                              In the

    United States Court of Appeals
                 For the Seventh Circuit
No. 14-2191

LINDA WONG, individually and on
behalf of all others similarly situated,
                                                  Plaintiff-Appellee,

                                 v.


ACCRETIVE HEALTH, INC., et al.,
                                              Defendants-Appellees.

APPEAL OF: JAMES J. HAYES


        Appeal from the United States District Court for the
           Northern District of Illinois, Eastern Division.
        No. 12-CV-03102— Sharon Johnson Coleman, Judge.


   ARGUED OCTOBER 2, 2014 — DECIDED DECEMBER 9, 2014


   Before FLAUM, MANION, and HAMILTON, Circuit Judges.
   MANION, Circuit Judge. The Indiana State Police Benefit
System, as lead plaintiff in a class action, sued Accretive
Health, Inc., and two of its officers under Sections 10(b) and
20(a) of the Securities Exchange Act of 1934. James Hayes, a
2                                                                 No. 14-2191

member of the class, appeals pro se from the approval of the
class settlement and plan of distribution.1 We hold that the
district court did not abuse its discretion in approving the
settlement, and therefore affirm.
                               I. Background
   Accretive is a nationwide company that provides cost
control, revenue cycle management, and compliance services
primarily to not-for-profit healthcare providers. Underlying
the suit are two contracts Accretive entered into with
Minnesota-based Fairview Health Systems worth several
million dollars each. The first contract, called a Revenue Cycle
Operations Agreement (“RCA”), accounted for approximately
12% of Accretive’s revenue during the class period. Accretive’s
second contract with Fairview, called a Quality and Total Cost
of Care (“QTCC”) contract, was the first of its kind and was
held out by Accretive as the future for healthcare services. The
Indiana State Police Benefit System (“ISPBS”) alleged that
Accretive provided its services through overly aggressive


1
  Despite Hayes’s pro se status, he is an experienced litigator. See, e.g., Hayes
v. Harmony Gold Min. Co., 509 F. App’x 21, 23 n.1 (2d Cir. 2013) (declining
to consider waived argument despite customary solicitude offered to pro
se litigants because Hayes is “a frequent class action objector and
appellant”), cert. denied, 134 S. Ct. 310 (2013); In re Initial Pub. Offering Sec.
Litig., 728 F. Supp. 2d 289, 294 (S.D.N.Y. 2010) (concluding that Hayes was
a serial objector who must post bond); In re Genesis Health Ventures, Inc., 362
B.R. 657, 662 (D. Del. 2007) (“Suffice it to say that Mr. Hayes has turned the
system inside and out to try to obtain this particular relief.”), aff’d, 248 F.
App’x 475, 477 (3d Cir. 2007) (affirming the district court’s denial of Hayes’s
motion for an extension of time to file a notice of appeal after finding Hayes
to be “an experienced litigator”).
No. 14-2191                                                    3

collection practices and with inadequate regulatory
compliance, conduct that was both illegal and in violation of its
contracts with Fairview. ISPBS further alleged that Accretive
concealed this fact and instead represented that it complied
with the law and its contractual obligations in an effort to
artificially inflate the price of Accretive common stock.
   Certain newsworthy events eventually uncovered
Accretive’s alleged improper and unlawful conduct. On
January 19, 2012, the Minnesota Attorney General sued
Accretive for failure to comply with healthcare, debt collection,
and consumer protection laws. In response to the lawsuit,
Accretive announced on March 29, 2012, that it was winding
down its RCA contract well short of its five-year term and
expecting a loss of $62 to $68 million in revenue. On April 24,
2012, the Minnesota Attorney General released a voluminous
and damaging report on Accretive’s business practices. Three
days later, on April 27th, Accretive announced that Fairview
was cancelling its QTCC contract, thereby severing all ties with
Accretive. News of these events caused Accretive’s stock to
plummet from over $24 per share on March 29, 2012, to under
$10 per share on April 27, 2012.
    Accretive moved to dismiss all claims on the grounds that
the alleged misrepresentations were mere puffery or immater-
ial omissions not actionable as securities fraud and that ISPBS
did not adequately allege scienter. The motion was fully
briefed, and the district court held a hearing on the motion.
After the hearing, the parties submitted the case to an
established mediation firm and participated in an in-person
session with an experienced mediator. After five weeks of
negotiation, before the district court ruled on the motion to
4                                                    No. 14-2191

dismiss, the parties agreed to the mediator’s proposal of $14
million to settle all claims against Accretive.
    The district court granted ISPBS’s motion for preliminary
approval of the class settlement and plan of distribution and
denied Accretive’s motion to dismiss as moot. The proposed
settlement of $14 million amounted to $0.20 per share, or $0.14
per share once attorneys’ fees and expenses were deducted.
Notice of the proposed settlement and plan of distribution was
sent to over 34,200 potential class members and published in
Investor’s Business Daily and over the Business Wire. Only one
individual opted out of the class settlement, and only Hayes
filed an objection.
    At the fairness hearing, the district court granted final
approval to the class settlement and plan of distribution and
overruled Hayes’s objection. The district court awarded
attorneys’ fees of 30% of the settlement proceeds, or $4.2
million, and expenses in the amount of $63,911.14. Hayes did
not attend the proceedings.
                         II. Discussion
   A district court may approve a class action settlement if it
finds it to be fair, adequate, and reasonable. Fed. R. Civ. P.
23(e)(2). “In the past, we have gone so far as to characterize the
court’s role as akin to the high duty of care that the law
requires of fiduciaries.” Synfuel Technologies, Inc. v. DHL
Express (USA), Inc., 463 F.3d 646, 652–53 (7th Cir. 2006)
(quotation omitted). We review such an approval for an abuse
of discretion. Isby v. Bayh, 75 F.3d 1191, 1196 (7th Cir. 1996).
“Our focus, then, is upon the general principles governing
approval of class action settlements and not upon the
No. 14-2191                                                        5

substantive law governing the claims asserted in the
litigation.” Id. at 1197 (quotation omitted).
    Hayes raises five arguments on appeal: 1) the settlement
recovers too low a percentage of class members’ potential
damages; 2) the plan of distribution provides settlement funds
to those who were not damaged by the alleged fraud; 3) a
district court lacks sufficient information to judge the fairness
of a class action settlement prior to ruling on a motion to
dismiss; 4) we should adopt a rule that attorneys’ fees in class
action settlements are deducted from each claim paid by the
settlement fund at a set rate per share, what he calls “per share
terms”; and, 5) we should direct the district court on remand
to replace the lead plaintiff with the named plaintiff and
himself. We address each argument in turn.
    Hayes’s first argument has two parts. First, he contends
that the district court erred by approving the settlement
because the Private Securities Litigation Reform Act
(“PSLRA”) of 1995 does not allow it. Hayes correctly points out
that Congress enacted the PSLRA to discourage frivolous
securities class actions. Recognizing the “concern over the use
of then-existing class action procedures to bring strike suits in
order to exact extortionate settlements,” Congress enacted the
PSLRA “to discourage frivolous lawsuits by establishing
special procedures for instituting private class actions under
the securities laws.” Hazen, LAW OF SECURITIES REGULATION
§ 12.15[1] (6th ed. 2009) (quotation omitted). See also Tellabs, Inc.
v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007)
(recognizing “the PSLRA’s twin goals: to curb frivolous,
lawyer-driven litigation, while preserving investors’ ability to
recover on meritorious claims”). However, Hayes mistakenly
6                                                     No. 14-2191

equates frivolous lawsuits with those that recover a low
percentage of potential damages. The fact that a lawsuit may
recover a small portion of a plaintiff’s potential damages does
not make it frivolous. A lawsuit is frivolous if it “lacks an
arguable basis either in law or in fact.” Neitzke v. Williams, 490
U.S. 319, 325 (1989). Although Congress expressed concern that
frivolous lawsuits for securities fraud often resulted in limited
recovery for the investor, see S. Rep. No. 104-98 at 9 (1995)
(“The ‘victims’ on whose behalf these lawsuits are allegedly
brought often receive only pennies on the dollar in damages.”),
it also expressed concern that abusive lawsuits often resulted
in exorbitant settlements, see H.R. Conf. Rep. No. 104-369 at 32
(1995) (“In these and other examples of abusive and
manipulative securities litigation, innocent parties are often
forced to pay exorbitant ‘settlements.’”). See also Tellabs, 551
U.S. at 321 (noting that Congress also limited recoverable
damages). When enacting the PSLRA, Congress was not
concerned with low recoveries but with abusive practices; the
PSLRA is not a per se bar to low settlements. See H.R. Cong.
Rep. No 104-369 at 31–32 (1995).
    Next, Hayes relies on our guidance in Reynolds v. Beneficial
Nat’l Bank, 288 F.3d 277 (7th Cir. 2002), that the district court
should “quantify the net expected value of continued litigation
to the class, since a settlement for less than that value would
not be adequate.” Id. at 284–85. In this case, ISPBS did not
provide the district court with a damage estimate from which
it could “estimat[e] the range of possible outcomes and
ascrib[e] a probability to each point on the range” as laid out in
Reynolds. Id. at 285. As ISPBS explained to the district court, for
the court to have quantified the case in this manner would
No. 14-2191                                                       7

have required testimony by a damages expert. Any such
testimony would have been hotly contested by Accretive. This
would have resulted in a lengthy and expensive battle of the
experts, with the costs of such a battle borne by the
class—exactly the type of litigation the parties were hoping to
avoid by settling.
    Rather, the district court followed our general, long-
standing guidance on the matter, namely, that when
conducting a fairness determination relevant factors include:
“(1) the strength of the case for plaintiffs on the merits,
balanced against the extent of settlement offer; (2) the
complexity, length, and expense of further litigation; (3) the
amount of opposition to the settlement; (4) the reaction of
members of the class to the settlement; (5) the opinion of
competent counsel; and (6) stage of the proceedings and the
amount of discovery completed.” Gautreaux v. Pierce, 690 F.2d
616, 631 (7th Cir. 1982) (citing Armstrong v. Board of School
Directors, 616 F.2d 305, 314 (7th Cir. 1980)); see also E.E.O.C. v.
Hiram Walker & Sons, Inc., 768 F.2d 884, 889 (7th Cir. 1985)
(restating factors), Isby, 75 F.3d at 1199 (same), and Synfuel, 463
F.3d at 653 (same). We have deemed the first factor to be the
most important: “The most important factor relevant to the
fairness of a class action settlement is the strength of plaintiff’s
case on the merits balanced against the amount offered in the
settlement.” In re Gen. Motors Corp. Engine Interchange Litig., 594
F.2d 1106, 1132 n.44 (7th Cir. 1979); see also Synfuel, 463 F.3d at
653 (quoting same).
   The district court considered numerous documents
provided by the parties concerning these factors. Accretive was
prepared to vigorously contest the lawsuit, having raised
8                                                   No. 14-2191

potentially valid defenses. Accretive’s motion to dismiss was
fully briefed and argued before the district court. Further
litigation almost certainly would have involved complex and
lengthy discovery and expert testimony. Insurance proceeds to
fund a settlement or judgment were a limited, wasting asset,
i.e., further defense costs would have reduced those funds. Of
the over 34,200 potential class members identified, only one
individual opted out and only Hayes objected to the
settlement. The counsel who negotiated the settlement during
mediation, and ultimately agreed to the mediator’s proposal,
are highly experienced. Although formal discovery had not
commenced, ISPBS had access to extensive public documents,
such as the Minnesota Attorney General’s report (which
included internal company documents otherwise unobtainable
up to this point in the proceedings), the Minnesota Department
of Health’s findings, U.S. Senate hearing transcripts, and a
number of potential witness interviews. Finally, and
importantly, the settlement was proposed by an experienced
third-party mediator after an arm’s-length negotiation where
the parties’ positions on liability and damages were extensively
briefed and debated. So, although we have said that a district
court generally should attempt “to quantify the net expected
value of continued litigation,” Reynolds, 228 F.3d at 284, it was
not an abuse of discretion to approve the settlement without
doing so here. Unlike Reynolds, there were no “suspicious
circumstances.” Id. The settlement was reached through
extensive arm’s-length negotiations with an experienced third-
party mediator, the parties contentiously litigated a motion to
dismiss, and the district court considered the other factors
above.
No. 14-2191                                                       9

    In his second argument, Hayes argues that the district court
abused its discretion by approving a plan of distribution that
includes class members not damaged by the alleged fraud. His
argument relies on Dura Pharmaceuticals, Inc., v. Broudo, 544
U.S. 336 (2005), in which the Supreme Court held that “[a]
private plaintiff who claims security fraud must prove that the
defendant’s fraud caused the economic loss.” Id. at 338. In so
doing, Dura stated that proof that a plaintiff sold an inflated
security at a loss is by itself insufficient to establish loss
causation. Id. at 343. One way of establishing loss causation is
to “show both that the defendants’ alleged misrepresentations
artificially inflated the price of the stock and that the value of
the stock declined once the market learned of the deception.”
Ray v. Citigroup Global Markets, Inc., 482 F.3d 991, 995 (7th Cir.
2007). That is the method ISPBS relied upon here. In its
amended complaint, ISPBS alleged that the truth of Accretive’s
misrepresentations was revealed over a period of
approximately one month in 2012 that covered the disclosures
of March 29, April 24, and April 27, and that the timing and
magnitude of the declines in Accretive common stock
following these disclosures established loss causation. Thus,
those class members who sold their Accretive common stock
before March 29, 2012, the first corrective price decline, cannot
be said to have suffered economic loss caused by Accretive’s
alleged fraud.
    However, the plan of distribution states that class members
will be eligible for a distribution if they suffered a net loss from
all transactions of Accretive common stock purchased or
acquired during the class period. The plan of distribution
accounts for, among others, those who purchased stock on or
10                                                 No. 14-2191

after November 10, 2010 and sold the stock on or after
November 10, 2010 through April 26, 2012. This period of time
includes those who purchased stock during the class period
and sold it before the first corrective disclosure on March 29,
2012, i.e., those who cannot show loss causation. Furthermore,
the stock was sufficiently volatile during this period that some
of those who sold before March 29, 2012 suffered a net loss.
The plan of distribution, then, appears to be overbroad because
it appears to provide for those who cannot show loss causation
but can show a net loss.
    Hayes’s position is that the district court abused its
discretion by approving a plan of distribution that provides for
those who cannot show damages, i.e., loss causation, even
though it defined the class for purposes of settlement as those
individuals who purchased Accretive common stock during
the class period “and who were damaged by Defendants’
alleged violations.” (Emphasis added.) Yet, he is mistaken. The
plan of distribution, in fact, does not provide for those who
cannot show loss causation. An examination of the formula
used to calculate settlement distributions reveals that only
those who can show loss causation, i.e., those that held their
stock until March 29, 2012, will receive a distribution. The
claim per share for those who sold before March 29, 2012 will
No. 14-2191                                                                  11

always be zero.2 Thus, the district court did not abuse its
discretion by approving the plan of distribution.
    Hayes’s last three arguments are waived on appeal because
he failed to raise them at the trial level. See Taubenfeld v. AON
Corp., 415 F.3d 597, 599 (7th Cir. 2005); Costello v. Grundon, 651
F.3d 614, 641 (7th Cir. 2011). The waiver of his fourth and fifth
arguments is straightforward, but the waiver of his third
argument requires some explanation. In the court below,
Hayes objected to the settlement on the grounds that the
district court could not have adequately determined the
settlement’s fairness because it established neither the legal
sufficiency of ISPBS’s claims nor the class’s commonality and
typicality as required by Fed. R. Civ. P. 23(a). But now Hayes
presents the very specific argument that the district court
should not have approved the settlement without first testing
ISPBS’s claims by ruling on Accretive’s motion to dismiss. This
argument now before us is sufficiently different from that
raised below to be considered newly raised, and therefore

2
  The portion of the distribution formula at issue is
         If sold on or between November 10, 2010 through April 26,
         2012, inclusive, the claim per share shall be the lesser of (i)
         the inflation in Table A at the time of purchase less the
         inflation in Table A at the time of sale; and (ii) the
         difference between the purchase price and the selling
         price.
Settlement Agreement, Ex. A-1 at 14. Importantly, Table A has one value for
the inflation during the time period of November 10, 2010 through March
28, 2012, that is $13.37. Id. at 15. So, the calculation for all claims involving
sales before March 29, 2012 (those without loss causation) will always be
zero: $13.37 – $13.37 = 0.
12                                                No. 14-2191

waived. Nevertheless, a review of our discussion concerning
the second part of Hayes’s first argument, supra, shows that
this new argument is also without merit.
                       III. Conclusion
   Because the district court’s approval of the settlement and
plan of distribution was not an abuse of discretion, we
AFFIRM.
