Court of Chancery Approves Disclosure Settlement Post-Trulia and Finds Management Projections Plainly Material
In re BTU International, Inc. Stockholders Litigation, Consol. C.A. No. 10310-CB (Del. Ch. Feb. 18, 2016)(Transcript)
As detailed in a prior post (available here), the ruling in In re Trulia, Inc. Stockholders Litigation, 2016 WL 270821 (Del. Ch. Jan. 22, 2016) changed the legal landscape for so-called disclosure settlements. Among other things, Trulia holds that disclosures must be “plainly material” to support a disclosure settlement – meaning that it “should not be a close call that the supplemental information is material as that term is defined under Delaware law.” Exactly what disclosures fit into that category remained an open question.
Answers have started to come. First, in rejecting a proposed settlement in Haverhill Retirement System v. Richard A. Kerley, et al. and The Providence Service Corp., C.A. No. 11149-VCL (Del. Ch. Feb. 9, 2016) (Transcript), the Court viewed conflicts of interest at the board, management, advisor, and significant stockholder levels as satisfying Trulia’s "plainly material" standard.
Now, as reported by The Chancery Daily (article behind paywall), the Court in BTU found that management free cash flow projections also satisfy Trulia’s "plainly material" standard. Also notable, and according to The Chancery Daily’s report, the Court’s bench ruling in BTU represents the first post-Trulia decision finding disclosures “plainly material,” accepting the proposed release for defendants as sufficiently narrow, and approving of the merger class action settlement.