Case3:12-cv-06003-CRB Document398-3 Filed07/17/15 Page1 of 76
REDACTED VERSION OF DOCUMENT SOUGHT TO BE SEALED
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WACHTELL, LIPTON, ROSEN & KATZ
MARC WOLINSKY (pro hac vice)
GEORGE T. CONWAY III (pro hac vice)
51 West 52nd Street
New York, NY 10019
Tel./Fax: 212.403.1000/2000
MWolinsky@wlrk.com
GTConway@wlrk.com

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FARELLA, BRAUN & MARTEL, LLP
NEIL A. GOTEINER, State Bar No. 83524
235 Montgomery Street, 17th Floor
San Francisco, CA 94104
Tel./Fax: 415.954.4400/4480
NGoteiner@fbm.com
Attorneys for Defendant
HEWLETT-PACKARD COMPANY

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IN THE UNITED STATES DISTRICT COURT
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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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IN RE HP SHAREHOLDER DERIVATIVE
LITIGATION

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This Document Relates to: All Actions

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Master File No. C-12-6003 CRB
HEWLETT-PACKARD COMPANY’S
RESPONSE TO OBJECTIONS TO
FINAL APPROVAL OF THE THIRD
AMENDED AND RESTATED
STIPULATION OF SETTLEMENT

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Dept.: Courtroom 6, 17th Floor
Judge: Hon. Charles R. Breyer
Date: July 24, 2015, 10:00 a.m.

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HP’S RESPONSE TO OBJECTIONS TO
FINAL APPROVAL
MASTER FILE NO. C-12-6003 CRB

 Case3:12-cv-06003-CRB Document398-3 Filed07/17/15 Page2 of 76
TABLE OF CONTENTS

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TABLE OF AUTHORITIES ......................................................................................................... iii

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TABLE OF CITATIONS............................................................................................................... ix

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STATEMENT OF ISSUE ............................................................................................................... 1

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SUMMARY OF ARGUMENT ...................................................................................................... 1

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ARGUMENT .................................................................................................................................. 3

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I.

THE OBJECTORS MISSTATE THE STANDARDS GOVERNING APPROVAL
OF THE SETTLEMENT. ................................................................................................... 3

II.

THE SCOPE OF THE RELEASE IS APPROPRIATE...................................................... 5

III.

THE CLAIMS BEING RELEASED ARE EXTREMELY WEAK. .................................. 7

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A.

The Morrical complaint was subject to dismissal on the basis of Morrical’s
failure to make a demand. ....................................................................................... 7

B.

All complaints would be subject to dismissal on the basis of the DRC’s and
HP board’s resolutions. ........................................................................................... 9
1.

The DRC was independent, its process thorough and its decisions
well-informed. ........................................................................................... 11

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(a)

The independence of the DRC is beyond dispute. ........................ 12

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(b)

The thoroughness of the DRC is beyond dispute. ......................... 14

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(c)

The DRC was entitled to rely on the law firms that it
selected to assist in the conduct of its work. ................................. 15

(d)

The objectors’ challenge to the DRC’s independence on the
basis of the manner in which Proskauer conducted the
investigation is unfounded. ........................................................... 17

(e)

That the DRC reached different conclusions than the
objectors does not mean that the DRC process was flawed. ......... 19

(f)

The Bennett deposition confirms that the DRC’s conclusions
should be respected and that the objectors’ claims to the
contrary are frivolous. ................................................................... 20

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2.

The conclusions reached by the DRC and HP board were
reasonable.................................................................................................. 21
(a)

Plaintiffs could not overcome the rigorous standards of
Delaware law in asserting claims against HP’s current and
former directors and officers. ........................................................ 22

(b)

There was a valid business case for the Autonomy
acquisition that predated Apotheker.............................................. 25

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HP’S RESPONSE TO OBJECTIONS TO
FINAL APPROVAL
MASTER FILE NO. C-12-6003 CRB

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(c)

HP’s due diligence was extensive and was consistent with
the scope of diligence applicable in UK public company
deals. ............................................................................................. 26

(d)

There were no “red flags” presented to the directors or HP
management. ................................................................................. 31

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(i)

The inability to obtain the Deloitte work papers cannot
support a claim. .................................................................. 31

(ii)

The KPMG report did not raise red flags. .......................... 32

(iii)

The analyst reports as a whole did not raise red flags........ 35

(iv)

Barclays’ and Perella’s concerns were resolved. ............... 38

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(e)

The Technology and Finance and Investment Committees
and full HP board were adequately involved in the
acquisition. .................................................................................... 39

(f)

The full HP board carefully considered Lesjak’s dissenting
views. ............................................................................................ 42

(g)

There is no basis for asserting any claims based on postannouncement events. ................................................................... 44

(h)

There is no basis for suing HP’s professional advisors. ............... 45

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IV.

THE SETTLEMENT CONSIDERATION IS APPROPRIATE. ..................................... 47
A.

The governance reforms are valuable and are directly tailored to address
allegations in the complaints. ................................................................................ 47

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B.

Plaintiffs contributed to the development of the reforms...................................... 50

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C.

The fact that HP did not adopt Copeland’s ill-conceived reforms is not a
basis for rejecting the settlement. .......................................................................... 53

D.

There is no requirement that any defendant or HP’s insurers make a
monetary contribution to the settlement................................................................ 54

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V.

THE SETTLEMENT IS NOT COLLUSIVE. .................................................................. 56

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VI.

NOTICE WAS FAIR AND APPROPRIATE. ................................................................. 59

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VII.

THE OBJECTORS’ ATTEMPTS TO RELITIGATE THEIR DISCOVERY
DEMANDS SHOULD BE DISREGARDED. ................................................................. 61

VIII.

WACHTELL LIPTON IS NOT CONFLICTED. ............................................................. 64

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CONCLUSION ............................................................................................................................. 66

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HP’S RESPONSE TO OBJECTIONS TO
FINAL APPROVAL
MASTER FILE NO. C-12-6003 CRB

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TABLE OF AUTHORITIES

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Cases

Page(s)

Adams v. Calvarese Farms Maint. Corp.,
2010 WL 3944961 (Del. Ch. Sept. 17, 2010) ........................................................................... 24
Alaska Elec. Pension Fund v. Brown,
941 A.2d 1011 (Del. 2007) ................................................................................................... 2, 50
Allied Artists Pictures Corp. v. Baron,
413 A.2d 876 (Del. 1980) ......................................................................................................... 50
Alvarado Partners, L.P. v. Mehta,
723 F. Supp. 540 (D. Colo. 1989) ............................................................................................. 55
Arace v. Thompson,
2011 WL 3627716 (S.D.N.Y. Aug. 17, 2011) .......................................................................... 59
Aronson v. Lewis,
473 A.2d 805 (Del. 1984) ....................................................................................................... 2, 7
Ash v. McCall,
2000 WL 1370341 (Del. Ch. Sept. 15, 2000) ................................................................... 7, 8, 30
Barovic v. Ballmer,
2014 WL 7011840 (W.D. Wash. Dec. 10, 2014)...................................................................... 11
Biondi v. Scrushy,
820 A.2d 1148 (Del. Ch. 2003) ......................................................................................... 13 n.11
Brazen v. Bell Atl. Corp.,
695 A.2d 43 (Del. 1997) ..................................................................................................... 10, 21
Brehm v. Eisner,
746 A.2d 244 (Del. 2000) .................................................................................................. passim
Bushansky v. Armacost,
2014 WL 2905143 (N.D. Cal. June 25, 2014) .............................................................. 60 & n.62
Carlton Invs. v. TLC Beatrice Int’l Holdings, Inc.,
1997 WL 305829 (Del. Ch. May 30, 1997) .......................................................... 16, 17 n.14, 62
Citibank, Inc. v. Weill,
Index No. 600645/06 (N.Y. Sup. Ct. May 14, 2007) ........................................................ 52 n.53
City of Orlando Police Pension Fund v. Page,
970 F. Supp. 2d 1022 (N.D. Cal. 2013) .............................................................................. 11 n.6
Class Plaintiffs v. City of Seattle,
955 F.2d 1268 (9th Cir. 1992)......................................................................................... 1, 3, 4, 5
Cohn v. Nelson,
375 F. Supp. 2d 844 (E.D. Mo. 2005) ............................................................................... 49 n.48
Cook v. Hewlett-Packard Co.,
2014 WL 311111 (Del. Ch. Jan. 30, 2014) ............................................................................... 63
HP’S RESPONSE TO OBJECTIONS TO
FINAL APPROVAL
MASTER FILE NO. C-12-6003 CRB

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Copeland v. Apotheker,
No. 3-14-cv-0622 (EJD) (N.D. Cal.) (Copeland II)...................................................... 6 & n.3, 7
Copeland v. Lane,
2013 WL 1899741 (EJD) (N.D. Cal. May 6, 2013),
appeal pending No. 13-16251 (9th Cir.) (Copeland I) ....................................... 6 & n.3, 44 n.44
David B. Shaev Profit Sharing Account v. Armstrong,
2006 WL 391931 (Del. Ch. Feb. 13, 2006)
aff’d, 911 A.2d 802 (Del. 2006) ....................................................................................... 23 n.19
Duban v. Diversified Mortg. Inv’rs,
87 F.R.D. 33 (S.D.N.Y. 1980) .................................................................................................. 55
Eubank v. Pella Corp.,
753 F.3d 718 (7th Cir. 2014)..................................................................................................... 57
Feuer v. Thompson,
2013 WL 2950667 (N.D. Cal. June 14, 2013) .................................................................. 48 n.47
Glicken v. Bradford,
35 F.R.D. 144 (S.D.N.Y. 1964) ................................................................................................ 55
Grunin v. Int’l House of Pancakes,
513 F.2d 114 (8th Cir. 1975)............................................................................................. 60 n.64
Guttman v. Huang,
823 A.2d 492 (Del. Ch. 2003) ........................................................................................... 23 n.19
Hainey v. Parrott,
617 F. Supp. 2d 668 (S.D. Ohio 2007) ..................................................................................... 56
Hanlon v. Chrysler Corp.,
150 F.3d 1011 (9th Cir. 1998)..................................................................................................... 4
Hausman v. Buckley,
299 F.2d 696 (2d Cir. 1962) ...................................................................................................... 64
Hesse v. Sprint Corp.,
598 F.3d 581 (9th Cir. 2010)................................................................................................... 1, 5
Hill v. State Street Corp.,
2015 WL 127728 (D. Mass. Jan. 8, 2015) ................................................................................ 60
Howard v. SEC,
376 F.3d 1136 (D.C. Cir. 2004) ................................................................................................ 34
In re Accuracy, Inc. S’holder Derivative Litig.,
757 F. Supp. 2d 919 (N.D. Cal. 2010) ...................................................................................... 34
In re Atheros Commc’ns, Inc.,
2011 WL 864928 (Del. Ch. Mar. 4, 2011) ................................................................................ 53
In re BankAm. Corp. Sec. Litig.,
210 F.R.D. 694 (E.D. Mo. 2002) ...................................................................................... 61 n.65

HP’S RESPONSE TO OBJECTIONS TO
FINAL APPROVAL
MASTER FILE NO. C-12-6003 CRB

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In re Caremark Int’l Inc. Derivative Litig.,
698 A.2d 959 (Del. Ch. 1996) ....................................................................................... 23 & n.19
In re Citigroup Inc. S’holder Derivative Litig.,
964 A.2d 106 (Del. Ch. 2009) ............................................................................................... 8 n.4
In re Cornerstone Therapeutics Inc. S’holder Litig.,
--- A.3d. ----, 2015 WL 2394045 (Del. May 14, 2015) ........................................................... 22
In re Dow Chem. Co. Derivative Litig.,
2010 WL 66769 (Del. Ch. Jan. 11, 2010) ......................................................................... 23 n.19
In re First Interstate Bancorp. Consol. S’holder Litig.,
756 A.2d 353 (Del. Ch. Aug. 26, 1999) .................................................................................... 50
In re Gen. Motors Co. Derivative Litig.,
2015 WL 3958724 (Del. Ch. June 26, 2015) ..................................................................... passim
In re Gen. Motors Corp. Engine Interchange Litig.,
594 F.2d 1106 (7th Cir. 1979)..................................................................................................... 5
In re Johnson & Johnson Derivative Litig.,
900 F. Supp. 2d 467 (D. N.J. 2012) .................................................................................. 49 n.48
In re Lear Corp. S’holder Litig.,
967 A.2d 640 (Del. Ch. 2008) ..................................................................................... 35 n.31, 40
In re Mego Fin. Corp. Sec. Litig.,
213 F.3d 454 (9th Cir. 2000)....................................................................................................... 3
In re NVIDIA Corp. Derivative Litig.,
2008 WL 5382544 (N.D. Cal. Dec. 22, 2008) .............................................................. 49 & n.47
In re Oracle Corp. Derivative Litig.,
824 A.2d 917 (Del. Ch. 2003) ................................................................................................... 10
In re Oracle Sec. Litig.,
852 F. Supp. 1437 (N.D. Cal. 1994) ........................................................................ 52-53 & n.54
In re Pac. Enters. Sec. Litig.,
47 F.3d 373 (9th Cir. 1995)..................................................................................................... 1, 3
In re Primedia Inc. S’holders Litig.,
67 A.3d 455 (Del. Ch. 2013) ..................................................................................................... 10
In re Rambus Inc. Derivative Litig.,
2009 WL 166689 (N.D. Cal. Jan. 20, 2009) ......................................................... 49 n.47 & n.48
In re REMEC Inc. Sec. Litig.,
702 F. Supp. 2d 1202 (S.D. Cal. 2010) ..................................................................................... 34
In re Wachovia Corp.,
2011 WL 1496342 (N.D. Cal. Apr. 20, 2011) .......................................................................... 61
In re Walt Disney Co. Derivative Litig.,
907 A.2d 693 (Del. Ch. 2005), aff’d, 906 A.2d 27 (Del. 2006) ................................................ 30
HP’S RESPONSE TO OBJECTIONS TO
FINAL APPROVAL
MASTER FILE NO. C-12-6003 CRB

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Ironworkers Dist. Council of Phila. & Vicinity Ret. & Pension Plan v. Andreotti,
2015 WL 2270673 (Del. Ch. May 8, 2015) .......................................................................... 2, 19
Jaffe v. Morgan Stanley & Co.,
2008 WL 346417 (N.D. Cal. Feb. 7, 2008) .............................................................................. 63
Kaplan v. Wyatt,
499 A.2d 1184 (Del. 1985) ....................................................................................................... 13
Katell v. Morgan Stanley Grp., Inc.,
1995 WL 376952 (Del. Ch. June 15, 1995) .............................................................................. 16
La. Mun. Police Emps. Ret. Sys. v. Morgan Stanley & Co.,
2011 WL 773316 (Del. Ch. Mar. 4, 2011) ...................................................................... 9, 11 n.6
Lyondell Chem. Co. v. Ryan,
970 A.2d 235 (Del. 2009) ................................................................................................... 22, 23
Maher v. Zapata Corp.,
714 F.2d 437 (5th Cir. 1983)................................................................................. 20 n.17, 47, 60
Marshall v. Holiday Magic, Inc.,
550 F.2d 1173 (9th Cir. 1977)........................................................................................... 60 n.63
Masterson v. Pergament,
203 F.2d 315 (6th Cir. 1953)..................................................................................................... 55
MCG Capital Corp. v. Maginn,
2010 WL 1782271 (Del. Ch. May 5, 2010) ...................................................................... 35 n.30
Metro. Life Ins. v. Tremont Grp. Holdings, Inc.,
2012 WL 6632681 (Del. Ch. Dec. 20, 2012) ............................................................................ 24
Microtechs., LLC v. Autonomy, Inc.,
Case No. C-15-2220-RMW-HRL (N.D. Cal.) .......................................................................... 57
Midland Grange No. 27 Patrons of Husbandry v. Walls,
2008 WL 616239 (Del. Ch. Feb. 28, 2008) .............................................................................. 24
Mohammed v. Ells,
2014 WL 4212687 (D. Colo. Aug. 26, 2014) ................................................................... 49 n.48
Mullane v. Central Hanover Bank & Trust Co.,
339 U.S. 306 (1950) .................................................................................................................. 59
Noel v. Whitman,
No. 1:13-cv-251346 (Cal. Super. Santa Clara Cnty. Aug. 16, 2013) ............................... 51 n.50
Officers for Justice v. Civil Serv. Comm’n of City and Cnty. of S.F.,
688 F.2d 615 (9th Cir. 1982)............................................................................................... 3, 4, 5
Paramount Commc’ns Inc. v. Time Inc.,
1989 WL 79880 (Del. Ch. July 14, 1989),
aff’d, 571 A.2d 1140 (Del. 1990) .......................................................................................... 8 n.4
Petrovic v. Amoco Oil Co.,
200 F.3d 1140 (8th Cir. 1999)............................................................................................... 2, 60
HP’S RESPONSE TO OBJECTIONS TO
FINAL APPROVAL
MASTER FILE NO. C-12-6003 CRB

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Respler v. Evans,
17 F. Supp. 3d 418 (D. Del. 2014) ........................................................................................ 2, 64
Rodriguez v. West Publ’g Corp.,
563 F.3d 948 (9th Cir. 2009)................................................................................................... 1, 4
Rosenbloom v. Pyott,
765 F.3d 1137 (9th Cir. 2014)................................................................................................... 44
Sarnacki v. Golden,
778 F.3d 217 (1st Cir. 2015) ..................................................................................................... 16
Satchell v. Fed. Express Corp.,
2007 WL 1114010 (N.D. Cal. 2007) .................................................................................... 2, 56
Scattered Corp. v. Chi. Stock Exch.,
701 A.2d 70 (Del. 1997) ............................................................................................. 2, 9, 10, 11
Smith v. Van Gorkom,
488 A.2d 858 (Del. 1985) ................................................................................................. 34 n.30
Sobel v. Hertz Corp.,
2011 WL 2559565 (D. Nev. June 27, 2011) ........................................................................... 4, 5
Solash v. Telex Corp.,
1988 WL 3587 (Del. Ch. Jan. 19, 1988) ................................................................................... 24
Spiegel v. Buntrock,
571 A.2d 767 (Del. 1990) ..................................................................................................... 9, 10
Stepak v. Addison,
20 F.3d 398 (11th Cir. 1994)....................................................................................... 10, 17 n.15
Stone v. Ritter,
911 A.2d 362 (Del. 2006) ....................................................................................... 22 & n.18, 23
Strougo ex rel. The Brazil Fund, Inc. v. Padegs,
27 F. Supp. 2d 442 (S.D.N.Y. 1998) ................................................................................. 16 n.13
Synfuel Tech., Inc. v. DHL Express (USA), Inc.,
463 F.3d 646 (7th Cir. 2006)....................................................................................................... 4
Torrisi v. Tucson Elec. Power Co.,
8 F.3d 1370 (9th Cir. 1993)............................................................................................... 60 n.63
Wixon v. Wyndham Resort Dev. Corp.,
2010 WL 3630124 (N.D. Cal. Sept. 14, 2010) ....................................................... 2, 48, 49 n.48
Zucker v. Andreessen,
2012 WL 2366448 (Del. Ch. 2012) .................................................................................. 44 n.44

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FINAL APPROVAL
MASTER FILE NO. C-12-6003 CRB

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Rules and Statutes
DEL. CODE ANN. tit. 8, § 102(b)(7) ............................................................................................... 22
DEL. CODE ANN. tit. 8, § 141(e) ................................................................................ 23, 29, 32 n.26
Fed. R. Civ. P. 23(e)........................................................................................................................ 3
Fed. R. Civ. P. 23.1(c)................................................................................................................... 59

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MASTER FILE NO. C-12-6003 CRB

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TABLE OF CITATIONS

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Arbitration Decision

Arbitration Decision on Application for Attorney
Fees (Exhibit 25)

Ashton Decl.

Declaration of Ann. M. Ashton (Exhibit 23)

January 2014
Board Resolution

Hewlett-Packard Company Board of Directors’ Resolution Regarding Shareholder Derivative Claims
and Demands (Exhibit 2)

Bennett Dep.

Deposition of Robert Bennett (Exhibit 38)

Copeland Br.

Statement of Objections of A.J. Copeland to Proposed Third Amended and Restated Stipulation of
Settlement (Docket #379)

Ex. __

Exhibit to the Declaration of Caroline A. Olsen in
Support of Hewlett-Packard Company’s Response to
Objections to Final Approval of the Third Amended
and Restated Stipulation of Settlement, dated July
17, 2015

DRC Deck

Excerpted slides from presentation prepared for the
HP board by the Demand Review Committee, dated
January 9, 2014 (Exhibit 3)

DRC Resolution

Hewlett-Packard Company Independent Committee’s Resolution Regarding Derivative Claims and
Demands (Exhibit 1)

Prelim. Approval Order

Order Granting Motion for Preliminary Approval of
Third Amended Settlement, Setting Schedule, and
Addressing Miscellaneous Relief (Docket #319)

Steinberg Br.

Harriet Steinberg’s Objection to the Proposed Settlement (Docket #385)

Supp. Br.

Supplemental Objections of Harriet Steinberg and
A.J. Copeland to the Proposed Settlement (Docket
#391)

Varma Decl.

Declaration of Rishi Varma Regarding the Corporate
Governance Reforms in the Proposed Settlement
Agreement (Exhibit 24)

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MASTER FILE NO. C-12-6003 CRB

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STATEMENT OF ISSUE
Should the proposed settlement, providing HP and its shareholders the benefit of corporate
governance reforms and the termination of costly and distracting litigation in exchange for the

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release of claims deemed to be meritless by an independent committee after a thorough investigation, be finally approved as fundamentally fair, adequate, and reasonable?

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SUMMARY OF ARGUMENT

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Despite a transparent settlement process that has encompassed months of discovery, in-

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cluding the production of over 15,000 pages of documents and the deposition of a member of the

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Demand Review Committee (“DRC”), the objectors still have presented no evidence suggesting

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that the settlement is anything but fair, adequate and reasonable. There is therefore no reason to

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override the judicial policy in favor of settlement, in particular where, as here, the settlement is

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the result of hard-fought, arm’s-length negotiations overseen by a former federal judge.

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As discussed in detail below:
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1.

Copeland is wrong when he claims that the Court must weigh the precise dollar

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value of the released claims against the reforms in order to approve the settlement. See Rodriguez

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v. West Publ’g Corp., 563 F.3d 948, 965 (9th Cir. 2009). And Steinberg is just as wrong when

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she claims that the proponents of the settlement must establish its fairness by clear and convinc-

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ing evidence. The test is whether the court determines, in the exercise of its discretion, that the
settlement is fundamentally fair, adequate, and reasonable. In re Pac. Enters. Sec. Litig., 47 F.3d

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373, 377 (9th Cir. 1995); Class Plaintiffs v. City of Seattle, 955 F.2d 1268, 1291 (9th Cir. 1992).
That standard has been met.
2.

The scope of the release is appropriate. See Hesse v. Sprint Corp., 598 F.3d 581,

590 (9th Cir. 2010).

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MASTER FILE NO. C-12-6003 CRB

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3.

The claims that are being released are extremely weak and likely would have been

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dismissed on the ground that plaintiffs failed to make a demand or on the basis of the DRC Reso-

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lution. See Scattered Corp. v. Chi. Stock Exch., 701 A.2d 70, 77 (Del. 1997); Aronson v. Lewis,

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473 A.2d 805, 815 (Del. 1984); In re Gen. Motors Co. Derivative Litig., 2015 WL 3958724, at

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*11, *16 (Del. Ch. June 26, 2015); Ironworkers Dist. Council of Phila. & Vicinity Ret. & Pension
Plan v. Andreotti, 2015 WL 2270673, at *27 (Del. Ch. May 8, 2015).

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4.

The governance reforms that provide the consideration of the settlement are valua-

ble and plaintiffs and their counsel contributed to their development. See Wixon v. Wyndham Re-

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sort Dev. Corp., 2010 WL 3630124, at *3 (N.D. Cal. Sept. 14, 2010); Alaska Elec. Pension Fund

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v. Brown, 941 A.2d 1011, 1015 (Del. 2007).

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5.

The settlement is not collusive. See Satchell v. Federal Express Corp., 2007 WL

1114010, at *4 (N.D. Cal. 2007).

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6.

The notice provided to shareholders was appropriate. See Petrovic v. Amoco Oil

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Co., 200 F.3d 1140, 1153 (8th Cir. 1999).
7.

The objectors received all of the discovery to which they were entitled — and

18

more — and should not now be heard to challenge Magistrate Judge Laporte’s orders in that re-

19

gard. See Docket #348, #364.

20
21

8.

Wachtell Lipton, Rosen & Katz was not conflicted. It has always represented the

interests of the company, as directed by the board; the directors’ individual interests were repre-

22
sented by their own counsel. Cf. Respler v. Evans, 17 F. Supp. 3d 418, 421 (D. Del. 2014).
23
24

In short, the proposed settlement caps a rigorous and appropriate corporate governance

25

process that has worked just as Delaware law intended. Independent directors reviewed the de-

26

rivative plaintiffs’ allegations and recommended specific actions, including litigation against

27

those identified as wrongdoers, and the full board agreed with those recommendations and or-

28

dered their implementation. The settlement is fully consistent with the directive of the board,
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1
2

avoids costly and time-consuming litigation, and advances the interests of the corporation and its
shareholders. Approval of the settlement by this Court is therefore fully warranted.

3
ARGUMENT

4
I.

5
6

THE OBJECTORS MISSTATE THE STANDARDS GOVERNING APPROVAL
OF THE SETTLEMENT.
The Court’s task in determining whether to grant final approval to the proposed settlement

7
is to evaluate whether, taken as a whole, the settlement is “fundamentally fair, adequate, and rea8
9

sonable.” Fed. R. Civ. P. 23(e); In re Pac. Enters. Sec. Litig., 47 F.3d 373, 377 (9th Cir. 1995)

10

(citing Class Plaintiffs v. City of Seattle, 955 F.2d 1268, 1276 (9th Cir. 1992)). See also In re

11

Mego Fin. Corp. Sec. Litig., 213 F.3d 454, 458 (9th Cir. 2000). Among other things, the Court

12

may consider “the strength of the plaintiffs’ case; the risk, expense, complexity, and likely dura-

13
14

tion of further litigation; . . . the amount offered in settlement; the extent of discovery completed
and the stage of the proceedings; the experience and views of counsel; . . . and the reaction of the

15
16
17
18

class members to the proposed settlement.” In re Mego, 213 F.3d at 458. Ultimately, in a derivative litigation, the question for the court is whether the settlement is fair, adequate, and reasonable
to the corporation itself.

19

In light of this standard, the Ninth Circuit has held that the “fairness hearing is not to be

20

turned into a trial or rehearsal for trial on the merits.” Officers for Justice v. Civil Serv. Comm’n

21

of City and Cnty. of S.F., 688 F.2d 615, 625 (9th Cir. 1982).1 Likewise, the proposed settlement

22
is not “to be judged against a hypothetical or speculative measure of what might have been
23
24
25
26
27

1

For this reason, among others, there is no basis for Copeland’s request that Robert Bennett, a member of the DRC, or any other witness be called to testify at the fairness hearing. The
Court has made clear that it is important not “to turn the lawsuit into the discovery of the settlement of the lawsuit.” Aug. 25, 2014 Tr. (Docket #199) at 43.

28
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achieved by the negotiators.” Id. Rather, the Court should avoid reaching conclusions on con-

2

tested issues of fact and law underlying the merits of the dispute, “for it is the very uncertainty of

3

outcome in litigation and avoidance of wasteful and expensive litigation that induce consensual

4

settlements.” Class Plaintiffs, 955 F.2d at 1291 (quoting Officers for Justice, 688 F.2d at 625).

5
6

In the face of this law, Copeland argues the Court must have precise estimates of the value
of the released claims and the value of the proposed settlement before it can approve the settle-

7
8
9

ment. Copeland Br. 6. In making this claim, Copeland relies on a line of cases commencing with
the Seventh Circuit’s decision in Synfuel Technologies, Inc. v. DHL Express (USA), Inc., 463

10

F.3d 646 (7th Cir. 2006), decisions that arose in the context of class action settlements. This case,

11

however, is a derivative suit in which any claims belong to the company, not to shareholders.

12

Regardless, the Ninth Circuit has expressly rejected Synfuel’s valuation requirement even in the

13

context of class actions, explaining that “[w]e put a good deal of stock in the product of an arms-

14
length, non-collusive, negotiated resolution, and have never prescribed a particular formula by
15
16

which that outcome must be tested.” Rodriguez v. West Publ’g Corp., 563 F.3d 948, 965 (9th

17

Cir. 2009) (citing Hanlon v. Chrysler Corp., 150 F.3d 1011, 1027 (9th Cir. 1998); Officers for

18

Justice, 688 F.2d at 625).

19

Copeland’s only case from this Circuit, Sobel v. Hertz Corp., 2011 WL 2559565 (D. Nev.

20

June 27, 2011), is wholly inapposite, a fact that he elides through the inartful use of ellipses. So-

21

bel involved a coupon settlement subject to a Class Action Fairness Act-imposed requirement

22
(not relevant here) requiring the court to evaluate “the real monetary value and likely utilization
23
24

rate of the coupons provided by the settlement.” Id. at *10.

25

In his brief, Copeland quotes the following sentence from the Sobel court’s decision:

26

“[T]he parties have provided no evidence that would allow this court to make any reasoned as-

27

sessment of the actual value of the settlement to the class members or of the value of the claims to

28

be surrendered. Such lack of evidence is alone grounds for denying final approval . . . .”
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Copeland Br. 6 (ellipses in original). The words he omitted from his quotation were: “as the

2

court is simply unable to fulfill its duty to the settlement class under Rule 23 and CAFA.” So the

3

sentence as a whole reads: “Such lack of evidence is alone grounds for denying final approval, as

4

the court is simply unable to fulfill its duty to the settlement class under Rule 23 and CAFA.”

5
6

Sobel, 2011 WL 2559565, at *10. Thus, the Sobel court was clear that the need to perform the
sort of calculations that Copeland claims are missing is attributable to the unique requirements

7
8

imposed by CAFA in coupon settlements.
For her part, Steinberg misstates the evidentiary standard governing this motion, citing In

9
10

re General Motors Corp. Engine Interchange Litigation, 594 F.2d 1106, 1126 n.30 (7th Cir.

11

1979), for the proposition that when a settlement is “improperly” negotiated the proponents must

12

demonstrate its fairness by “clear and convincing evidence.” Steinberg Br. 17. But the settle-

13

ment in In re General Motors was the result of unauthorized negotiations undertaken in violation

14
of a court order. Id. at 1126. It has nothing in common with the settlement now before the Court.
15
16

In the Ninth Circuit, the decision whether to approve a settlement “is committed to the sound dis-

17

cretion of the trial judge,” Class Plaintiffs, 955 F.2d at 1291, who is empowered to balance vari-

18

ous factors and make use of “delicate balancing, gross approximations and rough justice.” Offic-

19

ers for Justice, 688 F.2d at 625.

20
21
22

II.

THE SCOPE OF THE RELEASE IS APPROPRIATE.
As the Court noted when it granted preliminarily approval, “a court may approve releases

that bar claims ‘ar[ising] from the same common nucleus of operative fact’ alleged in the settled

23
24
25

action.” Docket #319 (“Prelim. Approval Order”) at 8 (quoting Class Plaintiffs, 955 F.2d at
1288); Hesse v. Sprint Corp., 598 F.3d 581, 590 (9th Cir. 2010) (“[W]e have held that federal dis-

26

trict courts properly released claims not alleged in the underlying complaint where those claims

27

depended on the same set of facts as the claims that gave rise to the settlement.”).

28
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That is exactly what the settlement does. It proposes to release all Autonomy-Related

1
2

Claims and no others. As the Court found, the released claims are those at “the core of this litiga-

3

tion: the Autonomy acquisition,” and “[t]he shareholders do not appear to be relinquishing any

4

claims that lack a factual overlap with the substance of this litigation.” Prelim. Approval Order at

5

8-9.2

6

Copeland continues to insist that the release is overbroad because it does not specifically

7
8
9

exclude claims made by him in his own derivative litigation.3 Copeland Br. 3 & n.7. This objection is makeweight. The release specifically excludes “the claims made in the operative com-

10

plaint in Copeland v. Lane, 2013 WL 1899741 (EJD) (N.D. Cal. May 6, 2013), appeal pending

11

No. 13-16251 (9th Cir.) (Copeland I),” as well as “the claims made in Copeland v. Apotheker,

12

No. 3-14-cv-0622 (EJD) (N.D. Cal. (Copeland II)), but only to the extent such claims are also in-

13

cluded in and covered by Copeland I.” Third Amended and Restated Stipulation of Settlement

14
(Docket #277-1) at Part I, ¶ 48. The Copeland II claims that do not overlap with Copeland I
15
16
17
18
19
20
21
22
23
24
25
26
27

2

Having failed to raise the issue before preliminary approval, Copeland belatedly argues
that HP’s shareholders were unable to “see precisely what claims were made by Morrical and
what claims are proposed to be released” because portions of the consolidated complaint were
redacted. Copeland Br. 23 n.28. But the claims made by Morrical, Steinberg, Copeland, and others are fully detailed in the DRC Resolution, which has been on public file since September 14,
2014. Docket #211-1. Shareholders thus have been on full notice of the nature of the claims asserted and the scope of the release, which also was described in the Notice of Settlement itself.
The governance revisions, likewise, have been described in the Notice and in numerous court filings. See, e.g., Docket #210 (HP brief) at 13-14. In any event, the operative complaint has now
been filed with minimal redactions (Docket #395-1), rendering Copeland’s attack moot.
3
Judge Davila dismissed Copeland’s complaint in Copeland I and expressly denied him
leave to amend a third time to add “allegations related to actions HP took regarding its acquisition
of Autonomy corporation.” Copeland I, 2013 WL 1899741, at *4-6 (N.D. Cal. May 6, 2013).
Copeland sought to evade Judge Davila’s ruling by filing his amended complaint as a “new” action and moving to relate that case, Copeland II, to this case. The Court denied his motion (Order
at Docket #133), and Copeland II was assigned to Judge Davila. Undeterred, Copeland then
sought, unsuccessfully, to intervene in this case, not once but twice. Order Denying Motion for
Prelim. Approval of Second Amended Settlement (Docket #265) at 9 (denying motion to intervene as moot); Prelim. Approval Order at 10 (denying motion to intervene).

28
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claims (that is, the Copeland II Autonomy-related claims) are claims that are appropriately re-

2

leased by the settlement.

3

III.

THE CLAIMS BEING RELEASED ARE EXTREMELY WEAK.

4

If the case does not settle, HP would make a motion to dismiss that would almost certainly

5

be granted, either because Morrical failed to make a demand or because the DRC and the board

6

concluded that the claims that Morrical asserts should not be pursued. Steinberg’s complaint,

7
which alleges that her demand was wrongfully refused, would almost certainly be dismissed as
8
9
10

well.

11

A. The Morrical complaint was subject to dismissal on the basis of Morrical’s
failure to make a demand.

12

As a threshold matter, the case would be dismissed because Morrical failed to make a de-

13

mand on the HP board prior to instituting suit. Under Delaware law, a pre-suit demand is re-

14

quired absent a showing that it would have been futile. “The requirement that plaintiffs demon-

15

strate futility is — must be — rigorous” in order to “prevent frivolous usurpation of a core direc-

16
tor function by a stockholder, with all the distraction and chaos that would portend.” See In re
17
18

Gen. Motors Co. Derivative Litig., 2015 WL 3958724, at *1 (Del. Ch. June 26, 2015). Delaware

19

law is clear that the “mere threat of personal liability for approving a questioned transaction,

20

standing alone, is insufficient to challenge either the independence or disinterestedness of direc-

21

tors” to show demand futility. Aronson v. Lewis, 473 A.2d 805, 815 (Del. 1984).

22
23

Applying this standard, the Delaware Chancery Court in Ash v. McCall, 2000 WL
1370341 (Del. Ch. Sept. 15, 2000), dismissed a complaint alleging that the directors breached

24
25
26

their duty of care by failing to conduct adequate due diligence and thereby causing McKesson to
enter into its ill-fated merger with HBOC, a company that it was later learned had engaged in im-

27

proper accounting. The Chancellor held that all that plaintiff alleged was that the “directors made

28

a poor decision.” Id. at *10. But “absent some showing of self-dealing or suspect motivation”
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which is lacking here, as in Ash, that allegation “does not state a cause of action, much less meet

2

the standard for excusing demand.” Id.4 While the court relied on plaintiffs’ failure to plead par-

3

ticularized facts creating a reasonable doubt that the merger was anything other than a valid exer-

4

cise of business judgment, it noted that the company’s exculpatory provision would serve as ade-

5

quate independent grounds to dismiss the duty of care claim. Id. at *10.

6

Similarly, just last month, the Delaware Court of Chancery dismissed a case that, like the

7
8
9

complaint here, sought to hold the directors personally liable on the theory that the board failed to
exercise proper oversight and acted in bad faith. The litigation arose out of General Motors’ ad-

10

mitted failure to recall automobiles with defective ignition switches, a failure that resulted in nu-

11

merous motorist deaths and that subjected the company to billions of dollars in liabilities and sig-

12

nificant reputational harm. As here, the General Motors plaintiffs “conflate[d] concededly bad

13

outcomes from the point of view of the Company with bad faith on the part of the Board.” In re

14
Gen. Motors, 2015 WL 3958724, at *11. That conflation didn’t salvage the plaintiffs’ failure to
15
16

make a demand.

17

Thus, just as in General Motors, Morrical did not plead with particularity any knowledge

18

by HP’s directors that its policies and procedures were inadequate, did not plead with particularity

19

that the directors consciously disregarded their oversight obligations, and did not allege with par-

20

ticularity a basis for concluding that the directors acted in bad faith. See id. at *16. In short, in

21

the words of the General Motors decision, “there is a dearth of well pled facts from which [to]

22
23
24
25
26
27

4

Delaware law does not allow such claims for good reason. It strives to encourage “directors and managers . . . to maximize shareholder value in the long term by taking risks without the
debilitating fear that they will be held personally liable if the company experiences losses.” In re
Citigroup Inc. S’holder Derivative Litig., 964 A.2d 106, 139 (Del. Ch. 2009). To foster risktaking from which all shareholders benefit, Delaware law gives the directors and managers the
freedom to be “brilliantly prescient or dismayingly wrong” — and accepts the results either way.
Paramount Commc’ns Inc. v. Time Inc., 1989 WL 79880, at *30 (Del. Ch. July 14, 1989), aff’d,
571 A.2d 1140 (Del. 1990).

28
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reasonably infer that the Board was consciously acting in a manner inimical to [HP] and was ad-

2

vancing instead some other interest, or was otherwise violating its duty of loyalty by acting in bad

3

faith.” Id. at *17.

4
5
6

The notion that demand would have been futile with respect to claims against the company’s former officers is, if anything, even more fatuous. The board that created the DRC was the
same board that dismissed CEO Léo Apotheker before the Autonomy transaction had even

7
8
9
10

closed. There is every reason to believe that the DRC and the board would have held him or any
other officer accountable if the DRC had found evidence to support a claim.
B. All complaints would be subject to dismissal on the basis of the DRC’s and
HP board’s resolutions.

11
If plaintiffs’ suits were not dismissed based on failure to make a demand, they would be
12
13

dismissed on the basis of the DRC’s resolution and the HP board action adopting the DRC’s rec-

14

ommendations. The DRC’s investigation and its conclusion, adopted by the board, would simi-

15

larly dispose of the objectors’ complaints despite their having made demands on the board.

16
17
18

“[A] decision to refuse a litigation demand is reviewed under the business judgment rule,
which forces a plaintiff to overcome the rule’s powerful presumptions before a court will examine
the merits of the directors’ decision.” La. Mun. Police Emps. Ret. Sys. v. Morgan Stanley & Co.,

19
20
21

2011 WL 773316, at *7 (Del. Ch. Mar. 4, 2011). Under this framework, on a motion to dismiss
based on the DRC and board resolutions, the only issue would be whether the investigation “was

22

reasonable and conducted in good faith,” not whether the court agreed with the board’s decision

23

to adopt the DRC’s recommendations. Scattered Corp. v. Chi. Stock Exch., 701 A.2d 70, 77 (Del.

24

1997). See also Spiegel v. Buntrock, 571 A.2d 767, 773 (Del. 1990) (“The decision to bring a law

25

suit or to refrain from litigating a claim on behalf of a corporation is a decision concerning the

26
management of the corporation” and manifestly “part of the responsibility of the board of direc27
28

tors.”); Morgan Stanley, 2011 WL 773316, at *5. “Courts give deference to directors’ decisions
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reached by a proper process, and do not apply an objective reasonableness test in such a case to

2

examine the wisdom of the decision itself.” Brazen v. Bell Atl. Corp., 695 A.2d 43, 49 (Del.

3

1997).

4
5
6

The DRC’s conclusion that the released claims lack merit applies equally to Steinberg’s
demand wrongfully-refused complaint and disposes of the objectors’ insistence that their claims
must be considered separately. Copeland Br. 15-16; Steinberg Br. 24. Both Steinberg and

7
8
9

Copeland sent demand letters to the board and thus “concede[d] the independence of . . . the
board” as a matter of law. Spiegel, 571 A.2d at 777. Of course, a pre-suit demand does not pre-

10

clude shareholders from challenging the independence and good faith of the board for time im-

11

memorial. But to succeed on their demand wrongfully refused claim, the objectors would have to

12

plead particularized facts creating a reason to doubt that the investigation of the demand was rea-

13

sonable and made in good faith. Scattered Corp., 701 A.2d at 77.5

14
The cases that Steinberg cites to support her argument are all inapposite. Stepak v. Addi15
16

son, 20 F.3d 398 (11th Cir. 1994), involved a demand investigation dominated by the same firm

17

that represented the wrongdoers in a criminal action involving the same subject matter as the de-

18

mand. In re Primedia Inc. S’holders Litig., 67 A.3d 455 (Del. Ch. 2013), involved an alleged

19

conflict transaction in which a controlling shareholder usurped a corporate opportunity. In re Or-

20

acle Corp. Derivative Litig., 824 A.2d 917 (Del. Ch. 2003), involved a special litigation commit-

21

tee whose members shared Stanford affiliations with the fellow directors they were investigating

22
23
24
25
26
27

5

Relying on evidence that was produced months before their objections were due, the objectors allege that the board lacked independence because certain directors were on the board at
the time of the acquisition. But as the objectors concede, the only three executives on the board
who participated in the decision to acquire Autonomy (Whitman, Lane, and Livermore) recused
themselves from the board’s vote to accept the DRC’s recommendations. Supp. Br. 4. The other
members of the board were not substantively implicated in any wrongdoing. While the objectors
suggest it is improper for the board to rely on the DRC’s recommendation, that is precisely what
Delaware law authorizes a board to do. See Point III.B.1, infra.

28
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so as to raise questions regarding their impartiality. And Barovic v. Ballmer, 2014 WL 7011840

2

(W.D. Wash. Dec. 10, 2014), turned on the committee’s failure to interview persons outside the

3

company who could have had probative information.

4
5
6

No such facts are presented here. Rather, as in Scattered, Steinberg’s purported “‘facts’
creating a reasonable doubt about the disinterestedness and independence of the [DRC] are not
facts at all. Rather they are conclusory and speculative statements, suffering fatally from a pauci-

7
8

ty of particularization.” 701 A.2d at 75.6
1.

9
10

The DRC was independent, its process thorough and its decisions wellinformed.

The DRC was tasked with investigating, reviewing, and evaluating the facts and circum-

11
stances alleged in the derivative actions and demand letters and making a recommendation to the
12
13

board on whether HP should prosecute any of the potential claims. Ex. 2 (“January 2014 Board

14

Resolution”) at 2. Its investigation focused on determining whether it was in the interest of HP to

15

pursue any of the shareholders’ claims. Ex. 1 (“DRC Resolution”) at 1. As Bennett testified,

16
17
18
19
20
21
22
23
24
25
26
27

6

Steinberg asserts that “HP’s belated production of the DRC Resolution . . . shield[ed] the
vast bulk of the analysis from scrutiny” so as to deem demand wrongfully refused. Steinberg Br.
25. But Steinberg got something better than the DRC Resolution (and more than she could even
claim to be entitled to receive): a comprehensive, in-person presentation from the DRC’s counsel, which laid out the entirety of the DRC’s conclusions. See Ex. 4 (March 19, 2014 Sign-In
Sheet). And, of course, Steinberg has since received the DRC Resolution itself, as well as 1,289
pages of the presentation for the DRC submitted to the board. The redactions to that deck are entirely appropriate. See Point VII, infra. In light of this, Steinberg’s reliance on City of Orlando
Police Pension Fund v. Page, 970 F. Supp. 2d 1022 (N.D. Cal. 2013), is unavailing. In that case,
the committee provided only a conclusory demand refusal letter, completely insulating its investigation from scrutiny. Moreover, the court’s view that there was a reasonable doubt as to the good
faith of the investigation largely rested upon the fact that the company had admitted wrongdoing
in a non-prosecution agreement arising out of the same facts the committee purported to investigate. Id. at 1030. There is, of course, no such admission here. For the same reasons, La. Mun.
Police Emps. Ret. Sys. v. Morgan Stanley & Co., Inc., 2011 WL 773316 (Del. Ch. Mar. 4, 2011),
does Steinberg no good, as she already had the benefit of “substantive insight” into the board’s
decision through precisely the same sorts of documents (board minutes and presentations) that the
court found necessary in that case. Id. at *8.

28
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2

nothing was “predetermined . . . before the committee began its work.” Ex. 38 (“Bennett Dep.”)
196:17-18.
(a) The independence of the DRC is beyond dispute.

3
4

The members of the DRC at the time the DRC completed its work and made recommen-

5

dations to the board were Ralph Whitworth, Gary Reiner and Robert Bennett. January 2014

6

Board Resolution at 2. All three are independent directors; none is, or has ever been, an officer of

7
HP. Two were not on the board at the time of the Autonomy acquisition. Bennett did not join the
8
9

HP board until July 2013, long after the operative complaint was filed. DRC Resolution at 10.

10

He had no relationship with any director other than Whitworth, with whom he had served on the

11

board of another company for just one year. Bennett Dep. 173:13-18. He had never met

12

Apotheker before joining the board. Id. at 173:19-22.7

13
14
15

Whitworth, the Chair of the DRC, was not a member of the board at the time of the Autonomy acquisition. Id.; see also Compl. ¶ 47 (Docket #75-2). His experience and expertise in
corporate governance is extensive.8 He is the co-founder and principal of Relational Investors,

16
17
18
19
20
21
22
23
24
25
26
27

LLC, a registered investment advisor that held some 30 million shares, more than 1.6% of HP’s
7

Although it is not entirely clear what the objectors are arguing (Supp. Br. 3), they seem to
suggest that Bennett’s recusal from assessing claims against Perella Weinberg calls into question
all of the DRC’s conclusions because “whether Perella Weinberg has any potential liability is inherently bound up in the issue of whether HP’s directors and officers breached their fiduciary duties.” Supp. Br. 3. They cite no authority for this claim, and ignore the fact that Whitworth and
Reiner were fully capable of assessing whether HP has any claims against Perella Weinberg with
the assistance of Choate Hall, which “recommended that no litigation be brought against” Perella
Weinberg. DRC Resolution at 54. Moreover, even if the DRC had found reason to recommend
that HP assert claims against its own directors or officers, that conclusion would not have meant
that claims would lie against HP’s advisors. A separate analysis of the advisors’ potential liability was required (and was made) independently of the analysis of the directors’ and officers’ potential liability.
8
The objectors recognize as much, calling Whitworth “the most prominent member of the
DRC.” Supp. Br. 1. Nonetheless, they attack HP for not making him available for deposition.
Id. But Magistrate Judge Laporte’s Order did not require that Whitworth testify, and Bennett
agreed to appear to satisfy that order because Whitworth is no longer a member of the board, having resigned after he was diagnosed with cancer.

28
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1
2

outstanding stock. His interests were clearly aligned with those of HP’s other public shareholders.9

3

Gary Reiner was the only Committee member on the board at the time of the acquisition.

4

As courts have recognized, this fact does not even come close to raising a doubt as to Reiner’s

5
6

independence. See, e.g., Kaplan v. Wyatt, 499 A.2d 1184, 1189 (Del. 1985) (“The mere fact that
a director was on the Board at the time of the acts alleged in the complaint does not make that di-

7
8
9

rector interested or dependent so as to infringe on his ability to exercise his independent business
judgment of whether to proceed with the litigation.”).10

10

The objectors try to find support for their claim that Reiner could not serve from Bennett’s

11

testimony. Supp. Br. 2. But Bennett did not testify that he doubted whether Reiner could serve.

12

He simply asked a question: I “raised the issue with counsel as to whether or not that was an ac-

13

ceptable arrangement,” and “was advised that — that that was not a problem.” Bennett Dep.

14
34:4-13. Bennett also independently observed Reiner for evidence of conflict. What he found
15
16
17

was that “Reiner’s conduct . . . did not give any appearance of having any different perspective or
didn’t appear to be trying to protect his own potential interests.” Bennett Dep. 34:20-23.11

18
9

27

Recognizing there is no challenge to Whitworth’s independence, the objectors only suggest that his independence “remains unexplored” because the DRC Resolution fails to discuss
Whitworth’s social and philanthropic affiliations. Supp. Br. 3. Not true. With respect to each of
the Committee members, the DRC considered, among other things, “Any financial, business, social, political, public-service, or philanthropic relationships . . . with any other person who might
have an inherent interest in the outcome of the Committee’s findings.” DRC Resolution at 21.
10
Thus, even in the context of a special litigation committee, where the standard for members’ independence is higher than the standard for DRC members’ independence and disinterestedness, being subject to minor or indirect liability does not preclude independence and disinterestedness.
11
The contrast with cases where a committee actually was not independent is stark. For instance, in Biondi v. Scrushy, 820 A.2d 1148 (Del. Ch. 2003), the directors appointed to the special
litigation committee had “long-standing personal ties” with the alleged wrongdoer (the notorious
CEO of HealthSouth, Richard Scrushy), including joint service on a foundation’s board and a college stadium jointly named for a committee member and Scrushy. Id. at 1156-57. On the very
same day the committee was formed, the board retained outside counsel to conduct the same in-

28

(footnote continued)

19
20
21
22
23
24
25
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2

(b) The thoroughness of the DRC is beyond dispute.
Pursuant to the authority delegated to it by the board, the DRC retained its own counsel in

3

the United States and the United Kingdom, as well as other professional advisors, including fi-

4

nancial, accounting and forensic experts, to assist in its review. DRC Resolution at 13. See also

5

Bennett Dep. 16:2-7; 31:21-24. With the assistance of these advisors, the DRC engaged in a

6
7

year-long evaluation that entailed:
 Twelve formal DRC meetings to discuss the status of the investigation, the work being

8
9
10
11

done by the Committee’s advisors, and other issues related to potential claims.
 The collection of documents and the review by the Committee’s counsel of relevant documents from databases containing more than 17.5 million electronic files.

12

 Interviews by the Committee’s counsel of more than 90 individuals, including current and

13

former employees, officers and directors of HP and Autonomy, and various advisors to

14
15

HP and Autonomy on relevant issues.12
 Approximately 34,000 hours spent by the Committee’s counsel on the review of docu-

16
17
18

ments, witness interviews and analyses of legal, insurance, indemnity, valuation and business issues relevant to the Committee’s mandate.

19

 More than 16,000 hours of work by experts and consultants retained to advise on account-

20

ing principles, economic analyses, and Delaware and English legal issues and standards.

21

DRC Resolution at 16-17.

22
23
24
25
26
27

vestigation — and, while the committee was in the early stages of its investigation, issued a press
release indicating that the outside firm had cleared Scrushy of any wrongdoing. Id. at 1157-58.
12
DRC member Bennett personally attended Apotheker’s interview. DRC Resolution at
16; Bennett Dep. 16:7-11.

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In addition, counsel for the DRC invited 13 plaintiffs’ law firms representing HP share-

2

holders in various derivative actions and demand letters, including counsel to objectors Steinberg

3

and Copeland, to meetings in order to obtain their input, discuss the status of the review and ex-

4

plain the DRC’s and the board’s conclusions. Id. at 15. The DRC also sought to interview

5
6

Sushovan Hussain and Michael Lynch. Both refused. Id. at 14; Bennett Dep. 82:20-83:2. Nonetheless, the DRC considered a letter sent by Lynch to the Committee detailing his views on the

7
8
9

acquisition and integration. DRC Resolution at 14; Bennett Dep. 83:3-20 (explaining that the
DRC reviewed the claims made in Lynch’s letter and concluded that they were not correct).

10

Following its investigation, the DRC concluded that the claims being settled have no val-

11

ue to HP. DRC Resolution at 83-89. As Bennett explained: “We did not conclude that we had a

12

legitimate legal basis for pursuing the officers and directors other than [Lynch and Hussain]. . . .

13

I think there’s virtually no chance of recovering $8.8 billion [from officers and directors]. . . .

14
How are we going to recover that? We found that there was no wrongdoing.” Bennett Dep.
15
16

95:21-96:2; 97:13-14; 97:17-18. Bennett further explained: “as a business judgment, the cost of

17

pursuing [released claims], both in terms of the company’s money and in terms of distraction of

18

the management team, would make it a very bad decision.” Id. at 97:7-10.

19
20
21

(c) The DRC was entitled to rely on the law firms that it selected to assist in the conduct of its work.
In the face of all this, Copeland questions the DRC’s investigation on the grounds that the

22

DRC relied on counsel, in particular Proskauer Rose LLP, to conduct the investigation. Copeland

23

Br. 17-18 & n.22. See also Supp. Br. 10. As Bennett testified, however, the DRC was involved

24

in every stage of the investigation and received thorough updates from the advisors working at its

25

direction. Bennett explained that counsel presented its findings as to the Autonomy acquisition,

26
“and then the committee made its determinations.” Bennett Dep. 29:9-11. See also id. at 30:1527
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2

24 (explaining that counsel for the committee conducted the investigation, then presented its findings to the committee).

3

Contrary to the objectors’ claim, Supp. Br. 10, the DRC was fully entitled to rely on the

4

work of counsel acting at its direction to conduct the time-consuming tasks of document review

5
6

and witness interviews. “While the directors bear ultimate responsibility for making informed
judgments, good faith reliance by a SLC on independent, competent counsel to assist the SLC in

7
8
9

investigating claims is legally acceptable, practical, and often necessary.” Carlton Invs. v. TLC
Beatrice Int’l Holdings, Inc., 1997 WL 305829, at *12 (Del. Ch. May 30, 1997); see also

10

Sarnacki v. Golden, 778 F.3d 217, 225 (1st Cir. 2015) (“Reliance on experienced outside counsel

11

for the SLC is often taken as evidence that the SLC conducted its investigation reasonably and in

12

good faith, not the opposite.”); Katell v. Morgan Stanley Grp., Inc., 1995 WL 376952, at *10

13

(Del. Ch. June 15, 1995) (a special committee “can select any agent to perform its duties as

14
Special Committee, as long as the agents can perform their assigned tasks competently,” and a
15
16
17

special committee’s “heavy reliance on its competent attorneys does not render its investigation
unreasonable”).13

18

Steinberg and Copeland attempt to attack the DRC’s independence by suggesting, wrong-

19

ly, that the DRC did not hire its own counsel but instead relied upon counsel retained by the com-

20

pany. Steinberg Br. 14; Copeland Br. 19; Supp. Br. 5. This is a complete misreading of the DRC

21

Resolution. The Committee itself interviewed several firms and made its own decision as to

22
which to retain. Although HP itself was the firms’ technical client, the firms reported exclusively
23
24
13

25
26
27

The objectors’ assertion that there is something untoward in the fact that Proskauer did not
record or transcribe its interviews is makeweight. Supp. Br. 10. That practice is the norm. See,
e.g., Strougo ex rel. The Brazil Fund, Inc. v. Padegs, 27 F. Supp. 2d 442, 452 (S.D.N.Y. 1998)
(“In the majority of cases in which derivative actions have been terminated by special litigation
committees, the interviews were not taken under oath or before a stenographer.”).

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to the DRC, not to the company. See Bennett Dep. 32:9-12 (Proskauer reported solely to the

2

DRC), 184:17-19 (“[T]he committee had interviewed a number of potential advisors, and the

3

committee selected the Proskauer firm.”).14 Contrary to the objectors’ unsupported assertion,

4

Proskauer never served as “counsel to the Board.” Supp. Br. 4.

5

(d) The objectors’ challenge to the DRC’s independence on the basis of
the manner in which Proskauer conducted the investigation is unfounded.

6
7

The objectors’ related claim that the entire work of the DRC was suspect because of the
8
9

manner in which Proskauer oversaw the project is without a shred of substance. Supp. Br. 4-5.

10

Their first argument is based on the fact that the DRC tasked two other firms with investigating

11

potential claims against professional advisors: Choate Hall (as to Perella Weinberg (“Perella”))

12

and Brown Rudnick (as to Barclays). DRC Resolution at 54. But that is not a basis for rejecting

13

the DRC’s work, it is a basis for accepting it. Choate Hall and Brown Rudnick had no conflict

14
15

that would prevent them from providing objective advice to the DRC based on their respective
investigations.15

16
Copeland’s additional argument is that the DRC’s independence was compromised be-

17
18

cause Proskauer was directed to consult with “counsel for the Individual Defendants/HP/the

19
20
21
22
23
24
25
26
27

14

The objectors’ demand, Supp. Br. 5, for the Proskauer retention letter is meritless, as they
have failed to show how it would be relevant to assessing the fairness and adequacy of the settlement — especially given that both the DRC Resolution and Bennett’s testimony are clear that
Proskauer reported solely to the DRC. DRC Resolution at 13; Bennett Dep. 32:9-12, 184:17-19.
The objectors similarly lack any basis to attack the settlement because they were barred from deposing a Proskauer attorney. Supp. Br. 5. Magistrate Judge Laporte correctly refused the request
because Copeland “point[ed] to no persuasive reason why this Court should deviate from the general rule that counsel ‘are not deposed regarding the assistance or advice they provide to their clients in this type of action.’” Docket #364 at 2 (quoting Carlton Invs., 1997 WL 38130, at *5).
15
The only case the objectors cite, Stepak, 20 F.3d 398, is completely inapposite. In Stepak,
the investigation of a shareholder’s demand was dominated by a law firm that represented the
wrongdoers in a criminal action involving the same subject matter; the conflicted firm therefore
could not conduct a vigorous investigation without risking violation of its duties to those preexisting clients.

28
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Board (i.e., Wachtell), which was negotiating simultaneously in the purported interests of HP and,

2

de facto, in the interests of the Individual Defendants.” Copeland Br. 20.16 But as HP explained

3

to Copeland in February 2015, when he demanded that Wachtell, Lipton, Rosen & Katz

4

(“Wachtell Lipton”) be discharged, Wachtell Lipton was retained by the company to represent the

5
6

company; the individual officer and director defendants had the benefit of their own counsel. Ex.
5 (Feb. 25, 2015 Letter from J. Schultz to R. Greenfield).

7
The board, acting at the recommendation of the DRC, resolved that the derivative claims

8
9

be settled or dismissed and unanimously resolved that the stipulation of settlement was in the best

10

interests of the company and its shareholders. Id. The DRC’s counsel, Proskauer, along with

11

Wachtell Lipton, negotiated the initial terms of the settlement, including a broad release of claims

12

against current and former HP officers and directors. By that time, the DRC and the board had

13

reached their conclusions, and the interests of HP and of the individual defendants were entirely

14
aligned: the company and the individuals all wanted to see the meritless derivative claims re15
16

solved (or dismissed) without further litigation.

17

After the Court indicated that it would not approve of the version of the settlement that in-

18

cluded a retention agreement for plaintiffs’ counsel, Wachtell Lipton worked on behalf of the

19

company to negotiate a revised settlement agreement. In doing so, it worked in the interests of

20

the company and pursuant to the directive of the HP board — which had concluded that settling

21

litigation that it had deemed to be meritless was in HP’s interests — rather than serving the inter-

22
23
24
25
26
27

16

The DRC presentation did not say that Proskauer or the other DRC counsel allowed the
company’s counsel to dictate the scope, substance, or nature of their review. To the contrary, the
DRC Resolution and the DRC presentation made clear that the DRC’s counsel were chosen by
and reported exclusively to the DRC, not to the company’s counsel. Within that framework, a certain amount of consultation or coordination between DRC counsel and the company’s counsel on
procedural matters, timing, logistics, and other such matters is entirely appropriate in the course
of a complicated, extensive, ten-month review that intersected with ongoing criminal investigations here and abroad.

28
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ests of the individual directors and officers, who were represented by their own counsel. As to

2

Copeland’s demand that Wachtell Lipton be dismissed, the board unanimously determined that to

3

do so would not be in the best interests of the company or its shareholders. Id.

4
5

(e) That the DRC reached different conclusions than the objectors
does not mean that the DRC process was flawed.

6

For her part, Steinberg merely reiterates the claims she would have the company bring and

7

tries to twist the Committee’s decision to recommend against pursuing those claims into evidence

8

of its bad faith. Steinberg Br. 27-30. But the mere fact that objectors disagree with the DRC’s

9

conclusions does not render those conclusions invalid or conspiratorial.

10

“Demonstrating that directors have breached their duty of loyalty by acting in bad faith

11
goes far beyond showing a questionable or debatable decision on their part.” Ironworkers Dist.
12
13

Council of Phila. & Vicinity Ret. & Pension Plan v. Andreotti, 2015 WL 2270673, at *27 (Del.

14

Ch. May 8, 2015). “[M]ere disagreement with the Committee’s ultimate conclusion, as well as its

15

subsidiary conclusions leading thereto, will be insufficient to raise a reasonable doubt that the

16

Board acted in good faith and on an informed basis.” Id.

17
18

The objectors’ arguments rely on the same res ipsa loquitur logic that the court rejected in
Ironworkers: they believe that the Autonomy acquisition was so costly to the company “that

19
20
21

somebody must be liable for a breach of fiduciary duties, and that liability is so clear and so
valuable to [HP] that a decision not to pursue that claim must have been made in bad faith.” Id. at

22

*26. Here, the DRC did determine someone was liable: Hussain and Lynch. This case is

23

exceptional because the DRC not only determined who the wrongdoers were, but the company is

24

currently pursuing the executives at the heart of the fraud in the U.K. courts and has initiated pre-

25
26
27
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2

action proceedings against Autonomy’s accountants.17 There is thus no basis upon which to
question the good faith, independence, or thoroughness of the DRC’s investigation.

4

(f) The Bennett deposition confirms that the DRC’s conclusions
should be respected and that the objectors’ claims to the contrary
are frivolous.

5

Grasping at straws, the objectors argue that the DRC did not act in an informed basis

3

6

because Bennett could not recall certain information at his deposition. Supp. Br. 6. As the Court

7
will see upon a review of the entirety of Bennett’s deposition transcript, Bennett had a masterful
8
9

recall of the facts; that is especially true in light of the breadth and depth of the DRC

10

investigation. When he could not remember a specific fact from memory, Bennett asked to see

11

the DRC Resolution in order to refresh his recollection; over and over again, counsel for

12

Copeland refused this simple request. See, e.g., Bennett Dep. 58:18-20; 67:2-5; 101:4-11; 122:3-

13

8; 127:10-19. The problem, therefore, was not with Bennett’s recollection and diligence — the

14

problem was with Copeland’s sharp deposition tactics.

15
Indeed, rather than ask meaningful questions that would aid this Court in evaluating the
16
17

independence and good faith of the committee, counsel subjected Bennett to a memory test with

18

absurd and wasteful questioning. For example, Bennett was asked about details of the release,

19

without being provided a copy of the release, on the ostensible basis that the release was

20

ambiguous, even though Bennett had no parol evidence to offer on the subject since he was not a

21

negotiator of its terms. But Bennett was nonetheless clear (and correct) when he testified that all

22
23
24
25
26
27

17

Steinberg suggests that the settlement should not be approved until the company’s pending suit against Lynch and Hussain is resolved. Steinberg Br. 35. That suggestion would only
hurt the company whose interests she purports to protect by continuing the distraction of litigation
against directors and other releasees. Instead, the directors should be allowed to refocus their energies where they belong for the sake of the company and its shareholders: the boardroom, not
the courtroom. See Maher v. Zapata Corp., 714 F.2d 437, 467 (5th Cir. 1983).

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2

of the Autonomy-related claims against the individual defendants are being released, with the
exception of those against Lynch and Hussain. Bennett Dep. 117:1-22.

3

The absurdity of the objectors’ misuse of the deposition to critique Bennett and his

4

recollection is highlighted by their claim that he should be faulted because he did not recall that

5
6

Lesjak had raised concerns about Autonomy’s accounting practices before the transaction was
completed. Supp. Br. 6. Of course Bennett has no memory of Lesjak expressing accounting

7
8
9

concerns because Lesjak did not express any such concerns. Indeed, when Bennett asked to see
something that would reflect Lesjak’s concerns as to Autonomy’s accounting practices, objector’s

10

counsel could not provide it. Bennett Dep. 75:18-20. And, indeed, even though objectors have

11

repeated the claim that Lesjak raised these sorts of concerns, they have never provided a shred of

12

substantiation for their unfounded assertion. Copeland Br. 12; Supp. Br. 6.

13

Bennett’s testimony on Lesjak’s actual concerns, however, was crisp. Bennett Dep. 75:2-

14
8 (“She had concerns about the transaction from the perspective of what the Wall Street reaction
15
16

would be to such a large acquisition and such a large premium. I do not recall seeing or hearing

17

anything in which she objected to the transaction itself or expressed concerns about the

18

accounting.”).

19
20
21
22

2.

The conclusions reached by the DRC and HP board were reasonable.

In light of the thoroughness and independence of the DRC, on a motion to dismiss, the
Court would not need to — in fact, would be precluded from — second-guess the HP board’s
business judgment that the asserted claims should be dismissed. Brazen, 695 A.2d at 49. This

23
24
25
26

Court’s review could therefore end here and approval of the settlement would be fully warranted.
But even if the objectors’ attacks on the DRC’s conclusions were considered on their own terms,
they would still fail.

27
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(a) Plaintiffs could not overcome the rigorous standards of Delaware
law in asserting claims against HP’s current and former directors
and officers.

3

The claims objectors would have the company pursue against the directors boil down to

4

allegations that they failed to exercise their duty of care. Those claims would be dismissed on the

5

pleadings. HP’s charter contains an exculpation provision that, in accordance with Delaware law,

1

6

protects HP’s directors from personal liability for breaches of the duty of care. See DEL. CODE

7
ANN. tit. 8, § 102(b)(7). The Delaware Supreme Court has recently made clear that “[w]hen the
8
9

independent directors are protected by an exculpatory charter provision and the plaintiffs are una-

10

ble to plead a non-exculpated claim against them, those directors are entitled to have the claims

11

against them dismissed,” regardless of the standard of review applicable to the underlying con-

12

duct. In re Cornerstone Therapeutics Inc. S’holder Litig., --- A.3d. ----, 2015 WL 2394045, at *1

13

(Del. May 14, 2015).

14

Faced with this absolute bar against duty of care claims, the objectors try to recast their

15
claims as claims for breaches of the duty of loyalty. To plead and prove a duty of loyalty claim, a
16
17

plaintiff would have to plead that the directors acted in bad faith18 — which can encompass either

18

“an intent to harm” or “intentional dereliction of duty.” Lyondell Chem. Co. v. Ryan, 970 A.2d

19

235, 240 (Del. 2009). There is no allegation here that any director intentionally wronged the cor-

20

poration to advance his or her personal interests. Thus, to succeed on a claim against the direc-

21
22

tors, plaintiffs would have to prove that the directors acted in bad faith by “fail[ing] to act in the
face of a known duty to act, thereby demonstrating a conscious disregard for their responsibili-

23
24

ties.” Stone, 911 A.2d at 369-70. This is a high standard: “[I]f the directors failed to do all that

25
26
27

18

There is no independent fiduciary duty of good faith; rather, only the duties of care and
loyalty can give rise to liability. Stone v. Ritter, 911 A.2d 362, 370 (Del. 2006).

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they should have under the circumstances, they breached their duty of care. Only if they know-

2

ingly and completely failed to undertake their responsibilities would they breach their duty of

3

loyalty.” Lyondell, 970 A.2d at 243-44.

4
5
6

Claims of this type have been described as “possibly the most difficult theory in corporation law upon which a plaintiff might hope to win a judgment.” In re Caremark Int’l Inc. Derivative Litig., 698 A.2d 959, 967 (Del. Ch. 1996).19 They require a plaintiff to establish that the di-

7
8
9

rectors either (1) “utterly failed to implement any reporting or information systems or controls,”
or (2) “having implemented such a system or controls, consciously failed to monitor or oversee its

10

operations thus disabling themselves from being informed of risks or problems requiring their at-

11

tention.” Stone, 911 A.2d at 370. Delaware law is clear that hindsight-driven claims of suppos-

12

edly inadequate oversight, like those the objectors would have HP bring (see, e.g., Steinberg Br.

13

20), are inadequate. See In re Gen. Motors, 2015 WL 3958724, at *15 (“[I]n criticizing the

14
Board’s risk oversight and its delegation thereof, throughout the Complaint, the Plaintiffs concede
15
16
17

that the Board was exercising some oversight, albeit not to the Plaintiffs’ hindsight-driven satisfaction.”).

18

The directors are further protected by Delaware law entitling them to rely on managers

19

and advisors. See Brehm v. Eisner, 746 A.2d 244, 261 (Del. 2000); DEL. CODE ANN. tit. 8,

20

§ 141(e). To overcome the protections of Section 141(e), a plaintiff must allege particularized

21
22
19

23
24
25
26
27

In Caremark itself, the “extremely weak” claims that the directors had failed to monitor
the corporation were settled on the basis of corporate governance reforms and changes to the
company’s drug referral policies. 698 A.2d at 972. Failure-to-monitor claims against directors
and officers are routinely dismissed on the pleadings by the Delaware Court of Chancery. See,
e.g., In re Dow Chem. Co. Derivative Litig., 2010 WL 66769, at *15 (Del. Ch. Jan. 11, 2010);
David B. Shaev Profit Sharing Account v. Armstrong, 2006 WL 391931 (Del. Ch. Feb. 13, 2006)
aff’d, 911 A.2d 802 (Del. 2006); Guttman v. Huang, 823 A.2d 492, 507-08 (Del. Ch. 2003).
Merely demanding a “better” system for information reporting will not suffice. See In re Gen.
Motors, 2015 WL 3958724, at *14.

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facts demonstrating, for instance, that the directors “did not in fact rely on the expert,” or that the

2

“reliance was not in good faith,” or even that “they did not reasonably believe that the expert’s

3

advice was within the expert’s professional competence.” Brehm, 746 A.2d at 262. There are no

4

such allegations here.

5
6

While these provisions of Delaware law do not apply to HP’s officers, a plaintiff seeking
to bring claims against them would still have to prove that the officers acted with gross negli-

7
8
9

gence. Adams v. Calvarese Farms Maint. Corp., 2010 WL 3944961, at *18 (Del. Ch. Sept. 17,
2010); Midland Grange No. 27 Patrons of Husbandry v. Walls, 2008 WL 616239, at *9 (Del. Ch.

10

Feb. 28, 2008). Delaware courts construing this standard have held that a would-be plaintiff

11

would have to prove that HP’s officers took actions “which [were] without the bounds of reason,”

12

Adams, 2010 WL 3944961, at *18 (quotation marks omitted), and were “‘so grossly off-the-mark

13

as to amount to reckless indifference or a gross abuse of discretion.’” Metro. Life Ins. v. Tremont

14
Grp. Holdings, Inc., 2012 WL 6632681, at *7 (Del. Ch. Dec. 20, 2012) (quoting Solash v. Telex
15
16

Corp., 1988 WL 3587, at *9 (Del. Ch. Jan. 19, 1988)).20
The facts considered and the conclusions reached by the DRC and presented to the board

17
18

demonstrate that these strict standards of Delaware law could not be satisfied in this case.

19
20
21
22
23
24
25
26
27

20

Steinberg argues that the DRC applied “a single standard based upon the exculpation provisions of Delaware law” and ignored the fact that HP’s officers could be liable for gross negligence. Steinberg Br. 27. Not true. The DRC Resolution reflects that the DRC was fully cognizant of the different standards applicable to officers and directors. See, e.g., DRC Resolution at
48 (“The Committee considered the provision in HP’s charter providing for exculpation of its directors (but not officers or employees).”). The DRC also assessed the claims against the officers
and directors separately and under the relevant standards. See id. at 83-86.
Again, grasping at straws, the objectors mischaracterize portions of Bennett’s deposition
to argue that the exculpatory provision in HP’s charter was the basis for the DRC’s decision to
dismiss claims against HP’s officers. But Bennett made clear that, in addition to the exculpatory
charter provision, the Committee’s recommendation also was based on its finding that there was
no wrongdoing: “As it has been explained and described to me, and with the exculpatory provisions that we have in the charter, and with, in any case, our finding of no wrongdoing, there’s
very little probability of success.” Bennett Dep. 96:23-97:2 (emphasis added).

28
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1
2

(b) There was a valid business case for the Autonomy acquisition that
predated Apotheker.
Although the objectors have balkanized their claims into several fragmented parts, the

3
overall thrust is that HP was unaware of the true state of affairs at Autonomy prior to the acquisi4
5

tion not because HP was the victim of a massive fraud but because its officers and directors failed

6

to conduct adequate due diligence and to inform themselves about Autonomy. Steinberg Br. 18-

7

24; Copeland Br. 7-15. The findings recounted in the DRC’s resolution — facts that the objectors

8

ignore — refute the claim that Apotheker, Robison, Lesjak, or any other HP officer or director

9

breached their fiduciary duties by failing to inform themselves adequately.

10

Far from being uninformed, the DRC’s investigation established that HP’s knowledge of

11
and interest in Autonomy predated the acquisition by several years. HP had firsthand knowledge
12
13

of Autonomy’s technology prior to the acquisition. As early as 2009, the two companies devel-

14

oped a business relationship, entering several Original Equipment Manufacturer (“OEM”) and

15

licensing agreements, which enabled HP’s internal use of Autonomy products. As a result of

16

these connections, “Autonomy and its technology were known to HP well before the Acquisi-

17
18

tion.” DRC Resolution at 29.
HP was also familiar with Autonomy, as it had previously considered the company as a

19
20
21

potential target. Under the leadership of CEO Mark Hurd, HP developed a business strategy to
expand its software enterprise and considered a number of potential software acquisitions as part

22

of that strategy. Indeed, three of the acquisitions HP completed before Autonomy — 3PAR,

23

ArcSight, and Fortify — were executed to expand HP’s software footprint. As part of the same

24

strategy, the Technology Committee recognized Autonomy’s ability to “support HP’s participa-

25

tion in the enterprise search space,” and it repeatedly considered Autonomy as a potential target.

26
Id. Through this process, HP accumulated knowledge of Autonomy, its technology, and the pros
27
28

and cons of a potential acquisition. Id.
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1
2

Steinberg misleadingly claims that HP affirmatively rejected Autonomy as a viable acquisition candidate in 2010,

3
4

Steinberg Br. 21; see also Supp. Br. 9.

5
6
7
8
9
10

As the DRC concluded, HP never doubted

11

the technological or strategic merits of an Autonomy acquisition; rather, its decision not to pursue

12

Autonomy earlier was simply a matter of prioritization. DRC Resolution at 29.

13
14

(c) HP’s due diligence was extensive and was consistent with the scope
of diligence applicable in UK public company deals.

15
16
17
18

As the DRC found, HP completed months of preliminary due diligence on the deal before the board formally considered the acquisition:

19
20
21

 Directed by a transaction team comprising veterans with significant experience, a team
that had recently completed extensive due diligence on another potential software acquisi-

22

tion, HP received, reviewed, and stress-tested information from Autonomy’s senior offi-

23

cials and bankers regarding the company’s financial condition, operating results, technol-

24

ogy, product development, and business strategy. DRC Resolution at 30.

25
26
27
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1
2
3

 HP Corporate Development analyzed Autonomy’s publicly reported financial information,

4

as well as analysts’, industry, experts’ and trade groups’ reports on Autonomy. Based on

5
6

this information, HP’s investment bankers confirmed the rationale for an Autonomy acquisition. DRC Resolution at 30.

7
8
9
10

 In March 2011, a detailed presentation was prepared for the Technology Committee meeting that provided an overview of Autonomy, its products, its architecture, its revenue
breakdown, and expected financial performance. Id.

11

 Consistent with HP’s protocols, a detailed preliminary business case for the Autonomy

12

deal was prepared for the board’s May 2011 meeting. Similar presentations were pre-

13

pared for the board’s Finance and Investment Committee (“FIC”) and Technology Com-

14
mittee. Id.
15
16
17
18

After HP completed this preliminary due diligence, the board met to consider granting

19

management authority to negotiate a deal at its July 19-21, 2011 meeting. Consistent with HP’s

20

practice in previous deals, Apotheker assumed the role of deal sponsor at the meeting, presenting

21

the rationale for the acquisition to the board. The board also received presentations from HP’s

22
financial advisors and investment bankers, which praised the deal as a “‘crucial offensive move
23
24
25

toward [HP’s] strategic vision’” and recommended “‘that [HP] should pursue the acquisition expeditiously.’” DRC Resolution at 30.

26

During the meeting, HP’s investment bankers warned the board that the U.K. Takeover

27

Code created certain risks for the acquisition. Under the Code, “non-public information provided

28

to HP by Autonomy had to be equally and promptly provided to any other bidder or potential bidHP’S RESPONSE TO OBJECTIONS TO
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1

der.” Id. at 31. HP’s bankers identified IBM, Oracle, Google, Microsoft, EMC2, and SAP as po-

2

tential interlopers and warned that sharing Autonomy’s non-public information with them could

3

impair HP’s likelihood of success on its bid and result in a competitor having sensitive Autonomy

4

information if HP succeeded. Id. at 30-31. Accordingly, HP would primarily rely on reported

5
6

financial information and oral representations if it moved forward with the acquisition. After a
full discussion and assessment of these and other risks, the HP board authorized management to

7
8
9

proceed with an analysis of Autonomy as a target. Id. at 31.
As the DRC found, HP’s subsequent due diligence was entirely consistent with what is

10

typically conducted for deals involving public U.K.-based companies that are subject to the U.K.

11

Takeover Code. Id. at 31-32. KPMG said the same thing in its report (cited heavily by the objec-

12

tors). Ex. 6 (KPMG Report) at 7.

13

Thus, following the board’s July meeting, HP convened a cross-disciplinary team of em-

14
ployees from Corporate Development, Finance, Sales Operations, Legal, and several other de15
16

partments to spearhead the due diligence. DRC Resolution at 27-28, 31. These teams reviewed

17

nonpublic documents, participated in at least 28 due diligence phone calls, and pored over public-

18

ly filed Autonomy financial statements — statements that had already been audited by Deloitte

19

UK. Id. at 31-32. Not content with that, HP insisted on more. As a result, HP received assuranc-

20

es (which turned out to be false) from Autonomy’s then-CFO Hussain that Autonomy’s public

21

financials were accurate. Id. at 32.

22
To assist HP’s internal efforts, HP hired Barclays and Perella to advise on strategy and the
23
24
25

fairness of the price. Id. at 31. While one fairness opinion is generally more than sufficient, in
this case, both banks reviewed the transaction and opined that it was fair. Id. at 54-55.

26
27

By statute, the

28
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board was entitled to rely on this advice. See DEL. CODE ANN. tit. 8, 141(e); Brehm, 746 A.2d
at 261-62.

HP also retained two top-tier international law ?lms. Fresh?elds and Gibson Drum, to
conduct legal due diligence. to provide advice on the UK. Takeover Code. and to act as deal
counsel. DRC Resolution at 31. In addition. HP retained KPMG to conduct fmancial and ac-
corurting due diligence. Id.

The HP team collected and scrutinized public information and nonpublic documents and
representations supplied by Autonomy executives. Id. at 31-32. By the end of the due diligence
process, Autonomy executives had provided a response to every one of ?must have" dili-
gence requests except one access to Deloitte work papers. Id. at 32. The materials Au-
tonomy had provided included the open-soru'ce scan of its source code, lists of revenue by prod-
uct category. redacted sample OEM contracts, and redacted lists of top forty customers and top
forty contracts. Id. at 31-32.21

In parallel with management?s efforts. the board rnet ?ve times over the course of August
2011 to keep abreast of the progress of the transaction and extensive diligence efforts. Dur-
ing these meetings, the board received presentations from management and professional advisors

on key due diligence ?ndings and other updates on the negotiation process.

 

21 Steinberg argues that due diligence was inadequate because Apotheker and Shane

Robison failed to arrange for ?hands-on testing of Autonorny?s software by a software engineer.?
Steinberg Br. 20. This objection is without substance. The entire acquisition was overseen 

   
   

are engineers test Autonorny?s soft-
ware. The problem with Autonomy was not that its software did not perform as promised. The
problem was that its fmancial statements were fraudulent.

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In light of all of these ?ndings, the DRC concluded that diligence ?had in fact been
?rigorous? (particularly in the context of the normative standards of conduct for UK public-
cornpany transactions),? and ?had considered all material information that was reasonably availa-
ble to the Company.? DRC Resolution at 36.

These facts do not state a violation of the duty of care by Apotheker, Robison, Lesjak or
any other HP of?cer or director.22 In re Walt Disney Co. Derivative Litig, 907 A.2d 693, 749
(Del. Ch. 2005). 906 A.2d 27 (Del. 2006); see also id. at 765 (concluding no breach of ?du-
ciary duty by accepting cormterparty?s representations as true). To the contrary, the objectors?
efforts to cobble together an attack on the DRC ?s conclusions ?relies entirely on the wisdom of
hindsight? precisely the sort of claim that the Delaware courts consistently reject. Ash, 2000
WL 1370341, at 10 (dismissing gross negligence claim against directors based on failed acquisi-
tion). The problem was not that Apotheker, Robison, Lesjak or anyone else did not diligently

seek the truth about Autonomy. The problem was that and Hussain intentionally con-

cealed it.23

 

22 In addition to the defendants named in the operative complaint, other individuals and

third-party entities. including James Mrurin and KPMG, were named as defendants in some of the
pie-consolidation federal derivative complaints, but they were omitted from the operative corn-
plaint. Nevertheless, the DRC considered the potential claims and concluded that it was not in
the company?s interest to pm?sue any of them. DRC Resolution at 51.

23 As HP later discovered, Autonomy?s publicly ?led fmancials, which were reviewed by

Deloitte UK, together with the narrative in the armual reports that accompanied the munbers,
were riddled with misrepresentations and outright falsehoods. As the orut will see upon review
of the Particulars of Claim that has been ?led against and Hussain in the UK. (Docket
#337), there is nothing to Steinberg?s suggestion that there was no fraud at Autonomy, a sugges-
tion based on nothing more than the UK. Serious Fraud Of?ce?s decision to close its
investigation. Steinberg Br?cede[] [jlu?isdiction] to the US authori-
ties whose investigation is ongoing.? Ex. 34 (Press Release, HP Autonomy Investigation, Serious
Fraud O?ice (Jan. 19, 2015)). HP continues to cooperate with SEC and DOJ of?cials to support
their investigations, which are ongoing.

(footnote continued)

 

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Document398?3 FiledO7/17/15 Page41 of 76

There were no ?red ?ags? presented to the directors or HP man-
agement.

Notwithstanding the abundant evidence that Autonomy?s executives actively concealed a
massive fraud from HP. the objectors contend that HP would have discovered the fraud if only it
had paid attention to ?red ?ags? before the acquisition. The DRC considered this claim and c011-
cluded that none of the supposed red ?ags provides a basis for asserting a claim against any pre-
sent or fonner of?cer or director (other than Resolution at 35. That conclusion
was correct.

be inability to obtain the Deloitte work papers cannot support
a claim.

The objectors fn?st contend that inability to obtain Deloitte work papers was a
fatal ?aw in the diligence process. Steinberg Br. 7. 19: Copeland Br. 10-11. The directors were
never advised of any issue in this regard. To the contraly. they were told that account-
ing review. including its inteiview with Deloitte. presented ?no material issues.m DRC Resolu-

tion at 34.

Instead of gaining access to the papers themselves.

Deloitte UK agreed to a due diligence phone call with the HP team and KPMG as a substitute.

DRC Resolution at 32.? 

 

 

 

24

Sushovan Hussain was never an of?cer of HP.

25 Steinberg mistakenly claims that the Deloitte UK call occ1ured after the board had author-

ized the acquisition. Steinberg Br. 7. The call occurred after the board provided approval to 11e-

(footnote continued)

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The HP team asked

1
2

the right questions about Autonomy’s revenue recognition policies, specifically asking whether

3

Deloitte UK had any disagreements with Autonomy’s management about accounting policies or

4

conclusions. Deloitte UK failed to disclose any disagreements. Id.

5
6
7
8
9

(ii) The KPMG report did not raise red flags.
The objectors next allege that HP’s due diligence was insufficient because KPMG was

10

unable to complete certain diligence tasks due to a lack of data about Autonomy. Steinberg Br. 7;

11

Copeland Br. 10.26 KPMG’s report acknowledged that the information available to it was more

12

limited than in non-U.K. takeovers. Nowhere did KPMG suggest that HP’s due diligence was

13

inadequate as a result. Rather, the report expressly noted that “the data and access provided to us

14

during due diligence [were] . . . comparable with other acquisitions involving large U.K. publicly

15
traded companies.” Ex. 6 (KPMG Report) at 7. The HP board was fully informed that diligence
16
17
18

would be limited due to the constraints of the U.K. Takeover Code and, as noted, were told that
KPMG had not uncovered any material issues.27

19
20
21
22
23
24
25
26
27

gotiate but before the board authorized HP to close the deal on August 18, 2011. DRC Resolution
at 32, 35.
26
No claim can be asserted against the HP directors on the basis of the KPMG report, as
they were told that “KPMG’s accounting review, including its interview of Deloitte, presented
‘no material issues.’” DRC Resolution at 34. The directors were entitled to rely on this advice.
See DEL. CODE ANN. tit. 8, § 141(e); Brehm, 746 A.2d at 261.
27
The DRC’s “experts on UK due-diligence procedures confirmed to the Committee that the
receipt of limited information is consistent with UK market practices for acquisitions of FTSE
100 companies (as KPMG had advised the board before the Acquisition).” DRC Resolution at
34.

28
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And. critically, in light of the natru'e of the fraud that was later rurcovered at Autonomyt
KPMG concluded (incorrectly. it turned out) that Autonomy ?recognize[d] revenue in accordance
with? the relevant accounting standard. 10?. KPMG added that ?the majority of [Autonomy]?s
revenue recognition policies appear to be consistent with US. GAAP and HP policies.? 10?. The
report fruther said that any differences in revenue recognition between Autonomy?s practices and
policies ?should only have a short-term impact on GAAP model revenue recognition
through FY13) . . .  Id. (emphasis added). In short. contrary to Steinberg?s and
opeland?s telling, report did not wave red ?ags. it ?ashed green lights.28

Relatedly. the objectors assert that Apotheker and Robison were grossly negligent in fail-

ing to review the KPMG report themselves. Steinberg Br. 19: Copeland Br. 9-10. 9 11.14. The

claim is without substance.

1?1

(I)

therefore disingenuous for the objectors to claim that Apotheker and Robison were remiss in not

reviewing the draft KPMG report.

 

    

28 Steinberg and Copeland assert that KPMG found Autonom ?s or oanrc ?owth rates sus-

ect. Steinbero Br. 19: eland Br. 10.

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Apotheker and Robison were entitled. as senior HP executives. to rely on the work of sub-
ject matter experts who were actively engaged with KPMG in the due diligence effort. including
the head of Corporate Development. Andrew Johnson. In light of the ?gross negligence
akin to recklessness? standard that would apply. it is not ??without the bounds of reason?? that
CEO and TO would rely orr their subject-matter experts to review the accounting report.
In re Accz/i'aci', Inc. ?liola'er Derivative Litig. 757 F. Supp. 2d 919. 934 (ND. Cal. 2010) (quot-
ing In re Walt Disner. 907 A.2d at 750): In re REAIEC Inc. Sec. Litig. 702 F. Supp. 2d 1202.
1239-51 (S.D. Cal. 2010) (CEO acted reasonably by delegating and relying on work conducted by
F0 and accormting department regarding complex goodwill impairment issue); see also Howard
V. SEC. 376 F.3d 1136. 1147-48 (DC . Cir. 2004) (reasonable for a senior corporate executive to
rely on the expertise of internal and external counsel. as well as the company?s corporate ?nance

. . . . 30
department. n1 preparmg documents for and approvmg a transaction).

 

29 The fact that KPMG did not speci?cally opine that the call was an adequate substitute for

Deloitte work papers is inapposite. Supp. Br. 9. As noted. KPMG told HP that the level of
information provided to KPMG even without Deloitte?s work papers was comparable to
what it received in other UK. transactions. Ex. 6 at 7 (KPMG Report).

 

30

The cases cited by the objectors (Supp. Br. 8) discuss the legal standard applicable in duty
of care cases and have no bearing 011 the facts of this case. See, Brelnn. 746 A.2d at 264
(noting that ?good faith . . . is a key ingredient of the business judgment rule?): Smith V. Van
Gorkom. 488 A.2d 858. 872 (Del. 1985) the business judgment rule there is no protec-

(footnote continued)

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1

Finally, the objectors focus on the timing of the Deloitte UK call

2

to suggest that the

3

acquisition was conducted in “extreme haste” and with a “lack of interest.” Supp. Br. 9. The

4

contention is nothing more than a weak debating point. If full disclosure had been made in the

5
6

diligence call, there is no doubt that the deal as then conceived would have stopped dead in its
tracks.31

7
8
9

(iii) The analyst reports as a whole did not raise red flags.
Steinberg next argues that HP failed to consider analyst reports that raised supposed red

10

flags about the acquisition. Steinberg Br. 28. Again, the DRC reviewed the reports and conclud-

11

ed that they did not provide a basis for asserting any claims. As the DRC explained, the “many

12

positive reports regarding Autonomy published in the same period (dating back to 2005), offset

13

the negative reports.” DRC Resolution at 35.32

14

Indeed, in the years preceding the acquisition, positive analyst reports on Autonomy were

15
commonplace. See, e.g., Exs. 39 at 1 (Societe Generale in April 2010: “Our positive view on
16
17
18
19
20
21
22
23
24
25
26
27

tion for directors who have made an unintelligent or unadvised judgment” (internal quotation
marks omitted)); MCG Capital Corp. v. Maginn, 2010 WL 1782271, at *21 n.129 (Del. Ch. May
5, 2010) (recognizing that there must be a causal link between negligent conduct, e.g., “sloth-like
delivery of information” and a failure of the board to be “adequately informed when they make a
corporate decision”).
31
In any event, Delaware law recognizes that “[s]eizing specific opportunities is an important business skill, and that involves some measure of risk. Boards may have to choose between acting rapidly to seize a valuable opportunity without the luxury of months, or even weeks,
of deliberation . . . . Courts should therefore be extremely chary about labeling what they perceive as deficiencies in the deliberations of an independent board majority over a discrete transaction as not merely negligence or even gross negligence, but as involving bad faith.” In re Lear
Corp. S’holder Litig., 967 A.2d 640, 654 (Del. Ch. 2008).
32
Misreading the resolutions, Steinberg argues the DRC acted in bad faith by “confin[ing]
its analysis to [analyst] reports ‘cited in the Complaint.’” Steinberg Br. 28. Not true. While the
DRC focused on the “dates on which the cited analyst and media reports were published,” the
DRC considered much more, including the “many positive reports” not cited in the complaints.
DRC Resolution at 35 (emphasis added).

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Autonomy is unchanged . . . thanks to several drivers”); 40 at 1 (Deutsche Bank in April 2009:

2

“Business momentum and management commentary continues to support our view that the group

3

is in a unique position, being both a high growth software company and a safe haven from the

4

current economic crisis.”); 41 at 1 (J.P. Morgan in July 2008: “Autonomy’s strong performance

5
6

is an indication of strong product offering, lack of competition and continued benefit from legislation in US. We remain believers in Autonomy’s strong growth potential with 50% EPS CAGR

7
8
9

over FY07-09E.”).
And contrary to Steinberg’s assertion, the analyst reports remained favorable in the run up

10

to the acquisition. Indeed a brief survey of reports in the final quarter before the acquisition

11

shows that analysts were still providing glowing reviews of Autonomy:

12
13

 Jeffries headlined its July 2011 report with “Strong Growth Driven by Cloud and OEM,”
elaborating that “Q2 11 results confirm strong traction across key segments such as OEM

14
and Cloud. The relatively positive tone of Q&A in the analyst call confirms that suspi15
16

cions with respect to accounting issues have faded. The scene is set for the premium or-

17

ganic growth rate to unfold in a premium rating, which we believe to be entirely warrant-

18

ed.” Ex. 8 at 1 (July 2011).

19

 Societe Generale praised Autonomy’s “Q2 earnings above expectations” and noted,

20

“IDOL products organic growth was 15% . . . . OEM business remained dynamic with

21

27% growth, in line with prior quarters. . . . Cloud signings are up 27%, with ‘commit

22
customers’ at $437m, showing strong growth potential.” Ex. 9 at 1 (July 2011).
23
24

 Barclays Capital commented: “Another good quarter. . . . Autonomy has followed up a

25

strong Q1 with a quarter of healthy product revenue growth. . . . We do not see much

26

weakness in Autonomy’s numbers.” Ex. 10 at 1 (July 2011).

27
28

 Panmure Gordon & Co. wrote, “Autonomy has delivered Q2 results ahead of our expectations, and the outlook statement is better than we hoped. Again, ‘Cloud’ is the highlight
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of the results — with 17% growth . . . this improves Autonomy visibility and strengthens

1
2

the investment case.” Ex. 11 at 1 (July 2011).

3

Steinberg also claims that investors were uniformly skeptical of Autonomy’s organic

4

growth, citing a number of analyst reports. Steinberg Br. 4-5. But for every skeptic, there was an

5
6

analyst praising Autonomy’s impressive organic growth. For example, in March 2010, Societe
Generale wrote, “We believe Autonomy should be able to deliver EPS growth of 20%+ pa over

7
8
9

the next three years. . . . This strong organic growth is driven by: 1) an increase in regulatory and
compliance obligations for companies . . . ; 2) high structural growth within the large installed

10

base (20,000+ clients) . . . ; 3) strong leverage from the fast-growing OEM business . . . ; and 4)

11

new products such as Meaning-Based Marketing solutions and IDOL SPE.” Ex. 12 at 4.

12
13

Likewise, in July 2010, Credit Suisse noted its “view that Autonomy continues to exhibit
strong organic growth and resistance to pricing pressure.” Ex. 13 at 1. The report continued:

14
“The Company’s strong IDOL technology, coupled with an extensive catalogue of data repository
15
16
17

connectors, provides high barriers to entry, which we believe will allow the company to sustain
its strong and profitable growth for the foreseeable future.” Id. at 2.33

18

In any event, because HP also had access to financial information not available to ana-

19

lysts, the company reasonably concluded that its due diligence process would be the “ultimate

20

test” of whether there were any red flags. DRC Resolution at 35.

21
22
23
24
25
26
27

33

See also Ex. 14 at 1 (Credit Suisse in April 2009 noted that for the first quarter of 2009,
Autonomy had an organic growth rate of 17.5% and that the company’s “key metrics” were
“sound”); Ex. 15 at 1 (RBC Capital in 2009: “the current guidance is for 10-20% top line organic
growth”; “Underlying Q4 organic growth was 29%”); Ex. 16 at 1 (UBS Capital in July 2008:
“40% organic license growth; 40% margins”). Even the reports cited by Steinberg recognize Autonomy’s organic growth was impressive. See, e.g., Ex. 17 at 1 (Steinberg Ex. 32) (“Autonomy
posted 13% organic growth” in the second quarter of 2010); Ex. 18 at 1 (Steinberg Ex. 33) (“Organic growth of 13% (19% for IDOL products) is in line.”).

28
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1
The problem was that Hussain was lying.34

2
3

(iv) Barclays’ and Perella’s concerns were resolved.
4

Steinberg’s next alleged “red flag” —

5

— is without substance. Steinberg Br. 6

6
7
8
9
10
11
12
13
14
15
16
17
18
19
34

20
21
22
23
24
25
26
27

Steinberg focuses on reports from the second quarter of 2010 to suggest the reports should
have alerted HP to Autonomy’s hardware sales. But the reports do not suggest that there was a
trend towards increasing hardware revenues and instead treat the apparent spike in hardware revenue as an exception. See, e.g., Ex. 17 (Steinberg Ex. 32); Ex. 19 (Steinberg Ex. 34). Moreover,
the hardware at issue in those reports was not the “naked,” loss-making hardware that HP discovered only after the acquisition. Rather, the hardware discussed in the reports was for appliances
— hardware loaded with Autonomy software. See Ex. 18 at 1 (Steinberg Ex. 33) (noting a “mix
shift towards appliance” revenue) (emphasis added). Autonomy’s management had previously
warned investors that hardware revenue would be higher in the second quarter due to an increase
in sales of Arcpliance, an appliance product that included hardware. As Credit Suisse explained,
investors’ focus on hardware in that quarter was expected and unexceptional. Ex. 13. Steinberg
also cites a few cherry-picked analyst reports to suggest that the investment community writ large
was skeptical of Autonomy’s financial results. Steinberg Br. 4-5. But other reports hailed Autonomy as a “‘growth’ software provider” with “a ‘pure’ business model with new license sales
comprising 66% of overall revenue . . . .” Ex. 12 at 13.

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i U3
ax

The Technology and Finance and Investment Committees and full
HP board were adequately involved in the acquisition.

Steinberg?s next attack is 011 the two HP board committees with responsibility for acquisi-

tions, the Teclmology and the Finance and Investment onmrittees. But Steinberg has it exactly

Thus.

backwards.

 

 

cy. 1 1011. lack of transparent disclosures could not be a red ?ag that the board ignored because
the board was never presented with the issue.
36

 

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rather than delegate to a board committee, the full board acted on the acquisition, discussing the

2

deal at seven separate meetings, including one devoted exclusively to that subject. DRC Resolu-

3

tion at 30-35.

4
5
6

That is a sign of effective and focused board oversight; it cannot provide a basis for a
breach of the duty of oversight. See, e.g., In re Lear, 967 A.2d at 654 (concluding that plaintiffs
did “not come close to pleading facts suggesting that the [defendant] directors ‘consciously and

7
8
9
10

intentionally disregarded their responsibilities’ and thereby breached their duty of loyalty” when
it was clear that “the [defendant] board held regular meetings and received advice from several
relevant experts”).

11

In any event, both committees more than lived up to their responsibilities. Steinberg con-

12

tends that the Technology Committee failed to sufficiently vet Autonomy’s technology prior to

13

approving the transaction. Steinberg Br. 23-24. Again, this complaint is irrelevant. There has

14
never been a question about the efficacy of Autonomy’s software. In any event, this complaint
15
16

misconstrues the Technology Committee’s responsibilities.

17
18
19
20
21
22
23
Again, the Committee was entitled to rely on those repre-

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25

sentations. Brehm, 746 A.2d at 261.

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1
2
3

Having considered all of these facts,

4

the DRC concluded the allegations against the Technology Committee were unsubstantiated.

5

DRC Resolution at 35.37

6

Separately, Steinberg contends that the FIC failed adequately to supervise the acquisition

7
8

process. Steinberg Br. 23.

9
10
11
12
13
14
15
16
17
18
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20
21
22
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24
25
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27

37

The DRC also considered and rejected Steinberg’s unsubstantiated (and irrelevant) allegation that Autonomy’s technology was outdated. Autonomy issued regular updates and improvements to its IDOL technology, including 24 releases for IDOL 4 and 24 releases for IDOL 5, and
38 releases for IDOL 7. DRC Resolution at 38. A senior Autonomy software developer confirmed that the 38 releases for IDOL 7 resulted in “fundamental and material changes” to the
technology. Id. As the DRC found, “[t]he fact that there had not been a ‘major version’ release
of IDOL for several years does not support the conclusion that HP bought ‘outdated technology,’”
as major version releases were typically driven by marketing, as opposed to technological considerations, and technology was continually improved even without major-version releases.” Id. at
39.

28
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Again the PIC was emi-

tled to rely orr those representations. Brehm. 746 A.2d at 261.39
The full HP board carefully considered Lesjak?s dissenting views.

Copeland asserts that FO Catherine Lesjak warned of accormting improprieties at
Autonomy. Copeland Br. 8. There is absolutely no basis for that claim. and Copeland cites none.
Neither Lesjak. nor. for that matter. any other presenter to the HP board identi?ed any accounting
concerns regarding Autonomy. DRC Resolution at 34. And as discussed in the DRC ?s resolu-
tion, Lesjak stated that. in her View. while the strategic vision for the deal was sound. the size of
the premium would concern shareholders and bankers had rurderestimated the impact of the
acquisition on the stock price. She did not state or indicate that the proposed acquisition of A11-
tonomy placed too high a value on Autonomy. 10?.

And contrary to Steinberg?s claim. the board did not ignore Lesjak?s warnings and ?new
news? about the acquisition. Steinberg Br. 8-9, 11-1240 After Lesjak raised her concerns, the

board?s outside directors met in an additional. executive session on August 17. 2011 to consider

 

 

39

The objectors assert that Bennett?s deposition demonstrates that the DRC failed to assess
whether the members of the board. the Technology Committee. or the PIC consciously disregard?
ed their duties because Bermett did not affnmatively raise that issue. See Supp. Br. 8. But Ben-
nett was never asked a question that would have elicited the answer that objectors fault him for
failing to give.

40 The objectors suggest that Lesjak based her opposition to the deal on earlier due diligence

conducted on Autonomy in Project Ag ie which led HP to re'ect an Autonom ac 11isition in
2010. Steinber 

    

. 1e ac 1a reasons 13 eSjak
. Resolution. DRC Resolutlon at

gave oro jec mg 0
34.

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those concerns and to make sure there were adequate responses. Bennett Dep. 200:22-201:2;

2

201:9-13.41 It was only after that meeting, and after the board again met with Apotheker, that the

3

directors decided to proceed with the transaction. Id. at 34. See also Bennett Dep. 69:17-18

4

(“Cathy’s objections were made known to the board.”); 74:25-75:8 (discussing Lesjak’s con-

5

cerns); 200:21-201:13 (explaining that the board met to consider the issues raised by Lesjak).

6

Steinberg suggests that the board simply rubber-stamped Apotheker’s recommendation

7
8
9
10

without reviewing any additional materials. Steinberg Br. 9. But as the DRC noted, the board
reviewed substantial additional materials at its August 18 follow-up meeting after it learned of
Lesjak’s concerns.

11
12
13

Far from casting doubt upon the board’s thor-

14
oughness and deliberation, the episode demonstrates that it heard critical views, took them seri15
16

ously, and made a conscious decision to go forward only after the concerns were addressed.42

17

As Steinberg’s own cases make clear, the HP board’s active response to Lesjak’s concerns

18

is a far cry from the kinds of conscious inaction courts require to sustain claims for breach of the

19
20
21
22
23
24
25
26
27

41

Copeland snipes that there were no minutes taken at the August 17, 2011 meeting. While
there is nothing unusual about the fact that no minutes were made at an executive board session,
there is no dispute as to what occurred in the meeting based on the DRC’s interviews of the meeting participants. DRC Resolution at 34.
42
Steinberg argues that the Committee acted in bad faith by “explaining away” a statement
by Whitman on November 20, 2012 that “the two people [Apotheker and Robison] that should
have been held responsible [for the Autonomy acquisition] are gone.” Steinberg Br. 27. But as
the DRC correctly determined, the statement “was intended to convey that those two executives
had ‘owned’ the transaction process, but were no longer with the Company — not that they had
engaged in any wrongdoing in connection with the Acquisition.” DRC Resolution at 72. It is
clear from the context that Whitman was not blaming Apotheker or Robison. Quite the opposite:
Whitman defended HP’s “very extensive due diligence process”; its reliance on “audited financials, audited by Deloitte, not Brand X accounting firm, but Deloitte”; and its hiring of KPMG to
assist in the diligence. Ex. 37 (Steinberg Ex. 42) at 8-9.

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duty of loyalty. Cf. Rosenbloom v. Pyott, 765 F.3d 1137, 1153-54 (9th Cir. 2014) (plaintiffs ade-

2

quately pleaded a claim for conscious disregard of duties because: (1) the board ignored “repeat-

3

ed FDA warnings about illegal promotion of Botox,” which “constituted a red flag, waved nearly

4

every year for five straight years, that Allergan was breaking federal law”; (2) “an employee re-

5
6

signed after filing an ethics complaint” relating to the illegal conduct; and (3) the board actively
encouraged the illegal marketing tactics).

7
(g) There is no basis for asserting any claims based on postannouncement events.

8
9
10
11
12
13
14
15
16

44

17
18

Steinberg questions the absence of a provision enabling HP to terminate the deal because
it changed its mind. Steinberg Br. 10. As Bennett explained in his deposition, there is nothing

19
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22
23
24
25
26
27

unusual about an acquisition agreement limiting the circumstances in which the acquirer can ter-

43

“Joe Bloggs” is the U.K. equivalent of “John Doe.” See wikipedia.org/wiki/Joe_Bloggs.
Copeland argues that the board failed to have a succession plan in place to deal with
Apotheker’s departure before the Autonomy deal closed. Copeland Br. 12-13. This claim was
already considered by a prior special committee of HP’s board (which found that HP did in fact
have a succession plan) and was rejected by Judge Davila in Copeland I, 2013 WL 1899741, at
*2, *11, and by the Delaware Court of Chancery in Zucker v. Andreessen, 2012 WL 2366448, at
*10-11 (Del. Ch. June 21, 2012), which held that HP’s directors did not face a substantial threat
of liability for allegedly failing to establish a CEO succession plan because the plaintiff had not
identified a basis from which the existence of a known duty to establish such a plan could reasonably be inferred. The DRC was entitled — as it explained in its Resolution — to rely on the prior
committee’s work and on the prior judicial decisions on this issue. See DRC Resolution at 73-74.
44

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minate to situations in which there is a post-signing material adverse change in the target?s busi-
ness. Bennett Dep. 41 :4-25. In any event. board chairman Raymond Lane asked manage-
ment and advisors whether there was any way for HP to terminate the deal.45 They concluded
that there was no basis to do so. 10?. at 42:7-48: 18.

There is no basis for suing professional advisors.

The objectors assert that the settlement improperly releases valuable claims against 
professional advisors Barclays and Perella. Steinberg Br. 24; Copeland Br. 7. 34 n.34; Supp. Br.
3. Again. the DRC investigated these potential claims and concluded that it was not in in-
terest to plu?sue them. DRC Resolution at 53-55. 58-59.

The DRC formd that both Barclays and Perella had engagement letters that severely lirn?
ited ability to recover. Contrary to Steinberg?s contention. there is no ?mystery? about their
terms. Steinberg Br. 24. Barclays? agreement with HP included ?a limitation of liability based
other than on bad faith. willful misconduct or gross negligence,? while Per?ella?s ?engagement let-
ter contained an indemnity from liability.? DRC Resolution at 53-54; see also Bennett Dep.
97225-982 (?We concluded that given the contractual relationships we had with those advisors.
that there was not a claim to be made against them?).

The DRC also considered the information that was available to Barclays and Perella. and
the fact that both advisor?s. by the terms of their engagement letters. were entitled to rely on the
information they received about Autonomy without verifying its accru?acy. Id. at 53-55. There

was also no evidence lmcovered that either Barclays or Perella was aware of Autonomy?s ac-

 

 

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counting improprieties. As the DRC concluded, “two law firms . . . undertook separate investiga-

2

tions of [Barclays and Perella].” Id. at 54. The fact that “each law firm, being equally diligent

3

and thorough, ha[d] recommended that no litigation be brought against either advisor enhanced

4

the Committee’s capacity to vet the reasonableness of the recommendation regarding both Bar-

5

clays and Perella.” Id.

6

Steinberg asserts that the board abdicated its responsibility by hiring Barclays, which

7
8
9

served in a dual capacity as both financial advisor and loan underwriter. Steinberg Br. 22. But
the board was fully aware of Barclays’ financial interest in the deal.

10
11
12
13
14

Contrary to Copeland’s
contention (Copeland Br. 34 n.34), Perella did not have a financial interest in the Autonomy acquisition going forward.46

15
Based on these and other factors described in the Resolution, the DRC concluded that the

16
17

advisors “did not” act in bad faith, “did not” act negligently, and “did,” in fact, “act in good faith,

18

in a reasonable effort to fulfill their responsibilities as defined by their engagement letters . . . .”

19

DRC Resolution at 52-59 (emphasis in original). The objectors have not put forth any basis to

20

contradict those conclusions.

21
22
23
46

24
25
26
27

Steinberg complains that she is unable to assess the potential liability of Barclays and
Perella because portions of the presentation prepared for the board on those issues have been redacted. Steinberg Br. 24. Steinberg has no need for the redacted materials; the DRC Resolution
lays out the Committee’s analysis in full detail. Regardless, this attack on the redactions to the
DRC presentation is a wrongful attempt to retread old ground, as Magistrate Judge Laporte has
already rejected objectors’ demands for unredacted versions of that presentation. Docket #348 at
1-2; Docket #364 at 2. See Point VII, infra.

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IV.

THE SETTLEMENT CONSIDERATION IS APPROPRIATE.
A. The governance reforms are valuable and are directly tailored to address allegations in the complaints.

2
3

As demonstrated above, if this action were to proceed, the claims against the defendants

4
would almost certainly be dismissed. In contrast, the corporate governance reforms have signifi5
6

cant value. HP has agreed to implement the reforms not only at HP but also at HP Enterprise, the

7

newly formed public company that will result from the spinoff of HP’s enterprise technology in-

8

frastructure, software and services businesses. The settlement will further benefit the company

9

and its shareholders by avoiding further legal expense, and “of at least as great importance . . .

10
11

tak[ing] its management ‘out of the courtroom and restor[ing] them fulltime to the corporate
board room and business.’” Maher, 714 F.2d at 467.

12
Steinberg argues that the governance reforms are inadequate consideration because the

13
14

parties have failed to demonstrate that the reforms would have “prevented the damages HP suf-

15

fered in connection with the Acquisition.” Steinberg Br. 30. But that is not the test. As Stein-

16

berg concedes, the reforms are appropriate if they confer a “‘substantial benefit’ on HP.” Id. The

17

reforms in this case provide such a benefit to HP — particularly when measured against the

18

claims being released — because they are tailored to address the overarching allegation in the

19
complaint that HP had a weak M&A diligence process and strengthen HP’s process for reviewing
20
21
22
23
24
25
26
27
28

and approving potential acquisitions or targets. Docket #367-3 (Governance Revisions). Specifically:
 Closer alignment between the board and HP’s Finance and Investment Committee
(“FIC”): The HP board will work more closely with the FIC, which has been responsible
for M&A oversight. The reforms call on the board to ensure that the FIC is composed of
members with significant M&A experience, to discuss potential transactions before the
FIC provides approval to sign, and to review the FIC’s decisions regarding approval to
sign for large transactions.
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 Increased responsibilities for the FIC: The FIC will advise the board regarding the

2

disclosure protocols of M&A transactions, conduct a yearly process review to evaluate

3

implemented and planned improvements to the M&A process, and ensure that M&A due

4

diligence and related processes have been properly observed.

5

 Increased depth of involvement by HP’s Management Executive Committee (“EC”)

6

in the evaluation of acquisition targets: The EC will review and recommend changes

7

where necessary to the criteria developed by the business units to evaluate the

8

attractiveness of potential transaction targets.

9

reviewed by the board of directors and the FIC for approval.

The EC’s recommendations will be

10

 Greater oversight of due diligence by HP’s Risk Management Committee: HP’s Risk

11

Management Committee (“RMC”) will review important due diligence findings, be

12

available as a point of escalation for identified risks, and ensure that all elevated risks are

13

properly resolved or further investigated. The RMC will also have three permanent

14

members, including the Chief Financial Officer, the General Counsel and the Director of

15

Corporate Development.

16

 Additional focus on due diligence for acquired technology: For larger transactions, the

17

Technology Committee will approve a written technology due diligence plan that is

18

specific to the particular transaction being evaluated.

19

 Adoption of a formal fairness opinion policy: HP’s fairness opinion policy will require

20

both consideration of whether a potential transaction can be deemed fair from a financial

21

perspective and the evaluation of any facts or circumstances that might compromise the

22

independence of an advisor. Id.

23
s, and the overwhelming weight of authority supports that decision.47 As Bennett

24
25
47

27

Ex. 22 (July 16, 2014 Board Resolution); Feuer v. Thompson, 2013 WL 2950667, at *2
(N.D. Cal. June 14, 2013) (“Courts have recognized that corporate governance reforms provide
valuable benefits to corporations and their shareholders.”) (internal quotation marks and citation

28

(footnote continued)

26

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testified at his deposition, the reforms resulted in “formalizing processes and institutionalizing

2

disciplines to the process,” which was “beneficial and valuable to the company.” Bennett Dep.

3

198:7-10. Bennett specifically highlighted the reform ensuring that “all the experts reports” and

4

“advisory reports go to the finance and investment committee” — a reform advocated by Cotchett

5

Pitre — as a particularly beneficial improvement. Id. at 198:17-20.

6

Judge Walker concluded that the reforms “provide a substantial benefit to HP and its

7

shareholders.” Ex. 25 (“Walker Arbitration Decision”) at 11. And as this Court recognized when

8

it preliminarily approved the settlement, “[t]he revisions to HP’s mergers and acquisitions

9

policies through the corporate governance reforms inure to the benefit of both HP entities, and at

10

this early stage of the litigation, the trade-off of Autonomy-related claims for corporate

11

governance reforms appears fair, reasonable, and adequate.” Prelim. Approval Order at 9.

12

The case law likewise recognizes that governance reforms achieved as part of a derivative

13

settlement can “‘provide valuable benefits’ to corporations and their shareholders.” Wixon v.

14

Wyndham Resort Dev. Corp., 2010 WL 3630124, at *3 (N.D. Cal. Sept. 14, 2010) (quoting In re

15

NVIDIA, 2008 WL 5382544, at * 3). Because of these benefits, courts routinely approve reform-

16

only settlements without a monetary component.48

17
18
19
20
21
22
23
24
25
26
27

omitted); In re Rambus Inc. Derivative Litig., 2009 WL 166689, at *3 (N.D. Cal. Jan. 20, 2009)
(corporate governance reforms valuable to company); In re NVIDIA Corp. Derivative Litig., 2008
WL 5382544, at *3 (N.D. Cal. Dec. 22, 2008) (recognizing that “strong corporate governance is
fundamental to the economic well-being and success of a corporation”).
48
See, e.g., Mohammed v. Ells, 2014 WL 4212687, at *3 (D. Colo. Aug. 26, 2014) (“The
fact that the settlement involves only corporate governance . . . does not weigh against approval
of the settlement. To the contrary, the corporate governance reforms . . . are specifically and appropriately designed to prevent the recurrence of the alleged misconduct . . . .”); In re Johnson &
Johnson Derivative Litig., 900 F. Supp. 2d 467, 485 (D. N.J. 2012); Wixon, 2010 WL 3630124, at
*2; In re Rambus, 2009 WL 166689, at *3 (“In the instant case, the Court is satisfied that the corporate governance reforms are of significant value to [the company]”); Cohn v. Nelson, 375 F.
Supp. 2d 844, 853 (E.D. Mo. 2005) (“Where the corporate governance reforms are achieved independently of any monetary benefits, the therapeutic benefits are even more worthwhile”).

28
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24
25
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B. Plaintiffs contributed to the development of the reforms.
The objectors wrongly continue to deny that settling plaintiffs had a substantial impact in
developing the reforms. Steinberg Br. 32-33. As a preliminary matter, under Delaware law,
“courts ‘recognize a presumption that there is a causal relationship between [a] benefit [achieved]
and a timely filed suit.’” Alaska Elec. Pension Fund v. Brown, 941 A.2d 1011, 1015 (Del. 2007).
To overcome this presumption, Copeland and Steinberg “have the burden of ‘demonstrating that
the lawsuit did not in any way cause its action.’” Id. (emphasis added) (quoting Allied Artists
Pictures Corp. v. Baron, 413 A.2d 876, 880 (Del. 1980)). Neither Copeland nor Steinberg have
provided any evidence to meet this “heavy” burden. In re First Interstate Bancorp. Consol.
S’holder Litig., 756 A.2d 353, 363 (Del. Ch. Aug. 26, 1999). As a result, the Court need not
determine which reforms originated with plaintiffs. All the reforms developed after the filing of
the complaints — reforms adopted through the efforts of the DRC, a committee formed in
response to those complaints — are properly considered as a response to the litigation and as
benefits conferred by the settlement.
While HP management did initiate reforms on its own (as any responsible management
would), those reforms were not as extensive as those recommended by the DRC and then further
developed with input from plaintiffs’ counsel. Ex. 23 (“Ashton Decl.”) at 2-3; Ex. 24 (“Varma
Decl.”) at 1-2; Bennett Dep. 139:19-22 (“[T]he settlement includes a more robust set of . . .
procedures for the M&A process than what the company had developed on its own.”).
As Judge Walker concluded, “the derivative actions filed [in this litigation] were
instrumental in identifying the need for, devising and implementing valuable corporate
governance reforms that are directly tailored to prevent the types of alleged breaches of fiduciary
duty involved in large acquisitions” like the Autonomy deal. Walker Arbitration Decision at 11.
For that reason, and as Judge Walker concluded, the HP board resolved, prior to the
commencement of settlement talks, that the DRC’s “recommendations for further M&A reforms”
had been “informed by recommendations from [Robbins Geller] and by the allegations in Lead
Plaintiff’s consolidated complaint.” Id. at 17 (internal quotation marks and citation omitted).
Thus, the objectors’ assertion that the source of the corporate governance reforms was HP rather
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than Lead Plaintiff (Copeland Br. 24-26; Steinberg Br. 32?33) is just wrong. In fact. both
Robbins Geller and otchett Pitre took an active role in developing the governance reforms. And

contrary to Steinberg?s claim (Steinberg Br. 33). in December 2013.49 Robbins Geller provided a

50

revised set of reforms to Proskauer that were focused on issues.

The DRC conmrented on the proposed reforms. Ashton Decl. at 3.

5



The DRC resolved to reconmrend a set of corporate governance reforms to the board. and noted

that its recormnendations to the board had been informed by the recormnendations from plaintiffs.

 

49 Copeland incorrectly states that Exhibit to his brief is the November 2013 version of

Robbins Geller?s proposed reforms. In November 2013. Robbins Geller presented a set of re-
forms to Proskauer. At that time. Proskauer? noted that. in contrast to the core claims in the com-
plaints. the proposed reforms were not M&A-related. See Ashton Decl. at 1-2. Copeland has not
submitted the November 2013 Robbins Geller deck. On December 12. 2013. Robbins Geller sent
a revised proposal that was more M&A-focused but included a proposal to add a governance ex-
pert to the board. That is opeland?s Exhibit L. After Proskauer reminded Robbins Geller that
Whitworth. a noted governance expert, was ahead}! 011 the board, Robbins Geller provided anoth-
er version of the deck. on December 16, 2013, that HP continue to enhance the
corporate governance expertise 011 the board. See Ashton Decl. 2; Docket #350 (Letter Brief) at
4-5 (describing the tinreline). Thus. opeland?s suggestion that the minimal number of differ?
ences between the two slide decks rmdercuts Robbins Geller?s contribution to the reforms is
without substance. See Copeland Br. 25-26.

50 Robbins Geller also recommended that HP sue Michael something that the ?rm

had ah?eady done in its state court complaint. ornpl. 1m 65. 84-118. Noel V. Whitman. No. 1:13-
cv-251346 (Cal. Super. Santa Clara nty. Aug. 16. 2013). HP has of coru?se now sued 
(and Hussain) in the UK. for perpetrating the fraud at Autonomy.

51

Robbins Geller?s in?uence 011 the reforms by the DRC is evident from a
comparison of the suggestions that Robbins Geller made and the reforms the DRC ro osed.
Two re resentative exam les rurder?score this contribution.

 

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See Bennett Dep. 108:6-17; 139:9-12; 140:23-141:1. The board considered the DRC’s recom-

2

mendations and directed management to consider the reforms. See January 2014 Board Resolu-

3

tion at 12. Indeed, the HP board explicitly acknowledged that the proposed reforms had been in-

4

formed by plaintiffs’ actions. Id. See also Bennett Dep. 108:6-17; 139:9-12; 140:23-141:1.52

5

Thereafter, plaintiffs were provided with a copy of the reforms and the parties engaged in

6

substantial negotiations regarding the reforms during the mediation overseen by Judge Walker.

7

The result was a set of reforms that reflected joint input from Cotchett Pitre and Robbins Geller.

8

See Ex. 30 (Term Sheet) at Schedule A.

9
10
11
12
13
14
15
16

Relying principally on In re Oracle Securities Litigation, 852 F. Supp. 1437 (N.D. Cal.

17

1994), Steinberg speculates that other factors could have caused the reforms.54 But what could

18
52

27

In an odd twist, the objectors switch from complaining that they have not received enough
documents to complaining about documents that were produced to them. Supp. Br. 13. The additional documents were produced in advance of the Bennett deposition precisely so that the objectors could question Bennett on the nature and extent of plaintiffs’ impact on the DRC’s corporate
governance proposals.
53
Citibank, Inc. v. Weill, Index No. 600645/06 (N.Y. Sup. Ct. May 14, 2007), is inapposite.
In an unreported decision, the court found that the plaintiff had not contributed sufficiently to the
reforms because there was “no acknowledgement of plaintiff’s role in the adoption of these reforms by Citigroup in the stipulation.” Id. at 29. By contrast, the stipulation here clearly recognizes that the “Governance Revisions . . . had been informed by allegations in the Federal Action
and by proposals from State Plaintiffs.” Third Amended and Restated Stipulation of Settlement
(Docket #277-1) at 2.
54
In Oracle, the court found that the derivative suit did not cause the reforms relying primarily on the fact that Oracle was being investigated by the SEC. 852 F. Supp. at 1447-48. Indeed, the court noted that “Oracle’s pattern of acquiescence toward the SEC . . . is clear” and
found that “Oracle’s remedial policy changes appear to be one step in the process by which Ora-

28

(footnote continued)

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20
21
22
23
24
25
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have happened is irrelevant here because what did happen is that Cotchett Pitre and Robbins

2

Geller both meaningfully contributed to the development of the corporate governance reforms.

3

Moreover, the Oracle court granted final approval to the settlement even absent evidence that the

4

complaint or derivative counsel caused or contributed to the reforms “[o]n the basis of the report

5

of Oracle’s special litigation committee,” which found that prosecuting the derivative action

6

would not be in the company’s best interest, and that, therefore, the settlement was in the best

7

interests of the company and its shareholders.

8

justification for rejecting the settlement, Oracle is a fortiori for approving it.

Id. at 1440-44.

Thus, far from providing

9

Finally, Copeland takes issue with the DRC’s failure to adopt Robbins Geller’s proposal

10

to link executive compensation to the success of an acquisition. Copeland Br. 27-28. Bennett

11

explained why that proposal would not be in HP’s interests: “If you try to set up scenarios where

12

somebody’s compensation is damaged if anything goes wrong, you encourage a culture where

13

nothing happens and . . . no one is willing to take any risks.” Bennett Dep. 144:15-18.

14
15
16
17
18
19
20
21
22
23

C. The fact that HP did not adopt Copeland’s ill-conceived reforms is not a basis
for rejecting the settlement.
Copeland has conceded that “there are some badly-needed corporate governance
enhancements included in the proposed settlement.” Docket #212 (Copeland Brief) at 2. He
nonetheless argues that the reforms are inadequate because — predictably — they do not include
two reforms that Copeland favors: eliminating contingent fee arrangements for financial advisors
and requiring HP’s financial advisors to render opinions on non-financial matters. Copeland Br.
34-35. But Copeland’s first reform ignores the fact that case law has repeatedly recognized
contingent fees for advisors as “undoubtedly routine” and beneficial to shareholders. See, e.g., In
re Atheros Commc’ns, Inc., 2011 WL 864928, at *8 (Del. Ch. Mar. 4, 2011) (noting that

24
25
26
27

cle hoped to placate the SEC.” Id. at 1448. Unlike Oracle, HP is not being investigated by the
SEC. Bennett Dep. 215:6-10 (HP is not under investigation by SEC related to Autonomy acquisition).

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contingent-fee arrangements can “reduce . . . expense” and “properly incentivize the financial

2

advisor to focus on the appropriate outcome.”).

3

And as Bennett testified, there was not “any reason to believe that [a contingency fee

4

arrangement] undermined [any advisor’s] independence in the matter.” Bennett Dep. 194:24–

5

195:3. Instead, what matters is the reputation of the advisor for doing high-quality work; the fee

6

arrangement should not matter if the firm is one of high repute. Id. at 194:10-12, 195:8-17. As

7

Bennett noted, the fact that bankers were paid on a contingent basis is “very common” and there

8

was no “reason to believe that [the fee arrangement] undermined their independence in the

9

matter.” Id. at 194:25-195:3. Indeed, as noted above, Perella did not even have a contingent fee

10

arrangement. It was paid the same amount regardless of whether or not it deemed the transaction

11

price fair.

12

Copeland’s other desired reform — requiring financial advisors to render opinions that a

13

given transaction is fair to HP “in all material respects” — fares no better, as financial advisors

14

are not qualified to render opinions on non-financial matters.55

15
16

D. There is no requirement that any defendant or HP’s insurers make a monetary contribution to the settlement.

17

Copeland and Steinberg both also complain that HP should have obtained monetary con-

18

tributions from the defendants themselves, or obtained a payment on the directors’ behalf from

19

HP’s insurance carriers. Copeland Br. 16-17; Steinberg Br. 33-34. But once the DRC concluded

20
21

that HP had no claims to bring, there was no basis for demanding a payment from any defendant
or from HP’s insurers. Thus, while, as Bennett testified, the DRC did consider the potential

22
23

availability of insurance proceeds, it concluded that because the underlying claims were meritless,

24
25
26
27

55

Steinberg argues that the reforms would remain intact even if the settlement is not approved. But in so arguing, she tacitly admits that the reforms have value. See Steinberg Br. 33
(“[T]here is every indication that they would remain in place to the extent they are viewed as adding a dose of prevention to a potential repetition of the errors made in the Acquisition.”).

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further consideration of just how much of a payout could be obtained from insurance carriers was

2

unnecessary. See Bennett Dep. 119:20-23; 186:13-17 (“[W]e concluded that the settlements

3

weren’t worth $200 million [a hypothetical number included in Copeland’s counsel’s deposition

4

question], and so we wouldn’t have wanted to — to draw down our insurance for something that

5
6

we didn’t think was worth it.”). For these same reasons, once the DRC concluded that the claims
against the individual defendants other than Lynch, Hussain and Deloitte UK were without merit

7
8
9

and not worth pursuing, there was no reason to conduct an in-depth examination of their personal
net worth or to demand any monetary contribution from them.56

10

In any event, the law is clear that not all released parties must contribute to a settlement.

11

See, e.g., Masterson v. Pergament, 203 F.2d 315, 330 (6th Cir. 1953) (fact that not all releasees

12

contributed to settlement not reason for the court to deny approval); Glicken v. Bradford, 35

13

F.R.D. 144, 152 (S.D.N.Y. 1964) (“The general rule is that release of noncontributing defendants

14
is no reason for disapproving a compromise.”). The question before the Court is whether suffi15
16

cient compensation is being paid, not the appropriate contribution of each defendant. Alvarado

17

Partners, L.P. v. Mehta, 723 F. Supp. 540, 548 (D. Colo. 1989); see also Duban v. Diversified

18

Mortg. Inv’rs, 87 F.R.D. 33, 40 (S.D.N.Y. 1980) (“[T]he release of noncontributing defendants

19

through a settlement agreement is no reason for disapproving the compromise.”) (internal quota-

20

tion marks and citation omitted).

21
22
23
56

24
25
26
27

Bennett Dep. 96:7-14 (“But at the end of the day we concluded that there was no probability of success and there’s no point consuming management time and attention and consuming
corporate funds that we would have to advance to defend the claims. There’s no point in doing
that with no likelihood of success.”); see also id. at 94:16-21 (“[T]here were not meritorious
claims to be pursued against the officers and directors, and so . . . the company has no interest in
the . . . expense or distraction of pursuing those claims because we . . . concluded that they would
not succeed.”).

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V.

In granting preliminary approval, this Court observed that “the Third Amended Settlement

2
3
4
5

appears to be the result of good-faith and arms’-length bargaining, with no evidence of fraud or
collusion to taint the negotiation.” Prelim. Approval Order at 9. Despite months of discovery,
the objectors have unearthed nothing to disturb this Court’s conclusion.
Thus, Copeland argues that the settlement should not be approved because the DRC

6
7
8
9
10

expected “that the litigation was on a track to settle.” Copeland Br. 22. There is no substance to
that claim. As Bennett testified, “I don’t think anything was predetermined. Nothing was
[predetermined] before the committee began its work.” Bennett Dep. 196:17-18. See also DRC
Resolution at 83-90.57
Once settlement discussions were initiated, they were conducted at arm’s length with

11
12
13
14
15
16
17
18

experienced and informed counsel on both sides. The negotiations that led to this settlement had
an additional protection against collusion: mediation by retired federal Judge Vaughn Walker.
The oversight of Judge Walker, “an experienced mediator in the settlement process[,] confirms
that the settlement is non-collusive.” Satchell v. Fed. Express Corp., 2007 WL 1114010, at *4
(N.D. Cal. 2007); see also Hainey v. Parrott, 617 F. Supp. 2d 668, 673 (S.D. Ohio 2007) (“The
participation of an independent mediator in the settlement negotiations virtually insures that the
negotiations were conducted at arm’s length and without collusion between the parties.”).
As Judge Walker observed, the negotiations “were intense and detailed” and “contentious

19
20
21

THE SETTLEMENT IS NOT COLLUSIVE.

and hard fought.” Docket #149-1 (“Walker Decl.”) at 5. He concluded that “the settlement is the
product of exceedingly capable attorneys operating from a thorough base of knowledge and

22
23
24
25
26
27

57

Copeland points to the fact that plaintiffs were permitted “otherwise unimaginable latitude” in their confirmatory discovery as evidence of collusion. Copeland Br. 22 & n.26. But of
course had HP not allowed that discovery, he inevitably would have complained that plaintiffs
had insufficient information by which to decide whether to settle. So in Copeland’s world, HP is
being damned for allowing the discovery, but would have been just as damned if it hadn’t.
Copeland’s related argument that the parties should have engaged in motion to dismiss briefing
first would have imposed even greater costs and distraction on the company whose interests he
purports to represent.

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experience and in possession of a significant body of evidence and in earnest pursuit of their

2

respective clients’ interests.” Id. at 6. If, as the objectors claim, the settlement negotiations were

3

tainted by collusion, Judge Walker would have noticed and indicated as much. Instead, Judge

4

Walker submitted a declaration describing an arm’s-length process devoid of collusion.

5

This settlement, therefore, is a far cry from other settlements that courts have rejected.

6

For instance, the “scandalous” settlement in Eubank v. Pella Corp., 753 F.3d 718, 721 (7th Cir.

7

2014), involved, inter alia, a representative plaintiff who was the father-in-law of class counsel,

8

as well as class counsel who had been charged with misappropriation of firm assets and whose

9

suspension had been recommended by the Illinois bar (motivating him to “obtain a large

10

attorney’s fee in this case before his financial roof fell in on him”). Id. at 721-22. There are no

11

such indicia of misbehavior or ill motivation here.

12

With nothing new to say, the objectors recycle the argument that the fee provisions in the

13

original settlement evidence collusion. Steinberg Br. 17-18; Copeland Br. 23 n.29. The objection

14

is meritless. The fact that the original stipulation of settlement contemplated that HP would retain

15

plaintiffs’ counsel to assist HP in prosecuting affirmative claims against the parties who

16

defrauded HP is not evidence of collusion.58 Rather, it reflected a decision by HP to engage

17

counsel who had become fully familiar with the facts and who this Court had already recognized

18

as “experienced and informed” (Docket #319 at 9) to assist in the prosecution of the company’s

19

claims, claims that have now resulted in the initiation of litigation in the Northern District of

20

California by an HP subsidiary against a company that aided and abetted the fraud at Autonomy.

21

See Microtechs., LLC v. Autonomy, Inc., Case No. C-15-2220-RMW-HRL (N.D. Cal.).

22

Far from being a “fee-induced framework for a settlement,” Copeland Br. 3, see also

23

Steinberg Br. 17-18, no discussion of fees took place until after the parties agreed on corporate

24
58

25
26
27

Steinberg’s assertion that the $18 million fee was to be paid “for the Settling Plaintiffs’
purported role in the Governance Revisions,” Steinberg Br. 17, is flat-out wrong. Rather, that fee
was to be paid in exchange for plaintiffs’ counsel assistance prosecuting those claims. See Ex. 35
at 72 (Arbitration Transcript) (“the overwhelming justification for [the 18 million-dollar retainer]
was the services that HP was going to be getting”).

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governance reforms. See Walker Decl. at ¶¶ 13 (“To the best of my knowledge, the parties did

2

not engage in any discussion about attorney’s fee amounts before reaching the agreement in

3

principle.”), 22 (“Only after the parties had agreed on those settlement terms did they begin in my

4

presence to discuss issues relating to attorneys’ fees, including plaintiffs’ counsel’s role in any

5

affirmative proceedings that HP might bring against Autonomy-related persons and entities.”);

6
7

Indeed, the Settlement Term Sheet expressly stated that “[n]o fee amounts have been discussed

8

prior to the execution of this Term Sheet.” Ex. 30 at 5.59

9

Bennett made this clear at his deposition, explaining that the proposed governance reforms

10

were finalized before the fee negotiation was conducted, and that the fee provisions were always

11

severable from the settlement agreement itself. Bennett Dep. 214:4-9; 214:17-24; 217:8-12. And

12

there was nothing secretive about the arrangement. The fee provision contained in the original

13

settlement was transparent, and the stipulation always provided that the Court’s approval of the

14

fee provision was not a condition of the settlement. Stipulation of Settlement (Docket #149-2), at

15

§ 4. See also Docket #199 at 16:22-17:14, 17:24-18:10. Once the question was raised, the parties

16

executed an amended stipulation eliminating the retention agreement and confirming what was

17

true all along, i.e., that the retention agreement was not a condition to the settlement. Amended

18

and Restated Stipulation of Settlement (Docket #201).

19

Thus, Copeland’s and Steinberg’s argument that “the reasonable inference is that

20

negotiations over the terms of the settlement were entangled with negotiation of attorneys’ fees”

21

(Supp. Br. 12) is tendentious conjecture without a shred of substance.

22

settlement negotiation, a retired federal judge, Bennett, and the settlement term sheet itself have

The parties to the

23
24
59

25
26
27

Copeland and Steinberg also recycle their old refrains that they were allowed inadequate
discovery, this time with regard to the settlement negotiation process given the alleged taint of the
original retention agreement. But Magistrate Judge Laporte concluded, correctly, that they were
not entitled to discovery of the parties’ settlement negotiations. Docket #348 at 3; Docket #354 at
1-2. See Point VII, infra.

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all been clear that the discussions of attorneys’ fees occurred only after an agreement had been

2

reached on the reforms.

3

VI.

4
5

NOTICE WAS FAIR AND APPROPRIATE.
Yet again, Copeland argues that notice of the proposed settlement was inadequate.

Copeland Br. 48-51. He was wrong when he made the argument at the preliminary approval

6
stage and he is wrong now. HP provided notice in the manner approved by the Court through
7
8
9
10

publication in The New York Times, Investor’s Business Daily, The Wall Street Journal, and The
San Francisco Chronicle, through an 8-K, and on the Investor Relations page of the HP website.60 Courts have approved this notice procedure innumerable times in the past.61

11
12
13

Copeland’s principal case for his contention that notice was inadequate is Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306 (1950) — the same case he cited to the Court before preliminary approval. As HP pointed out then, Mullane is not controlling because it did not

14
15
16

involve a derivative settlement, and, as other courts have recognized, it “d[oes] not bar notice by
publication.” Arace v. Thompson, 2011 WL 3627716, at *4 (S.D.N.Y. Aug. 17, 2011). “In a de-

17

rivative action, a court may determine that notice of a proposed settlement by publication is ap-

18

propriate . . . .” Id. (citing Fed. R. Civ. P. 23.1(c)). Indeed, in the only derivative case cited by

19

Copeland on the requirements of notice, the court endorsed a procedure that was far less rigorous

20
21
22
23
24
25
26
27

60

In accordance with the Court’s Order, HP filed an affidavit attesting to its compliance
with the Notice requirements on June 10, 2015 (Docket #360).
61
See Docket #259 (HP Reply Mem. in Supp. Second Stip. Settlement) at 11-12 (collecting
authorities).

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1
2

than the one employed here, requiring neither publication nor direct mailing. See Bushansky v.
Armacost, 2014 WL 2905143, at *7 (N.D. Cal. June 25, 2014).62

3

Copeland again asserts that the notice should have contained more detail about the settle-

4

ment process. Copeland Br. 50-51. But he “point[s] to no case law to support [his] contention

5
6

that this level of detail is required.” Hill v. State Street Corp., 2015 WL 127728, at *2 (D. Mass.
Jan. 8, 2015). “It is well settled that the notice is not required to provide a complete source of in-

7
8
9

formation.” Petrovic v. Amoco Oil Co., 200 F.3d 1140, 1153 (8th Cir. 1999) (internal quotation
marks omitted). A notice need “only summari[ze]” the terms of the settlement while directing

10

shareholders to the settlement documents themselves. Maher, 714 F.2d at 452 (internal quotation

11

marks omitted). That is exactly what the notice here did.

12
13
14

Copeland cites no authority to support his hodgepodge of other objections. Copeland Br.
50-51. Courts have routinely approved objection deadlines set 28 days from the notice being
sent, not 28 days from the submission of any brief in support of the settlement.63 The notice peri-

15
16

od provides ample time for the objectors’ out-of-state attorneys to seek admission to practice, as-

17

suming they needed it, and even if they didn’t, the notice period would still be adequate.64 HP’s

18

decision to give shareholders access to the governance revisions subject to a confidentiality

19
20
21
22
23
24
25
26
27

62

The court required defendant to: (1) post a “link on [its] investor relations website that
leads to a webpage to be displayed for a minimum of thirty days”; (2) submit “an 8-K filing with
the SEC”; and (3) issue a “press release.” Bushansky, 2014 WL 2905143, at *7.
63
E.g., Torrisi v. Tucson Elec. Power Co., 8 F.3d 1370, 1375 (9th Cir. 1993) (holding a 31day notice period between mailing of notice and deadline to object was adequate in opt-out class
action); Marshall v. Holiday Magic, Inc., 550 F.2d 1173, 1178 (9th Cir. 1977) (26 days between
mailing of notice and deadline for opting out of class was “more than adequate”).
64
E.g., Grunin v. Int’l House of Pancakes, 513 F.2d 114, 121 (8th Cir. 1975) (rejecting argument that notice period was inadequate because “it did not give class members an opportunity
to retain counsel”; “appellant is incorrectly attempting to limit our review of the factual setting in
this case to the 19-day notice period”).

28
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agreement was approved by court order and entirely consistent with precedent.65 The Consolidat-

2

ed Complaint has been posted on HP’s website since March 24, 2015, and the unredacted version

3

was filed in advance of this submission.

4

VII.

5

THE OBJECTORS’ ATTEMPTS TO RELITIGATE THEIR DISCOVERY
DEMANDS SHOULD BE DISREGARDED.

6

Copeland and Steinberg rehash the demands for discovery that they have made repeatedly

7

through the course of this action, insisting that Magistrate Judge Laporte’s decisions denying

8

those demands were erroneous. Copeland Br. 4 n.10, 44-48; Steinberg Br. 17-18; Supp. Br. 11.

9

But the time for rehashing those demands has long since passed.66

10

As Magistrate Judge Laporte has explained, objectors “‘are not automatically entitled to

11
discovery or to question and debate every provision of the proposed compromise.’” Docket #348
12
13

(Order Denying Discovery) at 2 (quoting In re Wachovia Corp., 2011 WL 1496342, at *1 (N.D.

14

Cal. Apr. 20, 2011)). To the extent that discovery is permitted, “‘the Court may, in its discretion,

15

limit the discovery or presentation of evidence to that which may assist it in determining the

16

fairness and adequacy of the settlement.’” Id. (quoting In re Wachovia, 2011 WL 1496342, at

17

*1).67

18

In denying Copeland’s most recent demand to depose the principal negotiators of the

19
20

proposed settlement, Magistrate Judge Laporte found that “Copeland points to no persuasive

21
22
23
24
25
26
27

65

E.g., In re BankAm. Corp. Sec. Litig., 210 F.R.D. 694, 706 (E.D. Mo. 2002) (concluding
that “due process has been provided” when settlement procedure allowed objectors to view confidential documents under the terms of the existing protective order).
66
This Court has declined to review Magistrate Judge Laporte’s rulings each time the objectors have sought relief from them by not taking action in response to those requests.
67
As HP explained in its opposition to Copeland’s most recent motion for discovery, the
cases upon which he relied (the very same cases to which he now points the Court, see Copeland
Br. 47-48 n.53) are manifestly distinguishable and, if anything, only support the correctness of
Magistrate Judge Laporte’s conclusions. See Docket #361 at 7 n.3.

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reason why this Court should deviate from the general rule that counsel ‘are not deposed

2

regarding the assistance or advice they provide to their clients in this type of action.’” Docket

3

#364 at 2 (quoting Carlton Invs., 1997 WL 38130, at *5). She further reiterated her conclusion

4

that Copeland had shown no need for an unredacted version of the DRC’s presentation to the

5

board. Id. (citing Order Denying Discovery (Docket #348) at 1-2).68 So much for the objectors’

6

insistence that the redactions to the presentation have improperly “shield[ed] evaluation of the

7
8

Potential Claims from scrutiny.” Supp. Br. 11.
The objectors do not even pretend that they are after anything other than privileged

9
10

materials.

11

containing the DRC’s (i.e., counsel’s) evaluation of the Potential Claims,” Supp. Br. 12, even if

12

there were the objectors would have no right to it — as Magistrate Judge Laporte has been very

13

While they believe it is likely that there is some “treasure trove of documents

clear each time the objectors have tried to attack the privilege shielding those documents from

14
disclosure. Copeland has thus received all (indeed, more than) the discovery to which he is
15
16

entitled.69

17

For her part, Steinberg points to the existence of millions of documents in various data-

18

bases as evidence that plaintiffs conducted insufficient discovery. Steinberg Br. 34-35. That

19

classic non-sequitur is also without merit. The speculation that there must be something of rele-

20

vance in those documents runs directly contrary to the Delaware Court of Chancery’s decision in

21

purported intervenor Rodney Cook’s losing Section 220 trial. The court there concluded that

22
23
24
25
26
27

68

See also Docket #348 at 3 (finding that Copeland had not shown an adequate basis for
discovery of settlement negotiations); Docket #354 at 1-2 (refusing Steinberg’s demand for discovery of settlement negotiations); Docket #364 at 2 (denying Copeland’s demand to depose settlement negotiators).
69
Copeland’s motion for reconsideration of Magistrate Judge Laporte’s June 17, 2015 order
is no longer “pending.” Copeland Br. 45. That motion was deemed denied after 14 days. N.D.
Cal. L.R. 72-2 (“If no order denying the motion or setting a briefing schedule is made within 14
days of filing the motion, the motion shall be deemed denied.”).

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2

Cook’s demands “amount[ed] to a fishing expedition. . . .’” Cook v. Hewlett-Packard Co., 2014
WL 311111, at *5 (Del. Ch. Jan. 30, 2014).

3

It is obvious to anyone with even the most remote familiarity with document review, let

4

alone modern day e-discovery, that the mere fact that there are millions of documents in a data-

5
6

base does not mean that any of them are relevant to the issue before the Court, i.e., whether to approve this settlement. A large percentage of the documents were collected in order to provide the

7
8
9

government with the information it requested to investigate the fraud committed by Lynch and
Hussain prior to the acquisition. See id. at *1, *2, *5 (noting that, in his Section 220 action, Cook

10

sought “all documents produced by, or sought from, the Company by all governmental authorities

11

investigating wrongdoing by the acquired entity,” that HP was cooperating with the various gov-

12

ernmental investigations, and that HP had provided 750,000 pages of documents to the govern-

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mental investigators). Those documents certainly are relevant to the DRC’s work in deciding

14
whether to sue Lynch, Hussain and Deloitte UK. But they have no relevance to whether the set15
16

tled claims have merit.

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As this Court has previously cautioned, “[o]ne of the benefits of . . . resolving litigation —

18

a recognized benefit — is the curtailment of the costs of discovery,” and it is important not “to

19

turn the lawsuit into the discovery of the settlement of the lawsuit.” Aug. 25, 2014 Tr. (Docket

20

#199) at 43-44. Were it otherwise, the very benefits of settlement, including avoiding the distrac-

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tion, expense, and burden of litigation, would be substantially undone. See Jaffe v. Morgan Stan-

22
ley & Co., 2008 WL 346417, at *2 (N.D. Cal. Feb. 7, 2008).
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24

Objectors (and plaintiffs) have all the documents to which they are entitled, and Magis-

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trate Judge Laporte has repeatedly found that they are entitled to no more. See, e.g., Docket #348,

26

#354. See also Cook, 2014 WL 311111, at *5 (the only documents “necessary and essential” to

27

Cook’s stated purpose in making his Section 220 demand were “the documents that the Plaintiff

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has already received: board and committee minutes for meetings at which the board discussed the
Autonomy acquisition, and documents reflecting presentations given at those meetings”).
VIII.

WACHTELL LIPTON IS NOT CONFLICTED.

4

Finally, Copeland alone makes the completely unsubstantiated allegation that the settle-

5

ment should not be approved because the company’s counsel, Wachtell Lipton, is somehow con-

6

flicted, advancing the interests of the company’s directors and officers at the expense of the inter-

7
ests of the company itself. Copeland Br. 38-44.
8
Copeland made, and lost, this argument when he opposed preliminary approval. Docket

9
10

#290; Copeland Br. 10. He also made the same claim to the HP board on January 11, 2015, de-

11

manding that the board terminate Wachtell Lipton as counsel on the ground that the firm had im-

12

properly put the interests of the individual directors and officers above the interests of HP. The

13

board rejected Copeland’s allegation as meritless. As was explained to Copeland at the time,

14

Wachtell Lipton has been directed by HP’s Office of the General Counsel through each phase in

15
the litigation. Ex. 5 (Feb. 25, 2015 Letter from J. Schultz to R. Greenfield). Once the DRC and
16
17

the board resolved that HP should seek to have the Morrical suit and the related state court litiga-

18

tion settled or dismissed, it was entirely appropriate for Wachtell Lipton to negotiate for a settle-

19

ment providing for a release of the victims of Lynch and Hussain’s fraud.70

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22

The cases that Copeland does cite for support on this point, Hausman v. Buckley, 299 F.2d
696, 699-700 (2d Cir. 1962), and Respler v. Evans, 17 F. Supp. 3d 418, 421 (D. Del. 2014), both
found no conflict of interest. And Copeland concedes that the case law acknowledges that it can

23
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70

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Two retired Delaware Supreme Court Justices, Andrew Moore and Jack Jacobs, have publicly stated that Copeland’s claim of conflict is without basis. Justice Jacobs concluded that
“[s]ince the company’s interest was aligned with the board’s interest, there’s no conflict.” And
Justice Moore concluded flatly that he “cannot see how the conflict of interest accusation against
Wachtell has any real basis.” Ex. 33 (Oct. 17, 2014 Reuters Article).

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be appropriate for a firm to represent both the individual defendants and the nominal defendant in

2

a derivative action when their interests are aligned (as they are in seeking the resolution of a case

3

deemed to be meritless). See Copeland Br. 39.

4
5
6

Objectors’ final argument is that Wachtell Lipton’s defense of Bennett at his deposition
somehow indicates “that the precise lines in the representation between Proskauer and Wachtell
(which also served as de facto counsel to the individual defendants) were often blurred.” Supp.

7
8
9

Br. 5. Not so. Bennett is not named as a defendant and thus is not a party to this action. There
was therefore nothing objectionable with Wachtell Lipton, as the company’s counsel, represent-

10

ing a current independent director at his deposition. The individual defendants are all represented

11

by their own counsel, several of whom attended the deposition defending the interests of their cli-

12

ents. Bennett Dep. 1-3 (listing four sets of counsel for individual defendants). No one could ar-

13

gue with a straight face that any defendants are confused as to who represents them, or that any of

14
their counsel are not fully cognizant of who their clients are.
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CONCLUSION

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2

The settlement will provide significant benefits to HP and its shareholders. The claims

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being released are extremely weak and if they were to survive a motion to dismiss (which is ex-

4

tremely unlikely), HP would have to pay for the defense of the very weak claims that the objec-

5

tors would have the company pursue. The corporate governance reforms negotiated by plaintiffs

6
7

will improve the company’s M&A processes and provide significant benefits both to HP itself,
and to HP Enterprise, the new company that is being spun off to HP shareholders. The Court

8
9

should approve the settlement.

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Dated: July 17, 2015

WACHTELL, LIPTON, ROSEN & KATZ

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By:
Marc Wolinsky
George T. Conway III
51 West 52nd Street
New York, NY 10019
Telephone: (212) 403-1000
Facsimile: (212) 403-2000

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FARELLA, BRAUN & MARTEL, LLP

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Neil A. Goteiner
235 Montgomery Street, 17th Floor
San Francisco, CA 94104
Telephone: (415) 954-4400
Facsimile: (415) 954-4480

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Attorneys for Defendant Hewlett-Packard Company

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