In this appeal, we consider several challenges to the district court’s approval of a settlement agreement between representative plaintiffs and the defendant Bank of America in a class action lawsuit alleging violations of the Securities Act of 1933, 15 U.S.C. § 77a et seq., and the Securities Exchange Act of 1934, 15 U.S.C. § 78a et seq. The underlying litigation traces its origins to Bank of America’s negotiations with Merrill Lynch in the Fall of 2008, which culminated in the two financial institutions merging in January 2009. Holders of Bank of America stock and derivative options brought claims against Bank of America when it was discovered that senior officers at the Bank had withheld information leading up to the shareholder vote on the merger — information that included Merrill Lynch’s losses of more than $20 billion in the final quarter of 2008 and agreements regarding bonuses orchestrated by the two financial institutions in anticipation of the merger. The district court consolidated these claims and named lead plaintiffs to pursue the actions on behalf of the larger class in conformance with the Private Securities Litigation Reform Act, 15 U.S.C. § 78u-4(a)(3)(B)(i). Before trial commenced, the parties negotiated a settlement agreement. Pursuant to Federal Rule of Civil Procedure 23(e), the district court approved the notice of the settlement to class members. After that notice issued, certain nonnamed class members objected to the settlement. We address these objections.
The amended class action complaint, filed in October 2010, recounts the conduct alleged to have been perpetrated by Bank of America and Merrill Lynch officers. The false and misleading statements made by Bank of America officers in the lead up to the merger between the two banks, plaintiffs contend, gave rise to violations of Sections 10(b), 14(a), and 20(a) of the Securities Exchange Act of 1934, and violations of Sections 11, 12, and 15 of the Securities Act of 1933.
In mid-September 2008, Bank of America announced the potential acquisition of Merrill Lynch and a shareholder vote to follow in December of 2008. Much of the behind-the-scenes negotiations were conducted by John Thain and Michael Lewis, the CEOs of Merrill Lynch and Bank of America, respectively. These negotiations included whether Bank of America would subsidize prospective year-end bonuses for Merrill Lynch executives and employees for the 2008 year, a condition to which Bank of America agreed. The parties also agreed that these bonuses would be paid out in December of 2008, prior to the merger officially closing. Leading up to a shareholder vote on the merger, Merrill Lynch incurred losses of $7.5 billion in October, and $5.8 billion in November (with an additional “goodwill impairment” of $2.2 billion tied to the subprime residential -mortgage side of Merrill Lynch’s operations) — a total loss of $15.5 billion over the first two months of the quarter alone. Neither financial institution revealed to shareholders or the public the extent of Merrill Lynch’s losses during the fourth quarter. In November 2008, instead of disclosing any discussion of the agreement on bonuses or Merrill Lynch’s losses, Bank of America and Merrill Lynch filed a Joint Definitive Proxy Statement seeking approval of the merger from shareholders. Shareholders thereafter.voted to approve the merger.
In their complaint plaintiffs allege that after the shareholder vote some senior Bank of America executives who were aware of Merrill Lynch’s losses sought to invoke a “material adverse change” clause to terminate the merger between the banks. The plaintiffs claim that Bank of America was stopped from invoking the clause and halting the merger by then-Secretary of the Treasury Henry Paulson and then-Chairman of the Federal Reserve Ben Bernanke. The plaintiffs further allege that the government did not credit Bank of America’s assertions that Merrill Lynch’s insolvency took the bank by surprise because it had had three months to investigate Merrill Lynch. Bank of America, the plaintiffs allege, was nonetheless able to negotiate a resolution with the federal government: agreeing not to invoke the “material adverse change” clause so long as the federal government provided Bank of America with a $138 billion
At the time the merger closed on January 1, 2009, shareholders remained unaware that the projected losses for Merrill Lynch in the fourth quarter of 2008 were over $21 billion; that Bank of America executives had attempted to use the material adverse change clause to avoid the merger; that Bank of America negotiated the acquisition of Merrill Lynch with the federal government and secured an agreement that the objecting executives would not be fired if they went forward with the merger; and that, despite the losses, Merrill Lynch still paid its executives and employees $3.6 billion in bonuses. This information only became public in mid-to-late January. Once this information reached the public, Bank of America shares fell from $12.99 to $5.10 over the course of eleven days. Shareholder lawsuits promptly followed.
After the claims were consolidated, pursuant to Federal Rule of Civil Procedure 23 the district court certified the plaintiff class and designated various pension funds and other parties as the Class Representatives. The court also approved the notice of the class action that would be distributed through a variety of media to inform the public of the action. The certified classes included:
(1) All persons and entities who held Bank of America Corporation common stock as of October 10, 2008, and were entitled to vote on the merger between Bank of America Corporation and Merrill Lynch & Co., Inc. that was consummated on January 1, 2009;
(2) All persons and entities who purchased or otherwise acquired the common stock of Bank of America Corporation during the period from September 18, 2008 through January 21, 2009, inclusive, excluding shares of Bank of America Corporation common stock acquired by exchanging Merrill Lynch & Co., Inc. common stock for Bank of America Corporation common stock through the merger between the two companies;
(3) All persons and entities who purchased or otherwise acquired January 2011 call options on Bank of America Corporation common stock during the period from September 18, 2008 through January 21, 2009, inclusive; and
(4) All persons and entities who purchased Bank of America Corporation common stock issued under the Registration Statement and Prospectus and October 7, 2008 Supplemental Prospectus of the Bank of America Corporation, in the common stock offering that occurred on or about October 7, 2008.
The notice provided potential class members with information about being a member of the class as well as the procedures to follow to opt out of the class. It also provided a deadline of May 7, 2012, to -opt out of the settlement.
In November 2012, the class representatives filed a motion for preliminary approval of a negotiated settlement of $2,425,000,000.00. The motion included the proviso that funds from the settlement would go toward paying any litigation costs and attorneys’ fees awarded by the court. The district court preliminarily approved the settlement in December 2012, and notice was provided to class members. The notice also allowed class members the opportunity to opt back into the class if they had previously opted out, and an opportunity to object to the settlement. Following notice of the preliminary approval of the settlement, several persons filed objections.
The objections at issue in this appeal were originally raised in the district court by the Washeniks, the Masiowskis and
The district court conducted a hearing in April to discuss the substance of these challenges and those asserted by other class members. Relevant to this appeal, the court found that the notice of the settlement complied with the preliminary approval order, constituted the best notice practicable under the circumstances, amounted to a notice that was reasonably calculated to inform class members of their rights under the settlement, and complied with Federal Rule of Civil Procedure 23, the United States Constitution, and the Private Securities Litigation Reform Act. The objectors appealed.
DISCUSSION
We review a district court’s approval of a settlement agreement for abuse of discretion. See, e.g., Masters v. Wilhelmina Model Agency, Inc.,
The Award of Reimbursement Costs to Representative Plaintiffs
Objectors-appellants first argue the district court violated the Private Securities Litigation Reform Act, 15 U.S.C. §§ 78u-4(a)(2)(A)(vi), 78u-4(a)(4), when it awarded $453,003.04 to representative plaintiffs. They contend that the notice to class members — approved by the district court — was deficient because it failed to identify these expected costs and because the costs were not reasonable under 15 U.S.C. § 78u-4(a)(4). We conclude that the district court did not abuse its discretion in any of these instances.
The notice to class members states that “Co-Lead Counsel also will apply for the reimbursement of Litigation Expenses ... which may include the reasonable costs and expenses of Class Representatives ... directly related to their representation of the Class.” J. App’x at 750. The yardstick against which we measure the sufficiency of notices in class action proceedings is one of reasonableness. See, e.g., Wal-Mart Stores, Inc. v. Visa U.S.A., Inc.,
Likewise, the costs borne by representative plaintiffs litigating this matter were reasonable, in accord with 15 U.S.C. § 78u-4(a)(4). We note that the representative plaintiffs submitted affidavits to the district court that included a thorough accounting of hours dedicated to the litigation and a statement that these hours constituted lost work time — an item for which § 78u-4(a)(4) expressly allows recovery. See Varljen v. H.J. Meyers & Co.,
Notice of the Statement of Average Amount of Damages Per Share
Objectors-appellants next contend that the notice was constitutionally deficient in violation of objectors’ due process rights with respect.to the “Statement of Average Amount of Damages Per Share.” We have had occasion to reject this argument previously in light of the applicable requirements of the Private Securities Litigation Reform Act. See In re Am. Int’l Grp., Inc. Sec. Litig.,
The Award of Attorneys’ Fees
“What constitutes a reasonable fee is properly committed to the sound discretion of the district court, and will not be overturned absent an abuse of discretion, such as a mistake of law or a clearly erroneous factual finding.” Goldberger v. Integrated Res., Inc.,
We have considered all of objectors-appellants remaining arguments and conclude that they are without merit. The judgment of the district court approving the settlement is, therefore, AFFIRMED.
Notes
. Appellees have challenged whether certain objectors-appellants demonstrated in the district court proceedings an interest as members of the certified class such that they may maintain the present appeal. An objector-appellant must demonstrate his or her status as a class member in order to raise an objection in the district court and subsequently be considered a party for purposes of Rule 3 of the Federal Rules of Appellate Procedure. See Fed. R.App. Pro. 3(c); cf. Devlin v. Scardelletti,
. We also are not persuaded by objectors-appellants' argument that the notice was deficient for failing to “summarize” these costs on the cover page as required by 15 U.S.C. § 78u-4(a)(7)(C). That provision reads:
If any of the settling parties or their counsel intend to apply to the court for an award of attorneys’ fees or costs from any fund established as part of the settlement, a statement indicating which parties or counsel intend to make such an application, the amount of fees and costs that will be sought (including the amount of such fees and costs determined on an average per share basis), and a brief explanation supporting the fees and costs sought. Such information shall be clearly summarized on the cover page of any notice to a party of any proposed or final settlement agreement.
15 U.S.C. § 78u-4(a)(7)(C) (emphasis supplied). "Our starting point in statutory interpretation is the statute’s plain meaning,” United States v. Dauray,