In re Energy Recovery, Inc. Securities Litigation

Frequently Asked Questions

Helpful Hint: Using the general subject of your question may provide the best search results. For example, enter the word "hearing" in the search box to find information about the Settlement's Fairness Hearing.

1. Why did I get this notice package?

You or someone in your family may have purchased shares of Energy Recovery common stock during the period of March 7, 2013 and March 5, 2015, inclusive ("Settlement Class Period"). The Court directed that this Notice be sent to potential Settlement Class Members because they have a right to know about a proposed settlement of a class action lawsuit, and about all of their options, before the Court decides whether to approve the Settlement. If the Court approves the Settlement and any appeals are resolved, an administrator appointed by the Court will make the payments that the Settlement allows.

(collapse all)

2. What is this lawsuit about?

Lead Plaintiff's Second Amended Class Action Consolidated Complaint for Violation of Federal Securities Laws (the "Complaint") filed on May 26, 2016, alleges that Energy Recovery and Mr. Rooney violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, promulgated thereunder by the United States Securities and Exchange Commission. The Complaint also generally alleges that Energy Recovery and Mr. Rooney made false and misleading statements regarding Energy Recovery's products and operations and seeks unspecified money damages and other relief. When this information became public, the Complaint alleges that the share price fell and shareholders were damaged. The Complaint also asserted "control person" claims against the individual defendants, Mr. Rooney and Ms. Bold, under Section 20(a) of the Securities Exchange Act of 1934. The lawsuit seeks money damages against Defendants for alleged violations of the federal securities laws. Defendants believe that the claims asserted in the action are completely without merit. Defendants have denied and continue to deny any and all wrongdoing whatsoever and maintain that their conduct was at all times proper and in compliance with applicable provisions of law. Defendants have denied and continue to deny each and all of the claims and contentions alleged by Lead Plaintiff in the Litigation and deny that they have committed any of the wrongful acts or violations of law that are alleged in the Litigation, especially the central premise of Plaintiff's claims that Energy Recovery's products remained in the engineering prototype phase during the Class Period. Defendants assert that Plaintiff is unable to prove falsity or scienter in support any of his allegations. Defendants deny all charges of wrongdoing or liability against them arising out of any of the conduct, statements, acts, or omissions alleged, or that could have been alleged, in the Litigation. Defendants also have denied and continue to deny, among other things, the allegations that Lead Plaintiff or the Settlement Class have suffered damages and that Lead Plaintiff or the Settlement Class were harmed by the conduct alleged in the Consolidated Complaint or its predecessor complaints.

(collapse all)

3. Why is this a class action?

In a class action, one or more people called Class Representatives (in this case, the Lead Plaintiff Henry Low), sue on behalf of people who have similar claims. All persons with similar claims are Settlement Class Members, who together constitute the class. Bringing a case, such as this one, as a class action allows the collective adjudication of many similar claims that might be economically too small to bring in individual actions. One court resolves the issues for all class members, except for those who exclude themselves from the class. Judge Edward Chen of the United States District Court for the Northern District of California is overseeing this class action.

(collapse all)

4. Why is there a settlement?

The Court did not decide in favor of Lead Plaintiff or Defendants. Instead, both sides agreed to a settlement. In this manner, they avoid the risks of further litigation and trial, including the risk that there would be no recovery by any members of the Settlement Class. The Lead Plaintiff and their attorneys think the Settlement is best for all Settlement Class Members. The settling Defendants in this Litigation, while continuing to deny all allegations of wrongdoing or liability whatsoever, recognize the expense, risks and uncertain outcome of litigation and appeals, especially in a complex action such as this, and wish to avoid the uncertainties, burdens and costs associated with further litigation.

Because of the risks associated with continuing to litigate and proceeding to trial, there was a danger that Lead Plaintiff would not have prevailed on any of his claims, in which case the Settlement Class would receive nothing. The Defendants have asserted that they did not engage in any wrongful conduct and have no liability for any breach of the federal securities laws. Thus, there is a risk that Lead Plaintiff would not have established any liability or damages against the Defendants. Lead Plaintiff and his attorneys think the Settlement is best for all members of the Class.

(collapse all)

5. How do I know if I am part of the Settlement?

The Court directed that, for the purposes of the proposed Settlement, everyone who fits this description is a Settlement Class Member: all Persons (as defined in the Stipulation) who purchased the common stock of Energy Recovery during the period March 7, 2013 through March 5, 2015, inclusive.

(collapse all)

6. What does the Settlement provide?

Defendants have agreed to the creation of a $3.85 million fund to be distributed, after the payment of claims administration and notice costs and Plaintiff's Counsel's attorneys' fees and expenses as awarded by the Court, to all Settlement Class Members who send in a valid and timely Proof of Claim and Release Form.

In return, the Litigation will be dismissed and Lead Plaintiff and all Settlement Class Members who do not timely and validly request exclusion from the Settlement Class agree to release, relinquish and discharge all Released Claims (including Unknown Claims) against the Defendants, Energy Recovery, and their respective Related Persons, whether or not these members of the Settlement Class execute and deliver the Proof of Claim and Release.

(collapse all)

7. How can I get a payment?

To qualify for a potential payment, you must send in a Proof of Claim and Release Form. A Proof of Claim and Release Form accompanied the Notice. Any Settlement Class member who fails to submit a Proof of Claim by such date shall be forever barred from receiving any distribution from the Settlement Fund (unless by order of the Court the deadline to submit a Proof of Claim is extended or such Class member's Proof of Claim is accepted), but otherwise shall be bound by all of the terms of the Stipulation and the Settlement, including the releases in the Stipulation, and will be permanently barred and enjoined from commencing or prosecuting any action asserting any Released Claims against any Released Persons.

(collapse all)

8. When would I get my payment?

The Court will hold a hearing on August 24, 2017, to decide whether to approve the Settlement. If the Settlement is approved, the Claims Administrator will complete the administration process and determine how much each Authorized Claimant is entitled to receive. Lead Counsel will then seek permission from the Court to distribute the Settlement Amount on a pro rata basis to Authorized Claimants. This may take several months.

(collapse all)

9. When and where will the Court decide whether to approve the proposed Settlement?

The Court will hold a Final Approval Hearing at 1:30 p.m. on August 24, 2017, at the United States District Court for the Northern District of California, 450 Golden Gate Avenue, San Francisco, CA 94102. At this hearing, the Court will consider whether the Settlement is fair, reasonable and adequate. At the Final Approval Hearing, the Court also will consider the proposed Plan of Allocation for the proceeds of the Settlement and the application of Plaintiff's Counsel for attorneys' fees and reimbursement of expenses. The Court also may listen to people who have properly indicated, within the deadline identified above, an intention to speak at the hearing; but decisions regarding the conduct of the hearing will be made by the Court. The Court will also decide the amount of attorneys' fees and expenses to award Plaintiff's Counsel. After the hearing, the Court will decide whether to approve the Settlement and to enter the Judgment dismissing the Litigation with prejudice. We do not know how long these decisions will take.

You should be aware that the Court may change the date and time of the Final Approval Hearing. Thus, if you want to come to the hearing, you should check with Lead Counsel or by checking with the Court's Public Access to Court Electronic Records (PACER) system at before coming to be sure that the date and/or time has not changed.

(collapse all)

For all other questions, please refer to the Notice.