[00:00:00] Speaker 00:
Morning, Your Honor.

[00:00:01] Speaker 00:
I'm Albert Chang with the law firm of Botinia and Botinia in San Diego appearing on behalf of Appellant Mr. Leco.

[00:00:09] Speaker 00:
I would like to reserve five minutes for rebuttal.

[00:00:12] Speaker 01:
All right.

[00:00:13] Speaker 01:
I'll try to help you out, but you're in charge of your own time.

[00:00:16] Speaker 00:
Thank you.

[00:00:17] Speaker 00:
May it please the court.

[00:00:18] Speaker 00:
The key issue in this appeal is whether the district court has done enough to scrutinize all indicia of collusion in granting final approval of a class action settlement.

[00:00:30] Speaker 00:
In Bluetooth, this court instructed the district courts to look for not only evidence of explicit collusion, but also, and I quote, more subtle signs.

[00:00:42] Speaker 01:
District court was well aware of Bluetooth and laid out a pretty detailed analysis of Bluetooth.

[00:00:49] Speaker 01:
So where did the district court err in that analysis?

[00:00:53] Speaker 00:
Well, the district court err at least in three regards.

[00:00:57] Speaker 00:
First, class counsel sought

[00:01:00] Speaker 00:
and obtained a $5,000 incentive award on behalf of class council's starter plaintiff, Mr. Dobin, by concealing that Mr. Dobin was an in-and-out trader.

[00:01:16] Speaker 00:
Under clear case law, in-and-out traders are subject to unique defenses.

[00:01:21] Speaker 01:
Did you raise that issue below?

[00:01:23] Speaker 00:
We did not, Your Honor.

[00:01:24] Speaker 00:
But that doesn't matter in the sense that we were not able to raise it due to class counsel's concealment of the in-and-out trader status of Mr. Dobin.

[00:01:38] Speaker 00:
And on top of it, the PSRA

[00:01:41] Speaker 01:
in this language requires that the... Part of the problem that I have with your case is the way that this case is litigated here in the Ninth Circuit, because you're raising a lot of arguments for the first time.

[00:01:54] Speaker 01:
And in fairness, the district court, you didn't give the court a chance to address any of these issues.

[00:01:59] Speaker 01:
On the notice issues, on the analysis under Bluetooth, all these

[00:02:06] Speaker 01:
So many arguments are being raised here for the first time.

[00:02:09] Speaker 01:
So why shouldn't we deem them all waived or forfeited?

[00:02:13] Speaker 00:
Well, because Bluetooth instructs all courts, including this court because it's the binding president, to scrutinize all indicia of implicit and explicit collusion.

[00:02:25] Speaker 00:
This court is essentially a court of error.

[00:02:29] Speaker 00:
We're trying to do justice here in the sense that the district court approves the settlement.

[00:02:35] Speaker 00:
This court can take a second look.

[00:02:38] Speaker 00:
And you look at the issue of the $5,000 incentive award for Mr. Dobin, the PSRA by statute requires

[00:02:50] Speaker 00:
that the district court must find evidence of, and I quote, reasonable cause and expenses directly relating to the representation of the class.

[00:03:02] Speaker 00:
This is a legal issue.

[00:03:03] Speaker 00:
This is not waivable.

[00:03:05] Speaker 00:
The district court here awarded a $5,000 incentive award to a plaintiff that cannot serve as a class representative.

[00:03:15] Speaker 00:
That is wrong, and this court must reverse just based on that issue alone.

[00:03:21] Speaker 01:
Now, as this court... Is there a factual finding embedded in that argument of yours?

[00:03:28] Speaker 01:
So, for example, with regard to whether he is, in fact, an in-and-out traitor, do we make factual determinations here for the first time, or is it something that you're saying should be sent back to the district court for reanalysis?

[00:03:42] Speaker 00:
Well, my answer is twofold.

[00:03:45] Speaker 00:
One, there's no need for factual finding in the sense that Mr. Dobin's in and out trader status is apparent on the record, is on his face.

[00:03:55] Speaker 00:
Mr. Dobin sold all his stock during the class period and sold in June of 2021, two months before the end of the class period.

[00:04:07] Speaker 00:
And to the extent that there needs to be factual finding, yes, remand is appropriate because the district court can take a first look as to Mr. Dobin's in and out trader status.

[00:04:18] Speaker 00:
Now, this court cautioned in Regus that any service awards, class representatives must be scrutinized to ensure that there's adequacy of representation of the class by the representatives.

[00:04:33] Speaker 00:
And this is also the rule in Staten.

[00:04:36] Speaker 00:
This court rejected in Staten a settlement agreement where the awards request indicated that class representatives were, and I quote, more concerned with maximizing their incentives than with judging the adequacy of the settlement as it applies to the class members, end of quote.

[00:04:59] Speaker 00:
So in addition to these cautionary rules, as I indicated,

[00:05:04] Speaker 00:
The PSRA imposes a statutory limit on any recovery by class representatives to their pro rata share in the settlement plus, and I quote, any reasonable cost and expenses, including lost wages, directly relating to the representation of the class.

[00:05:25] Speaker 00:
Now, this record here did not have any evidence

[00:05:31] Speaker 00:
of Mr. Dobin's involvement in the case, nor did the district court have any evidence as to how much reasonable costs and expenses Mr. Dobin incurred in connection with representing the class.

[00:05:46] Speaker 00:
Our point is that Mr. Dobin cannot represent the class at all because he was an in and out trader.

[00:05:55] Speaker 00:
And the case was crystal clear about it.

[00:05:58] Speaker 00:
The fact that my friends here said, oh, well, there was a curative disclosure before Mr. Dobenzold, that doesn't matter because that requires this court's reliance on the partial disclosure theory of class counsel's case.

[00:06:20] Speaker 00:
And there's no such reliance can be made here because at the outset, Mr. Dobin was an in-and-out traitor.

[00:06:27] Speaker 00:
If Mr. Dobin was put up as a lead plaintiff at the very inception of the case, his application would have been rejected.

[00:06:35] Speaker 00:
Now, moving on from Mr. Dobin's inadequacy, class counsel here also

[00:06:46] Speaker 00:
manipulated the plan of allocation in favor of the lead plaintiff, Mr. LaFrono.

[00:06:55] Speaker 00:
Class Council allocated $2.99 of damages for Mr. LaFrono's purchase period.

[00:07:05] Speaker 00:
Now, that manipulation is contrary to Class Council's own expert's analysis

[00:07:14] Speaker 00:
Class Council's own expert analysis said that there was only one disclosure at the very end of the class period in August 3rd.

[00:07:26] Speaker 00:
Mr. LaFerrano was not entitled to recover $2.99 per share simply because he was Lee plaintiff and simply because he was represented by Class Council.

[00:07:43] Speaker 00:
Now, I think there are multiple indicia of collusion in this proposed settlement.

[00:07:52] Speaker 00:
The indicia include Mr. Dobin's service award that violated the PSRA, the use of Mr. Dobin's wife to submit a declaration regarding accident class members' reaction to the settlement, the plan of allocation, as I said, that benefits Mr. Lofrano

[00:08:13] Speaker 00:
in contravention with the damages analysis of class counsel's own expert and the absence of any damage analysis before the filing of the preliminary approval papers.

[00:08:28] Speaker 00:
Now, under Bluetooth, the district court was required to conduct a search and inquiry of all indicia of possible implicit collusion in scrutinizing class action settlement because this settlement was reached before class certification.

[00:08:48] Speaker 00:
But the district court here failed to conduct this search and inquiry.

[00:08:53] Speaker 00:
and multiple indicia of collusion metastasized to other aspects of the proposed settlement.

[00:09:00] Speaker 00:
So on those basis, we urge this court to reverse and remand.

[00:09:04] Speaker 00:
I'll reserve the remainder of my time.

[00:09:07] Speaker 01:
Thank you, counsel.

[00:09:17] Speaker 04:
Good morning, Your Honors, and may it please the Court.

[00:09:21] Speaker 04:
One of the key problems with every issue raised by my adversary on this appeal is that none of this was raised below.

[00:09:30] Speaker 04:
All of a sudden, what's only metastasized in this Court is the arguments objecting to the settlements of this case.

[00:09:40] Speaker 04:
Laco has been a member of the class.

[00:09:42] Speaker 04:
He initiated this action.

[00:09:44] Speaker 04:
at the start of the case.

[00:09:46] Speaker 04:
He objected to preliminary approval of the settlement.

[00:09:49] Speaker 04:
He put in opposition to preliminary approval.

[00:09:51] Speaker 04:
He objected to final approval, and you don't hear anything in those papers about collusion being alleged.

[00:09:59] Speaker 04:
You don't hear anything, any complaint about the compensatory award.

[00:10:03] Speaker 04:
You don't hear any complaints about Dobin's status as an in-and-out trader.

[00:10:08] Speaker 04:
None of this is raised to the corporate law.

[00:10:10] Speaker 04:
And so the council and LACO had an opportunity to raise all these issues at the district court in aid to do a searching inquiry and simply failed to do so.

[00:10:23] Speaker 04:
So let's break it down point by point.

[00:10:25] Speaker 04:
One being Dobin being an in-now trader.

[00:10:29] Speaker 04:
There's simply he's not an in-now trader.

[00:10:31] Speaker 04:
He purchased during the class period before multiple corrective disclosures and sold after multiple corrective disclosures.

[00:10:38] Speaker 04:
That is not an in-and-out trader.

[00:10:40] Speaker 04:
An in-and-out trader is one-one, purchases and sells prior to any corrective disclosure.

[00:10:44] Speaker 04:
Mr. Dobin would be an adequate class representative, and counsel here had every opportunity to argue against his adequacy before the court on the record.

[00:10:54] Speaker 04:
We didn't hide his trades.

[00:10:56] Speaker 04:
It was on a certification filed in front of this court.

[00:10:59] Speaker 01:
During this process, he was appointed by the district court as a class representative.

[00:11:03] Speaker 04:
Yes, he was.

[00:11:04] Speaker 04:
He was at preliminary approval.

[00:11:06] Speaker 04:
He was approved, and counsel and Laco did not file any objection to his status as a class representative.

[00:11:14] Speaker 04:
Where was he?

[00:11:15] Speaker 04:
Why didn't he raise these issues?

[00:11:16] Speaker 04:
The only thing that's misstatisticizing are his arguments in opposition to the settlements.

[00:11:23] Speaker 04:
He says that there was no damages analysis put when we filed our initial motion papers.

[00:11:31] Speaker 04:
Council for Laco here never files settlement papers with a damages analysis for preliminary approval or final approval.

[00:11:38] Speaker 04:
Only after he raises issues then we've had the report filed.

[00:11:41] Speaker 04:
The indication regarding estimated damages was an informal work that we had done by the expert.

[00:11:49] Speaker 04:
It was actually in paper form that was submitted to us and then we had it formalized in the declaration.

[00:11:54] Speaker 04:
in support of preliminary approval.

[00:11:56] Speaker 04:
As far as manipulating the plan of allocation, once again, never raise at the district court.

[00:12:01] Speaker 04:
If the plan of allocation is not manipulated, we simply gave the higher at all instances in the plan of allocation.

[00:12:08] Speaker 01:
Can you address the argument raised on appeal regarding the low ball settlement offer in the cornerstone report?

[00:12:15] Speaker 04:
Sure, Your Honor.

[00:12:16] Speaker 04:
You have a settlement of we put in the maximum estimated damages as $32 million.

[00:12:23] Speaker 04:
That wasn't manufactured at preliminary approval.

[00:12:25] Speaker 04:
That was in our Rule 26A disclosures.

[00:12:28] Speaker 04:
The maximum we felt any class member can get was $32 million.

[00:12:32] Speaker 04:
This settlement is $3.5 million.

[00:12:34] Speaker 04:
Cornerstone has an analysis saying that when settlements include a Section 10 and 11 claim, those settlements range between 6% and 7%.

[00:12:45] Speaker 04:
Here, the 11% that we achieve for the class is better than that, but we should really look into

[00:12:51] Speaker 04:
How does that $32 million, how's that broken down?

[00:12:53] Speaker 04:
That assumes that all of our alleged corrective disclosures, many of which are not statistically significant, are upheld by this court and are upheld by the court below.

[00:13:02] Speaker 04:
Your Honor, that is pie in the sky.

[00:13:04] Speaker 04:
The damages here after experts and after discovery very well could have been $7 million or very well could have been $6 million.

[00:13:12] Speaker 04:
And actually, Laco, when he argues that there's only one corrective disclosure, which he actually points to an alternative damage analysis put in by our expert, he says there's only one corrective disclosure, August 3rd.

[00:13:26] Speaker 04:
If that's true, that there's only one corrective disclosure, the class-wide damages are $7.29 million.

[00:13:32] Speaker 04:
So then you compare the $3.5 million to the $7.29 million, that's 59%.

[00:13:39] Speaker 04:
In no universe is 59% an inappropriate settlement.

[00:13:44] Speaker 04:
And quite frankly, in no universe is 11% of damages.

[00:13:47] Speaker 04:
an inadequate settlement.

[00:13:48] Speaker 04:
What's lacking from Laco's papers is his own damages analysis.

[00:13:52] Speaker 04:
What does he think damages are?

[00:13:54] Speaker 04:
What does he think the total damages are in this case?

[00:13:56] Speaker 04:
Did he ever do that work?

[00:13:57] Speaker 04:
Even if it were the $47 million that he says the full Section 11 damages should be, he's still dealing with a settlement that's in the 6% to 7% range, which has also been endorsed by Cornerstone.

[00:14:09] Speaker 04:
There's no level, there's no analysis here that does not support approval

[00:14:13] Speaker 04:
Of the settlements every each and every issue that's been raised by that we heard our my adversary speak about Today has been some new newly manufactured problems with the settlement that he didn't have that he didn't raise on below And he didn't even show up to the plenary of approval hearing below I'm at the district court at the final approval to challenge the expert expert and I I

[00:14:35] Speaker 04:
He challenged that we didn't put in the not report at the outset of the case, and he said there were distinctions between the expert report and the plan of allocation.

[00:14:46] Speaker 04:
That's correct.

[00:14:47] Speaker 02:
So is it your position that he didn't challenge the validity of Nye's estimation of damages below?

[00:14:53] Speaker 04:
Yeah, he doesn't.

[00:14:55] Speaker 04:
All he says is that there's a contradiction between the plan of allocation and the damages report by Nye.

[00:15:04] Speaker 04:
He doesn't submit his own report.

[00:15:05] Speaker 04:
And certainly the issues regarding the plan of allocation, the discrepancies between the plan of allocation and Nye's report are simply because Nye at all points uses a hire of section 11 and section 10B.

[00:15:18] Speaker 04:
He operates by that rule and he operates by another rule that he only uses one date as a disclosure date.

[00:15:23] Speaker 02:
I asked that because frankly, looking through the NIA report, it's really hard to understand what he's even saying on some points.

[00:15:30] Speaker 02:
And so I'm trying to figure out if the district court didn't have detailed or specific arguments challenging NIA's methodology or his conclusions, then I guess I would agree with your argument that

[00:15:44] Speaker 02:
the district court got sandbagged by trying to raise arguments up here.

[00:15:48] Speaker 02:
But it's not clear to me that that's what the record is, that there were no challenges to Nye's methodology or conclusions.

[00:15:55] Speaker 04:
There were challenges to Nye's methodology, and each of them were answered, Your Honor.

[00:15:59] Speaker 04:
He had challenged that

[00:16:01] Speaker 04:
that he challenged our use of the May 14th cutoff for Section 11, and we gave it reason.

[00:16:06] Speaker 04:
Under SLAC, you simply, once you have unregistered shares that come to the market, under SLAC in the Ninth Circuit, it's virtually impossible to allege that you have Section 11 standing.

[00:16:17] Speaker 04:
So, Section 11, we cut off at May 14th.

[00:16:20] Speaker 04:
He did state certain points that we should use both section 11 damages and 10B.

[00:16:27] Speaker 04:
We should show both.

[00:16:28] Speaker 04:
And I stated we're going to use the higher of section 11 and section 10B at each point.

[00:16:33] Speaker 04:
And then the only other issue was is that we have more corrective disclosure dates in the NIE report

[00:16:38] Speaker 04:
than in the plan of allocation.

[00:16:40] Speaker 04:
That's because we used only one day for corrective disclosure.

[00:16:44] Speaker 04:
We did not use multiple days.

[00:16:45] Speaker 04:
All of those issues were raised at the district court with respect to NYE.

[00:16:49] Speaker 04:
All of those were answered multiple times below in our preliminary approval and final approval papers.

[00:16:54] Speaker 04:
There was no question brought to NYE or about NYE's report that was not answered by our papers.

[00:17:01] Speaker 04:
And the court had gone through those issues and found that we did adequately answer those issues.

[00:17:08] Speaker 04:
If there's nothing further, I'll rest.

[00:17:09] Speaker 01:
Thank you.

[00:17:10] Speaker 04:
Thank you.

[00:17:18] Speaker 03:
Good morning.

[00:17:19] Speaker 03:
Daniel Adler on behalf of Loan Depot and the other defendants.

[00:17:22] Speaker 03:
So I'll address each of the points in order.

[00:17:24] Speaker 03:
I'll start with the service award.

[00:17:26] Speaker 03:
That issue was forfeited.

[00:17:27] Speaker 03:
It was not raised below.

[00:17:28] Speaker 03:
The district court didn't have an opportunity to address it.

[00:17:31] Speaker 03:
The notion that the in-and-out trader status was concealed is incorrect.

[00:17:35] Speaker 03:
There's an attachment to the operative complaint that indicates when Mr. Dobin bought and when he sold his shares.

[00:17:41] Speaker 03:
That's page 1077.

[00:17:43] Speaker 03:
Mr. Dobin is also all over the complaint.

[00:17:45] Speaker 03:
He's on the caption.

[00:17:46] Speaker 03:
There's a paragraph explaining that he's an additional plaintiff in the case.

[00:17:49] Speaker 03:
He's in the notice.

[00:17:50] Speaker 03:
There's no concealment of this guy's involvement in the case.

[00:17:54] Speaker 03:
I also agree with my colleague that he suffered the same injury, if in fact anyone suffered injury here as the rest of the class because he sold after a supposed corrective disclosure.

[00:18:05] Speaker 03:
So this really just amounts to a weak and forfeited adequacy argument.

[00:18:12] Speaker 03:
There's also evidence, I heard a question about is there evidence that he actually performed any service to the class?

[00:18:17] Speaker 03:
There is.

[00:18:18] Speaker 03:
He has a declaration in the record that's pages 285 to 287 explaining that he spent something like 30 hours on the case.

[00:18:24] Speaker 03:
that if he had not spent that time, he would have used it profitably in his other investment activities.

[00:18:29] Speaker 03:
That's the sort of service award that we generally think is merited, and we're talking about the standard $5,000 service award.

[00:18:35] Speaker 03:
We're not talking about a service award like in the Staten case, where 29 plaintiffs were set to get $30,000 each, and it would have been 6% of the total damages award.

[00:18:45] Speaker 03:
We're not talking about Rodriguez, which was, these are cases my colleague on the other side raised.

[00:18:50] Speaker 03:
Rodriguez was a case involving an incentive agreement

[00:18:52] Speaker 03:
That's a case where I suppose you might say that the incentives were skewed because in that case, the plaintiffs were going to be awarded up to $75,000 so long as the settlement was $10 million or above.

[00:19:03] Speaker 03:
And at that point, they didn't really have a great incentive to push for more.

[00:19:07] Speaker 03:
The rest of the class would have liked more, but they were going to get their 75 if it was just 10.

[00:19:11] Speaker 03:
And so this court said, we don't like that.

[00:19:14] Speaker 03:
We would prefer that the incentives of the class members and their representatives be aligned.

[00:19:18] Speaker 03:
There's no problem here.

[00:19:19] Speaker 03:
All we have is a standard service payment.

[00:19:22] Speaker 03:
If you get to the plan of allocation, this whole notion that there's any mismatch between the plan of allocation

[00:19:27] Speaker 03:
And the damages estimate is entirely because my colleague on the other side is focusing on the secondary estimate of the expert, which is the one that, frankly, from the perspective of the defendants, we think is more realistic, more likely.

[00:19:39] Speaker 03:
So that secondary damages estimate says, here's what I'm going to do.

[00:19:43] Speaker 03:
I'm going to take the more realistic, more sophisticated model, the multi-trader model.

[00:19:48] Speaker 03:
I'm going to look only at disclosures that result in an impact the next day.

[00:19:53] Speaker 03:
I'm not going to assume that the market takes like a week

[00:19:55] Speaker 03:
to respond to bad news, especially when the supposed disclosures here were earnings reports, which is something that the market is reacting to essentially in real time.

[00:20:04] Speaker 03:
And I'm only going to look at statistically significant events that result from these supposed disclosures.

[00:20:11] Speaker 03:
When you put all those things together, those assumptions, you get to something like 6 million bucks.

[00:20:16] Speaker 03:
And that's where that 59% comes in.

[00:20:18] Speaker 03:
So this is a very healthy settlement by that measure.

[00:20:20] Speaker 03:
What my colleague here representing the plaintiff says is we agree a pie in the sky number, 32 million.

[00:20:25] Speaker 03:
It's still a healthy measure, even according to that denominator.

[00:20:29] Speaker 03:
And so if you have any questions, Judge Forrest, specifically about Mr. Nye's analysis, I'm happy to answer those.

[00:20:34] Speaker 03:
But that's basically the difference between the two damages estimates is one is sort of the pie in the sky number that with all the generous assumptions given to the plaintiffs,

[00:20:43] Speaker 03:
And the other is a much narrower conservative estimate that, frankly, is more consistent with the defendant's understanding of the case.

[00:20:49] Speaker 03:
The damages here would be zero or maybe up to something like $6 million, a $3.5 million settlement.

[00:20:55] Speaker 02:
I'll just say that it would have been helpful to have your summary that you just gave when I was studying the report.

[00:20:59] Speaker 03:
Yeah, understood.

[00:21:00] Speaker 03:
And the district court did, I think, understand these issues well, which is evidenced on pages 52 to 54 of the record, addressed all of the complaints that were raised below by the objector.

[00:21:13] Speaker 03:
Finally, I want to echo the point about why is there a distinction, inter-class distinction, across certain class members?

[00:21:21] Speaker 03:
Why are some people recovering more?

[00:21:23] Speaker 03:
And the district court addressed this too.

[00:21:25] Speaker 03:
The principal reason is that certain people here had stronger claims than others.

[00:21:29] Speaker 03:
And the ones who had the strongest claims were those who could sue under Section 11.

[00:21:32] Speaker 03:
Section 11 is a very powerful tool.

[00:21:34] Speaker 03:
It offers statutory damages.

[00:21:37] Speaker 03:
That's great if you can sue under it, but not everybody can sue under it.

[00:21:40] Speaker 03:
Under the slack decision from the Supreme Court and then coming back on remand from this court, you essentially have to prove you bought registered shares, only registered shares.

[00:21:48] Speaker 03:
That might be easy to do if the only shares in the market are registered shares because the IPO just happened.

[00:21:53] Speaker 03:
But as soon as the lockup period ends, and in this case there were something like 4 million shares sold in the IPO,

[00:21:59] Speaker 03:
And then 90 days later, up to 6 million shares could be sold by insiders and early investors.

[00:22:04] Speaker 03:
As soon as that lockup expires, it's essentially impossible to prove you bought only registered shares.

[00:22:09] Speaker 03:
And so what the expert did here is he said, well, those people who could sue early on because they were early holders, they're going to have strong claims.

[00:22:16] Speaker 03:
We're going to reward them with additional

[00:22:19] Speaker 03:
with an additional payment.

[00:22:22] Speaker 03:
Whereas other people, they're going to have only a Section 10 claim.

[00:22:25] Speaker 03:
And as we all know, that's a lot harder to prove because you have to prove science.

[00:22:28] Speaker 03:
That is not an element of a Section 11 claim.

[00:22:31] Speaker 03:
So it's not like this was an irrational or arbitrary distinction across class members.

[00:22:35] Speaker 03:
The people who have the strongest claims are being rewarded, and the class in general is getting a healthy settlement.

[00:22:41] Speaker 03:
If there are no other questions, I'm happy to yield the rest of my time.

[00:22:44] Speaker 01:
Thank you, counsel.

[00:22:45] Speaker 01:
Thank you.

[00:22:52] Speaker 00:
Thank you, Your Honor.

[00:22:55] Speaker 00:
If you look at ER page 22, the fee award order, the district court, when awarding Mr. Dobin a 5,000 incentive award, did not analyze PSLRA at all, did not make any findings whether Mr. Dobin was qualified to represent the class.

[00:23:17] Speaker 00:
And if you look at ER 44, the preliminary approval order where the district court conditionally certified the class for settlement purposes, the district court appointed Mr. Dobin just by saying in one conclusory sentence that he bought Lone Depot staff during the class period.

[00:23:36] Speaker 00:
Those are the factual findings that the district court made because they were wrong because the district court did not have the information necessary

[00:23:46] Speaker 00:
to make the statutory finding under the PSLRA that Mr. Dolbin can be entitled to a service award and that in the preliminary approval stage that Mr. Dolbin could represent the class due to his in and out trader status.

[00:24:05] Speaker 00:
Now, this case is similar to Bluetooth in a sense that the fee order, the incentive award order, infects the entire final approval process of this proposal.

[00:24:20] Speaker 02:
I don't understand that.

[00:24:21] Speaker 02:
Why is that true?

[00:24:22] Speaker 00:
In Bluetooth, this court found that the trial court made an error as to whether to use a percentage method or use the low star method in awarding attorney's fees.

[00:24:36] Speaker 00:
And this court analyzed the fee order first.

[00:24:41] Speaker 00:
before analyzing the final approval order and before reversing both and sending the entire case back to the district court.

[00:24:49] Speaker 02:
Yeah, but you've been arguing about this representative award, not attorney fees.

[00:24:54] Speaker 02:
So, I mean, this is a $3.5 million settlement.

[00:24:56] Speaker 02:
This representative award was $5,000.

[00:24:58] Speaker 02:
So even if you were right that the $5,000 number was wrong, would we reverse this whole settlement for $3.5 million?

[00:25:05] Speaker 00:
Absolutely, because it was wrong because it violates the PSRA.

[00:25:10] Speaker 00:
Because the PSRA does not allow any recovery in addition to pro-lata share other than the cost and expenses directly relating to the representation of the class.

[00:25:24] Speaker 00:
That is in the federal statute.

[00:25:26] Speaker 00:
and Mr. Dobin could not have represented the class at all because he was an in-and-out trader, he would have, if he applied to become a... So if we reject your argument that he's an in-and-out trader, does your argument then fall apart?

[00:25:41] Speaker 00:
For the indicia of Mr. Dobin benefiting from the settlement, yes, if you find that Mr. Dobin's in and out trader status has nothing to do with his qualification to represent the class, we'll lose that indicia.

[00:26:02] Speaker 00:
But you cannot do that because case laws crystal clear that in and out traders cannot serve as a lead plaintiff.

[00:26:11] Speaker 00:
and we cited multiple cases on that point.

[00:26:14] Speaker 02:
And if Mr. Dobin... Why didn't you challenge him when the district court was considering preliminary approval?

[00:26:20] Speaker 00:
because that issue was indeed not brief at all.

[00:26:24] Speaker 00:
And Mr. Dobin's... I'm sorry, that issue was... That issue, the application for Mr. Dobin to apply to become a class representative at the preliminary approval stage for conditional certification,

[00:26:41] Speaker 00:
The only evidence that counsel put forth was that Mr. Dobin bought in the class period.

[00:26:51] Speaker 02:
And that's all the factual record that was before the... So you could have said, I object, I don't think that there's enough here to show that this person is qualified.

[00:26:59] Speaker 00:
We did not notice that issue, and that issue obviously was at issue in our request for judicial notice, that Mr. Dobin's in-and-out trader status was never raised, and it was apparent in another case, and not in this case, in the first case that Mr. Dobin filed.

[00:27:23] Speaker 00:
i guess i wouldn't vote on what does it does frankfurter said was the wisdom often don't come at all and and if it comes uh... you know we shall not object just because it comes late uh... i have a question on a different matter did you ever object to the district court applying the twenty five percent best benchmark for attorney fees we objected to it yes and as we saw in the record uh... it's

[00:27:49] Speaker 02:
What I understood is you objected to going over the 25% because they asked for 28%.

[00:27:53] Speaker 00:
Oh, I'm sorry.

[00:27:54] Speaker 00:
I misunderstood your question.

[00:27:56] Speaker 00:
We objected to an upward departure from 25% benchmark.

[00:28:01] Speaker 00:
We did not object to 25% itself.

[00:28:03] Speaker 00:
Got it.

[00:28:04] Speaker 02:
Thank you.

[00:28:05] Speaker 00:
Yes.

[00:28:09] Speaker 00:
And with regard to the expert report, in the initial report, the statutory estimate damages under section 11 was, under one trader model, was 0.67 million dollars.

[00:28:22] Speaker 00:
When we challenged that analysis, the expert, Dr. Nye,

[00:28:28] Speaker 00:
Submitted a supplemental report.

[00:28:29] Speaker 00:
That's er 524 Let's just say hey the structures with that damages was actually fifty six point seven nine million dollars now there are other problems and inaccuracies in the expert report for example class council alleged that

[00:28:50] Speaker 00:
The fees in, I'm sorry, the stock drop on May 10th was 22 percent.

[00:28:58] Speaker 00:
And Dr. Nye said that, oh, that 22 percent stock drop has 88.9 percent confidence level.

[00:29:07] Speaker 00:
But that stock drop was not used.

[00:29:09] Speaker 01:
You're actually a little bit over your time.

[00:29:11] Speaker 00:
I understand.

[00:29:12] Speaker 01:
But we appreciate arguments by council for both sides.

[00:29:16] Speaker 01:
The matter is already submitted.

[00:29:17] Speaker 01:
Thank you, counsel.

[00:29:18] Speaker 00:
Thank you, Your Honor.