In re Thornburg Mortg., Inc. Sec.Litig.

912 F.Supp.2d 1178

In re THORNBURG MORTGAGE, INC. SECURITIES LITIGATION.

No. CIV 07–0815 JB/WDS.

United States District Court, D. New Mexico.

Nov. 26, 2012.

Frederic S. Fox, Aviah Cohen Pierson, Kaplan, Fox & Kilsheimer, Nancy Kaboolian, Abbey, Spanier, Rodd, Abrams & Paradis, LLP, Curtis V. Trinko, Law Offices of Curtis V. Trinko, LLP, Fred T. Isquith, Gregory M. Nespole, Rachel S. Poplock, Martin E. Restituyo, Wolf Haldenstein Adler Freeman & Herz, LLP, New York, NY, Richard A. Lockridge, Nathan D. Prosser, Karen H. Riebel, Lockridge, Gindal, Nauen & Holstein, Minneapolis, MN, Evan J. Smith, Brodsky & Smith, L.L.C., Mineola, NY, David R. Scott, Scott & Scott, LLC, Colchester, CT, Arthur Shingler, III, Scott & Scott, LLP, Betsy C. Manifold, Francis M. Gregorek, Rachele R. Rickert, Patrick H. Moran, Wolf, Haldenstein, Adler, Freeman & Herz, LLP, San Diego, CA, Charlotte Itoh, Fine Law Firm, Cody Kelley, Kelley Law Offices, Turner W. Branch, Branch Law Firm, Shane C. Youtz, Albuquerque, NM, Andrew L. Zivitz, Benjamin J. Sweet, Michelle M. Newcomer, Richard Russo, Jr., Sean M. Handler, Stewart L. Berman, D. Seamus Kaskela, Kessler, Topaz, Meltzer & Check, LLP, Radnor, PA, for Plaintiffs.

David A. Freedman, Joseph Goldberg, David H. Urias, Freedman, Boyd, Hollander, Goldberg, Urias & Ward, P.A., Albuquerque, NM, for Defendants Joseph H. Badal, Michael B. Jeffers, Owen M. Lopez, Stuart C. Sherman, Paul G. Decoff.

Amy L. Neuhardt, Boies, Schiller & Flexner, LLP, Washington, District of Columbia, Donald L. Flexner, Philip C. Korologos, Boies, Schiller & Flexner, LLP, New York, NY, for Defendants Garrett Thornburg, Anne–Drue M. Anderson, David A. Ater, Joseph H. Badal, Eliot R. Cutler, Ike Kalangis, Francis I. Mullin, III, Stuart C. Sherman, and Paul G. Decoff.

William H. Forman, Scheper, Kim & Overland, LLP, Los Angeles, CA, David F. Cunningham, Thompson, Hickey, Cunningham,Clow, April & Doran, P.A., Santa Fe, NM, for Defendants Thornburg Mortgage, Inc., Garrett Thornburg, Larry A. Goldstone, Clarence G. Simmons, Anne–Drue M. Anderson, David A. Ater, Joseph H. Badal, Eliot R. Cutler, Michael B. Jeffers, Ike Kalangis, Owen M. Lopez, Francis I. Mullin, III, and Stuart C. Sherman.

Clinton W. Marrs, Tax, Estate & Business Law, N.A., LLC, Albuquerque, NM, Peiyin Patty Li, Wilmer, Cutler, Pickering, Hale & Dorr, LLP, Los Angeles, CA, Jonathan A. Shapiro, Elizabeth H. Skey, Wilmer, Cutler, Pickering, Hale & Dorr, LLP, Palo Alto, CA, for Defendants Larry A. Goldstone and Clarence G. Simmons.

Joel Sher, Shapiro, Sher, Guinot & Sandler, Baltimore, MD, Mary R. Jenke, Walsh, Anderson, Brown, Aldridge & Gallegos, Albuquerque, NM, for Thornburg Mortgage, Inc.

Clifford K. Atkinson, John S. Thal, Atkinson, Thal & Baker, P.C., Albuquerque, NM, for Defendants A.G. Edwards & Sons, Inc., BB & T Capital Markets, UBS Securities, Citigroup Global Markets Inc., Friedman, Billings, Ramsey & Co., Oppenheimer & Company, Inc., RBC Dain Rauscher Corp., Stifel, Nicolaus & Company, Inc., and Bear Sterns & Co., Inc.

Jonathan C. Dickey, Gibson, Dunn & Crutcher, LLP, New York, NY, Dean J. Kitchens, Lindsay R. Pennington, Gibson, Dunn & Crutcher, LLP, Los Angeles, CA, for Defendants A.G. Edwards & Sons, Inc., BB & T Capital Markets, Citigroup Global Markets Inc., Oppenheimer & Company, Inc., RBC Dain Rauscher Corp., and Stifel, Nicolaus & Company, Inc.

David C. Bohan, David J. Stagman, Katten, Muchin, Rosenman, LLP, Chicago, IL, for Defendants UBS Securities and Bear Sterns & Co., Inc.

Steven M. Farina, William Pittard, Margaret A. Keeley, Williams & Connolly, LLP, Washington, District of Columbia, for Defendant Friedman, Billings, Ramsey & Co.

MEMORANDUM OPINION AND ORDER

JAMES O. BROWNING, District Judge.

THIS MATTER comes before the Court on: (i) the Plaintiffs' Motion for Final Approval of Proposed Settlement, Plan of Allocation and Certification of Class for Settlement Purposes, filed July 23, 2012 (Doc. 391)(“Motion for Final Approval”); and (ii) Co–Lead Counsel's Motion for an Award of Attorneys' Fees and Expenses and Memorandum of Law in Support of Approval of Co–Lead Counsel's Motion for an Award of Attorneys' Fees and Expenses, filed July 23, 2012 (Doc. 392)(“Motion for Attorneys' Fees”). The Court held a hearing on August 27, 2012. The primary issues are: (i) whether the proposed Class meets the requirements of rule 23 of the Federal Rules of Civil Procedure and may be certified for settlement purposes; (ii) whether the proposed Settlement of $2,000,000.00 is fair and reasonable; and (iii) whether the requested attorneys' award for twenty-percent of the $2,000,000.00 recovery, in addition to costs, is reasonable. The Court determines that the proposed Class meets rule 23's requirements and will certify the Class for settlement purposes only. The Court finds that the Settlement will be fair and reasonable, and will address the concerns of the objectors thereto, if: (i) a second distribution of the un-cashed checks is made to Class members who cashed their checks in the first distribution; and (ii) a judgment reduction provision is added to the Settlement Order. The Court cannot order the parties to agree to a settlement over their objection. If the parties do not agree to these revisions, the Court believes that the Settlement would not be fair and reasonable, and will not approve the Settlement.If there is no approved settlement, the parties are free to negotiate different settlement terms and petition the Court for approval in the future, or the parties may proceed to trial. The Court believes that the requested attorneys' award is reasonable, and thus approves the award.

FACTUAL BACKGROUND¹

This case—so far as is relevant to the disposition of this motion—involves four public offerings that, the Plaintiffs allege, were made pursuant to false or misleading offering documents. This consolidated action is brought by (i) W. Allen Gage, individually and on behalf of J. David Wrather, and Robert Ippolito, individually and as Trustee for the Family Limited Partnership Trust, and Nicholas F. Aldrich, Sr., individually and on behalf of the Aldrich Family (“Lead Plaintiffs”); and (ii) Betty L. Manning; (iii) John Learch; and (iv) Boilermakers Lodge 154 Retirement Plan. (collectively, with the Lead Plaintiffs, “the Plaintiffs”). Consolidated Amended Class Action Complaint at 1, filed June 14, 2011 (Doc. 361)(“CACAC”). The Plaintiffs purchased shares of Defendant Thornburg Mortgage, Inc. (“Thornburg Mortgage”) stock during the class period—from April 19, 2007 to March 19, 2008, inclusive—at prices that they allege were artificially inflated. They assert that they were damaged as a result of these inflated-price purchases, now that the truth has been revealed. See CACAC ¶¶ 55–59, at 25–26. Manning acquired 550 shares of Thornburg Mortgage common stock during the May, 2007 Offering. See CACAC ¶ 56, at 25. She bought them on May 4, 2007, and paid $27.05 per share. See CACAC ¶ 56, at 25. Learch, as trustee for the Learch trust, acquired 400 shares of 07.5% Series E Cumulative Convertible Redeemable Preferred Stock in the June, 2007 Offering. See CACAC ¶ 57, at 25. He bought his shares on June 19, 2007, and paid $25.00 per share. See CACAC ¶ 57, at 2. Boilermakers Lodge purchased 860 shares of Thornburg Mortgage Series F Preferred Stock in the September, 2007 Offering. See CACAC ¶ 58, at 25. Boilermakers Lodge purchased these shares on August 30, 2007, and paid $25.00 per share. See CACAC ¶ 58, at 25.

1. The Defendants.

Thornburg Mortgage, the company whose securities are at the heart of this action, is a publicly traded residential-mortgage lender that represents that it focuses primarily on the “jumbo” and “super jumbo” segment, i.e., loans totaling over $417,000.00, of the adjustable-rate mortgage (“ARM”) market. ² CACAC ¶ 6, at 10. “[Thornburg Mortgage] generates income from the small, net spread between the interest income it earns on its assets and the cost of its borrowings.” CACAC ¶ 6, at 10. Thornburg Mortgage was formed under the laws of the State of Maryland and has its principal place of business in Santa Fe, New Mexico. See CACAC ¶ 60, at 26. At all relevant times, Thornburg Mortgage's securities have been traded on the New York Stock Exchange under the symbol “TMA.” CACAC ¶ 60, at 26. For federal income tax purposes, Thornburg Mortgage is classified as a Real Estate Investment Trust. See CACAC ¶ 115, at 44.

The “Individual Defendants” are: (i) Garrett Thornburg, the Chairman of

Thornburg Mortgage's Board of Directors; (ii) Larry A. Goldstone who served as the President and a Director of Thornburg Mortgage; (iii) Joseph H. Badal who served as a Director, Chief Lending Officer, and Executive Vice President of Thornburg Mortgage until his 2007 retirement; (iv) Paul G. Decoff who serves as Senior Executive Vice President and Chief Lending Officer; and (v) Clarence D. Simmons who served as Senior Executive Vice President and Chief Financial Officer until he left the company in 2009. See CACAC ¶¶ 61–66, at 26–27. The following Defendants constitute the “Underwriter Defendants,” which are all nationally recognized investment banking and asset management firms: (i) A.G. Edwards, Inc.; (ii) Bear Sterns & Co., Inc.; (iii) BB & T Capital Markets, a division of Scott & Stringfellow, Inc.; (iv) Citigroup Global Markets, Inc.; (v) Friedman Billings Ramsey & Co.; (vi) Oppenheimer & Co. Inc.; (vii) RBC Dain Rauscher Inc.; (viii) Stifel Nicolaus & Company, Inc.; and (ix) UBS Securities LLC. CACAC ¶¶ 460–69, at 154–57. The “Director Defendants” include: (i) Anne–Drue M. Anderson; (ii) David A. Ater; (iii) Eliot R. Cutler; (iv) Ike Kalangis; (v) Owen M. Lopez; (vi) Francis I. Mullin, III; and (vii) Stuart C. Sherman. CACAC ¶¶ 470–77, at 157–58.

2. The Claims.

This federal-securities class action sets forth claims under the Securities Act of 1933, 15 U.S.C. §§ 77a to 77aa (“Securities Act”), and under the Securities Exchange Act of 1934, 15 U.S.C....