Pension Trust Fund For Operating Engineers v. DeVry Education Group, Inc. et al

Northern District of Illinois, ilnd-1:2016-cv-05198

MEMORANDUM by Utah Retirement Systems in support of motion for settlement 144 /Lead Plaintiffs' Unopposed Motion for Preliminary Approval of Proposed Class Action Settlement

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Case: 1:16-cv-05198 Document #: 145 Filed: 08/30/19 Page 1 of 23 PageID #:2508 UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION PENSION TRUST FUND FOR OPERATING ENGINEERS, Individually and on Behalf of All Case No. 1:16-CV-05198 Others Similarly Situated, Hon. Mary M. Rowland Plaintiff, v. DEVRY EDUCATION GROUP, INC., DANIEL HAMBURGER, RICHARD M. GUNST, PATRICK J. UNZICKER, AND TIMOTHY J. WIGGINS, Defendants. LEAD PLAINTIFF'S MEMORANDUM OF LAW IN SUPPORT OF UNOPPOSED MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT Case: 1:16-cv-05198 Document #: 145 Filed: 08/30/19 Page 2 of 23 PageID #:2508 TABLE OF CONTENTS Page PRELIMINARY STATEMENT .................................................................................................... 1 HISTORY OF THE LITIGATION ................................................................................................ 2 THE PROPOSED SETTLEMENT ................................................................................................ 4 ARGUMENT.................................................................................................................................. 5 I. THE PROPOSED SETTLEMENT MERITS PRELIMINARY APPROVAL .................. 5 A. Arm's-Length Settlement Efforts by Adequate Representatives............................ 6 B. The Settlement Falls Well Within the Range of Reasonableness........................... 7 C. The Settlement Treats All Settlement Class Members Fairly................................. 9 II. THE SETTLEMENT CLASS SHOULD BE PRELIMINARILY CERTIFIED.............. 11 A. The Settlement Class Meets the Requirements of Rule 23(a) .............................. 12 1. Rule 23(a)(1): Numerosity........................................................................ 12 2. Rule 23(a)(2): Questions of Law or Fact Are Common .......................... 12 3. Rule 23(a)(3): Lead Plaintiff's Claims Are Typical ................................. 13 4. Rule 23(a)(4): The Lead Plaintiff Is Adequate ........................................ 13 B. Rule 23(b)(3) – Predominance and Superiority.................................................... 13 III. THE PROPOSED NOTICE PLAN AND FORMS SHOULD BE APPROVED ............ 14 CONCLUSION............................................................................................................................. 15 Case: 1:16-cv-05198 Document #: 145 Filed: 08/30/19 Page 3 of 23 PageID #:2508 TABLE OF AUTHORITIES Cases Page(s) Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128 (1972)...........................................................................................................13, 14 Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (1997).................................................................................................................13 Armstrong v. Bd. of Sch. Dirs. of the City of Milwaukee, 616 F.2d 305 (7th Cir. 1980) .................................................................................................5, 6 In re Bank One Sec. Litig./First Chicago S'holder Claims, No. 00 CV 0767, 2002 WL 989454 (N.D. Ill. May 14, 2002).................................................14 Barragan v. Evanger's Dog & Cat Food Co., 259 F.R.D. 330 (N.D. Ill. 2009)...............................................................................................12 Basic, Inc. v. Levinson, 485 U.S. 224 (1988).................................................................................................................14 In re Delphi Corp. Sec. Derivative & ERISA Litig., 248 F.R.D. 483 (E.D. Mich. 2008) ............................................................................................6 Flood v. Dominguez, 270 F.R.D. 413 (N.D. Ind. 2010) .............................................................................................12 In re Genworth Financial, Inc. Sec. Litig., No. 14-cv-02392 (S.D.N.Y.)....................................................................................................11 In re Hewlett-Packard Co. Sec. Litig., Case No. SACV 11-1404 (C.D. Cal.) ......................................................................................11 Isby v. Bayh, 75 F.3d 1191 (7th Cir. 1996) .....................................................................................................5 Keele v. Wexler, 149 F.3d 589 (7th Cir. 1998) ...................................................................................................13 Ledford v. City of Highland Park, No. 00-C-4212, 2000 WL 1053967 (N.D. Ill. July 31, 2000) ...................................................5 Mangone v. First USA Bank, 206 F.R.D. 222 (S.D. Ill. 2001) .................................................................................................6 In re NeoPharm, Inc. Sec. Litig., 225 F.R.D. 563 (N.D. Ill. 2004)...............................................................................................12 ii Case: 1:16-cv-05198 Document #: 145 Filed: 08/30/19 Page 4 of 23 PageID #:2508 In re Omnivision Techs., Inc., 559 F. Supp. 2d 1036 (N.D. Cal. 2008) .....................................................................................8 Retired Chi. Police Ass'n v. City of Chi., 7 F.3d 584 (7th Cir. 1993) .......................................................................................................13 Retsky Family Ltd. P'ship v. Price Waterhouse LLP, 2001 WL 1568856 (N.D. Ill. Dec. 10, 2001).............................................................................9 Stull v. YTB Int'l, Inc., No. 08-cv-0565, 2015 WL 13631334 (S.D. Ill. June 8, 2015) ..................................................7 Suchanek v. Sturm Foods, Inc., 764 F.3d 750 (7th Cir. 2014) ............................................................................................. 12-13 Williams v. Quinn, 748 F. Supp. 2d 892 (N.D. Ill. 2010) .........................................................................................5 Wong v. Accretive Health, Inc., 773 F.3d 859 (7th Cir. 2014) .................................................................................................5, 6 Statutes and Rules 15 U.S.C. § 78u-4(a)(4) ............................................................................................................. 9-10 15 U.S.C. §78u-4(a)(7)(A)-(F).......................................................................................................15 Fed. R. Civ. P. 23(a) ................................................................................................................12, 13 Fed. R. Civ. P. 23(b) ......................................................................................................................13 Fed. R. Civ. P. 23(c) ......................................................................................................................14 Fed. R. Civ. P. 23(e) ........................................................................................................................5 Other Authorities Laarni T. Bulan, Ellen M. Ryan, and Laura E. Simmons, Securities Class Action Settlements – 2018 Review and Analysis (Cornerstone Research 2019) ...................................7 iii Case: 1:16-cv-05198 Document #: 145 Filed: 08/30/19 Page 5 of 23 PageID #:2508 Lead Plaintiff Utah Retirement Systems ("URS" or "Lead Plaintiff"), on behalf of itself and all other members of the proposed Settlement Class, respectfully submits this memorandum of law in support of its unopposed motion, pursuant to Rule 23 of the Federal Rules of Civil Procedure, for entry of the Parties' agreed-upon proposed Preliminary Approval Order.1 The proposed Order will, among other things: (i) preliminarily approve the Settlement on the terms set forth in the Settlement Agreement; (ii) approve the form and content of the Notice, Claim Form, and Summary Notice attached as Exhibits 1, 2 and 3 to the Preliminary Approval Order; (iii) approve the procedures for distribution of the Notice, Claim Form, and the Summary Notice; and (iv) set a date and time for the Final Approval Hearing, at which the Court will consider final approval of the Settlement, the proposed Plan of Allocation for distributing the proceeds of the Settlement, and Lead Counsel's application for attorneys' fees and expenses. PRELIMINARY STATEMENT The Parties have reached a proposed settlement of this securities class action (the "Action") for a total of $27,500,000 in cash (the "Settlement Payment") that, if approved by the Court, will resolve all claims asserted, or that could have been asserted, against Defendants ("Released Claims"), see Stipulation, Section I.B.(41). As explained below, Lead Plaintiff respectfully submits that the Settlement warrants preliminary approval given that it is the result of vigorous arm's-length negotiations by experienced counsel overseen by a well-respected mediator, represents a very favorable recovery, and is very likely to meet all of the approval factors required by Fed. R. Civ. P. 23(e) and Seventh Circuit precedent. 1 All capitalized terms not otherwise defined herein have the same meaning as those in the Stipulation of Settlement, dated as of August 29, 2019 (the "Settlement Agreement"), filed herewith as Exhibit 1 to the Declaration of Carol C. Villegas ("Villegas Decl."). All exhibits referenced below are attached to the Villegas Declaration. The proposed Preliminary Approval Order is submitted herewith and attached as Exhibit A to the Settlement Agreement. Case: 1:16-cv-05198 Document #: 145 Filed: 08/30/19 Page 6 of 23 PageID #:2508 Entry of the proposed Preliminary Approval Order will begin the process of consideration of final approval of the Settlement by authorizing notice of the Settlement to members of the Settlement Class. A Final Approval Hearing will then be conducted, after the Settlement Class has been given an opportunity to object or seek exclusion, so that the Court can make a final determination as to whether the Settlement is fair, reasonable, and adequate. HISTORY OF THE LITIGATION The Action was commenced with the filing of a putative federal securities class action complaint on May 13, 2016. ECF No. 1. During the class period, the Company, then known as DeVry Education Group, Inc., provided educational services through DeVry University and several subsidiaries. DeVry was one of the largest postsecondary educational institutions in the U.S. In general, the Action asserts claims that, during the Settlement Class Period, Defendants made a number of materially false and misleading statements and omissions regarding the job placement and salary outcomes achieved by DeVry's students after graduation. These metrics were allegedly critical to DeVry's investors who viewed superior outcomes as a sign of DeVry's financial health and stability. The Complaint further alleges that when the truth regarding the Company's education metrics was allegedly disclosed to the market, the price of DeVry publicly traded common stock declined causing damages to the proposed class. After the Action was filed, following briefing, and pursuant to the Private Securities Litigation Reform Act of 1995 ("PSLRA"), the Court entered an Order on August 24, 2016, appointing URS as Lead Plaintiff and approving its selection of counsel, Spector, Roseman & Kodroff, PC. ECF No. 37. URS filed an Amended Class Action Complaint on November 8, 2016. ECF No. 43. The Amended Complaint alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 promulgated thereunder by the U.S. Securities and Exchange Commission ("SEC") on behalf of a class of all purchasers 2 Case: 1:16-cv-05198 Document #: 145 Filed: 08/30/19 Page 7 of 23 PageID #:2508 of DeVry's publicly traded common stock between August 26, 2011 and January 27, 2016, inclusive. URS filed a Second Amended Complaint shortly thereafter, on December 23, 2016. ECF No. 51. The Second Amended Complaint added, among other things, allegations regarding a settlement that DeVry entered into with the Federal Trade Commission ("FTC") in a related false advertising lawsuit. Defendants moved to dismiss the Second Amended Complaint on January 27, 2017. ECF No. 58. Lead Plaintiff opposed the motion on March 28, 2017 (ECF No. 61) and the motion was fully briefed by April 27, 2017. On August 17, 2017, Lead Plaintiff moved to change its selection of counsel and by Order dated August 21, 2017, the Court appointed Labaton Sucharow LLP as Lead Counsel. ECF No. 78. On December 6, 2017, the Court issued an Order dismissing the Second Amended Complaint without prejudice. On January 29, 2018, Lead Plaintiff filed the Third Amended Class Action Complaint, the operative complaint in the Action (the "Complaint"). ECF No. 84. On March 30, 2018, Defendants filed a motion to dismiss, (ECF No. 91), which the Court denied on December 20, 2018 (ECF No. 113). Lead Plaintiff, through Lead Counsel, has conducted a thorough investigation relating to the claims, defenses, and underlying events and transactions that are the subject of the Action, as set forth below. Lead Plaintiff's process, through Lead Counsel, included reviewing and analyzing: (i) documents filed publicly by the Company with the SEC; (ii) publicly available information, including press releases, news articles, financial information, and public statements issued by or concerning the Company and the Defendants; (iii) research reports issued by financial analysts concerning the Company; (iv) other publicly available information and data concerning the Company; and (v) the applicable law governing the claims and potential defenses. Lead Counsel also contacted 199 former DeVry employees and other persons with relevant 3 Case: 1:16-cv-05198 Document #: 145 Filed: 08/30/19 Page 8 of 23 PageID #:2508 knowledge and interviewed 68 of them. In addition, Lead Counsel sent FOIA requests to four separate government entities that investigated DeVry, including the FTC and the U.S. Department of Education. Finally, Lead Plaintiff engaged a well-respected economist to review Lead Plaintiff's claims and conduct an analysis of damages. THE PROPOSED SETTLEMENT To explore the possibility of a negotiated resolution of the claims in the Action, the Parties engaged the Honorable Layn R. Phillips (Ret.), a well-respected and highly experienced mediator. The mediation process involved an extended effort to settle the claims and was preceded by the exchange of mediation statements and materials. On September 20, 2018, the Parties and their counsel met with Judge Phillips in an attempt to reach a settlement; however, a settlement was not reached. Following the Court's December 20, 2018 decision denying Defendants' motion to dismiss, the Parties agreed to participate in a second mediation session. In advance of the second mediation, Defendants agreed to provide a production of core documents to Lead Plaintiff and produced approximately 74,000 pages of documents. The mediation was also preceded by the exchange of additional briefing with the mediator. The second mediation session was held on May 22, 2019 and, after continued arm's-length negotiations with the assistance of Judge Phillips, a settlement in principle was reached. The Parties subsequently negotiated the Settlement Agreement, which sets forth the final terms and conditions of the Settlement.2 2 The Parties have also entered into a confidential Supplemental Agreement Regarding Requests for Exclusion, dated as of August 29, 2019. See Stipulation, Section X.B.2. The Supplemental Agreement sets forth the conditions under which Defendants may terminate the Settlement if requests for exclusion from the Settlement Class exceed a certain amount (the "Termination Threshold"). As is standard in securities class actions, such agreements are not made public in order to avoid incentivizing the formation of a group of opt-outs for the sole purpose of leveraging the Termination Threshold to exact an individual settlement. Pursuant to 4 Case: 1:16-cv-05198 Document #: 145 Filed: 08/30/19 Page 9 of 23 PageID #:2508 ARGUMENT I. THE PROPOSED SETTLEMENT MERITS PRELIMINARY APPROVAL It is well-established that there is an overriding public interest in settling and quieting litigation, and this is particularly true in class actions. See Isby v. Bayh, 75 F.3d 1191, 1196 (7th Cir. 1996) ("Federal courts naturally favor the settlement of class action litigation."); Williams v. Quinn, 748 F. Supp. 2d 892, 897 (N.D. Ill. 2010) (same). District court review of a class action settlement proposal is a two-step process. See Armstrong v. Bd. of Sch. Dirs. of the City of Milwaukee, 616 F.2d 305, 314 (7th Cir. 1980). First, the court performs a preliminary review of the proposed settlement to determine whether it is sufficient to warrant notice to the class and whether to proceed with a fairness hearing; and second, after notice has been provided and a fairness hearing has been held, determines whether to grant final approval of the settlement. Id. At the preliminary approval stage, the question before the Court is "whether the proposed settlement is within the range of possible approval." Id.;3 see also Ledford v. City of Highland Park, No. 00-C-4212, 2000 WL 1053967, at *2 (N.D. Ill. July 31, 2000) (the question is "whether the proposed consent order falls within the range of reasonableness such that it can preliminarily be found to be a fair settlement"). Effective December 1, 2018, Rule 23(e)(1)(B) was amended to, among other things, specify that the crux of a court's preliminary approval evaluation is whether notice should be provided given the likelihood that the court will be able to finally approve the settlement and certify the class. Rule 23(e)(1)(B).4 As summarized below, its terms, the Supplemental Agreement may be submitted to the Court in camera or under seal. The Supplemental Agreement, Stipulation, and term sheet are the only agreements concerning the Settlement entered into by the Parties. 3 All internal quotations and citations are omitted, unless otherwise noted. 4 In connection with final approval, the Court will be asked to review the following core 5 Case: 1:16-cv-05198 Document #: 145 Filed: 08/30/19 Page 10 of 23 PageID #:2508 and as will be detailed in a subsequent motion for final approval, this Settlement is more than likely to meet all of the factors required and, therefore, warrants preliminary approval. A. Arm's-Length Settlement Efforts by Adequate Representatives The Settlement was fairly and honestly negotiated by vigorous advocates for the Settlement Class, namely Lead Plaintiff and Lead Counsel. As noted above, the Settlement was achieved only after diligent arm's-length mediated negotiations between counsel with considerable knowledge and expertise in the field of federal securities law. See Mangone v. First USA Bank, 206 F.R.D. 222, 226 (S.D. Ill. 2001) (a settlement proposal arrived after arm's-length negotiations by fully informed, experienced and competent counsel may be properly presumed to be fair and adequate). Judge Phillips' involvement as an experienced mediator further supports that the Settlement is fair and that the Parties achieved it free of collusion. See In re Delphi Corp. Sec. Derivative & ERISA Litig., 248 F.R.D. 483, 498 (E.D. Mich. 2008) (speaking of Judge Phillips, "the Court and the parties have had the added benefit of the insight and considerable talents of a former federal judge who is one of the most prominent and highly skilled mediators of complex actions"); Wong, 773 F.3d at 864 (affirming district court's approval of settlement "proposed by an experienced third-party mediator after an arm's-length negotiation where the parties' positions on liability and damages were extensively briefed and debated"). Here, the Parties conducted two separate, formal, in-person mediation sessions before Judge Phillips. factors identified by Rule 23(e)(2), whether: (a) Lead Plaintiff and Lead Counsel adequately represented the class; (b) the Settlement was negotiated at arm's-length; (c) the relief provided to the class is adequate; and (d) the proposal treats class members equitably relative to each other. In assessing these core factors, the Court may also consider the Seventh Circuit's long-standing approval factors, many of which overlap with the Rule 23 factors: (1) the strength of the case for plaintiffs on the merits, balanced against the amount offered in settlement; (2) the defendant's ability to pay; (3) the complexity, length and expense of further litigation; (4) the amount of opposition; (5) the presence of collusion; (6) the reaction of members of the class to the settlement; (7) the opinion of competent counsel; and (8) the stage of the proceedings. See Armstrong, 616 F.2d at 314; see also Wong v. Accretive Health, Inc., 773 F.3d 859, 863 (7th Cir. 2014). 6 Case: 1:16-cv-05198 Document #: 145 Filed: 08/30/19 Page 11 of 23 PageID #:2508 Moreover, Lead Plaintiff reached the Settlement following a rigorous investigation of the merits, and after consulting with experts. Lead Counsel developed a deep understanding of the facts of the case and merits of the claims through their analysis of, inter alia: (i) interviews with 68 former employees or other persons with relevant knowledge; (ii) extensive briefing on Defendants' three rounds of motions to dismiss; (iii) analysis of Defendants' first mediation statement and exhibits; (iv) documents produced by Defendants in advance of the second mediation; and (v) consultations with an expert in damages and loss causation. Additionally, Labaton Sucharow is among the most experienced and skilled firms in the securities litigation field, and has a long and successful track record. See Ex. 2. During these efforts, the Settlement Class was also well-represented by Lead Plaintiff URS, a highly sophisticated institutional investor that provides retirement benefits to Utah's public school and education employees. Complaint at ¶ 67. URS manages approximately $33 billion in assets for the benefit of its members, as of December 31, 2018. https://www.urs.org/documents. B. The Settlement Falls Well Within the Range of Reasonableness At the preliminary approval stage, the Court need only "determine whether the proposed settlement is within the range of possible approval." Stull v. YTB Int'l, Inc., No. 08-cv-0565, 2015 WL 13631334, at *5 (S.D. Ill. June 8, 2015). This Settlement is well within the range of reasonableness for several reasons. First, the Settlement presents a very favorable recovery when compared to the median settlement value in securities class action settlements in 2018, which was reported by Cornerstone Research to be $11.3 million, and indeed when compared to the median between 1996 and 2017, which was $8.6 million. See Laarni T. Bulan, Ellen M. Ryan, and Laura E. Simmons, Securities Class Action Settlements – 2018 Review and Analysis, at 1 (Cornerstone Research 2019), Ex. 3. 7 Case: 1:16-cv-05198 Document #: 145 Filed: 08/30/19 Page 12 of 23 PageID #:2508 Second, Lead Plaintiff's consulting damages expert has estimated that if liability were established with respect to all claims throughout the class period, maximum aggregate damages, based on "non-disaggregated"5 stock price declines on the two alleged disclosure dates would be approximately $230 million (and approximately $196 million, if gains accrued during the class period on pre-class period purchases were removed). If only one alleged disclosure were found actionable, damages would decrease to approximately $186 million (and $158 million with pre- class period gains netted). The Settlement, therefore, reflects a recovery of approximately 12% to 17% of Lead Plaintiff's possible damages. Courts have approved settlements that recovered a far smaller percentage of damages. See, e.g., In re Omnivision Techs., Inc., 559 F. Supp. 2d 1036, 1042 (N.D. Cal. 2008) ($13.75 million settlement yielding 6% of potential damages after deducting fees and costs was "higher than the median percentage of investor losses recovered in recent shareholder class action settlements"). Third, the proposed $27.5 million Settlement is a substantial recovery for the Settlement Class, when considering the risks of further litigation. Although Lead Plaintiff believes its claims are strong, had litigation continued, Defendants would have likely moved for summary judgment, arguing, among other things, that Lead Plaintiff would not be able to prove that the Individual Defendants acted with scienter, that the alleged misstatements were false or misleading, and that the alleged fraud caused the stock price declines. If Defendants were successful on any of these grounds, either at summary judgment or in challenging a favorable verdict, a lengthy appeal could have ensued, with no certainty of any recovery for the class. Regarding scienter, Defendants would likely have argued that Lead Plaintiff would not be able to prove that the Individual Defendants knew that the representations regarding DeVry's 5 If confounding non-fraud related information had to be analyzed and removed from the price declines, these figures would decrease. 8 Case: 1:16-cv-05198 Document #: 145 Filed: 08/30/19 Page 13 of 23 PageID #:2508 employment statistics were false or misleading, or that they intentionally acted in a manner that they knew would violate applicable law. Specifically, Defendants would argue that the CEO, Daniel Hamburger, was never directly informed about concerns raised within the Company about employment metrics. Similarly, Defendants would likely argue that any problems with DeVry's employment statistics were isolated to specific campuses and did not permeate the organization, such that the Defendants should have been aware they were false or misleading. Regarding the falsity and materiality of the alleged misstatements, Defendants would likely have contended at summary judgment and trial that Lead Plaintiff would not be able to prove that the employment statistics were false and misleading when made. Defendants would argue that there are no clear national standards governing the reporting of employment statistics, and thus DeVry's methodology was reasonable. Similarly, Defendants would argue that DeVry's methodology was sufficiently disclosed to investors. Lead Plaintiff would have had to prevail at multiple additional stages in the litigation – in connection with a class certification motion (and in a likely petition pursuant to Rule 23(f) even once certified), at trial, and in inevitable appeals. There was no guarantee of a recovery greater than the Settlement Payment, or a recovery at all. See Retsky Family Ltd. P'ship v. Price Waterhouse LLP, 2001 WL 1568856, at *2 (N.D. Ill. Dec. 10, 2001) ("Securities fraud litigation is long, complex and uncertain."). C. The Settlement Treats All Settlement Class Members Fairly The Settlement does not improperly grant preferential treatment to either Lead Plaintiff or any segment of the Settlement Class.6 Rather, all members of the Settlement Class, including 6 In connection with Lead Counsel's motion for attorneys' fees and expenses, Lead Plaintiff may seek reimbursement of its costs and expenses (including lost wages) related to its participation in the Action. Such reimbursement is explicitly allowed by the PSLRA. See 15 9 Case: 1:16-cv-05198 Document #: 145 Filed: 08/30/19 Page 14 of 23 PageID #:2508 Lead Plaintiff, will receive a distribution from the Net Settlement Fund pursuant to a Plan of Allocation approved by the Court. At the Final Approval Hearing, the Court will be asked to approve the proposed Plan of Allocation for the Net Settlement Fund, which is set forth in full in the Notice and was prepared with the assistance of a consulting damages expert. Here, the proposed Plan of Allocation follows the Exchange Act's measure of damages, namely that the prices of DeVry common stock and exchange-traded options were artificially inflated (or deflated in the case of put options) during the Settlement Class Period, as a result of the alleged fraud, and that the inflation was removed on two days in reaction to public disclosures. The Plan of Allocation is designed to equitably distribute the Settlement proceeds among members of the Settlement Class who were allegedly injured and who submit valid Claim Forms through the calculation of a "Recognized Loss" amount for each purchase of DeVry Equity Securities during the Settlement Class Period. The Claims Administrator will calculate claimants' Recognized Losses using the transactional information provided by claimants in their claim forms, which can be mailed to the Claims Administrator, submitted online using the settlement website, or for large investors with hundreds of transactions, via e-mail to the Claims Administrator's electronic filing team. Because most securities are held in "street name" by the brokers that buy them on behalf of clients, the Claims Administrator, Lead Counsel, and Defendants do not have Settlement Class Members' transactional data and a claims process is required. Because the Settlement does not recover 100% of alleged damages, the Claims Administrator will determine each eligible claimant's pro rata share of the Net Settlement Fund based upon each claimant's total U.S.C. § 78u-4(a)(4). Moreover, the Settlement does not grant excessive compensation to Lead Counsel. The reasonableness of attorneys' fees will be decided by the Court after Lead Counsel files a motion seeking an award. Lead Counsel will be compensated out of the Settlement Fund, under the common fund doctrine, and not by Defendants. 10 Case: 1:16-cv-05198 Document #: 145 Filed: 08/30/19 Page 15 of 23 PageID #:2508 "Recognized Claim" compared to the aggregate Recognized Claims of all eligible claimants. Once the Claims Administrator has processed all claims, notified claimants of deficiencies or ineligibility, processed responses, and made claim determinations, distributions will be made to eligible claimants. After an initial distribution, if there is any balance remaining in the Net Settlement Fund (whether by reason of tax refunds, uncashed checks or otherwise) after at least six (6) months from the date of initial distribution, Lead Counsel will, if feasible and economical, re-distribute the balance among eligible claimants who have cashed their checks. These re-distributions will be repeated until the balance in the Net Settlement Fund is no longer feasible to distribute. See Settlement Agreement, Section III.D.9. Any balance that still remains that is not feasible or economical to reallocate, after payment of any outstanding Notice and Administration Expenses or Taxes, will be donated to the Council of Institutional Investors, or any not-for-profit successor of it, or as otherwise ordered by the Court.7 Id. II. THE SETTLEMENT CLASS SHOULD BE PRELIMINARILY CERTIFIED At the Final Approval Hearing, the Court will be asked to grant final approval of the Settlement on behalf of the Settlement Class.8 For that reason, and pursuant to the recent amendments to Rule 23(e), it is appropriate for the Court to consider, at the preliminary approval stage, whether certification of the Settlement Class is appropriate. 7 CII is a nonprofit, nonpartisan association, which seeks to educate its members, policymakers, and the public about corporate governance, shareowner rights, and related investment issues. See www.cii.org. CII has been approved as a cy pres beneficiary in many securities class actions, such as In re Genworth Financial, Inc. Sec. Litig., No. 14-cv-02392 (S.D.N.Y.); and In re Hewlett-Packard Co. Sec. Litig., Case No. SACV 11-1404 (C.D. Cal.). 8 The Settlement Class is defined as, "all persons and entities who purchased or otherwise acquired DeVry Education Group, Inc. publicly traded common stock and/or exchange-traded call options (and/or sold exchange-traded put options on such common stock) during the period from August 26, 2011 through January 27, 2016, inclusive, (the "Class Period") and were allegedly damaged thereby." 11 Case: 1:16-cv-05198 Document #: 145 Filed: 08/30/19 Page 16 of 23 PageID #:2508 A. The Settlement Class Meets the Requirements of Rule 23(a) 1. Rule 23(a)(1): Numerosity Rule 23(a)(1) requires that a class be so numerous that joinder of all members is "impracticable." Fed. R. Civ. P. 23(a)(1). The numerosity requirement is usually met if there are more than 40 class members. See, e.g., Flood v. Dominguez, 270 F.R.D. 413, 417 (N.D. Ind. 2010) ("Generally speaking, when the putative class consists of more than 40 members, numerosity is met[.]"). Here, there can be no dispute that the Settlement Class satisfies numerosity. DeVry's publicly traded common stock was actively traded on the NYSE. As of January 29, 2016, DeVry had approximately 63.117 million shares of common stock issued and outstanding. See Complaint at ¶495. Although the exact number of class members is not known at this time, there are likely thousands of members. See In re NeoPharm, Inc. Sec. Litig., 225 F.R.D. 563, 565 (N.D. Ill. 2004) ("NeoPharm stock trades on NASDAQ and more than 16 million shares are outstanding. It can be reasonably inferred that hundreds, if not thousands, of persons would be included in the proposed class."). 2. Rule 23(a)(2): Questions of Law or Fact Are Common Rule 23(a)(2) requires the existence of "questions of law or fact common to the class." Fed. R. Civ. P. 23(a)(2). "Commonality requires that there be at least one question of law or fact common to the class." Barragan v. Evanger's Dog & Cat Food Co., 259 F.R.D. 330, 334 (N.D. Ill. 2009) (quoting Rosario v. Livaditis, 963 F.2d 1013, 1018 (7th Cir. 1992)). In this case, the central questions–whether Defendants' public statements during the class period misrepresented material facts about the truthfulness of the employment and compensation statistics of DeVry graduates; whether Defendants acted with the requisite mental state, and whether the prices of DeVry common stock were artificially inflated–are the same for all class members. See Suchanek v. Sturm Foods, Inc., 764 F.3d 750, 765 (7th Cir. 2014) ("Where the 12 Case: 1:16-cv-05198 Document #: 145 Filed: 08/30/19 Page 17 of 23 PageID #:2508 same conduct or practice by the same defendant gives rise to the same kind of claims from all class members, there is a common question."). 3. Rule 23(a)(3): Lead Plaintiff's Claims Are Typical Rule 23(a)(3) requires that the claims of the class representative be "typical" of the claims of the class. A claim is typical if it "arises from the same event or practice or course of conduct that gives rise to the claims of other class members and. . . [the] claims are based on the same legal theory." Keele v. Wexler, 149 F.3d 589, 595 (7th Cir. 1998). Here, like all Settlement Class Members, Lead Plaintiff purchased DeVry common stock during the Class Period and claims to have suffered damages. 4. Rule 23(a)(4): The Lead Plaintiff Is Adequate The adequacy determination is two-pronged: "'the adequacy of the named plaintiff's counsel, and the adequacy of representation provided in protecting the different, separate, and distinct interest' of the class members." Retired Chi. Police Ass'n v. City of Chi., 7 F.3d 584, 598 (7th Cir. 1993). Here, Lead Plaintiff is an institutional investor who has and will continue to represent the interests of the class fairly and adequately, and Lead Counsel has and will continue to ably and effectively represent Lead Plaintiff and the proposed Settlement Class. See Ex. 2. B. Rule 23(b)(3) – Predominance and Superiority Rule 23(b)(3)'s predominance inquiry "tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation." Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 623 (1997). In this case, as is generally so in securities class actions, Defendants' alleged fraudulent statements and omissions affected all Settlement Class Members in the same manner, and each element of the claims involves common questions of law and fact that predominate. With respect to the element of reliance, Lead Plaintiff contends it is established through the application of Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128 (1972), because 13 Case: 1:16-cv-05198 Document #: 145 Filed: 08/30/19 Page 18 of 23 PageID #:2508 the asserted claims are predicated upon omissions of material fact, or the "fraud on the market" presumption of reliance in Basic, Inc. v. Levinson, 485 U.S. 224, 241-42 (1988). Application of Affiliated Ute or Basic dispenses with the requirement of individual proof of reliance on Defendants' alleged misstatements. Id. DeVry stock is traded on the NYSE at regular substantial volumes and was followed by numerous securities analysts, thus there is sufficient evidence of market efficiency. Complaint at ¶¶491-92. Further, resolution of this case through a class action is far superior to litigating (and settling) thousands of individual cases where the expense for a single investor would likely exceed their loss. See In re Bank One Sec. Litig./First Chicago S'holder Claims, No. 00 CV 0767, 2002 WL 989454, at *8 (N.D. Ill. May 14, 2002). III. THE PROPOSED NOTICE PLAN AND FORMS SHOULD BE APPROVED Lead Counsel proposes that individually mailed and published notice (via The Wall Street Journal and transmission over PR Newswire) be given in the form of the Notice and Summary Notice. See Preliminary Approval Order, Exs.1 & 3. Rule 23 requires that notice of a settlement be "the best notice that is practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort." Fed. R. Civ. P. 23(c)(2)(B). Notice in the form and manner proposed is standard in securities settlements and will satisfy due process, Rule 23, and the PSLRA. The proposed Notice describes the terms of the Settlement and the releases; the considerations that caused Lead Plaintiff to conclude that the Settlement is fair, adequate, and reasonable; the maximum attorneys' fees and expenses that may be sought; the procedure for requesting exclusion or objecting; the procedure for submitting a claim; the proposed Plan of 14 Case: 1:16-cv-05198 Document #: 145 Filed: 08/30/19 Page 19 of 23 PageID #:2508 Allocation; and the date and place of the Final Approval Hearing. The Notice also satisfies each of the PSLRA's separate disclosure requirements. See 15 U.S.C. §78u-4(a)(7)(A)-(F).9 In connection with preliminary approval of the Settlement, the Court must set a Final Approval Hearing date, dates for mailing the Notice and publication of the Summary Notice, and deadlines for requesting exclusion from the Settlement Class, objecting, filing motions in support of final approval and fees and expenses, and the submission of Claim Forms. Lead Plaintiff proposes the schedule attached as Exhibit 5 to the Villegas Declaration, which summarizes the deadlines in the proposed Preliminary Approval Order and recommends a Final Approval Hearing date in December 2019. The hearing date is the only date that the Court must schedule. CONCLUSION For the foregoing reasons, Lead Plaintiff respectfully requests that the Court enter the proposed Preliminary Approval Order, submitted herewith, which will: (i) preliminarily approve the Settlement; (ii) approve the proposed manner and forms of notice to Settlement Class Members; (iii) appoint KCC as Claims Administrator; and (iv) set a date and time for the Final Approval Hearing to consider final approval of the Settlement and related matters, and grant such other and further relief as may be required. Dated: August 30, 2019 By: /s/ Carol C. Villegas LABATON SUCHAROW LLP Carol C. Villegas (pro hac vice) Theodore J. Hawkins (pro hac vice) 140 Broadway 9 Lead Plaintiff also requests that the Court appoint KCC LLC ("KCC") as the Claims Administrator to provide all notices approved by the Court and to process Claim Forms. KCC is a nationally recognized notice and administration firm that has successfully administered numerous complex securities class action settlements. See Villegas Decl. Ex. 4. 15 Case: 1:16-cv-05198 Document #: 145 Filed: 08/30/19 Page 20 of 23 PageID #:2508 New York, NY 10005 Telephone: (212) 907-0700 Facsimile: (212) 818-0477 cvillegas@labaton.com thawkins@labaton.com LABATON SUCHAROW LLP Mark S. Willis (pro hac vice) 1050 Connecticut Avenue, NW, Suite 500 Washington, D.C. 20036 Telephone: (202) 772-1880 mwillis@labaton.com Lead Counsel for Lead Plaintiff Utah Retirement Systems and the Proposed Settlement Class WEXLER WALLACE LLP Kenneth A. Wexler Mark R. Miller 55 West Monroe, Suite 3300 Chicago, IL 60603 Telephone: (312) 346-2222 kaw@wexlerwallace.com mrm@wexlerwallace.com Liaison Counsel for Lead Plaintiff Utah Retirement Systems 16 Case: 1:16-cv-05198 Document #: 145 Filed: 08/30/19 Page 21 of 23 PageID #:2508 CERTIFICATE OF SERVICE I certify that on August 30, 2019, I electronically filed the foregoing Lead Plaintiff's Memorandum of Law in Support of Unopposed Motion for Preliminary Approval of Class Action Settlement, using the Court's CM/ECF system, which will be sent electronically to the registered participants as identified on the attached Electronic Mail Notice List. /s/ Carol C. Villegas Carol C. Villegas Case: 1:16-cv-05198 Document #: 145 Filed: 08/30/19 Page 22 of 23 PageID #:2508 Mailing Information for a Case 1:16-cv-05198 Pension Trust Fund for Operating Engineers v. DeVry Education Group, Inc. et al Electronic Mail Notice List The following are those who are currently on the list to receive e-mail notices for this case. • Theodore J. Hawkins thawkins@labaton.com,lpina@labaton.com,5957819420@filings.docketbird.com, electroniccasefiling@labaton.com • William Robert Andrichik wandrichik@steptoe.com,acampos@steptoe.com • Anthony J. Anscombe aanscombe@steptoe.com,snolan@steptoe.com,ikelsch@steptoe.com, mbuckley@steptoe.com,dalt@steptoe.com • Sean M. Berkowitz sean.berkowitz@lw.com,chicago-litigation-services- 9637@ecf.pacerpro.com,chefiling@lw.com,sean-berkowitz-6005@ecf.pacerpro.com • Michael R. Dockterman mdockterman@steptoe.com,meckstein@steptoe.com,jcooper@steptoe.com • Jonathan Gardner jgardner@labaton.com,lpina@labaton.com,4027988420@filings.docketbird.com, fmalonzo@labaton.com,acarpio@labaton.com,electroniccasefiling@labaton.com, agreenbaum@labaton.com • Terance A Gonsalves Terance.Gonsalves@alston.com,joanne.halvorson@alston.com,dradziwon@steptoe.com, sdocket@steptoe.com,ptierney@steptoe.com • Lester R Hooker lhooker@saxenawhite.com,e-file@saxenawhite.com,cwallace@saxenawhite.com • Philip R. Khinda pkhinda@steptoe.com • Mark Richard Miller mrm@wexlerwallace.com • Patricia B. Palacios ppalacios@steptoe.com • Norman Rifkind Norman@rifslaw.com • Jeffrey Warren Sanford jsanford@steptoe.com,dlukes@steptoe.com • Eric Robert Swibel eric.swibel@lw.com,chicago-litigation-services- 9637@ecf.pacerpro.com,chefiling@lw.com,eric-swibel-5392@ecf.pacerpro.com • Carol C. Villegas cvillegas@labaton.com,lpina@labaton.com,5739893420@filings.docketbird.com, electroniccasefiling@labaton.com -2- Case: 1:16-cv-05198 Document #: 145 Filed: 08/30/19 Page 23 of 23 PageID #:2508 • Kenneth A. Wexler kaw@wexlerwallace.com,ecf@wexlerwallace.com • Mark S Willis MWillis@labaton.com,kgutierrez@labaton.com,electroniccasefiling@labaton.com • Nicole M. Zeiss nzeiss@labaton.com,5854006420@filings.docketbird.com,lpina@labaton.com, electroniccasefiling@labaton.com,cboria@labaton.com Manual Notice List The following is the list of attorneys who are not on the list to receive e-mail notices for this case (who therefore require manual noticing).  (No manual recipients) -3-