Free Motion for Order - District Court of Colorado - Colorado

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

Civil Action No. 00-cv-1864-REB-BNB (Consolidated with 00-cv-1908-REB-BNB, 00-cv1910-REB-BNB, 00-cv-1919-REB-BNB, 00-cv-1945-REB-BNB, 00-cv-1954-REB-BNB, 00-cv-1957-REB-BNB, 00-cv-1963-REB-BNB, 00-cv-1996-REB-BNB, 00-cv-2040-REBBNB, 00-cv-2074-REB-BNB, 00-cv-2149-REB-BNB, 00-cv-2243-REB-BNB, and 00-cv2316-REB-BNB) In re ICG COMMUNICATIONS, INC. SECURITIES LITIGATION This Document Relates To: All Actions

LEAD PLAINTIFFS' MOTION FOR FINAL APPROVAL OF CLASS ACTION SETTLEMENT, PLAN OF ALLOCATION AND CERTIFICATION OF SETTLEMENT CLASS

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TABLE OF CONTENTS

TABLE OF AUTHORITIES........................................................................................... iii-v I. II. III. PRELIMINARY STATEMENT............................................................................... 1 FACTUAL BACKGROUND................................................................................... 3 ARGUMENT ......................................................................................................... 6 A. Standard of Review For Approval of Class Action Settlement .......................................................................... 6 The Settlement is Fair, Reasonable and Adequate................................. 7 1. The Proposed Settlement Was Fairly and Honestly Negotiated ........................................................... 7 The Outcome of the Litigation Was Uncertain Because Serious Questions of Law and Fact Existed ....................................................................................... 9 Immediate Settlement Is More Beneficial to the Class Than the Possibility of Recovery in the Future............................................................................. 10 The Parties and Counsel Believe That the Settlement is Fair and Reasonable.......................................... 13

B.

2.

3.

4.

C. D.

The Plan of Allocation Is Fair and Reasonable ..................................... 15 Certification of the Class for Settlement Purposes Is Proper and Necessary .......................................................................... 17 1. The Proposed Class Satisfies Fed. R. Civ. P. 23(a) a. b. c. d. Rule 23(a)(1): Numerosity............................................ 17 Rule 23(a)(2): Common Questions of Law or Fact....... 18 Rule 23(a)(3): Typicality ............................................... 19 Rule 23(a)(4): The Interests Of The Class To Fairly and Adequately Protected ................................... 19

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2. IV.

The Proposed Class Satisfied Fed. R. Civ. P. 23(b) ................ 20

CONCLUSION.................................................................................................... 22

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TABLE OF AUTHORITIES CASES Alvarado Partners, L.P. v. Mehta, 723 F. Supp. 540 (D. Colo. 1989) ................................................................. 13 Amchem Products, Inc. v. Windsor, 521 U.S. 591 (1997)................................................................................ 17, 21 Anxieter v. Home-Stake Prod. Co., 977 F.2d 1549 (10th Cir. 1992) ..................................................................... 12 Carson v. American Brands, Inc., 450 U.S. 79 (1981).......................................................................................... 6 Class Plaintiffs v. Seattle, 955 F.2d 1268 (9th Cir. 1992) ....................................................................... 15 Daubert v. Merrell Dow Pharms., 509 U.S. 579 (1993)...................................................................................... 12 Detroit v. Grinnell Corp., 495 F.2d 448 (2d Cir. 1974) .......................................................................... 13 Devlin v. Scardelletti, 536 U.S. 1 (2002)............................................................................................ 6 Diaz v. Romer, 801 F. Supp. 405 (D. Colo. 1992) ................................................................... 6 Dura Pharms., Inc. v. Broudo, 544 U.S. 336 (2005)...................................................................................... 10 Gold Strike Stamp Co. v. Christensen, 436 F.2d 791 (10th Cir. 1970) ....................................................................... 21 Gottlieb v. Wiles, 11 F.3d 1004 (10th Cir. 1993), rev'd sub. nom.......................................... 6, 11 Grady v. De Ville Motor Hotel, Inc., 415 F.2d 449 (10th Cir. 1969) ......................................................................... 6

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In re Ikon Office Solutions, Inc., Sec. Litig., 194 F.R.D. 166 (E.D. Pa. 2000) .................................................................... 15 In re Intelcom Group, Sec. Litig., 169 F.R.D. 142 (D. Colo. 1996)..................................................................... 19 In re King Resources Co. Sec. Litig., 420 F. Supp. 610 (D. Colo. 1976) ................................................................. 13 In re New Mexico Natural Gas Antitrust Litig., 607 F. Supp. 1491 (D. Colo. 1984) (citation omitted) ................................ 6, 13 In re Painewebber Ltd. P'ships Litig., 171 F.R.D. 104 (S.D.N.Y.), aff'd, 117 F.3d 721 (2d Cir. 1997) ...................... 16 In re Ribozyme Pharms., Inc. Sec. Litig., 205 F.R.D. 572 (D. Colo. 2001)................................................... 17, 18, 20, 21 In re WorldCom Sec. Litig., 388 F. Supp. 2d 319 (S.D.N.Y. 2005) ........................................................... 15 Jones v. Nuclear Pharmacy, Inc., 741 F.2d 322 (10th Cir. 1984) ........................................................... 6, 7, 9, 10 Lucas v. Kmart Corp., 234 F.R.D. 688 (D. Colo. 2006)................................................................... 8, 9 Maley v. Del Global Techs. Corp., 186 F. Supp. 2d 358 (S.D.N.Y. 2002) .......................................................... 15 Marcus v. State of Kansas Department of Revenue, 209 F. Supp. 2d 1179 (D. Kan. 2002) ........................................................... 13 Miller v. Republic National Life Insurance Co., 559 F.2d 426 (5th Cir. 1977) ......................................................................... 14 Officers for Justice v. Civil Ser. Commission, 688 F.2d 615 (9th Cir. 1982) ......................................................................... 13 Randall v. Loftsgaarden, 478 U.S. 647 (1986)...................................................................................... 12 Rutter & Wilbanks Corp. v. Shell Oil Co., 314 F.3d 1180 (10th Cir. 2002) ....................................................................... 7 iv

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Schwartz v. Celestial Seasonings, Inc., 178 F.R.D. 545 (D. Colo. 1998)......................................................... 17, 18, 19 Wilkerson v. Martin Marietta Corp., 171 F.R.D. 273 (D. Colo. 1997)............................................................. 6, 7, 11 UNREPORTED DECISIONS Feerer v. Amoco Prod. Co., No. 95-0012, 1998 U.S. Dist. LEXIS 22248 (D.N.M. May 28, 1998)................................... 11 In re Qwest Committee International, Inc. Sec. Litig., No. 01-1451-REB, 2006 U.S. Dist. LEXIS 71039 (D. Colo. Sept. 28, 2006) ................. 7, 8, 10, 13 Veritas Software Corp. Sec. Litig., No. C-03-0283-M 2005 WL 3096079 (N.D. Cal. Nov. 15, 2005)................................................ 14 STATUTES AND RULES 15 U.S.C. § 78u-4(a)(7) ...................................................................................... 14 Federal Rule of Civil Procedure 23.............................................................. passim OTHER H.R. Conf. Rep. No. 104-369, at 32 (1995) .......................................................... 3

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I.

PRELIMINARY STATEMENT Pursuant to Rule 23(e) of the Federal Rules of Civil Procedure, Lead Plaintiffs,

Strategic Market Analysis Fund, Retirement Systems of Alabama, and the Policemen's Annuity and Benefit Fund of Chicago (collectively, "Lead Plaintiffs"), respectfully submit this motion in support of their application for (i) final approval of the settlement ("Settlement") with Defendants J. Shelby Bryan ("Bryan") and William S. Beans, Jr. ("Beans") (collectively, "Defendants"), pursuant to the terms in the Stipulation of Settlement dated July 10, 2006 ("Stipulation"); (ii) approval of the Plan of Allocation of the Net Settlement Fund; and (iii) certification of the Class for Settlement purposes. The Settlement provides for an immediate payment of $18 million in cash, plus interest accrued thereon, for the benefit of a "Class" of persons who purchased the common stock of ICG Communications, Inc. ("ICG" or the "Company") between December 9, 1999 through September 18, 2000, inclusive (the "Class Period"). Lead Plaintiffs and Lead Counsel submit that the $18 million settlement is an excellent result for the Class. This was a hard fought and strongly disputed Action, which spanned the course of nearly seven years, two consolidated complaints, numerous discovery motions, over 40 witness interviews, and extensive merits discovery, including depositions. At the time the parties reached the Settlement, they were only months away from the commencement of trial. The Settlement confers a substantial benefit on the Class and eliminates the risk of continued litigation under circumstances where a favorable outcome could not be assured. As detailed in the Joint Declaration of Norman Berman and Jeffrey N. Leibell

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In Support Of The Proposed Settlement And Motion For An Award Of Attorneys' Fees And Reimbursement Of Expenses ("Lead Counsel Decl.," submitted herewith), the settlement was reached only after Lead Counsel exhaustively analyzed and thoroughly investigated the claims and defenses, reviewed and analyzed over 140,000 pages of documents and thousands of electronic files, including documents produced by Defendants and non-parties, 1 interviewed more than 40 witnesses, deposed several former ICG employees and consulted extensively with damages and technical experts in the field of telecommunications. Lead Counsel also prepared two detailed

consolidated complaints, opposed Defendants' motions to dismiss, defended motions to compel discovery, engaged in numerous "meet and confer" sessions with Defendants concerning discovery matters, and filed a motion for class certification. The Settlement is the product of good faith and arm's-length settlement negotiations, which culminated in a two-day mediation before a highly experienced and respected mediator, Jonathan Marks of MarksADR, LLC. As explained below, the

Settlement was reached at a time when Lead Plaintiffs were cognizant of the strengths and weaknesses of the case and the risks of continued litigation. The favorable reaction of the members of the Class also supports the reasonableness of the settlement. Congress enacted the Private Securities Litigation Reform Act ("PSLRA") in large part to encourage sophisticated institutional investors to take control of securities class actions and to "increase the likelihood that parties with
1

These included ICG; its former customers, MCI, AT&T, Microsoft Networks LLC, Netzero, Inc., Lucent Technology, Cisco Systems, Verio, Inc., American Online and UUNet SA; its investors, Liberty Media Corp., Hicks Muse Tate & Furst, and Gleacher & Co.; and its outside auditor during the Class Period, KPMG LLP.

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significant holdings in issuers, whose interests are more strongly aligned with the class of shareholders, will participate in the litigation and exercise control over the selection and actions of plaintiff's counsel." H.R. CONF. REP. NO. 104-369, at 32 (1995).

Importantly, the Court-appointed Lead Plaintiffs, who were fully informed throughout the prosecution of the action, are precisely the type of institutional investors Congress sought to empower when passing the PSLRA, and each has approved of the settlement as fair, reasonable and in the best interests of the Class. For the reasons discussed herein and in the accompanying Lead Counsel Decl. and Joint Declaration of William F. Kelley, John Gallagher and Yomi Rodrig In Support of Final Approval of Settlement, Plan of Allocation and Award of Attorney's Fees and Reimbursement of Litigation Expenses ("Joint Client Decl."), attached as Exhibit 1 to the Lead Counsel Decl., Lead Counsel respectfully submit that the settlement is fair, reasonable, and adequate to the Class and should be approved by the Court. II. FACTUAL BACKGROUND This case began in September 22, 2000, when the first of fourteen related federal securities class actions on behalf of purchasers of ICG common stock was filed. By Order dated October 25, 2001, the Court appointed Strategic Market Analysis Fund, the Retirement Systems of Alabama, and the Policemen's Annuity and Benefit Fund of Chicago as Lead Plaintiffs for this securities class action, and approved the Lead Plaintiffs' selection of counsel, appointing Bernstein Litowitz Berger & Grossmann LLP ("Bernstein Litowitz") and Berman DeValerio Pease Tabacco Burt & Pucillo ("Berman

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DeValerio") as Lead Counsel, and Shuman & Berens LLP (f/k/a Dyer & Shuman LLP) as Liaison Counsel. In preparation for filing their Consolidated and Amended Complaint, Lead Counsel conducted an intensive factual investigation, including reviewing the publicly filed documents of ICG and interviewing former ICG employees and customers. Lead Counsel Decl. ¶¶4, 12-14. The result of this investigation formed the basis for the Consolidated and Amended Complaint, which was filed on February 15, 2002 (the "First Amended Complaint"), and alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5. Defendants moved to dismiss the First Amended Complaint on May 14, 2002, arguing, among other things, that Lead Plaintiffs failed to allege fraud with sufficient particularity, as required under Rule 9(b) and the PSLRA, and failed to adequately plead scienter. Upon consideration of the motion and Lead Plaintiffs' opposition papers, the Court, on August 25, 2004, granted Defendants' motion in part, and denied it in part, substantially limiting the scope of Lead Plaintiffs' claims. Following the Court's order, Lead Counsel embarked on a massive investigation to cure the perceived deficiencies in the First Amended Complaint identified by the Court. Lead Counsel interviewed over forty (40) former employees of ICG, both in person and via conference calls. Lead Counsel Decl. ¶¶4, 12, 13. Concurrently, Lead Counsel requested and reviewed documents produced by Defendants and non-parties relating to the claims in the First Amended Complaint that were sustained by the Court. Armed with the additional factual allegations gathered from their renewed investigation,

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on March 15, 2005, Lead Counsel filed a motion for leave to file the Second Consolidated and Amended Complaint (the "Second Amended Complaint"). The Court granted the motion to amend and, by order dated February 7, 2006, revived many of the claims it had earlier dismissed by denying Defendants' motion to dismiss in its entirety ­ with the sole exception of claims against Defendant Bryan concerning ICG's network problems and customer complaints, which the Court dismissed. 2 At the time the Settlement was reached, expedited discovery was well underway. Lead Counsel received, reviewed and analyzed over 140,000 pages of hard copy documents and approximately 3,000 electronic documents produced by ICG, as well as raw data concerning ICG's line count entry and billing systems. Lead Counsel Decl. ¶¶4, 12, 13, 19, 28. Lead Counsel also reviewed thousands of pages of documents produced by non-parties, including ICG; its auditor, KPMG LLP; and its former customers, suppliers, and investors. Lead Counsel Decl. ¶¶26, 27. Lead Counsel also consulted with technical experts in the field of telecommunications in analyzing the document production, as well as damages and accounting experts who aided in analyzing the issues in the case. In addition to document discovery, Lead Plaintiffs conducted more than 40 interviews with former ICG employees and customers, both inperson and via conference calls, drafted witness affidavits, and took four depositions of ICG employees. Lead Plaintiffs also responded to requests for production of

2

On March 14, 2006, the Court entered a Scheduling Order setting forth discovery and other litigation deadlines in the case, including setting a trial date of September 11, 2006. On March 17, 2006, Defendants answered the Second Amended Complaint.

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documents and interrogatories and submitted a motion for class certification to the Court. Lead Counsel Decl. ¶¶24, 31. III. ARGUMENT A. Standard of Review For Approval of Class Action Settlement

It is firmly established in the Tenth Circuit that courts favor the settlement of controversies. See Wilkerson v. Martin Marietta Corp., 171 F.R.D. 273, 284 (D. Colo. 1997); Diaz v. Romer, 801 F. Supp. 405, 407 (D. Colo. 1992) (in approving class action settlement, court explained that a "consensual resolution of a dispute is always preferred."); Grady v. De Ville Motor Hotel, Inc., 415 F.2d 449, 451 (10th Cir. 1969). The authority to approve a settlement of a class action "is committed to the sound discretion of the trial court." Gottlieb v. Wiles, 11 F.3d 1004, 1014 (10th Cir. 1993), rev'd sub. nom Devlin v. Scardelletti, 536 U.S. 1 (2002). "In exercising its discretion, the trial court must approve a settlement if it is fair, reasonable and adequate." Jones v. Nuclear Pharmacy, Inc., 741 F.2d 322, 324 (10th Cir. 1984). However, the court should not adjudicate the merits of the action or substitute its judgment for that of the parties who negotiate the settlement. Carson v. American Brands, Inc., 450 U.S. 79, 88 n. 14 (1981). As this Court has stated: [T]he court's intrusion upon what is otherwise a private consensual agreement negotiated between the parties to a lawsuit must be limited 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. Therefore, the settlement or fairness hearing is not to be turned into a trial or rehearsal for trial on the merits. In re New Mexico Natural Gas Antitrust Litig., 607 F. Supp. 1491, 1497 (D. Colo. 1984)
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(citation omitted). In Jones, the Tenth Circuit set forth the following four factors that the court should consider in assessing whether a proposed settlement is fair, reasonable and adequate: (1) whether the proposed settlement was fairly and honestly negotiated; (2) whether serious questions of law and fact exist, placing the ultimate outcome of the litigation in doubt; (3) whether the value of an immediate recovery outweighs the mere possibility of future relief after protracted and expensive litigation; and (4) the judgment of the parties that the settlement is fair and reasonable. 741 F.2d at 324; accord In re Qwest Comm. Int'l, Inc. Sec. Litig., No. 01-1451-REB, 2006 U.S. Dist. LEXIS 71039 (D. Colo. Sept. 28, 2006); Rutter & Wilbanks Corp. v. Shell Oil Co., 314 F.3d 1180, 1188 (10th Cir. 2002). As discussed below, the Settlement here easily satisfies each of these factors. B. The Settlement Is Fair, Reasonable and Adequate 1. The Proposed Settlement Was Fairly and Honestly Negotiated

The fact that the parties to this litigation have "vigorously advocated their respective positions throughout the pendency of the case" indicates that the settlement negotiations here have been fair, honest and at arm's-length. Wilkerson, 171 F.R.D. at 284. At the time of Settlement, Lead Counsel had effectively litigated this case for nearly seven years. During that time, Lead Counsel reviewed and analyzed over 140,000 pages of documents, conducted extensive discovery, including numerous See

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depositions, interviewed over forty witnesses with knowledge of the issues in the action and consulted with experts in the fields of telecommunications and damages. Settlement negotiations were conducted over a two-day period, on May 16 and May 17, 2006, and involved the mediation oversight of Jonathan Marks of MarksADR, LLC. Prior to the mediation, each side submitted lengthy mediation statements in support of their positions. Throughout the settlement negotiations, all counsel vigorously advocated the positions of their respective clients. Indeed, prior to

reaching the Settlement, Lead Counsel were well aware of the strengths and weaknesses of the Litigation, had a firm understanding of Defendants' positions, and thus were well versed on the decision whether to settle the Action, and if so, for how much. Further, Lead Plaintiffs were actively involved in the settlement negotiations

and directly participated in the mediation process, including reaching the decision to settle this Action on the terms described herein. Where the "settlement resulted from arm's length negotiations between experienced counsel after significant discovery had occurred, the Court may presume the settlement to be fair, adequate, and reasonable." Lucas v. Kmart Corp., 234 F.R.D. 688, 692 (D. Colo. 2006); see also In re Qwest, 2006 U.S. Dist. LEXIS 71039, at *16 (approving settlement where parties were represented by "competent, seasoned attorneys," claims were "challenged and refined" through several amended complaints, substantial discovery was completed prior to negotiations, and mediation was overseen by professional mediators). As discussed above, it is certainly the case here that the Settlement was

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reached at an advanced point in the Litigation, after significant discovery had occurred, and where both parties understood the strengths and weaknesses of their respective cases. Accordingly, this Jones factor has been met. 2. The Outcome of the Litigation Was Uncertain Because Serious Questions of Law and Fact Existed

The second factor considered by the Tenth Circuit in evaluating settlements is whether there were "serious questions of law and fact . . . [that] plac[ed] the ultimate outcome of the litigation in doubt." Jones, 741 F.2d at 324. In assessing the

settlement, the Court should balance the benefits of the substantial certain recovery for the Class against the risks of continued litigation. See Kmart, 234 F.R.D. at 693. A balance of these factors strongly supports the approval of the settlement here. Here, because Lead Counsel faced numerous obstacles in proving their case, recovery was less than certain. First, Lead Plaintiffs faced difficulty in proving that Defendants acted with scienter. Of specific concern here was that a jury could

reasonably find ­ as had been and would likely continue to be argued by Defendants ­ that Defendants were not responsible for the alleged fraud at ICG and lacked any financial motivation to commit fraud, particularly since the Defendants did not sell any of their ICG stock during the Class Period. Also of concern here is the fact that ICG never restated its financial statements, and therefore, never admitted that its financial statements issued during the Class Period were false. Further, Defendants would continue to argue that ICG never

announced that its reciprocal revenue results were inaccurate, or disclosed any alleged line-count inflation, therefore resulting in loss causation issues for Lead Plaintiffs under
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the Supreme Court's recent opinion in Dura Pharms., Inc. v. Broudo, 544 U.S. 336 (2005), which was handed down in mid-litigation, and presented numerous issues of first impression relating to issues of loss causation. Lead Counsel Decl. ¶16. Finally, even assuming Lead Plaintiffs survived Defendants' anticipated motions for summary judgment, Lead Plaintiffs have taken into account the complex issues that would have to be decided by a jury, including whether Defendants acted knowingly or recklessly, whether each of the alleged misrepresentations and omissions was material, and the amount of any damages caused by the alleged misrepresentations and omissions. A jury's outcome on such complex issues of law and fact is uncertain and presents risk. See In re Qwest, 2006 U.S. Dist. LEXIS 71039, at *17 (approving

securities class action settlement noting "accounting issues, the scienter issues, the causation issues, and the damages issues all are complex and problematic. Presenting these issues to a jury would create substantial risks for all parties, including the plaintiffs."). By contrast, the Settlement here is reasonable, certain, and eliminates all such risks. 3. Immediate Settlement Is More Beneficial to the Class Than the Possibility of Recovery in the Future

The third factor for evaluating whether the settlement is fair, reasonable and adequate, is "whether the value of an immediate recovery outweighs the mere possibility of future relief after protracted and expensive litigation." Jones, 741 F.2d at 324; see also In re Qwest, 2006 U.S. Dist. LEXIS 71039, at *18-19 (approving securities class action settlement and noting that immediate recovery outweighed the possibility of future relief). In the present case, Lead Plaintiffs believe that the benefits of settling the
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case now are far superior to the risk of adjudicating the case. In Gottlieb v. Wiles, 11 F.3d 1004 (10th Cir. 1993), the court noted that: The value of the immediate recovery is quite simply that; the monetary worth of the settlement. . . . Under the third Jones factor, that value is to be weighed not against the net worth of the defendant, but against the possibility of some greater relief at a later time, taking into consideration the additional risks and costs that go hand in hand with protracted litigation. Id. at 1015 (emphasis added). Absent the Settlement, fact discovery would have continued, expert discovery would have been conducted, summary judgment motions would have been briefed and argued, and pretrial procedures in preparation for the trial would have been conducted. As a result, the amount of insurance monies available for recovery would have been substantially depleted. If the case proceeded to trial, the preparation for trial and the trial would no doubt have been lengthy and would also have involved significant expenditures of time and resources on both sides. Moreover, even if Lead Plaintiffs had obtained a favorable verdict, any judgment would have been subject to further risks during the appeals process. Feerer v. Amoco Prod. Co., No. 95-0012, 1998 U.S. Dist. LEXIS 22248, at *26 (D.N.M. May 28, 1998) (finding immediate recovery desirable considering: (1) cost of trial; (2) strain on parties' resources; and (3) risk and delay caused by inevitable appeals); Wilkerson, 171 F.R.D. at 287-88 (finding that immediate benefit desirable due to extreme unlikelihood that case would settle due to its complexity, number of issues involved, and uncertainty of legal precedent). In addition to the significant costs of prosecuting the case through trial and appeals, the difficulties in proving damages also weigh in favor of settlement. Lead
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Plaintiffs would face formidable challenges in establishing the precise amount of loss, if any, attributable to Defendants' wrongful conduct. Under the measure of damages provisions in Section 10(b) cases, a defrauded buyer recovers the difference between the price paid for the security and the true value of that security (the value absent fraud) as of the date of purchase. Randall v. Loftsgaarden, 478 U.S. 647, 661-662 (1986) (holding that "the correct measure of damages" "in § 10(b) cases involving fraud by a seller of securities" "is the difference between the fair value of all that the [plaintiff] received and the fair value of what he would have received had there been no fraudulent conduct") (citations omitted); Anxieter v. Home-Stake Prod. Co., 977 F.2d 1549, 1553 (10th Cir. 1992) (same). Expert testimony is necessary to prove such

damages. Indeed, Defendants' expert would likely attribute ICG's stock price decline to the general decline in the telecommunications market during the Class Period. Lead Plaintiffs and Defendants would employ the testimony of experts for these complex damage calculations, and such experts would undoubtedly have reached far different conclusions. Lead Plaintiffs also would face the challenge of surviving any challenge to their expert's qualifications and methodology under Daubert v. Merrell Dow Pharms., 509 U.S. 579 (1993), and to convince the Court to adopt Lead Plaintiffs' methodology. In the end, the crucial damages element would be reduced to a "battle of experts." Defendants would strongly oppose both the inclusion of Lead Plaintiffs' expert testimony and the adoption of their damages methodology. If the parties were to try the case, it is virtually impossible to predict which expert the jury would find more credible.

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In re New Mexico Natural Gas, 607 F. Supp. at 1505 ("No one can predict whether a jury would . . . ultimately [find] in favor of [a party]."). In light of the risks noted in litigating the case through trial and appeals, and the possibility that Lead Plaintiffs would not recover anything, the $18 million Settlement is fair and reasonable. See Detroit v. Grinnell Corp., 495 F.2d 448, 455 & n.2 (2d Cir. 1974) (holding that proposed settlement should not be disapproved merely because proposed settlement amount is fraction of potential recovery); Officers for Justice v. Civil Ser. Comm'n, 688 F.2d 615, 628 (9th Cir. 1982) ("It is well-settled law that a cash settlement amounting to only a fraction of the potential recovery will not per se render the settlement inadequate or unfair."). Lead Counsel believe that a recovery now will provide an immediate benefit to the members of the Class, which is superior to the risk of proceeding with the Litigation in the hope of a larger recovery at a later stage. 4. Lead Plaintiffs and Lead Counsel Believe That the Settlement Is Fair and Reasonable

Both the Lead Plaintiffs and Lead Counsel believe that the Settlement is fair and reasonable in light of all of the circumstances of the case. In re Qwest, 2006 U.S. Dist. LEXIS 71039, at *19 (noting that judgment of plaintiffs' counsel is entitled to weight by Court); Alvarado Partners, L.P. v. Mehta, 723 F. Supp. 540, 548 (D. Colo. 1989) (same); In re King Res. Co. Sec. Litig., 420 F. Supp. 610, 626-27 (D. Colo. 1976) (same); see also Marcus v. State of Kansas Dept. of Revenue, 209 F. Supp. 2d 1179, 1182 (D. Kan. 2002) ("When a settlement is reached by experienced counsel after negotiations in an adversarial setting, there is an initial presumption that the settlement is fair and reasonable"). Lead Counsel's conclusion that the settlement is an excellent result for
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the Class is based on a careful review of the evidence, likelihood of prevailing on the claims asserted, and certain appeals and subsequent proceedings if Lead Plaintiffs prevailed at trial. Further, should Lead Plaintiffs prevail at trial, the costs expended by Defendants' counsel would have surely reduced the resources available to pay any judgment. In light of the unique and significant experience of Lead Counsel in litigating and settling securities fraud class actions, as well as their in-depth knowledge of the case's strengths and weaknesses, Lead Counsel's endorsement of the Settlement indicates that it is a fair and reasonable outcome for the class. As stated in the Joint Client Decl., the Court-appointed Lead Plaintiffs, sophisticated institutional investors, approve of the Settlement as fair, reasonable and adequate. The reaction of the Class Members also supports approval of the Settlement. Lead Counsel Decl. ¶43. 3 After mailing 24,344 Notices of the proposed Settlement to

3

Following the Court's preliminary approval of the Settlement and class certification, 24,344 copies of the Court-approved Notice of Proposed Settlement, Settlement Fairness Hearing and Motion for Attorney Fees and Reimbursement of Litigation Expenses (the "Notice") were mailed to individuals and entities; and on August 18, 2006, a Summary Notice of Proposed Settlement, Settlement Fairness Hearing and Motion for Attorney Fees and Reimbursement of Litigation Expense ("Summary Notice") was published once in the national edition of The Wall Street Journal. See Affidavit Of Anya Verkhovskaya ("Claims Admin. Aff."), ¶¶8, 9, 17. The Notice explained the action, summarized the allegations against Defendants and informed the Class Members that a request for exclusion or objection must be postmarked no later than December 12, 2006. This notice program complies with the requirements of the Federal Rules of Civil Procedure, the Reform Act and due process. See 15 U.S.C. § 78u-4(a)(7); In re Veritas Software Corp. Sec. Litig., No. C-03-0283-MMC, 2005 WL 3096079, at *6 (N.D. Cal. Nov. 15, 2005) (indicating that the notice was published in Investor's Business Daily and sent to more than 494,000 potential class members); see also Miller v. Republic Nat'l Life Ins. Co., 559 F.2d 426, 430 (5th Cir. 1977) (period of four weeks between the mailing and the hearing is sufficient).

The deadline for requesting exclusion from the Class is December 28, 2006. Once the deadline has passed, Lead Counsel will submit to the Court a list of those who validly requested 14

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Class Members, and with only two weeks remaining in the time to submit objections (December 28, 2006), to date Lead Plaintiffs have received no objections and only one request for exclusion from the Settlement. 4 Claims Admin. Aff. ¶¶8, 9, 17, 19. This apparent support for the Settlement is a further factor favoring approval. C. The Plan of Allocation Is Fair and Reasonable

Lead Plaintiffs also seek approval of the Plan of Allocation of the Net Settlement proceeds. The Plan of Allocation was set forth in the Notice mailed to Class Members. As discussed more fully in the accompanying Lead Counsel Decl., the Plan of Allocation reasonably and rationally distributes the settlement proceeds to those Class Members who suffered economic losses as a result of the alleged fraud, as opposed to losses caused by market, industry, or other non-fraud related Company specific factors. Lead Counsel Decl. ¶¶44-48. Assessment of a plan of allocation in a class action under Federal Rule of Civil Procedure 23 is governed by the same standards of review applicable to the settlement as a whole ­ the plan must be fair and reasonable. See In re WorldCom Sec. Litig., 388 F. Supp. 2d 319, 344 (S.D.N.Y. 2005); In re Ikon Office Solutions, Inc., Sec. Litig., 194 F.R.D. 166, 184 (E.D. Pa. 2000); Class Plaintiffs v. Seattle, 955 F.2d 1268, 1284 (9th Cir. 1992). It is well established that "[a] plan of

allocation that reimburses Class Members based on the type and extent of their injuries is reasonable." Maley v. Del Global Techs. Corp., 186 F. Supp. 2d 358, 367 (S.D.N.Y.

exclusion.
4

Should any objections be received, they will be addressed by Lead Counsel in a further submission to the Court on or before January 5, 2007 and/or at the Settlement Hearing.

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2002). "An allocation formula need only have a reasonable, rational basis, particularly if recommended by `experienced and competent' class counsel." Id. In determining whether the Plan of Allocation is fair, the opinion of counsel weighs heavily. See In re Painewebber Ltd. P'ships Litig., 171 F.R.D. 104, 133

(S.D.N.Y.) ("[T]he adequacy of an allocation plan turns on whether counsel has properly apprised itself of the merits of all claims, and whether the proposed apportionment is fair and reasonable in light of that information), aff'd, 117 F.3d 721 (2d Cir. 1997); White v. NFL, 822 F. Supp. 1389, 1420 (D. Minn. 1993) ("The Court . . . affords considerable weight to the opinion of experienced and competent counsel that is based on their informed understanding of the legal and factual issues involved" in approving the plan of allocation). Here, the Plan of Allocation was developed in connection with Lead

Counsel's damages expert, Forensic Economics, and it reflects an assessment of the damages that could have been recovered under the theories asserted in the case. The Plan of Allocation will result in a fair and equitable distribution of the proceeds among Class Members who submit valid claims and it should be approved. Courts also consider the reaction of a class to a plan of allocation. See

Painewebber, 171 F.R.D. at 126. The Notice described the proposed Plan of Allocation in detail, and indicated that the deadline for objecting to the Plan of Allocation was December 28, 2006. No objections to the Plan of Allocation have yet been received. Accordingly, the Plan of Allocation should be approved as fair, reasonable and adequate.

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D.

Certification of the Class for Settlement Purposes Is Proper and Necessary

Lead Plaintiffs request that the Court certify the Class for Settlement purposes only. 5 The Class, subject to certain exceptions as set forth in ¶4 of the Order and Final Judgment, consists of all persons who purchased ICG common stock on the open market from December 9, 1999, through September 18, 2000, inclusive, and were damaged thereby. In the settlement context, class certification criteria are easily met because the class is unified by a common interest in a reasonable recovery. See Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (1997). Although class action requirements must be met when certifying a settlement class, the settlement should be taken into account. 1. The Proposed Class Satisfies Fed. R. Civ. P. 23(a) a. Rule 23(a)(1): Numerosity Rule 23(a)(1) requires that the class be "so numerous that joinder of all members is impracticable." Fed. R. Civ. P. 23(a)(1). Although no bright line numerical test

applies, when class size reaches substantial proportions, the numerosity requirement is met. See In re Ribozyme Pharms., Inc. Sec. Litig., 205 F.R.D. 572, 578 (D. Colo. 2001) (numerosity requirement assumed to be satisfied in the case of a nationally traded security); Schwartz v. Celestial Seasonings, Inc., 178 F.R.D. 545, 550 (D. Colo. 1998). The numerosity requirement is easily satisfied here: ICG had tens of millions of shares

5

In the Stipulation of Settlement, all parties agreed to stipulate to class certification for settlement purposes only. Stipulation ¶29. In its Preliminary Approval Order dated July 28, 2006, the Court preliminarily certified the Class.

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traded during the Class Period, and the proposed Class of investors who purchased ICG shares contains thousands of individuals and entities. b. Rule 23(a)(2): Common Questions of Law or Fact Rule 23(a)(2) requires that there exist "questions of law or fact common to the class." Fed. R. Civ. P. 23(a)(2). The claims of potential class members need not be factually identical. Schwartz, 178 F.R.D. at 551; see also Ribozyme, 205 F.R.D. at 578 (Rule 23(a)(2) "does not require that the injuries of all class members be identical; only the harm complained of must be common to the class.") (citing Schwartz, 178 F.R.D. at 551). The proposed Class satisfies the commonality requirement. Several common issues of law and fact in this case include the following: · · · Whether the federal securities laws were violated by the acts and omissions of Defendants, as alleged in the SAC; Whether Defendants participated in and pursued the common course of conduct complained of in the SAC; Whether documents filed with the Securities and Exchange Commission and other public statements made during the Class Period misrepresented or omitted facts about ICG; Whether the market price of ICG's securities during the Class Period was artificially inflated due to the material misrepresentations and omissions; and; Whether members of the Class have suffered damages and, if so, the appropriate measure thereof.

·

·

Accordingly, Rule 23(a)(2) is met because absent class members would have to prove identical facts and address identical legal issues if they pursued their claims individually.

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c. Rule 23(a)(3): Typicality Rule 23(a)(3) requires that plaintiffs' claims be typical of the class' claims. Fed. R. Civ. P. 23(a)(3). This "requirement may be satisfied even though varying fact

patterns support the claims or defenses of individual class members or there is a disparity in the damages claimed by the representative parties and the other members of the class." Schwartz, 178 F.R.D. at 551. Typicality is shown where the "major issue presented is whether the Defendants have violated the federal securities laws." In re Intelcom Group, Sec. Litig., 169 F.R.D. 142, 149 (D. Colo. 1996). Here, the claims asserted by the proposed class representatives are typical, if not identical, to the claims of the respective members of the Class as a whole. Lead Plaintiffs allege that

Defendants violated various provisions of the Exchange Act, as well as rules promulgated thereunder, by issuing public statements that misrepresented and omitted material facts. Lead Plaintiffs also allege that Class members paid artificially inflated prices for ICG securities as a result of Defendants' material misrepresentations and omissions. Those claims, and the claims of the absent Class members, are based upon the same facts and legal theories. d. Rule 23(a)(4): The Interests Of The Class To Be Fairly and Adequately Protected Rule 23(a)(4) requires that plaintiffs "fairly and adequately protect the interests of the class." Fed. R. Civ. P. 23(a)(4). This requirement is comprised of two factors: (1) that the class representatives' attorneys are qualified, experienced and generally able to conduct the litigation; and (2) that the suit is not collusive, and plaintiffs' interests are not antagonistic to those of the other members of the class. In re Ribozyme, 205 F.R.D. at
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578. Both prongs of the Rule 23(a)(4) adequacy test are met here. Lead Counsel and Liaison Counsel's competency and qualifications cannot be denied. As reflected in their firm resumes, Berman DeValerio and Bernstein Litowitz, Lead Counsel for the Class, and Shuman and Berens LLP, Liaison Counsel, are experienced and capable of prosecuting this Litigation on behalf of the Class. Lead Plaintiffs' chosen counsel has vigorously and competently represented the interests of all Class members for the past seven years without fail, and will continue to do so. Further, Lead Plaintiffs' interests are neither antagonistic to, nor in conflict with, the interests of other Class members. 6 To the contrary, Lead Plaintiffs and other

members of the Class sustained losses as a result of the same alleged fraudulent conduct. Lead Plaintiffs purchased the ICG common stock at issue in this Action, and by prosecuting its own claims to achieve maximum recovery, it also sought to vigorously prosecute the claims of other ICG Class members. Accordingly, the requirements of Rule 23(a)(4) have been satisfied. 2. The Proposed Class Satisfies Fed. R. Civ. P. 23(b)

A class action must also satisfy one of the subdivisions of Rule 23(b). Here, the Class satisfies the requirements of Rule 23(b)(3), which provides that a class action may be maintained: [I]f the prerequisites of subdivision (a) are satisfied, and in addition . . . the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members,

6

In its Preliminary Approval Order dated July 28, 2006, the Court preliminarily concluded that Lead Plaintiffs are adequate class representatives and certified them for settlement purposes only as class representatives.

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and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy.

Fed. R. Civ. P. 23(b)(3). Here, common questions of law or fact predominate over any individual questions and the class action is superior to other means of adjudication. Whether common issues "predominate" focuses on the liability issue. Gold Strike Stamp Co. v. Christensen, 436 F.2d 791, 796 (10th Cir. 1970) ("where the question of basic liability can be established readily by common issues, then it is apparent that the case is appropriate for class action."). "Predominance is a test readily met . . . in cases alleging . . . securities fraud." Amchem, 521 U.S. at 625; see also In re Ribozyme, 205 F.R.D. at 578. Where, as here, Lead Plaintiffs allege that Defendants engaged in

misrepresentations causing inflation in the price of stock, which is alleged to violate the federal securities laws, the issues of law and fact that flow from these activities predominate over any individual issue in a class action. A class action is also superior to other methods of adjudication, and is particularly appropriate for addressing claims of violations of the securities laws. Clearly, multiple lawsuits by individual class members would be costly and inefficient. Nor would all class members be able to afford separate representation, making them unable to even have their claims adjudicated. See In re Ribozyme, 205 F.R.D. at 579 ("Securities fraud actions of this type involve geographically disbursed plaintiffs and involve such costs that if this litigation was not brought via class action, the costs of litigation would likely outweigh any benefit obtained.").

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The four factors specified in Rule 23(b)(3) favor class certification. First, there is no indication that any member of the Class would prefer to prosecute these claims individually. In any event, if some desire to do so, they have the opportunity to opt-out of the Class, as stated in the Notice. Second, Lead Counsel is unaware of any other litigation against these Defendants asserting these claims. Third, the concentration of litigation in one forum will avoid inconsistent adjudications and promote fairness and efficiency. Finally, this case presents no unusual difficulties in maintaining the class action or providing notice to the Class. IV. CONCLUSION For the reasons stated above, Lead Plaintiffs respectfully request that the Court approve the Settlement and the Plan of Allocation as fair, reasonable and adequate to all Class members, and certify the Class for settlement purposes pursuant to Fed. R. Civ. P. 23(a) and 23(b)(3).

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DATED: December 13, 2006

Respectfully submitted, _s/ Jeffrey A. Berens______________ Kip B. Shuman Jeffrey A. Berens SHUMAN & BERENS LLP 801 East 17th Avenue Denver, Colorado 80218 Tel: (303) 861-3003 Fax: (303) 830-6920 [email protected] Liaison Counsel For Lead Plaintiffs and The Class

Max W. Berger Jeffrey N. Leibell Eric T. Kanefsky BERNSTEIN LITOWITZ BERGER & GROSSMANN LLP 1285 Avenue of the Americas New York, NY 10019 Tel: (212) 554-1400 Fax: (212) 554-1444 Attorneys For Lead Plaintiffs Retirement Systems of Alabama and Policemen's Annuity and Benefit Fund of Chicago And The Class

Norman Berman Bryan A. Wood Julie A. Richmond BERMAN DEVALERIO PEASE TABACCO BURT & PUCILLO One Liberty Square Boston, MA 02109 Tel: (617) 542-8300 Fax: (617) 542-1194 Attorneys For Lead Plaintiff Strategic Market Analysis Fund And The Class

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