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Summaries and analysis of recent Delaware court decisions concerning business-related litigation.

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Showing 5 posts in Settlements.

Citing Trulia and Walgreens Decisions, Federal District Court Orders Plaintiffs’ Counsel to Return Agreed-Upon Mootness Fee

Posted In Class Actions, M&A, Settlements

House v. Akorn, Inc., Consol. Nos. 17-C-5018, 17-C-5022, 17-C-5026 (N.D. Ill. Jun. 24, 2019).

Disclosure-only settlements of stockholder class actions have received increased scrutiny following the Delaware Court of Chancery’s Trulia decision in 2016 and the Seventh Circuit Court of Appeals’ Walgreens decision later that year.  Those decisions observed the problem of M&A strike suits, expressed disfavor of disclosure-only settlements in M&A class actions, and significantly raised the bar for getting the required court approval of such settlements.  One consequence has been many M&A suits migrating from the Delaware Court of Chancery to federal courts around the country.  Another has been defendants more frequently acting to voluntarily moot the claimed disclosure violations through supplemental disclosures.  In that instance, the parties then face the choice of either litigating the appropriate mootness fee award to plaintiffs’ counsel for the supplemental disclosures prompted by their claims or, alternatively, privately negotiating the mootness fee award and thus avoiding the judicial process, provided no other stockholders object to the negotiated award.  More ›

Court Of Chancery Declines To Approve Derivative Settlement

Posted In Derivative Claims, Settlements

Stein v. Blankfein, C.A. 2017-0354-SG (October 23, 2018)

This is the rare decision that declines to approve the settlement of a derivative suit. The Court rejected the settlement because the proposed terms required the corporation, as a nominal defendant, to release breach of fiduciary duty claims against the director defendants in return for which those directors would agree to make disclosures already required by law. The Court viewed that agreeing to do what you had to do anyway as providing no real consideration for the release of the claims. This result illustrates the scrutiny the Court of Chancery applies to such settlements that affect corporate and stockholder rights.

Court of Chancery Approves Disclosure Settlement Post-Trulia and Finds Management Projections Plainly Material

Posted In Settlements

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. More ›

Court of Chancery Targets “Deal Tax” Litigation By Increasing its Scrutiny of “Disclosure-Only” Settlements

Posted In Settlements

Albert Manwaring and Albert Caroll

            M&A lawsuits and so-called “disclosure-only” settlements – where stockholder plaintiffs drop their requests to enjoin a deal and grant defendants broad releases primarily in exchange for supplemental disclosures to stockholders, followed by requests for six-figure attorneys’ fee awards – have proliferated in recent years.  In turn, these lawsuits have faced increasing scrutiny from scholars, practitioners, and members of the judiciary, who assert that these ubiquitous settlements rarely yield genuine benefits for stockholders, threaten the loss of potentially valuable claims that have not been sufficiently investigated, and only serve the interests of opportunistic plaintiffs’ counsel and defendants happy to acquire a form of deal insurance through a broad release of class action claims challenging the merger. More ›