|1.||Why did I get the Settlement Notice?|
The Court authorized that the Settlement Notice be sent to you because you, someone in your family, or someone for whom you are a trustee or other authorized representative, may have purchased or otherwise acquired the publicly traded common stock of Liquidity Services, Inc. from February 1, 2012, through May 7, 2014, inclusive.
If this description applies to you, someone in your family, or someone for whom you are a trustee or other authorized representative, you have a right to know about the proposed Settlement of this class action lawsuit, and about your options, before the Court decides whether to approve the Settlement. If the Court approves the Settlement, and after any objections and appeals are resolved, an administrator appointed by the Court will make the payments that the Settlement allows.
The Settlement Notice explains the lawsuit, the Settlement, Class Members’ legal rights, what benefits are available, who is eligible for them, and how to get them. Receipt of the notice does not mean you are a Class Member or that you are eligible for a payment from the Settlement.
The Court in charge of this Action is the United States District Court for the District of Columbia (the “Court”), and the case is known as Howard, et al. v. Liquidity Services, Inc., et al., Case No. 1:14-cv-1183-BAH (D.D.C.). The Action is assigned to the Honorable Chief Judge Beryl A. Howell, United States District Judge.
The Court did not decide in favor of Class Representatives or Defendants. Instead, they have agreed to a settlement. For Class Representatives, the principal reason for the Settlement is the certain benefit of a substantial cash recovery for the Class, in contrast to the costs and delay of fact and expert discovery; the uncertainty that the Court may grant, in whole or in part, some or all of the anticipated motions for summary judgment to be filed by Defendants; the uncertainty of being able to prove the allegations of liability and/or damages at a jury trial; and the difficulties and delays inherent in such litigation (including any appeals).
For Defendants, who deny all allegations of wrongdoing or liability whatsoever and deny that any Class Members were damaged, the principal reason for entering into the Settlement is to bring to an end the substantial burden, expense, uncertainty, and risk of further litigation.
|2.||What is this lawsuit about? What has happened so far?|
LSI provides online auction marketplaces for surplus and salvage assets, also known as a “reverse supply chain” or “reverse logistics.” Reverse logistics is essentially the redeployment and remarketing of retail customer returns, overstock products, and end-of-life goods or capital assets. LSI primarily makes money by buying and reselling goods, as well as retaining a percentage of the proceeds from the consignment sales it manages for its sellers. The Company operates through three divisions: (i) Retail, (ii) Capital Assets, and (iii) Public Sector.
The initial complaint was filed on July 14, 2014. On October 14, 2014, the Court issued an order appointing Caisse and NNERF as co-lead plaintiffs and approving their selection of Labaton Sucharow LLP and Spector Roseman Kodroff & Willis, P.C. (now Spector Roseman & Kodroff, P.C.) as co-lead counsel (collectively, “Co-Lead Counsel” or “Class Counsel”).
Lead Plaintiffs filed the operative Amended Complaint for Violations of the Federal Securities Laws on December 15, 2014 (the “Complaint”), alleging violations of §§10(b) and 20(a) of the Securities and Exchange Act of 1934 (“Exchange Act”). The Complaint alleges that during the Class Period, Defendants made materially false and misleading statements and failed to disclose information to investors about the financial performance of the Company’s Retail Division in violation of the Exchange Act, as well as making further allegations not related to the Retail Division. As detailed in the Complaint, Class Representatives allege that Defendants made materially false and misleading statements and omissions concerning the organic growth of its Retail Division. The Complaint alleges that in attempting to transition from a business that was dependent in primary part upon its contracts with the U.S. Department of Defense (“DoD”) to a more diversified retail client base, Defendants allegedly fraudulently portrayed LSI’s Retail Division as a growth driver and downplayed the impact of competition. The Complaint alleges that sales and margins in the Retail Division were not growing as much as portrayed during the Class Period due, in part, to heightened competition. On May 8, 2014, LSI reported substantial declines in gross merchandise volume (“GMV”), adjusted EBITDA, and adjusted diluted EPS. LSI’s stock price decreased.
Lead Plaintiffs further allege that the false and misleading statements and omissions inflated the price of LSI’s common stock, thereby damaging Class Members; and that when Defendants later allegedly disclosed that the Retail Division was not performing as strongly as had been previously indicated, and that LSI’s retail growth could not be sustained, LSI’s stock price declined.
On March 2, 2015, Defendants moved to dismiss the Complaint. On March 31, 2016, the Court issued a Memorandum Opinion, as well as an Order, denying in part (as to the Retail Division) and granting in part (as to the other allegations in the Complaint) Defendants’ motion to dismiss. Thereafter, on May 16, 2016, Defendants filed their answer to the Complaint, denying all allegations of wrongdoing or damages and asserting affirmative defenses.
On September 2, 2016, Lead Plaintiffs moved for class certification, appointment of Caisse and NNERF as class representatives, and appointment of Labaton Sucharow LLP and Spector Roseman & Kodroff, P.C. as class counsel. Defendants opposed the motion on March 14, 2017. Two weeks later, on April 5, 2017, Defendants moved for partial summary judgment on the issue of reliance. Lead Plaintiffs opposed the partial summary judgment motion on May 16, 2017.
On September 6, 2017, the Court issued an Order granting the certification motion and certifying the Class. The Court also appointed Caisse and NNERF as Class Representatives and appointed Co-Lead Counsel as Class Counsel. In the same Order, the Court denied Defendants’ motion for partial summary judgment. On November 17, 2017, the Class Representatives filed an unopposed motion for approval of the form and content of notices of pendency of the Action as a class action, and the methods for providing notice to the Class, which was granted on November 21, 2017.
Beginning on December 21, 2017, the Class Notice was mailed to potential Class Members and information was posted on this website. The Class Notice informed investors of this class action, their right to be excluded from the Class (to “opt out”), the requirements for requesting exclusion, and a February 20, 2018 deadline for seeking exclusion. Information in summary form was also published in Investor’s Business Daily and transmitted over the Internet via PR Newswire.
Class Representatives, through Class Counsel, have conducted a thorough investigation of the claims, defenses, and underlying events and transactions that are the subject of the Action. This process included reviewing and analyzing: (i) documents filed publicly by the Company with the U.S. Securities and Exchange Commission (“SEC”); (ii) publicly available information, including press releases, news articles, and other 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; (v) interviews with former employees of the Company and third-parties with relevant knowledge; (vi) approximately 500,000 pages of documents produced in discovery, including approximately 274,000 pages of documents produced by Defendants and approximately 223,000 pages of documents produced by third-parties; and (vii) the applicable law governing the claims and potential defenses.
Counsel for Class Representatives and Defendants engaged in voluminous class and fact discovery. In addition to Class Representatives’ review of approximately 500,000 pages of documents produced by Defendants and various non-parties, noted above, Class Counsel defended or took 15 depositions, including the depositions of Class Representatives, Class Representatives’ investment advisors, numerous current and former employees of the Company, and Class Representatives’ market efficiency expert; and they submitted one expert report directed at market efficiency, loss causation, and damages.
Following the Court’s certification of the Class, the Parties engaged the Honorable Layn R. Phillips (Ret.), a well-respected and highly experienced mediator and retired federal judge, to assist them in exploring a potential negotiated resolution of the claims in the Action. The mediation process involved an extended effort to settle the claims. Prior to the mediation, Class Counsel and Defendants’ Counsel met to preliminarily discuss settlement-related issues. Thereafter, the Parties provided the mediator with detailed mediation statements. On February 8, 2018, Class Counsel and Defendants’ Counsel met for a full day with Judge Phillips in an attempt to reach a settlement. However, the Parties were unable to reach a resolution at that time. In the month following the mediation, Judge Phillips continued his efforts to facilitate discussions and to mediate a potential resolution of the Action by the Parties. The Parties reached an agreement in principle to settle the Action on March 7, 2018. After further extensive negotiation, the Parties executed a Term Sheet on April 12, 2018; and they thereafter negotiated the Stipulation and exhibits incorporated therein.
|3.||How do I know if I am part of the Class?|
The Court has certified the following Class, subject to certain exceptions identified below:
All persons and entities who purchased or otherwise acquired the publicly traded common stock of LSI during the period from February 1, 2012, through May 7, 2014, inclusive, and who were damaged thereby.
If you are a member of the Class and did not previously and validly seek exclusion from the Class in connection with the Class Notice, you are subject to the Settlement.
Check your investment records or contact your broker to see if you have any eligible purchases during the period from February 1, 2012, through May 7, 2014 inclusive.
|4.||Are there exceptions to being included in the Class?|
Yes. Some people and entities are excluded from the Class by definition. Excluded from the Class, by definition, are: Defendants LSI, William P. Angrick, III, and James M. Rallo, and members of their immediate families; any subsidiary or affiliate of LSI, including any employee retirement and/or benefit plan(s) of LSI or its subsidiaries; the Minnesota limited liability company Jacobs Trading, LLC (“Jacobs Trading, LLC”), and its subsidiaries or affiliates; the directors and officers of LSI or its subsidiaries or affiliates; the directors and officers of Jacobs Trading, LLC; any entity in which any excluded person has a controlling interest; the legal representatives, heirs, successors, and assigns of any excluded person; and any person or entity that validly sought exclusion from the Class in connection with the previously disseminated Class Notice who does not opt back into the Class, in accordance with the procedures set forth under Question 8 below.
|5.||What if I am still not sure if I am included in the Class?|
If you are still not sure whether you are included in the Class, you can ask for free help. You can call the Claims Administrator toll-free at (888) 684-4985, send an e-mail to the Claims Administrator at firstname.lastname@example.org, or write to the Claims Administrator at LSI Securities Litigation, c/o GCG, P.O. Box 10520, Dublin, OH 43017-5589. Or you can fill out and return the Claim Form described under Question 6 to see if you qualify.
|6.||How can I receive a payment?|
To qualify for a payment, you must submit a timely and valid Claim Form. A Claim Form was included with the Settlement Notice that was mailed to you. If you did not receive a Claim Form, you can obtain one by clicking here. You can also ask for a Claim Form by calling the Claims Administrator toll-free at (888) 684-4985.
Please read the instructions on the Claim Form carefully, fill out the Claim Form, include all the documents the form requests, sign it, and mail or submit it to the Claims Administrator so that it is postmarked no later than November 3, 2018.
|7.||How are Class Members Affected by the Settlement?|
If you are a Class Member, upon the “Effective Date,” you will release all “Released Claims” against the “Released Defendant Parties.”
“Released Claims” means any and all claims, rights, actions, controversies, causes of action, duties, obligations, demands, actions, debts, sums of money, suits, contracts, agreements, promises, damages, and liabilities of every kind, nature, and description, including both known claims and unknown claims, whether arising under federal, state, or foreign law, or statutory, common, or administrative law, or any other law, rule, or regulation, whether asserted as claims, cross-claims, counterclaims, or third-party claims, whether fixed or contingent, choate or inchoate, accrued or not accrued, matured or unmatured, liquidated or un-liquidated, perfected or unperfected, whether class, representative, or individual in nature, that previously existed, currently exist, or that exist as of the date of entry of the Court’s Order approving the Settlement and entry of the Court’s Judgment dismissing the Action, that Class Representatives or any other member of the Class asserted in the Complaint or any of the complaints filed in the Action or that Class Representatives or any Member of the Class could have asserted in the Action or in any other action or in any forum (including, without limitation, any federal or state court, or in any other court, arbitration proceeding, administrative agency, or other forum in the United States or elsewhere), that in any way arise out of, are based upon, relate to, or concern both: (i) the claims, filings, pleadings, allegations, transactions, facts, circumstances, events, acts, disclosures, statements, representations, omissions, or failures to act alleged, set forth, referred to, involved in, or which could have been raised in the Action, including, without limitation, claims that arise out of or relate to any disclosures, SEC filings, press releases, investor calls, registration statements, offering memoranda, web postings, presentations, or any other statements by or on behalf of LSI or any other Defendant during the Class Period; and (ii) the purchase, acquisition, disposition, or sale of LSI publicly traded common stock during the Class Period. Released Claims do not include claims to enforce the Settlement contemplated by this Stipulation or claims in In re Liquidity Services, Inc. Derivative Litigation, Civ. No. 17-0080-JTL (Del. Ch.).
“Released Defendant Parties” means (i) each and every Defendant; (ii) Defendants’ respective present and former parents, affiliates, subsidiaries, divisions, general partners, limited partners, and any Person in which any Defendant has or had a controlling interest; and (iii) the present and former immediate family, heirs, principals, trustees, trusts, executors, administrators, predecessors, successors, assigns, members, agents, subsidiaries, employees, officers, managers, directors, general partners, limited partners, bankers, consultants, attorneys, accountants, auditors, representatives, estates, divisions, advisors, estate managers, indemnifiers, insurers, and reinsurers of each of the Persons listed in subpart (i) or (ii) of this definition.
“Unknown Claims” means any and all Released Claims that Class Representatives or any other Class Member, and each of their respective heirs, executors, trustees, administrators, predecessors, successors, and assigns, in their capacity as such, does not know or suspect to exist in his, her, or its favor at the time of the release of the Released Defendant Parties, and any and all Released Defendants’ Claims that any Defendant, and each of their respective heirs, executors, trustees, administrators, predecessors, successors, and assigns, in their capacity as such, does not know or suspect to exist in his, her, or its favor at the time of the release of the Released Plaintiff Parties, which if known by him, her, or it might have affected his, her, or its decision(s) with respect to the Settlement, including, in the case of any Class Member, the decision to object to the terms of the Settlement or to seek to be excluded from the Class. With respect to any and all Released Claims and Released Defendants’ Claims, the Parties stipulate and agree that, upon the Effective Date, Class Representatives and Defendants shall expressly, and each Class Member, and their respective heirs, executors, trustees, administrators, predecessors, successors, and assigns, in their capacity as such, shall be deemed to have, and by operation of the Judgment or Alternative Judgment shall have, to the fullest extent permitted by law, expressly waived and relinquished any and all provisions, rights, and benefits conferred by any law of any state or territory of the United States, or principle of common law, including, or which is similar, comparable, or equivalent to, Cal. Civ. Code § 1542, which provides:
A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.
Class Representatives, other Class Members, the Defendants, and each of their respective heirs, executors, trustees, administrators, predecessors, successors, and assigns, in their capacity as such, may hereafter discover facts, legal theories, or authorities in addition to, contrary to, or different from those which any of them now knows or believes to be true with respect to the subject matter of the Released Claims and the Released Defendants’ Claims, but Class Representatives and Defendants expressly, fully, finally, and forever waive, compromise, settle, discharge, extinguish, and release, and each Class Member, and each of their respective heirs, executors, trustees, administrators, predecessors, successors, and assigns, in their capacity as such, shall be deemed to have waived, compromised, settled, discharged, extinguished, and released, and upon the Effective Date and by operation of the Judgment or Alternative Judgment shall have waived, compromised, settled, discharged, extinguished, and released, fully, finally, and forever, any and all Released Claims and Released Defendants’ Claims, as applicable, known or unknown, suspected or unsuspected, contingent or absolute, accrued or unaccrued, apparent or unapparent, which now exist, or heretofore existed, or may hereafter exist, without regard to the subsequent discovery or existence of such different, contrary, or additional facts, legal theories, or authorities. Class Representatives and Defendants acknowledge, and all other Class Members, and each of their respective heirs, executors, trustees, administrators, predecessors, successors, and assigns, in their capacity as such, by operation of law shall be deemed to have acknowledged, that the inclusion of “Unknown Claims” in the definition of Released Claims and Released Defendants’ Claims was separately bargained for and was a material element of the Settlement.
The “Effective Date” will occur when an Order and Judgment entered by the Court approving the Settlement becomes final and is not subject to appeal. If you are a member of the Class, all of the Court’s orders will apply to you and legally bind you, even if you do not file a claim form or if your claim form is rejected in whole or in part.
|8.||What if I previously requested exclusion in connection with the Class Notice and now want to be eligible to receive a payment from the Settlement? How do I opt back into the Class?|
If you previously submitted a valid request for exclusion from the Class in connection with the Class Notice, you may opt back into the Class and be eligible to receive a payment from the Settlement. If you are not certain whether you previously submitted a request for exclusion, please contact the Claims Administrator at (888) 684-4985 for assistance.
In order to opt back into the Class, you must submit a written “Request to Opt Back into the Class” to the Claims Administrator, addressed as follows: LSI Securities Litigation, c/o GCG, P.O. Box 10520, Dublin, OH 43017-5589. This request must be received no later than September 14, 2018. Your Request to Opt Back into the Class must: (i) state the name, address, and telephone number of the person or entity requesting to opt back into the Class; (ii) state that such person or entity requests to opt back into the Class in “Howard v. Liquidity Services Inc. et al., No. 1:14-cv-01183-BAH (D.D.C.)”; and (iii) be signed by the person or entity requesting to opt back into the Class or an authorized representative.
Please note: Opting back into the Class does not mean that you will automatically be entitled to receive proceeds from the Settlement. If you wish to be eligible to participate in the distribution of proceeds from the Settlement, you are also required to submit the Claim Form that is being distributed with the Settlement Notice. See Question 6, above.
|9.||Do I have a lawyer in this case?|
The Court ordered the law firms of Labaton Sucharow LLP and Spector Roseman & Kodroff, P.C. to represent all Class Members. These lawyers are called Class Counsel. You will not be separately charged for these lawyers. The Court will determine the amount of Class Counsel’s fees and expenses, which will be paid from the Settlement Fund. If you want to be represented by your own lawyer, you may hire one at your own expense.
|10.||How will the lawyers for the Class be paid?|
Class Counsel have not been paid for any of their work. They will ask the Court to award them, on behalf of all Plaintiffs’ Counsel, attorneys’ fees from the Settlement Fund of no more than 25% of the Settlement Fund, which includes interest on such fees after funding at the same rate as earned by the Settlement Fund. Class Counsel will also seek payment of litigation expenses in connection with the prosecution of this Action of no more than $980,000, plus interest on such expenses after funding at the same rate as earned by the Settlement Fund, from which Class Representatives may seek an award pursuant to the PSLRA to reimburse them for their expenses and/or the time that they spent representing the Class.
|11.||How do I tell the Court that I do not like something about the proposed Settlement?|
If you are a Class Member, you can object to the Settlement or any of its terms, the proposed Plan of Allocation, and/or the Fee and Expense Application. You may write to the Court explaining your objection. You can ask the Court to not approve the Settlement; however, you cannot ask the Court to order a larger settlement – the Court can only approve or deny this Settlement. If the Court denies approval, the settlement payments will not be sent out; sums remaining in the Settlement Fund will be returned to Defendants; and the lawsuit will continue. If you would like the Court to consider your views, you must file a proper objection within the deadline, and according to the following procedures.
To object, you must mail a signed letter (or more formal court filing) stating that you object to the proposed Settlement in “Howard v. Liquidity Services Inc. et al., No. 1:14-cv-01183-BAH (D.D.C.).” You must include your name, address, telephone number, e-mail address, and signature; identify the date(s), price(s), and number(s) of shares of LSI common stock that you purchased, acquired, and sold; state the reasons why you object and the part(s) of the Settlement, Plan of Allocation, and/or Fee and Expense Application to which you object; and include any legal support and evidence, to support your objection. Unless otherwise ordered by the Court, any Class Member who does not object in the manner described in the Settlement Notice will be deemed to have waived their objection and shall be forever foreclosed from making any future objection. Your objection must be: (i) submitted to the Court, either by mailing the objection to the Clerk of the Court at the address below or by filing the objection in person at the location below, and (ii) mailed by first class mail to Class Counsel and Defendants’ Counsel. It must be received by each on or before September 14, 2018:
The Court Clerk of the Court United States District Court for the District of Columbia 333 Constitution Avenue N.W. Washington, D.C. 20001
Labaton Sucharow LLP Attn: Jonathan Gardner, Esq. 140 Broadway New York, NY 10005
Weil, Gotshal & Manges LLP Attn: Miranda S. Schiller, Esq. 767 Fifth Avenue New York, NY 10153
|Spector Roseman & Kodroff, P.C. Attn: Andrew D. Abramowitz, Esq. 1818 Market Street, Suite 2500 Philadelphia, PA 19103|
|12.||When and where will the Court decide whether to approve the proposed Settlement?|
The Court will hold the Settlement Hearing on October 5, 2018 at 9:30 a.m., in Courtroom 22A, 2nd Floor, United States District Court for the District of Columbia, 333 Constitution Avenue N.W., Washington, D.C. 20001.
At this hearing, the Court will consider: (i) whether the Settlement is fair, reasonable, and adequate and should be finally approved; (ii) whether the proposed Plan of Allocation is fair, reasonable, and adequate; and (iii) the application of Class Counsel for an award of attorneys’ fees and payment of litigation expenses.
The Court may change the date and time of the Settlement Hearing without another notice being sent to Class Members. If you want to attend the hearing, you should check with Class Counsel beforehand to be sure that the date and/or time has not changed or check this website to see if the Settlement Hearing stays as calendared or is changed.
|13.||May I speak at the Settlement Hearing?|
You may ask the Court for permission to speak at the Settlement Hearing. To do so, you must submit a statement that it is your intention to appear in “Howard v. Liquidity Services Inc. et al., No. 1:14-cv-01183-BAH (D.D.C.).” Persons who also intend to object to the Settlement, the Plan of Allocation, or Class Counsel’s Fee and Expense Application and desire to present evidence at the Settlement Hearing must also include in their objections (prepared and submitted in accordance with the answer to Question 11 above), in addition to the notice of appearance, the identity of any witness they may wish to call to testify and any exhibits they intend to introduce into evidence at the Settlement Hearing. You may not speak at the Settlement Hearing if you previously excluded yourself from the Class and have not opted back in, as provided under Question 8 above, or if you have not provided written notice of your objection and/or intention to speak at the Settlement Hearing in accordance with the procedures described under Questions 11 and 13.
|14.||What happens if I do nothing at all?|
If you do nothing and you are a member of the Class, you will receive no money from this Settlement but you will still be bound by the Settlement, including the releases contained therein, and you therefore still will be precluded from starting a lawsuit, continuing with a lawsuit, or being part of any other lawsuit against Defendants and the other Released Defendant Parties concerning the Released Claims. To share in the Net Settlement Fund, you must submit a Claim Form (see Question 6).
|15.||Are there more details about the proposed Settlement?|
The Settlement Notice summarizes the proposed Settlement. More details are in the Stipulation. Class Counsel’s motions in support of approval of the Settlement, the request for attorneys’ fees and litigation expenses, and approval of the proposed Plan of Allocation will be filed with the Court no later than August 31, 2018 and will be available from Class Counsel, the Claims Administrator, or the Court, pursuant to the instructions below.
You may review the Stipulation or documents filed in the case at the Office of the Clerk of the United States District Court for the District of Columbia, 333 Constitution Avenue N.W., Washington, D.C. 20001, on weekdays (other than court holidays) between 9:00 a.m. and 4:00 p.m., Eastern Time. Subscribers to PACER, a fee-based service, can also view the papers filed publicly in the Action through the Court’s online Case Management/Electronic Case Files System at https://www.pacer.gov.
You can also get a copy of the Stipulation and other case documents using this website, by calling the Claims Administrator toll free at (888) 684-4985, or by writing to the Claims Administrator at LSI Securities Litigation, c/o GCG, P.O. Box 10520, Dublin, OH 43017-5589. Please do not call the Court with questions about the Settlement.