

IN RE QUANTUM CORP. DERIVATIVE LITIGATION

Case No. 2018-1-CV-328139

(Consolidated with Case No. 2018-1-CV-328572)

TENTATIVE RULING RE: MOTION FOR FINAL APPROVAL OF DERIVATIVE SETTLEMENT

The above-entitled action comes on for hearing before the Honorable Thomas E. Kuhnle on September 6, 2019, at 9:00 a.m. in Department 5. The Court now issues its tentative ruling as follows:

I. INTRODUCTION
II.
This is a shareholder derivative action that includes three consolidated cases – Munn v. Gacek, et al., Case No. 2018-1-CV-328139; Palkon v. Ahmad, et al., Case No. 2018-1-CV-328572; and Asseta v. Rau, et al., Case No. 2019-1-CV-343607.

The consolidated action is brought on behalf of Quantum Corp., a Delaware corporation, for breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, and corporate waste. The parties have reached a settlement. In an order dated May 24, 2019, the Court granted preliminary approval of the settlement. Lead plaintiff Dennis Palkon (“Plaintiff”) now moves for final approval of the settlement.

III. LEGAL STANDARD
IV.
A court reviews the settlement of a derivative suit as a means of protecting the interests of those who are not directly represented in the settlement negotiations. (Robbins v. Alibrandi (2005) 127 Cal.App.4th 438, 449.) The court must therefore scrutinize the proposed settlement agreement to the extent necessary to reach a reasoned judgment that the agreement is not the product of fraud or overreaching by, or collusion between, the negotiating parties, and that the settlement, taken as a whole, is fair, reasonable and adequate to all concerned. (Ibid.) “The duty of a court reviewing a settlement of a class action provides a useful analogy because the court in such cases seeks to protect the members of the class who, like the corporation and non-named shareholders in a derivative suit, may have no independent representation and little control over the action.” (Id. at p. 449, fn. 2.)

V. DISCUSSION
VI.
As discussed in connection with the motion for preliminary approval, the settlement provides for several corporate governance reforms. These include modifications to requirements related to the Board of Directors; creation of a disclosure and controls committee; amendments to the audit committee charter; implementation of a compensation clawback policy; creation of a compliance officer; a requirement for additional director training; a confidential whistleblower program; and revisions to Quantum’s code of business conduct and ethics. The corporate governance reforms must remain in effect for at least five years. The settlement also provides for payment of $800,000 in attorneys’ fees and expenses to be paid by the Defendants’ insurer(s), and a service award of $2,000 to be paid out of the fee and expense amount.

On May 31, 2019, notice of the settlement was posted on Quantum’s investor relations website. (Declaration of Nicholas R. Miller Regarding Notice of Settlement, ¶ 3.) On June 3, 2019, Quantum published the summary notice in Investor’s Business Daily. (Id. at ¶ 5.) As of August 30, 2019, there have been no objections. (Declaration of Frank J. Johnson in Support of Final Approval of Derivative Settlement (“Johnson Decl.”), ¶ 34.)

The Court previously found the settlement is fair because it eliminates the risk and expense of further litigation and provides corporate governance changes that can protect shareholders in the future. The Court continues to make that finding for purposes of final approval.

Plaintiff requests a service award of $2,000 for lead plaintiff Dennis Palkon.

The rationale for making enhancement or incentive awards to named plaintiffs is that they should be compensated for the expense or risk they have incurred in conferring a benefit on other members of the class. An incentive award is appropriate if it is necessary to induce an individual to participate in the suit. Criteria courts may consider in determining whether to make an incentive award include: 1) the risk to the class representative in commencing suit, both financial and otherwise; 2) the notoriety and personal difficulties encountered by the class representative; 3) the amount of time and effort spent by the class representative; 4) the duration of the litigation and; 5) the personal benefit (or lack thereof) enjoyed by the class representative as a result of the litigation. These “incentive awards” to class representatives must not be disproportionate to the amount of time and energy expended in pursuit of the lawsuit.

(Cellphone Termination Fee Cases (2010) 186 Cal.App.4th 1380, 1394-1395, quotation marks, brackets, ellipses, and citations omitted.)

Palkon has submitted a declaration in which he states he participated in drafting the Complaint, reviewed all motions and pleadings prior to filing, and regularly consulted with and provided input to counsel regarding the status and progress of the action. (Declaration of Dennis Palkon in Support of Final Approval of Derivative Settlement, ¶ 3.) He estimates he spent about 25 hours on the case. (Ibid.) The Court finds the service award is warranted.

The Court also has an independent right and responsibility to review the requested attorneys’ fees and only award so much as it determines reasonable. (See Garabedian v. Los Angeles Cellular Telephone Co. (2004) 118 Cal.App.4th 123, 127-128.) Plaintiff’s counsel requests attorneys’ fees and costs in the amount of $800,000. In support of this request Plaintiff’s counsel provides a lodestar figure of $539,424. (Johnson Decl., ¶ 75.) This results in a multiplier of 1.48. Plaintiff’s counsel points out this lodestar amount does not include fees incurred by counsel for Assetta and Munn. (Id. at ¶ 87.) The Court notes Plaintiff’s counsel’s lodestar was reached at least in part with somewhat high billing rates (e.g., 154.5 hours at $945/hour). Nevertheless, in this case the Court finds the requested fees and costs to be reasonable and they are approved.

The motion for final approval of derivative settlement is GRANTED.

The Court will prepare the final order and judgment if this tentative ruling is not contested.