Free Declaration - District Court of Colorado - Colorado

Case 1:04-cv-00665-RPM

Document 134

Filed 02/16/2007

Page 1 of 13

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No. 04-cv-00665-RPM DAVID HELLER, On Behalf of Himself and All Others Similarly Situated, Plaintiff, v. QUOVADX, INC., LORINE R. SWEENEY and GARY T. SCHERPING, Defendants. DECLARATION OF JEFFREY W. LAWRENCE IN SUPPORT OF LEAD COUNSEL'S APPLICATION FOR AN AWARD OF ATTORNEYS' FEES AND REIMBURSEMENT OF EXPENSES

Case 1:04-cv-00665-RPM

Document 134

Filed 02/16/2007

Page 2 of 13

TABLE OF CONTENTS Page I. THE FEE APPLICATION (hearing date to be determined by Court on February 23, 2007) ..............................................................................................................................2 A. Factors to Be Considered in Support of the Requested Attorneys' Fee Award.......................................................................................................................3 1. 2. Extent of Litigation ......................................................................................3 The Risks of Contingent Litigation and the Need to Ensure the Availability of Competent Counsel in High-Risk, Contingent Securities Cases ...........................................................................................4

B. C. II.

Standing and Expertise of Lead Counsel .................................................................6 Standing and Caliber of Opposition Counsel...........................................................6

CONCLUSION....................................................................................................................6

-i-

Case 1:04-cv-00665-RPM

Document 134

Filed 02/16/2007

Page 3 of 13

I, JEFFREY W. LAWRENCE, declare as follows: 1. I am a partner of the law firm of Lerach Coughlin Stoia Geller Rudman & Robbins

LLP, and Lead Counsel for the Court appointed Lead Plaintiff. I submit this declaration in support of Lead Plaintiff's application, under Federal Rule of Civil Procedure 23(e), for this Court's approval of Lead Counsel's application for attorneys' fees and reimbursement of expenses. If called upon, I could and would competently testify that the following facts are true and correct. 2. As noted in the declaration filed in support of the settlement, this settlement is the

product of extensive review of the available evidence and a realistic assessment of the likely recovery at trial by the Class. Lead Counsel received, reviewed and analyzed over 350,000 pages of documents and e-mails from Defendants and third parties. Additionally, with the help of forensic accountants, we also reviewed and analyzed hundreds of work papers from Ernst & Young ("E&Y"). This settlement takes into consideration the risks of continued litigation and most importantly, the potential recovery at trial. It was negotiated by experienced counsel for the Lead Plaintiff and Defendants with a firm understanding of both the strengths and weaknesses of their respective cases. The settlement confers a substantial benefit on the Class ­ providing a recovery of approximately 77.5% of likely provable damages ­ and eliminates the numerous risks of continued litigation, trial and appeal. 3. With respect to Lead Counsel's application for an award of attorneys' fees, Lead

Counsel have prosecuted this action on a wholly contingent basis for three years and by doing so have shouldered the risk of an unfavorable result. The attorney fee application for an award of 25% of the Settlement Fund for the Class is fair both to the Class and Lead Counsel and warrants this Court's approval. We recognize that even though this fee request is well within the range of fees -1-

Case 1:04-cv-00665-RPM

Document 134

Filed 02/16/2007

Page 4 of 13

customarily awarded in such contingency actions and is entirely justified in light of the benefits conferred on the Class, the decision is ultimately this Court's. The excellent result obtained, risks undertaken, the quality of representation and the nature and extent of legal services performed all warrant the request. Should the Court approve the settlement and then approve the requested fees and expenses, the Class's recovery would be approximately 55% of the likely provable damages. 4. Lead Counsel also seek reimbursement of $361,279.25 in out-of-pocket expenses. A

significant amount of Lead Plaintiff's expenses relate to amounts for expert services connected with Lead Plaintiff's accounting allegations ­ which was going to be the principal emphasis at trial. This was so for two reasons: first, in my view it was the clearest and most straightforward element of Defendants' scheme to defraud and second, implicated all of the Defendants in the scheme. Throughout the case, the accounting issues were of principal importance: we spent a substantial amount of time understanding the Company's accounting and E&Y's role in the financial statements. In my opinion, the expenses incurred were necessary to the successful prosecution of this matter and are reasonable in amount. I. THE FEE APPLICATION (hearing date to be determined by Court on February 23, 2007) 5. The notice informs Class Members that Lead Counsel will apply for an award of

attorneys' fees of up to 25% of the Settlement Fund, plus expenses not to exceed $400,000. As set forth in Lead Counsel's Memorandum of Law in Support of Application for Award of Attorneys' Fees and Reimbursement of Expenses, submitted herewith, an award of 25% of the Settlement Fund is reasonable based on the result reached in the settlement, extent of Lead Counsel's work, and the financial risk carried by Lead Counsel in light of the significant risks of continued litigation.

-2-

Case 1:04-cv-00665-RPM

Document 134

Filed 02/16/2007

Page 5 of 13

6.

Lead Counsel have invested a significant amount of time and money in prosecuting

this action on behalf of the Class. Lead Counsel have received no compensation during the more than three years that this litigation has been pending, their fees being totally contingent and dependent upon a successful result and an award by this Court. The settlement obtained by Lead Counsel was, in large part, the result of their hard work, persistence, and skill. 7. Lead Counsel also request reimbursement of the expenses incurred by them in

connection with the prosecution of this litigation in the aggregate amount of $361,279.25. I believe that all of these expenses are reasonable and were necessarily incurred in connection with the prosecution of this litigation. A. Factors to Be Considered in Support of the Requested Attorneys' Fee Award 1. 8. Extent of Litigation

This case was primarily an accounting fraud and Lead Counsel spent hundreds of

hours reviewing documents to establish the facts of the fraud and Defendants' scienter. Because the case was largely dependant on the documents, it settled only after the case was virtually established through the documents produced and reviewed. Although the case settled before depositions were undertaken, I believe that we persuaded Defendants that the evidence was compelling. Lead Counsel reviewed and analyzed hundreds of thousands of pages of documents produced by Defendants and third parties, and engaged in mediation and settlement negotiations. Indeed, the fact that the case settled for over 75% of the likely provable damages even before the §11 case settled is a testament to that effort. By any measure, Lead Counsel's effort in prosecuting this litigation was significant.

-3-

Case 1:04-cv-00665-RPM

Document 134

Filed 02/16/2007

Page 6 of 13

2.

The Risks of Contingent Litigation and the Need to Ensure the Availability of Competent Counsel in High-Risk, Contingent Securities Cases

9.

This litigation was undertaken by Lead Counsel on a wholly contingent basis. From

the outset, Lead Counsel understood that they were embarking on a complex, expensive and lengthy litigation with no guarantee of ever being compensated for the enormous investment of time and money the case would require. In undertaking that responsibility, Lead Counsel were obligated to assure that sufficient attorney resources were dedicated to the prosecution of this litigation and that funds were available to compensate staff and to pay for the considerable out-of-pocket costs which a case such as this entails. 10. Because of the nature of a contingent practice where cases are predominantly "big

cases" lasting several years, not only do contingent litigation firms have to pay regular overhead, but they also have to advance the expenses of the litigation. With an average lag time of three to four years for these cases to conclude, the financial burden on contingent counsel is far greater than on a firm that is paid on an ongoing basis. 11. The above does not even take into consideration the possibility of no recovery. There

are numerous cases where plaintiff's counsel in contingent cases such as this, after the expenditure of thousands of hours, have received no compensation. I am aware of many hard fought lawsuits where, because of the discovery of facts unknown when the case was commenced, or changes in the law during the pendency of the case, or a decision of a judge or jury following a trial on the merits, excellent professional efforts on behalf of plaintiffs produced no fee for counsel. 12. The many appellate decisions affirming summary judgments and directed verdicts for

defendants show that surviving a motion to dismiss is no guaranty of recovery. See In re Digi Int'l, -4-

Case 1:04-cv-00665-RPM

Document 134

Filed 02/16/2007

Page 7 of 13

Inc. Sec. Litig., 14 Fed. Appx. 714 (8th Cir. 2001); Geffon v. Micrion Corp., 249 F.3d 29 (1st Cir. 2001); Greebel v. FTP Software, Inc., 194 F.3d 185 (1st Cir. 1999); Longman v. Food Lion, Inc., 197 F.3d 675 (4th Cir. 1999); In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970 (9th Cir. 1999); Phillips v. LCI Int'l, Inc., 190 F.3d 609 (4th Cir. 1999); In re Comshare, Inc. Sec. Litig., 183 F.3d 542 (6th Cir. 1999); Levitin v. PaineWebber, Inc., 159 F.3d 698 (2d Cir. 1998); Silver v. H&R Block, 105 F.3d 394 (8th Cir. 1997). Moreover, even plaintiffs who succeed at trial may find their judgment overturned on appeal. See, e.g., Anixter v. Home-Stake Prod. Co., 77 F.3d 1215 (10th Cir. 1996) (overturning plaintiffs' verdict obtained after two decades of litigation); Backman v. Polaroid Corp., 910 F.2d 10 (1st Cir. 1990) (en banc) (reversing plaintiffs' verdict for securities fraud and ordering entry of judgment for defendants); Ward v. Succession of Freeman, 854 F.2d 780 (5th Cir. 1988) (reversing plaintiffs' jury verdict for securities fraud); Robbins v. Koger Props., 116 F.3d 1441 (11th Cir. 1997) (reversing an $81 million judgment and dismissing action). 13. Losses such as those described in the paragraphs above are exceedingly expensive.

As was the case in this litigation, it takes hard and diligent work by skilled counsel to develop facts and theories that will persuade defendants to enter into serious settlement negotiations. If defendants believe they will prevail, experience shows that they will litigate to the end. The risk factor is real. 14. Courts have repeatedly held that it is in the public interest to have experienced and

able counsel enforce the securities laws and regulations pertaining to the duties of officers and directors of public companies. Vigorous private enforcement of the federal securities laws can only occur if the private plaintiffs can obtain parity in representation with that available to large institutional interests. If this important public policy is to be carried out, the courts must award fees

-5-

Case 1:04-cv-00665-RPM

Document 134

Filed 02/16/2007

Page 8 of 13

which will adequately compensate private plaintiffs' counsel, taking into account the enormous risks undertaken with a clear view of the economics of a contingent class action practice. 15. When Lead Counsel undertook to act for the Lead Plaintiff in this matter it was with

the knowledge that they would spend many hours of hard work against some of the best defense lawyers in the United States with no assurance of ever obtaining any compensation for their efforts. They were aware that the only way they would be compensated was to achieve a successful result. This outstanding settlement was obtained for the Class despite the existence of substantial risks and the potential that the Class could recover nothing. B. 16. Standing and Expertise of Lead Counsel The expertise and experience of Lead Counsel is described in the resume attached to

the Declaration of Joy Ann Bull Filed on Behalf of Lerach Coughlin Stoia Geller Rudman & Robbins LLP in Support of Application for Award of Attorneys' Fees and Reimbursement of Expenses, filed herewith. C. 17. Standing and Caliber of Opposition Counsel Defendants were represented by the law firms of Wilson Sonsini Goodrich & Rosati,

P.C.; Rothgerber Johnson & Lyons LLP and Wheeler Trigg Kennedy LLP. These firms are among the finest defense firms in Colorado and throughout the country. In the face of this formidable opposition, Lead Counsel developed their case and persuaded Defendants to settle on a favorable basis to the Class. II. CONCLUSION 18. Three years of litigating this action has informed Lead Plaintiff and his counsel of the

strengths and weaknesses of his case, the principles of law applicable to the issues that would be

-6-

Case 1:04-cv-00665-RPM

Document 134

Filed 02/16/2007

Page 9 of 13

rned. and the relative risks ofproceeding to triaL. Given this knowledge and a settlement that will
net ihe Class 56% of

their probable damages, as well as Lead Counsel's expen~nc~ in securiies

c lass actions, Lead Plaintiff and his counsel beli~ve that The serrlement obtained for the Class was an

excellent r~suh. Should the Coun find that the settlement is fair anq reasonable, Lead Counsel
r~spc:ctfully request that th~ CoLU set a hearg and grant their application for anomeys' fees and

reimbursemem of expt'nses, as submmed.
I declare under penalty of peijur unc:er the laws of

the State of Califorra that the foregoing

is rre and correct and that this declaration was execut~Q. this 16th day of February, 2007, at San

Francisco, California.

S:\S~nli:mçTt\(llUYai.. si:(\DEC'00039128-l~~ and E),pi:Sd dOl

.7.

Case 1:04-cv-00665-RPM

Document 134

Filed 02/16/2007

Page 10 of 13

CERTIFICATE OF SERVICE I hereby certify that on February 16, 2007, I electronically filed the foregoing with the Clerk of the Court using the CM/ECF system which will send notification of such filing to the e-mail addresses denoted on the attached Electronic Mail Notice List, and I hereby certify that I have mailed the foregoing document or paper via the United States Postal Service to the non-CM/ECF participants indicated on the attached Manual Notice List.

s/ Joy Ann Bull JOY ANN BULL LERACH COUGHLIN STOIA GELLER RUDMAN & ROBBINS LLP 655 West Broadway, Suite 1900 San Diego, CA 92101-3301 Telephone: 619/231-1058 619/231-7423 (fax) E-mail:[email protected]

Case 1:04-cv-00665-RPM

Document 134

Filed 02/16/2007

Page 11 of 13

Case 1:04-cv-00665-RPM

Document 134

Filed 02/16/2007

Page 12 of 13

Case 1:04-cv-00665-RPM

Document 134

Filed 02/16/2007

Page 13 of 13