Paulson v. McKowen et al

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Chief Judge Philip A. Brimmer
Civil Case No. 19-cv-02639-PAB-NYW
JOHN PAULSON, Individually and on Behalf of all Others Similarly Situated,
Plaintiff,
v.
JOHN R. MCKOWEN,
WAYNE HARDING, and
TIMOTHY BEALL,
Defendants.
ORDER
This matter is before the Court on Plaintiff’s Motion for Final Approval of the
Settlement [Docket No. 169] and Plaintiffs’ Motion for an Award of Attorneys’ Fees,
Incentive Award, and Reimbursement of Litigation Expenses [Docket No. 170].
I. BACKGROUND
A. Factual Background
Plaintiff brings a securities class action against defendants. Docket No. 56.
Plaintiff’s amended complaint alleges that John R. McKowen, Wayne Harding, and
Timothy Beall (collectively, the “individual defendants”) were officers of Two Rivers
Water and Farming Company (“Two Rivers”). Docket No. 157 at 5.
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Plaintiff alleges that Two Rivers and McKowen formed GrowCo, Inc. (“GrowCo”)1
to “capitalize on [the] burgeoning marijuana industry in Colorado.” Docket No. 56 at 5,
¶ 17. To support their operations, defendants offered GrowCo securities to investors
(the “Offerings”). Id. at 6, ¶ 28. With the Offerings, defendants provided “sales
presentations, memoranda of terms, exchange note purchase agreements, exchange
agreements, investor questionnaires, and other documents . . . which purported to
make material disclosures to investors about GrowCo and the Securities Offerings.” Id.,
¶ 27. Plaintiff alleges that the Offering documents omitted material information about
McKowen, including a 1987 disciplinary action, fine, and suspension with the National
Association of Securities Dealers, a 1995 bankruptcy, and a 1992 default judgment in
connection with a complaint before the Indiana Securities division. Id. at 7-8, ¶¶ 30–41.
B. Procedural Background
Defendants dispute these allegations and deny liability for the claims. McKowen
moved to dismiss the complaint, Docket No. 73, on the basis that the inf ormation
underlying the allegations against him “concerned the distant past, was not required to
be disclosed, and was not material to investors’ decisions to purchase GrowCo
securities.” Docket No. 157 at 6. This motion was pending when the parties and
defendants’ insurance carrier, Starstone Specialty Casualty Insurance Company
(“Starstone”), agreed to engage in mediation before retired Denver District Court Judge
1 GrowCo was in bankruptcy when this action was initiated and is not a party to
this action. Docket No. 157 at 5 n.3. On July 6, 2021, the Bankruptcy Court granted
the United States Trustee’s and Debtor’s Stipulated Motion for Entry of Order
Dismissing Chapter 11 Case. In re GrowCo., Inc., No. 19-10512, Docket No. 263 (D.
Colo. Bankr.).
2
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William Meyer. Id. at 2-3. The parties ultimately reached a settlement in August 2020,
id. at 7, and on October 9, 2020 plaintif f filed an unopposed motion for preliminary
approval of the settlement, approval of the notice to the class, preliminary certification
of the class for the purposes of settlement, appointment of class counsel, and the
scheduling of a fairness hearing. See Docket No. 131.
On January 25, 2021, the assigned magistrate judge granted a motion to
withdraw by counsel for Two Rivers and issued an order to show cause why she should
not impose sanctions against Two Rivers for failure to defend based on its failure to hire
counsel to represent it. Docket No. 137 at 6. On February 24, 2021, the Court entered
an order informing the parties that, because granting the motion for preliminary
approval of the class action settlement would trigger proceedings that necessitated Two
Rivers’s participation, through counsel, the Court would not rule on the motion for
preliminary approval until counsel entered an appearance on behalf of Two Rivers.
Docket No. 139. On March 10, 2021, the Court entered an order notif ying the parties
that the Court would deny the motion for preliminary approval without prejudice if Two
Rivers did not enter an appearance on or bef ore March 16, 2021. Docket No. 145.
On April 6, 2021, plaintiff filed a motion to dismiss Two Rivers as a party. Docket
No. 149. On June 29, 2021, the Court granted plaintiff’s motion to dismiss Two Rivers
without prejudice. Docket No. 153 at 11. The Court also granted plaintiff leave to file a
revised motion for preliminary approval of the class action settlement in light of Two
Rivers’ dismissal, Docket No. 154, which plaintiff subsequently filed. Docket No. 157.
On January 19, 2022, the Court granted plaintiff’s motion for preliminary
approval. Docket No. 162 at 25. On April 11, 2022, plaintif f filed a motion for final
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approval and a motion for attorneys’ fees. See Docket Nos. 169-170. On April 29,
2022, the Court held a fairness hearing. Docket No. 176.2
II. FINAL APPROVAL OF CLASS ACTION CERTIFICATION
Approval of a class action settlement under Fed. R. Civ. P. 23 takes place in two
stages. In the first stage, the Court preliminarily certifies a settlement class,
preliminarily approves the settlement agreement, and authorizes that notice be given to
the class so that interested class members may object to the fairness of the settlement.
In the second stage, after notice is given to the putative class, the Court holds a
fairness hearing at which it addresses (1) any timely objections to the treatment of this
litigation as a class action, and (2) any objections to the fairness, reasonableness, or
adequacy of the settlement terms. Fed. R. Civ. P. 23(e)(2); see, e.g., McReynolds v.
Richards-Cantave, 588 F.3d 790, 803 (2d Cir. 2009).
District courts have broad discretion in granting or denying class certification.
Shook v. Bd. of Cnty. Comm’rs of the Cnty. of El Paso (“Shook II”), 543 F.3d 597, 603
(10th Cir. 2008). “[C]ertification is proper only if ‘the trial court is satisfied, after a
rigorous analysis, that the prerequisites of Rule 23(a) have been satisfied.’” Wal-Mart
Stores, Inc. v. Dukes, 564 U.S. 338, 350-51 (2011) (quoting Gen. Tel. Co. of the Sw. v.
Falcon, 457 U.S. 147, 161 (1982)).
A district court may certify a class action if the proposed class satisfies the
prerequisites of Fed. R. Civ. P. 23(a) as well as the requirements of one of the three
types of classes identified in Rule 23(b). Where the plaintiff applies for class
2 The fairness hearing was conducted by United States District Judge Daniel D.
Domenico.
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certification, plaintiff bears the burden of proving that Rule 23’s requirements are
satisfied. DG ex rel. Stricklin v. Devaughn, 594 F.3d 1188, 1194 (10th Cir. 2010) (citing
Shook v. Bd. of Cnty. Comm’rs of the Cnty. of El Paso, 386 F.3d 963, 968 (10th Cir.
2004)).
A. Rule 23(a)
Rule 23(a) requires that (1) the class be so numerous that joinder is
impracticable; (2) there are questions of law or fact common to the class; (3) the claims
of the representative party are typical of those of the class; and (4) the representative
parties will fairly and adequately protect the interests of the class. Fed. R. Civ. P. 23(a).
In the order on the motion for preliminary approval, Docket No. 162 at 10-16, the Court
found each of the requirements met and incorporates those findings herein. The
requirements of Rule 23(a) are met.
B. Rule 23(b)(3)
The Court preliminarily certified the class under Rule 23(b)(3), id. at 16-18, which
states that a class action may be maintained if “the questions of law or fact common to
class members predominate over any questions affecting only individual members, and
[] a class action is superior to other available methods for fairly and efficiently
adjudicating the controversy.” Fed. R. Civ. P. 23(b)(3). The Court finds that final
certification is appropriate for the same reasons it found preliminary approval was
warranted. See Docket No. 162 at 16-18.
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III. FINAL APPROVAL OF CLASS ACTION SETTLEMENT
A. Overview of the Settlement Agreement
The settlement class consists of:
[A]ll persons or entities that currently hold claims based on securities in
GrowCo, and purchased or otherwise acquired the securities through
Offerings during the period of October 2014 through December 2017 (the
“Class Period”), and suffered Alleged Losses as defined above. For the
avoidance of doubt, persons or entities who purchased or otherwise
acquired the securities during the Class Period and who have assigned
the securities to VitaNova Partners, LLC are not excluded as Class
Members by virtue of such assignment. Excluded from the Class are (1)
the Defendants; (2) the officers and directors of Two Rivers and GrowCo
during the Class Period as set forth in the attached Exhibit E for securities
purchased at the time or after they were officers or directors; (3) any judge
or judicial officer who may hear any aspect of this Class Action and
his or her law clerks; and (4) except as provided in clause (2) of this
paragraph above, all persons or entities released in the Settlement. Also
excluded from the Settlement Class are the persons and/or entities who
request exclusion from the Settlement Class within the time period set by
the Court in the Preliminary Approval Order.
Name Type Approximate
Amount Raised
Date Range
GrowCo Partners 1, LLC Equity $ 3,349,151 December 2014 - January 2015
$4 Million Note Debt $ 4,000,000 March 2015 - September 2015
GCP Super Units LLC Equity $ 5,297,157 July 2015 - October 2017
$1.5 Million Note Debt $ 100,000 April 2016
$6 Million Note Debt $ 6,000,000 March 2016 - July 2016
$7 Million Note Debt $ 2,977,000 January 2016 - September 2017
$2 Million Note Debt $ 1,080,000 February 2017 - September 2017
$2 Million Note Debt $ 440,000 June 2017
See Docket No. 157 at 31-32, 34, ¶¶ 1.i, 1.s. There are no subclasses.
In exchange for the release of all claims of the Settlement Class against all
defendants, the Settlement Agreement provides that Starstone will pay $1.5 million for
the benefit of the Class. Id. at 29-30, 36-37, ¶ 1.ll, 3. The parties agreed that this
amount provides a “substantial and immediate benefit to the Class” and is appropriate
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given that GrowCo has been in bankruptcy and Two Rivers’s financial situation makes it
unlikely that it would be able to satisfy a judgment. Id. at 8. The parties arrived at this
amount after reviewing defendants’ insurance policy, which covers claims up to $2
million minus the cost of the defense. Id. The $1.5 million figure “represents
substantially all of the remaining insurance coverage net of defense costs to date.” Id.
The Claims Administrator, selected by Class Counsel, will administer the process
of receiving, reviewing, and denying claims under Class Counsel’s supervision and will
determine each claimant’s pro rata share of the Settlement Amount upon a Class
Member’s showing of loss. Id. at 40, ¶¶ 12–14. The $1.5 million Settlement Fund will
be used to pay, among other things, attorneys’ fees and expenses, costs and expenses
reasonably and actually incurred in connection with locating and providing notice to
potential Class Members, assisting with filing claims, and administering and distributing
the Settlement Fund. Id. at 40-41, ¶ 15.
B. Notice to the Settlement Class
Under Rule 23(e)(1), a district court approving a class action settlement “must
direct notice in a reasonable manner to all class members who would be bound by the
proposal.” Fed. R. Civ. P. 23(e)(1). Rule 23(c)(2)(B) provides, in relevant part, that for
“any class certified under Rule 23(b)(3), the court must direct to class members the best
notice that is practicable under the circumstances, including individual notice to all
members who can be identified through reasonable effort.” Fed. R. Civ. P. 23(c)(2)(B).
In addition to the requirements of Rule 23, the Due Process Clause also guarantees
unnamed class members the right to notice of a settlement. DeJulius v. New England
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Health Care Emps. Pension Fund, 429 F.3d 935, 943–44 (10th Cir. 2005). However,
due process does not require that each Class Member receive actual notice to be
bound by the adjudication of a representative action. Id. Instead, the procedural rights
of absent class members are satisfied so long as “the best notice practicable [is given]
under the circumstances including individual notice to all members who can be
identified through reasonable effort.” In re Integra Realty Resources, Inc., 262 F.3d
1089, 1110 (10th Cir. 2001) (citation omitted). Thus, the legal standards for satisfying
Rule 23(c)(2)(B) and the constitutional guarantee of procedural due process are
coextensive and substantially similar. DeJulius, 429 F.3d at 944.
Class counsel received a list of 82 investors and their addresses from GrowCo’s
bankruptcy counsel. Docket No. 169 at 30, ¶ 43. The claim administrator mailed the
notice to each of these persons by first class mail on February 2, 2022. Id. at 39, ¶ 3.
Following this, the claim administrator received three additional names and addresses
and mailed the notice to these addressed. Id., ¶ 4. Eleven of the notices were returned
undeliverable; the claim administrator took steps to find current addresses for each of
these people. Id., ¶ 5. On March 30, 2022, the claim administrator re-mailed a notice
to 56 potential class members who had not filed a claim form. Id. at 40, ¶ 6.
Additionally, on February 2, 2022, the claim administrator established a webpage
containing the current status of this case, case deadlines, and important documents,
including the notice. Id., ¶ 8. The Court finds that this notice procedure satisfies Rule
23(c)(2)(B) and (e)(1).
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C. Objections
Blue & Green, LLC (“Blue & Green”), a class member that holds two promissory
notes executed by GrowCo, objects to final approval of the settlement. Docket No. 172.
Blue & Green objects that the claims to be released by each class member are
overbroad such that they could be construed to release the claims Blue & Green have
against GrowCo based on the terms of the promissory notes. Id. at 3-4. The
Settlement Agreement states:
“Released Claims” means any and all Claims of or by the Releasors, as
against the Releasees, and any and all Claims of or by the Defendants as
against the Releasors, that were asserted, could have been asserted, or
could in the future be asserted, arising from, based on, or relating to
allegations in the Class Action. The term “Released Claims” does not
include any claims for collection of any amounts due under the GrowCo
securities pursuant to the terms of the securities, including claims in the
event of a GrowCo liquidation, including in the GrowCo Bankruptcy Action.
Docket No. 157 at 35, ¶ 1.cc. Blue & Green clarif ied at the fairness hearing that it does
not disagree with the definition of released claims, but its concern is with paragraph 28
of the settlement agreement. This paragraph states:
The Settling Parties agree and acknowledge that this Settlement
Agreement is intended to resolve and satisfy any and all claims that the
Releasors have made or could have made against any of the Releasees
arising out of the issuance or sale of GrowCo securities. The Parties
agree and acknowledge that they shall seek as part of the Final Order
Approving Settlement an order prohibiting further lawsuits and claims
against the Defendants arising out of the issuance and sale of GrowCo
securities which the Parties intend to operate as a complete bar to any
lawsuits or claims against the Defendants arising out of the issuance or
sale of GrowCo securities (the “Complete Bar Order”). The Complete Bar
Order will not bar claims for collection of any amounts due under the
GrowCo securities pursuant to the terms of the securities, including claims
in the event of a GrowCo liquidation including in the GrowCo Bankruptcy
Action.
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Id. at 45-46, ¶ 28. Blue & Green argued at the hearing that the release in paragraph 28
could be construed to be broader than the def inition of released claims and the
description of released claims in paragraph 27. Blue & Green argues that its
anticipated recovery from the settlement proceeds in this case should not be a bar to its
ability to collect under the terms of the promissory notes or the rights under the deeds
of trust securing the notes. Docket No. 172 at 4. Blue & Green asks the Court to clarif y
in its order that the scope of the release would not prohibit Blue & Green from collecting
on its notes and security interest. Id.
Plaintiff filed a response to the objection, arguing that the language in the
settlement agreement is not overbroad. Docket No. 173. At the hearing, plaintiff again
argued that the release language is clear. The Court agrees with plaintiff. The
settlement agreement makes clear that it releases claims relating to the class action,
which was based on the omission of material information in the offering documents.
See Elna Sefcovic, LLC v. TEP Rocky Mountain, LLC, 807 F. App’x 752, 765 (10th Cir.
2020) (unpublished) (“a court may release not only those claims alleged in the
complaint and before the court, but also claims which ‘could have been alleged by
reason of or in connection with any matter or fact set forth or referred to in’ the
complaint” (quoting In re Corrugated Container Antitrust Litig., 643 F.2d 195, 221 (5th
Cir. 1981)). The definition of released claim further clarifies that it does not apply to
claims to collect on the terms of the securities. Accordingly, Blue & Green’s objection is
overruled and its request for the Court to add clarifying language is denied as
unnecessary.
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D. Analysis of Rule 23(e) Factors
Rule 23(e) provides that a proposed settlement may only be approved after a
“finding that it is fair, reasonable, and adequate.” Fed. R. Civ. P. 23(e)(2). In making
this determination, “trial judges bear the important responsibility of protecting absent
class members” and must be “assur[ed] that the settlement represents adequate
compensation for the release of the class claims.” In re Pet Food Prods. Liab. Litig.,
629 F.3d 333, 349 (3d Cir. 2010); see also Amchem Prods., Inc. v. Windsor, 521 U.S.
591, 623 (1997) (noting that the Rule 23(e) inquiry “protects unnamed class members
from unjust or unfair settlements affecting their rights when the representatives become
fainthearted before the action is adjudicated or are able to secure satisf action of their
individual claims by a compromise”) (citations omitted).
To determine whether a proposed settlement is fair, reasonable, and adequate,
courts consider the following factors: (1) whether the proposed settlement was fairly
and honestly negotiated; (2) whether serious questions of law and fact exist, placing the
ultimate outcome of the litigation in doubt; (3) whether the value of an immediate
recovery outweighs the mere possibility of future relief after protracted and expensive
litigation; and (4) the judgment of the parties that the settlement is fair and reasonable.
Rutter & Wilbanks Corp. v. Shell Oil Co., 314 F.3d 1180, 1188 (10th Cir. 2002). If the
settling parties can establish these factors, courts usually presume that the proposed
settlement is fair and reasonable. In re Warfarin Sodium Antitrust Litig., 391 F.3d 516,
535 (3d Cir. 2004) (applying an “initial presumption of fairness” to a proposed
settlement where: (1) it is the result of arm's length negotiations; (2) it is based on
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sufficient discovery; (3) the proponents of the settlement are experienced in similar
litigation; and (4) only a small fraction of the class objected). In addition, Fed. R. Civ. P.
23(e)(2) states that a court is to consider the following factors when determining
whether a settlement is fair, reasonable, and adequate:
(A) the class representatives and class counsel have adequately
represented the class;
(B) the proposal was negotiated at arm’s length;
(C) the relief provided for the class is adequate, taking into account:
(i) the costs, risks, and delay of trial and appeal;
(ii) the effectiveness of any proposed method of distributing relief to
the class, including the method of processing class-member
claims;
(iii) the terms of any proposed award of attorney's fees, including
timing of payment; and
(iv) any agreement required to be identified under Rule 23(e)(3);
and
(D) the proposal treats class members equitably relative to each other.
“The goal of this amendment is . . . to focus the court and the lawyers on the core
concerns of procedure and substance that should guide the decision whether to
approve the proposal.” Fed. R. Civ. P. 23(e)(2) advisory committee’s note to 2018
amendment.
The Settlement Agreement was the product of arms-length negotiations between
the parties. Docket No. 169 at 8-10. These negotiations took place after the parties
had litigated various motions and were facilitated by a third-party mediator. See id.
The Court finds that the negotiations were done fairly and honestly. The value of
immediate recovery outweighs the mere possibility of future relief because further
litigation would deplete the insurance fund that the class now will obtain recovery from
and Two Rivers’ financial situation made it unlikely it would be able to satisfy a
judgment. The parties believe that the consent decree is fair and reasonable and was
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negotiated at arms length by experienced counsel. Id. at 13-14. Plaintiff and class
counsel have adequately represented the class, the relief provided to the class is
adequate, and the proposal treats class members equitably. See id. at 7-16. The
Court additionally notes that class counsel represented to the Court at the f airness
hearing that no class members have opted out of the settlement. Accordingly, the
Court finds that the settlement is fair, reasonable, and adequate under the factors set
forth in Rule 23(e)(2) and Rutter.
IV. ATTORNEYS’ FEES AND COSTS
Plaintiff filed a motion for attorney fees, an incentive award, and reimbursement
of litigation expenses. Docket No. 170 at 1. Class counsel requests an award of
$495,959.12, which is one third of the net Settlement, a $5,000 incentive award for
plaintiff, and $7,122.65 in litigation expenses for class counsel. Id. at 2. No class
members have objected to the request for attorney fees. In a certified class action, the
court may award reasonable attorney’s fees that are authorized by the parties’
agreement provided that (1) the claim for an award is made by motion under Rule
54(d)(2) and notice of the motion is directed to class members; (2) a class member or
party from whom payment is sought may object; and (3) the Court finds facts and states
its legal conclusions. Fed. R. Civ. P. 23(h). The notice provided to class members
included that plaintiff would seek an award of attorneys’ fees not to exceed 33.33% of
the settlement, for costs not to exceed $10,000, and for an award of $5,000 to plaintiff.
Docket No. 169 at 50.
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A. Attorney Fees
In common fund cases, the Tenth Circuit has “recognized the propriety of
awarding attorneys’ fees . . . on a percentage of the fund, rather than lodestar, basis.”
Uselton v. Commercial Lovelace Motor Freight, Inc., 9 F.3d 849, 853 (10th Cir. 1993);
accord Gottlieb v. Barry, 43 F.3d 474, 483 (10th Cir. 1994) (holding that, although either
method is permissible in common fund cases, “Uselton implies a preference for the
percentage of the fund method”). Because this is a common fund case and because
plaintiff’s fee request is for a percentage of the common fund, the Court will consider
the attorneys’ fees award using the percentage of the fund approach. See Brown v.
Phillips Petroleum Co., 838 F.2d 451, 454 (10th Cir. 1988) (distinguishing common fund
and statutory fees cases).
The “percentage reflected in a common fund award must be reasonable [and]
the district court must ‘articulate specific reasons for fee awards.’” Brown, 838 F.2d at
454 (quoting Ramos v. Lamm, 713 F.2d 546, 552 (10th Cir. 1983). In determ ining the
reasonableness of a percentage award, courts must apply the Johnson factors, which
are:
(1) the time and labor involved; (2) the novelty and difficulty of the
questions; (3) the skill requisite to perform the legal service properly; (4)
the preclusion of other employment by the attorney due to acceptance of
the case; (5) the customary fee; (6) any prearranged fee-this is helpful but
not determinative; (7) time limitations imposed by the client or the
circumstances; (8) the amount involved and the results obtained; (9) the
experience, reputation, and ability of the attorneys; (10) the undesirability
of the case; (11) the nature and length of the professional relationship
with the client; and (12) awards in similar cases.
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Id. at 454-55 (citing Johnson v. Ga. Highway Express, Inc., 488 F.2d 714, 717 (5th Cir.
1974); see also Gottlieb, 43 F.3d at 483. “[R]arely are all of the Johnson factors
applicable; this is particularly so in a common fund situation.” Brown, 838 F.2d at
455-56 (“The court here clearly considered all of the relevant Johnson factors and
applied them appropriately.”). Thus, in evaluating the reasonableness of a fee award, a
court need not specifically address each Johnson factor. Gudenkauf v. Stauffer
Commc’ns, Inc., 158 F.3d 1074, 1083 (10th Cir. 1998).
Class counsel represents that, under the lodestar method, they would have
incurred $602,319.75 in attorneys’ fees. Docket No. 170 at 14. Under the common
fund request here, class counsel will receive less than would have been warranted
under the lodestar method. Id. at 14-15. This weighs in favor of the reasonableness of
the award.
Class counsel have significant experience in class action cases, as reflected in
their histories provided to the Court. See Docket No. 157 at 145-58. Class counsel
additionally took this case on a contingency basis, Docket No. 170 at 13, adding to the
risk class counsel incurred by bringing the case. See In re Crocs, Inc. Secs. Litig., No.
07-cv-02351-PAB-KLM, 2014 WL 4670886, at *4 (D. Colo. Sept. 18, 2015) (“A
contingent fee arrangement often weighs in favor of a greater fee because such a large
investment of money and time places incredible burdens upon law practices.” (internal
alterations and quotation marks omitted)). A fee of one-third of the common fund is
typical in complex cases. See id. at *3 (collecting cases). The recovery for the class is
6.4%, which plaintiff represents is in line with median settlement values of 7.6%.
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Docket No. 170 at 9. Additionally, the value represents all of the remaining insurance
policy, and there is substantial doubt about Two River’s ability to satisfy a judgment.
The Court finds that, under the Johnson factors, an award of $495,959.12 in attorney
fees to class counsel is reasonable.
B. Incentive Award
“Courts have recognized that an award may be appropriate to provide an
incentive to act as a named plaintiff.” Chieftain Royalty Co. v. Enervest Energy
Institutional Fund XIII-A, L.P., 888 F.3d 455, 467 (10th Cir. 2017). Additionally, “courts
regularly give incentive awards to compensate named plaintiffs for the work they
performed—their time and effort invested in the case.” Id. at 468. Plaintiff represents
that he “assisted in Plaintiff’s Counsel’s investigation, preparation, and prosecution of
this Action by providing documents to Plaintiff’s Counsel in connection with his GrowCo
investment; reviewed and approved pleadings and briefs filed in this Action; and
consulted with Plaintiff’s Counsel regarding significant events in the litigation.” Docket
No. 170 at 19. Additionally, GrowCo named plaintiff as a defendant in an action related
to GrowCo’s bankruptcy due to plaintiff’s status in this litigation. Id. Plaintiff further filed
a limited objection in the bankruptcy case to prevent McKowen from accessing the
insurance policy that provides the settlement in this case. Id. The Court finds that an
award of $5,000 is fair and reasonable based on plaintiff’s involvement in this case.
C. Costs
Class counsel requests $7,122.65 in costs. Id. at 20. Class counsel provides a
break-down of the costs. Id. at 27-28, 32, 35-36. However, the declaration of Steve
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Miller contains an inconsistency regarding costs; Mr. Miller states both that “[m]y firm
has expended a total of $0 in unreimbursed costs and expenses” and that his firm had
a total of $472 in unreimbursed costs. Id. at 35-36. Because of this inconsistency, the
Court will reduce the costs award by $472. Accordingly, class counsel is awarded
$6,650.65 in costs.
V. CONCLUSION
For the foregoing reasons, it is
ORDERED that Plaintiff’s Motion for Final Approval of the Settlement [Docket
No. 169] is GRANTED. It is further
ORDERED that Plaintiffs’ Motion for an Award of Attorneys’ Fees, Incentive
Award, and Reimbursement of Litigation Expenses [Docket No. 170] is GRANTED. It is
further
ORDERED that, pursuant to Rule 23(b)(3) of the Federal Rules of Civil
Procedure, and for the purposes of settlement only, the class is certified as follows:
[A]ll persons or entities that currently hold claims based on securities in
GrowCo, and purchased or otherwise acquired the securities through
Offerings during the period of October 2014 through December 2017 (the
“Class Period”), and suffered Alleged Losses as defined above. For the
avoidance of doubt, persons or entities who purchased or otherwise
acquired the securities during the Class Period and who have assigned
the securities to VitaNova Partners, LLC are not excluded as Class
Members by virtue of such assignment. Excluded from the Class are (1)
the Defendants; (2) the officers and directors of Two Rivers and GrowCo
during the Class Period as set forth in the attached Exhibit E for securities
purchased at the time or after they were officers or directors; (3) any judge
or judicial officer who may hear any aspect of this Class Action and
his or her law clerks; and (4) except as provided in clause (2) of this
paragraph above, all persons or entities released in the Settlement. Also
excluded from the Settlement Class are the persons and/or entities who
17
Case No. 1:19-cv-02639-PAB-NRN Document 178 filed 03/15/23 USDC Colorado
pg 17 of 20

request exclusion from the Settlement Class within the time period set by
the Court in the Preliminary Approval Order.
It is further
ORDERED that the Court finds, solely for the purposes of this settlement, that
the prerequisites for a class action under Rules 23(a) and (b)(3) of the Federal Rules of
Civil Procedure have been satisfied in that: (a) the members of the settlement class are
so numerous that joinder of all members is impracticable; (b) there are questions of law
and fact common to the class; (c) the claims of the named plaintiffs are typical of the
claims of the class; (d) the named plaintiffs and plaintiffs’ counsel have fairly and
adequately represented and protected the interests of all of the class members; and (e)
questions of law or fact predominate over any questions affecting only individual
members and a class action is superior to other available methods for fairly and
efficiently adjudicating the controversy. It is further
ORDERED that the Court finds that the notice given to members of the class
was the best notice practicable under the circumstances, was reasonably calculated
under the circumstances to apprise such members of the pendency of this action and to
afford them an opportunity to object to, and meets the requirements of Rule 23
18
Case No. 1:19-cv-02639-PAB-NRN Document 178 filed 03/15/23 USDC Colorado
pg 18 of 20

(c)(2)(B) and (e)(1). Because the Court has afforded a full opportunity to all class
members to be heard, and no class member has opted-out of the settlement, the Court
further determines that all members of the class are bound by the Settlement
Agreement. It is further
ORDERED that, pursuant to Rule 23(e)(2) of the Federal Rules of Civil
Procedure, this Court finds that the Settlement Agreement is fair, reasonable, and
adequate. Accordingly, the Court gives final approval to the Settlement Agreement in
all respects and authorizes and directs the parties to consummate the Settlement
Agreement in accordance with its terms and provisions. It is further
ORDERED that plaintiff shall file the Settlement Agreement as a separate docket
entry within seven days of the entry of this ORDER. It is further
ORDERED that the parties and their counsel shall fulfill their obligations and
duties under the Settlement Agreement. It is further
ORDERED that plaintiff and all class members are permanently enjoined and
barred from asserting, initiating, prosecuting, or continuing any of the claims released
by the Settlement Agreement. It is further
ORDERED that Class Counsel is awarded $495,959.12 from the Settlement
Fund, which represents one third of the net Settlement Fund. It is further
ORDERED that plaintiff John Paulson is awarded an incentive award of $5,000
from the Settlement Fund. It is further
ORDERED that Class Counsel shall be reimbursed $6,650.65 in costs from the
Settlement Fund. It is further
19
Case No. 1:19-cv-02639-PAB-NRN Document 178 filed 03/15/23 USDC Colorado
pg 19 of 20

ORDERED that neither this Order nor the Settlement Agreement is an admission
or concession by defendants respecting any facts, liabilities, or wrongdoing. It is further
ORDERED that, without affecting the finality of this Order, this Court retains
jurisdiction to consider all further matters arising out of or connected with the Settlement
Agreement, including its implementation. It is further
ORDERED that judgment shall be entered dismissing this case with prejudice.
DATED March 15, 2023.
BY THE COURT:
__________________________
PHILIP A. BRIMMER
Chief United States District Judge
20
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pg 20 of 20