On August 13, 2020, the Court entered an Order appointing Barrack, Rodos & Bacine clients the Oakland County Employees’ Retirement System and Oakland County Voluntary Employees’ Beneficiary Association Trust, along with the Fire and Police Pension Association of Colorado, to serve as the Lead Plaintiffs in In re Grand Canyon Education, Inc. Securities Litigation, Case No. 1:20-cv-00639-JLH-CJB, in the U.S. District Court for the District of Delaware. The Court also approved the Lead Plaintiffs’ selection of Barrack, Rodos & Bacine as Co-Lead Counsel in the action.
Four years later, on August 22, 2024, after extensive litigation in the case, two mediation sessions that resulted ultimately in a $25.5 million proposed settlement, and full briefing on the Lead Plaintiffs’ motion for final approval of the settlement, the U.S. District Court entered final orders approving the settlement, approving the Lead Plaintiffs’ proposed plan of allocation, and petition for attorneys’ fee and reimbursement litigation expenses. Not a single Settlement Class member objected to the settlement or entry of any of the other proposed orders.
The Settlement Hearing, which was conducted by video, was held before the Honorable Christopher J. Burke, of the U.S. District Court for the District of Delaware. At the Settlement Hearing, the Court considered whether the proposed settlement is fair, reasonable, and adequate and should be approved; whether the proposed plan of allocation is fair and reasonable and should be approved; and whether Lead Counsel’s motion for attorneys’ fees and expenses should be approved. The Court approved in full the settlement, the proposed plan of allocation, and Lead Counsel’s motion for attorneys’ fees and expenses.
Other than certain persons and entities affiliated with the Defendants, which are excluded, the Settlement Class consists of: “all persons and entities who purchased Grand Canyon common stock during the period from January 5, 2018 through January 27, 2020, inclusive, and who were damaged thereby.”
To be eligible to receive a payment under the approved settlement, you must submit a Claim Form postmarked (if mailed) or submitted on-line by no later than September 19, 2024. Copies of the Claim Form can be accessed here. Payments to eligible claimants will be made only after the completion of all claims processing. Please be patient, this process will take some time to complete.
Background and History of the Litigation
Lead Plaintiffs asserted violations of the federal securities laws in the action against Grand Canyon Education, Inc. and certain of the company’s senior executives on behalf of investors in Grand Canyon common stock between January 5, 2018 and January 27, 2020, inclusive.
As alleged in Lead Plaintiffs’ operative complaint, defendants inflated Grand Canyon’s financial results by spinning off its formerly for-profit university, Grand Canyon University (“GCU”), as a purportedly non-profit university, New GCU. The complaint alleges that Grand Canyon used New GCU as an off-balance-sheet entity to which it was able to funnel expenses and costs in exchange for a disproportionate amount of revenue. Defendants repeatedly made false and misleading statements to investors describing New GCU as a “non-profit” and “independent” institution, misstating Grand Canyon’s role as a third-party provider of education services, and misstating the company’s financial results. In addition, Grand Canyon failed to disclose to investors that it had received repeated communications from the U.S. Department of Education (“DOE”) indicating that the agency’s approval of the spinoff was in doubt.
Lead Plaintiffs alleged that the truth emerged through a series of disclosures beginning on November 6, 2019, when Grand Canyon announced that it had received a letter from the DOE denying its application to designate New GCU as a non-profit. That denial was based on the DOE’s finding that New GCU was Grand Canyon’s “captive client” and that New GCU “is not the entity actually operating [GCU].” The DOE based its conclusion on an examination of several confidential analyses of the transaction commissioned by Grand Canyon’s Board of Directors. The DOE concluded that the relationship between Grand Canyon and New GCU violated “the most basic tenet of nonprofit status—that the nonprofit be primarily operated for a tax-exempt purpose and not substantially for the benefit of any other purpose or entity.” Then, on January 28, 2020, Citron Research published a second report expanding on the DOE’s findings, citing hundreds of pages of non-public supporting documentation from Grand Canyon that Citron obtained through a Freedom of Information Act request. The Citron Research report described Grand Canyon as the “educational Enron,” using a “captive non-reporting subsidiary” to “dump expenses and liabilities, while receiving a disproportionate amount of revenue at inflated margins in order to artificially inflate the stock price.” Lead Plaintiffs alleged that, as a result of these disclosures, the price of Grand Canyon common stock declined precipitously.
On December 21, 2020, defendants moved to dismiss the complaint. Lead Plaintiffs opposed that motion on February 19, 2021 and defendants filed their reply on March 22, 2021. The Court held oral argument on the motion to dismiss on May 26, 2021, and dismissed Lead Plaintiffs’ complaint without prejudice on August 9, 2021. Lead Plaintiffs filed an amended complaint on January 21, 2022. Defendants moved to dismiss the amended complaint on March 15, 2022. Lead Plaintiffs filed their opposition to that motion on May 6, 2022, and defendants filed their reply in further support of their motion on June 3, 2022. The court heard oral argument on the motion on October 25, 2022.
On February 17, 2023, Magistrate Judge Christopher J. Burke issued a Report and Recommendation to deny defendants’ motion to dismiss the operative complaint. On February 27, 2023, defendants filed objections to the Report and Recommendation and, on March 9, 2023, Lead Plaintiffs filed their response to defendants’ objections. On March 28, 2023, after oral argument, the Court overruled defendants’ objections and adopted the Report and Recommendation, denying defendants’ motion to dismiss.
Discovery in the action commenced in April 2023. In response to Lead Plaintiffs’ requests for production of documents, defendants produced thousands of documents to Lead Plaintiffs. The parties subpoenaed more than ten third parties and received additional documents from them. In addition, the parties met and conferred and exchanged numerous letters concerning disputed discovery issues over several months.
The parties began exploring the possibility of a settlement in the fall of 2023. The parties agreed to engage in private mediation and retained Michelle Yoshida of Phillips ADR Enterprises to act as mediator. On November 14, 2023, counsel for the parties participated in a full-day mediation session before the mediator. In advance of that session, the parties exchanged and submitted detailed confidential mediation statements to the mediator. The session ended without any agreement being reached.
On January 5, 2024, Lead Plaintiffs filed their motion for class certification and appointment of class representatives and class counsel, which was accompanied by a report from Lead Plaintiffs’ expert on market efficiency and common damages methodologies.
On February 21, 2024, the parties participated in a second full-day mediation session before the mediator. In advance of the mediation session, the parties again exchanged and submitted confidential mediation statements to the mediator. At the conclusion of this second mediation session, the mediator made a recommendation that the action be settled for $25.5 million, which recommendation the parties accepted.
On March 25, 2024, the parties entered into a Stipulation and Agreement of Settlement, which sets forth the terms and conditions of the settlement.
On May 1, 2024, the Court preliminarily approved the settlement, authorized notice of the settlement to be sent to potential Settlement Class Members. The Court granted final approval to the settlement at the final Settlement Hearing on August 22, 2024. BR&B partners Jeff Golan (jgolan@barrack.com) and Chad Carder (ccarder@barrack.com) and associate Jordan Laporta (jlaporta@barrack.com) worked extensively on the case.