Notice from the Weiser Law Firm P.C. to Current HQSM Shareholders
SEATTLE, June 28, 2013 /PRNewswire/ –
UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE
In re HQSM SUSTAINABLE MARITIME Lead Case No. 2:11- INDUS., INC. DERIVATIVE LITIGATION cv-00910-RSL This document relates to: [ALL] ACTIONS -------------
TO: ALL OWNERS OF HQSM SUSTAINABLE MARITIME INDUSTRIES, INC. COMMON STOCK AS OF MAY 6, 2013.
PLEASE READ THIS NOTICE CAREFULLY AND IN ITS ENTIRETY. YOUR RIGHTS MAY BE AFFECTED. THIS NOTICE RELATES TO A PROPOSED SETTLEMENT AND DISMISSAL OF SHAREHOLDER DERIVATIVE LITIGATION AND CONTAINS IMPORTANT INFORMATION REGARDING YOUR RIGHTS. YOUR RIGHTS MAY BE AFFECTED BY LEGAL PROCEEDINGS IN THESE ACTIONS.
IF THE COURT APPROVES THE SETTLEMENT AND DISMISSAL OF THE FEDERAL DERIVATIVE ACTION, SHAREHOLDERS OF HQSM WILL BE FOREVER BARRED FROM CONTESTING THE APPROVAL OF THE PROPOSED SETTLEMENT AND FROM PURSUING THE SETTLED CLAIMS. THESE ACTIONS ARE NOT “CLASS ACTIONS.” THUS, THERE IS NO COMMON FUND UPON WHICH YOU CAN MAKE A CLAIM FOR A MONETARY PAYMENT.
THE FEDERAL COURT HAS MADE NO FINDINGS OR DETERMINATIONS RESPECTING THE MERITS OF THE FEDERAL DERIVATIVE ACTION. THE RECITATION OF THE BACKGROUND AND CIRCUMSTANCES OF THE SETTLEMENT CONTAINED HEREIN DOES NOT CONSTITUTE THE FINDINGS OF THE FEDERAL COURT. IT IS BASED ON REPRESENTATIONS MADE TO THE FEDERAL COURT BY COUNSEL FOR THE PARTIES.
YOU ARE HEREBY NOTIFIED, pursuant to Federal Rule of Civil Procedure 23.1 and an Order from the Honorable Robert S. Lasnik of the U.S. District Court for the Western District of Washington, that a proposed settlement agreement has been reached among Plaintiffs,  on behalf of themselves and derivatively on behalf of HQSM, Individual Defendants, and HQSM in connection with the shareholder derivative actions entitled (i) In re HQ Sustainable Maritime Indus., Inc. Derivative Litigation, Lead Case No. 2:11-cv-00910-RSL, and the cases that have been consolidated in it, including (a) Smith v. Intrater, et al., No. 2:11-cv-001030-RSL, (b) Karsan, et al., v. Sporns, et al., No. 2:11-cv-01159-RSL, (c) Niksich v. Li, et al., No. 2:11-cv-01005-RSL, and (d) Hopkins v. Sporns, et al., No 2:11-cv-00910-RSL pending before the Federal Court, (ii) In re HQ Sustainable Maritime Industries, Inc., Derivative Litigation, No. 11-2-16742-9 SEA, and the cases that have been consolidated in it, including (a) Guyton v. Sporns, et al., No. 11-2-18160-0 SEA, and (b) Morgan v. Sporns, et al., No. 11-2-16742-9 SEA, pending in the Superior Court of the State of Washington, County of King, and (iii) Britt v. Intrater, et al., CA No. 7230-VCP pending in the Court of Chancery of the State of Delaware.
Plaintiffs filed the Actions derivatively on behalf of HQSM to remedy the alleged harm caused to the Company by the Individual Defendants’ alleged breach of their fiduciary duties. The proposed Settlement, if approved by the Federal Court, would fully, finally and forever resolve the Actions on the terms set forth in the Stipulation and summarized in this Notice, including the dismissal of the Actions with prejudice.
As explained below, a Settlement Hearing shall be held before the Federal Court on September 19, 2013 at 10:00am to determine whether, inter alia, the proposed Settlement is fair, reasonable, and adequate, and should be finally approved by the Federal Court. You have the right to object to the Settlement in the manner provided herein. If you fail to object in the manner provided herein at least fourteen (14) business days prior to the Settlement Hearing, you will be deemed to have waived your objections and will be bound by the Final Order and Judgment to be entered and the releases to be given, unless otherwise ordered by the Federal Court.
This Notice is not intended to be and should not be construed as an expression of any opinion by the Federal Court with respect to the merits of the claims made in the Actions, but is merely to advise you of the proposed Settlement and of your rights as a Current HQSM Shareholder.
HQSM produces and markets functional and sustainable biomass products focused on the Tilapia aquaculture. The Company produces and sells wholesale feed products as well as retail focused nutraceutical and health products through direct and franchise sales in China.
On April 28, 2011, a putative securities class action was filed against HQSM in the Federal Court alleging violations of Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10(b)(5), captioned Moomjy v. HQ Sustainable Maritime Industries, Inc., Civil Action No. 2:11-cv-00726-RSL.
The Securities Action was followed by four shareholder derivative suits filed in the Federal Court by plaintiffs Gene Niksich, Alan Hopkins, Farida Corkery-Smith, and Cem Karsan. On July 21, 2011, Federal Plaintiffs filed a Motion to Consolidate the Federal Court actions. On August 2, 2011, Federal Plaintiffs filed a stipulation and proposed order consolidating the related cases and appointing co-lead counsel. On August 3, 2011, the Federal Court actions were consolidated as the Federal Derivative Action.
On August 17, 2011, Federal Plaintiffs filed a Motion to Compel Defendants’ initial disclosures. On August 19, 2011, the Company and certain of the Individual Defendants filed motions to dismiss or stay the Federal Derivative Action. On August 29, 2011, Defendants filed a Cross Motion to Stay Plaintiffs’ Motion to Compel. On September 12, 2011, Federal Plaintiffs filed a Response to Defendants’ Cross Motion to Stay.
The operative complaint in the Federal Derivative Action alleged the following Counts against the Individual Defendants (except for Mr. Intrater, who was dropped as a defendant from the operative complaint): (I) Breach of Fiduciary Duty for Disseminating False and Misleading Information; (II) Breach of Fiduciary Duty for Failing to Maintain Internal Controls; (III) Breach of Fiduciary Duty for Failing to Properly Oversee and Manage the Company; (IV) for Unjust Enrichment; (V) for Abuse of Control; and (VI) Breach of Fiduciary Duty for Gross Mismanagement. The Company and certain of the Individual Defendants’ motions to dismiss argued in part that the Federal Derivative Action should be dismissed due to Federal Plaintiffs’ failure to make pre-suit demand and failure to state a claim upon which relief could be granted. On November 28, 2011, the Federal Court ruled on the motion to dismiss. The Federal Court dismissed Counts I and II as to all defendants and Counts III-VI as to defendants Fred Bild, Daniel Too, Kevin M. Fitzsimmons and Jean-Pierre Dallaire. The Federal Court found that the complaint’s allegations sufficient to excuse pre-suit demand on the grounds of futility and state a claim for breach of fiduciary duty, unjust enrichment, abuse of control, and gross mismanagement against defendants Norbert Sporns, Lillian Wang Li, and Harry Wang Hua.
Washington State Plaintiffs commenced their shareholder derivative action for equitable relief and damages on May 5, 2011 in the Superior Court of the State of Washington for King County. The operative Consolidated Complaint was filed in the Washington State Derivative Action on July 1, 2011 and the Washington State Plaintiffs commenced discovery. On July 25, 2011, Washington State Plaintiffs moved to compel discovery, citing an intent to seek injunctive relief, including an equitable accounting and document preservation order. That same day, certain of the Defendants moved to stay State Plaintiffs’ discovery and for a protective order, both before Judge Prochnau in the Washington State Court and in the Securities Action before Judge Lasnik. Though Judge Prochnau denied Defendants’ motion to stay discovery on August 8, 2011, the Washington State Court ordered that the parties meet and confer and propose a discovery master and discovery master protocol, which were submitted on September 2, 2011. Thereafter, on September 12, 2011, Judge Lasnik granted Defendants a stay of discovery in the State Derivative Action pursuant to the Securities Litigation Uniform Standards Act.
Delaware State Plaintiff commenced his shareholder derivative action on February 8, 2012 in the Court of Chancery of the State of Delaware. On April 12, 2012, Defendants moved to stay or dismiss the Delaware State Derivative Action. Having reached a settlement in principle of the Delaware State Derivative Action, the parties to that action requested that the court stay that action pending this Court’s consideration of this Stipulation of Settlement. The Delaware State Court stayed the Delaware State Derivative Action on December 20, 2012.
On April 24-25, 2012, the Federal Plaintiffs, Washington State Plaintiffs, and certain of the Defendants engaged in a two-day mediation in New York City. While a final resolution was not reached at that time, after an extended series of discussions and with the aid of a mediator, Jed Melnick Esq., the Federal Plaintiffs, Washington State Plaintiffs, and Defendants were able to reach an agreement in principle to the terms required to settle the Federal Derivative Action and Washington State Derivative Action. The Delaware State Plaintiff and Defendants later reached an agreement in principle to the terms required to settle the Delaware State Derivative Action.
II. PLAINTIFFS’ COUNSEL’S INVESTIGATION AND RESEARCH, PLAINTIFFS’ CLAIMS AND THE BENEFITS OF SETTLEMENT
Plaintiffs’ Counsel conducted extensive investigations relating to the claims and the underlying events alleged in the Actions including, but not limited to: (1) inspecting, analyzing, and reviewing HQSM’s public filings with the U.S. Securities and Exchange Commission, press releases, announcements, transcripts of investor conference calls, and news articles; (2) drafting and filing the various complaints in the Actions; (3) researching the applicable law with respect to the claims asserted in the Actions and the potential defenses thereto; (4) researching corporate governance issues; and (5) exchanging certain information and participating in extensive settlement discussions with Individual Defendants’ Counsel, HQSM’s Counsel and the Mediator. Plaintiffs’ Counsel believe that the claims asserted in the Actions have merit and that their investigation supports the claims asserted. Without conceding the merit of any of Defendants’ defenses or the lack of merit of any of their own allegations, and solely in order to avoid the potentially protracted time, expense, and uncertainty associated with continued litigation, including potential trial(s) and appeals, Plaintiffs have concluded that it is desirable that the Actions be fully and finally settled in the manner and upon the terms and conditions set forth in this Stipulation. Plaintiffs and Plaintiffs’ Counsel recognize the significant risk, expense, and length of continued proceedings necessary to prosecute the Actions against the Individual Defendants through trial(s) and through possible appeals. Plaintiffs’ Counsel also have taken into account the uncertain outcome and the risk of any litigation, especially in complex cases such as the Actions, as well as the difficulties and delays inherent in such litigation. Based on their evaluation, Plaintiffs and Plaintiffs’ Counsel have determined that the Settlement is in the best interests of Plaintiffs, HQSM, and Current HQSM Shareholders (as defined herein), and have agreed to settle the Actions upon the terms and subject to the conditions set forth herein.
III. DEFENDANTS’ DENIALS OF WRONGDOING AND LIABILITY
The Individual Defendants have denied and continue to deny that they have committed or attempted to commit any violations of law, any breach of fiduciary duty owed to HQSM, or any wrongdoing whatsoever. Without admitting the validity of any of the claims Plaintiffs have asserted in the Actions, or any liability with respect thereto, the Individual Defendants have concluded that it is desirable that the claims be settled on the terms and subject to the conditions set forth herein. Defendants are entering into this Settlement because it will eliminate the uncertainty, distraction, disruption, burden, risk, and expense of further litigation. Further, Defendants acknowledge that the Settlement is fair, reasonable, adequate, and in the best interests of HQSM and Current HQSM Shareholders.
Neither the Stipulation, nor any of its terms or provisions, nor entry of the Final Order and Judgment, nor any document or exhibit referred or attached to the Stipulation, nor any action taken to carry out the Stipulation, is or may be construed or used as evidence of the validity of any of Plaintiffs’ Released Claims, or as an admission by or against Defendants of any fault, wrongdoing, or concession of liability whatsoever.
IV. THE SETTLEMENT HEARING
The Settlement Hearing will be held before the Honorable Robert S. Lasnik on September 19, 2013 at 10:00am at the U.S. District Court for the Western District of Washington, 700 Stewart Street, Seattle, WA 98101 to determine: (i) whether the proposed Settlement, upon the terms set forth in the Stipulation, should be finally approved in all respects as fair, reasonable, and adequate; (ii) whether the Final Order and Judgment approving the Settlement should be entered; (iii) whether Plaintiffs’ Counsel’s agreed-to Fee Award should be finally approved; and (iv) whether the Incentive Awards should be finally approved. The Settlement Hearing may be continued by the Federal Court at the Settlement Hearing, or at any adjourned session thereof without further notice.
V. THE SETTLEMENT
The terms and conditions of the proposed Settlement are set forth fully in the Stipulation described above. The following is only a summary of its terms.
HQSM and HQSM’s and its directors’ and officers’ insurers have paid or caused to be paid the amount of Two Million Seven Hundred Fifty Thousand Dollars ($2,750,000) to settle the Securities Action. The Parties acknowledge that the Court’s denial in part of the Motions to Dismiss in the Federal Derivative Action and the pendency of the Washington State Derivative Action and the Delaware State Derivative Action increased the risk to the Director and Officer Defendants. As such, the global resolution of the Actions and the Securities Action was a substantial factor in persuading Defendants’ insurance carriers to contribute to this settlement. Defendants acknowledge that this Settlement has and/or will confer substantial benefits upon HQSM and Current HQSM Shareholders.
Defendants’ directors’ and officers’ liability insurance carrier has agreed to fund the Settlement and Defendants will use their best efforts to ensure that Defendants’ directors’ and officers’ liability insurance carrier complies with its agreement to do so. Conditions precedent to Individual Defendants’ obligations under the Settlement are: (i) the directors’ and officers’ liability insurance carriers’ compliance with their commitment to Defendants with respect to their contribution to the settlement and payment of attorneys’ fees; and (ii) approval and consummation of the Securities Action Settlement.
VI. DISMISSAL AND RELEASES
In connection with the Federal Court’s approval of the Settlement, the Parties will jointly request entry of the Final Order and Judgment by the Court, dismissing with prejudice of all claims alleged by Plaintiffs against the Individual Defendants in the Federal Derivative Action. Additionally, within five (5) days after entry of the Final Order and Judgment by the Federal Court, the Washington State Plaintiffs and Defendants will jointly apply to the Washington State Court to have the Washington State Derivative Action dismissed with prejudice. Within five (5) days after entry of the Final Order and Judgment by the Federal Court, the Delaware State Plaintiff and Defendants will jointly apply to the Delaware State Court to have the Delaware State Derivative Action dismissed with prejudice.
Upon the Effective Date, Plaintiffs, HQSM, and Current HQSM Shareholders, on behalf of themselves, and each of the Plaintiffs’ Released Persons, shall be deemed to have – and by operation of the Final Order and Judgment shall have – released, waived, discharged, and dismissed any and all of Plaintiffs’ Released Claims, and shall forever be barred and enjoined from instituting, commencing, or prosecuting any and all Plaintiffs’ Released Claims, against Defendants and the Individual Defendants’ Released Persons.
Further, upon the Effective Date, Individual Defendants, on behalf of themselves, and each of the Individual Defendants’ Released Persons, shall be deemed to have – and by operation of the Final Order and Judgment shall have – released, waived, discharged, and dismissed any and all Individual Defendants’ Released Claims, and shall forever be barred and enjoined from instituting, commencing, or prosecuting any and all Individual Defendants’ Released Claims, against Plaintiffs and Plaintiffs’ Released Persons.
VII. ATTORNEYS’ FEES AND EXPENSES
As a unitary part of the Settlement terms set forth herein and in recognition of the substantial benefits provided to HQSM and Current HQSM Shareholders by Plaintiffs’ Counsel’s efforts in initiating, prosecuting, and settling the Actions, Defendants, subject to approval of the Federal Court, shall pay or cause to be paid to Plaintiffs’ Counsel the Fee Award in the total amount of $612,500. The Fee Award shall be allocated to Federal Plaintiffs’ Counsel, Washington State Plaintiffs’ Counsel, and Delaware State Plaintiff’s Counsel to be divided among such counsel as has been separately agreed, and to any Incentive Awards, as described below, to Federal Plaintiffs, Washington State Plaintiffs, and Delaware State Plaintiff. The Parties mutually agree that this Fee Award is fair and reasonable in light of the substantial benefits conferred upon HQSM and Current HQSM Shareholders by this Stipulation.
In light of the benefits Plaintiffs have created for HQSM and all Current HQSM Shareholders, Plaintiffs may apply for Court-approved incentive awards in the amount of $1,000 each. The Incentive Awards shall be funded from the Fee Award to the extent that the Fee Award is approved in whole or in part. Defendants take no position as to the Incentive Awards.
VIII. THE RIGHT TO OBJECT AND/OR BE HEARD AT THE SETTLEMENT HEARING
Any Current HQSM Shareholder may object and/or appear and show cause, if he, she, or it has any concern, why the Settlement should not be approved as fair, reasonable, and adequate, or why the Final Order and Judgment should not be entered thereon, or why the Fee Award or Incentive Awards should not be approved; provided, however, unless otherwise ordered by the Federal Court, no Current HQSM Shareholder shall be heard or entitled to contest the approval of the terms and conditions of the Settlement, or, if approved, the Final Order and Judgment to be entered thereon approving the same, or the Fee Award, unless that shareholder has, at least fourteen (14) business days prior to the Settlement Hearing: (1) filed with the Clerk of the Federal Court a written objection to the Settlement setting forth: (a) the nature of the objection; (b) proof of ownership of HQSM common stock through the date of the Settlement Hearing, including the number of shares of HQSM common stock and the date of purchase; and (c) any documentation in support of such objection; and (2) if a Current HQSM Shareholder intends to appear and requests to be heard at the Settlement Hearing, such shareholder must have, in addition to the requirements of (1) above, filed with the Clerk of the Federal Court: (a) a written notice of such shareholder’s intention to appear; (b) a statement that indicates the basis for such appearance; and (c) the identities of any witnesses the shareholder intends to call at the Settlement Hearing and a statement as to the subjects of their testimony. If a Current HQSM Shareholder files a written objection and/or written notice of intent to appear, such shareholder must also simultaneously serve copies of such notice, proof, statement, and documentation, together with copies of any other papers or briefs such shareholder files with the Federal Court (either by hand delivery or by first class mail) upon each of the following:
Brett D. Stecker Robert W. Hayes THE WEISER LAW FIRM, P.C. COZEN O'CONNER 22 Cassatt Ave 1900 Market Street Berwyn, PA 19312 Philadelphia, PA 19103 Counsel for Plaintiffs Counsel for HQSM
Any Current HQSM Shareholder who does not make his, her, or its objection in the manner provided herein shall be deemed to have waived such objection and shall forever be foreclosed from making any objection to the fairness, reasonableness, or adequacy of the Settlement, the Fee Award, and the Incentive Awards as incorporated in the Stipulation, unless otherwise ordered by the Federal Court, but shall otherwise be bound by the Final Order and Judgment to be entered and the releases to be given.
IX. CONDITIONS FOR SETTLEMENT
The Settlement is conditioned upon the occurrence of certain events described in the Stipulation, which requires, among other things: (1) entry of the requested Final Order and Judgment by the Federal Court; and (2) the Final Order and Judgment has become Final. If, for any reason, any one of the conditions described in the Stipulation is not met and the entry of the Final Order and Judgment does not occur, the Stipulation might be terminated and, if terminated, will become null and void; and the Parties to the Stipulation will be restored to their respective positions as of May 6, 2013.
X. EXAMINATION OF PAPERS AND INQUIRIES
This Notice contains only a summary of the terms of the Settlement. For a more detailed statement of the matters involved in the Actions, reference is made to the Stipulation, which may be inspected at the Clerk of the Court’s Office, U.S. District Court for the Western District of Washington, 700 Stewart Street, Seattle, WA 98101, during business hours of each business day.
Any other inquiries regarding the Settlement or the Actions should be addressed in writing to the following:
Brett D. Stecker
THE WEISER LAW FIRM, P.C.
22 Cassatt Ave
Berwyn, PA 19312
Telephone: (610) 225-2677
Facsimile: (610) 225-2678
Counsel for Plaintiffs
PLEASE DO NOT TELEPHONE THE COURT OR HQSM
REGARDING THIS NOTICE.
 For purposes of this Notice, the Federal Court incorporates by reference the definitions in the Parties’ Stipulation of Settlement fully executed as of May 6, 2013, and all capitalized terms used herein, unless otherwise defined, shall have the same meanings as set forth in the Stipulation. A copy of the Stipulation may be inspected at the Clerk of the Court’s Office for the U.S. District Court for the Western District of Washington, 700 Stewart Street, Seattle, WA 98101.
 As noted, no claims were pending against Mr. Intrater in the Complaint.
 Mr. Intrater was not named as a defendant in the Washington State Derivative Action.
SOURCE The Weiser Law Firm, P.C.