Directors of a Delaware corporation found that Morris James’ counsel took what could have been an expensive, time-consuming and burdensome shareholder suit and turned it into a successful court-approved mediated settlement that let the companies get back to business.
Directors of a Delaware corporation found themselves in defending class and derivative litigation which was expensive and a burden and distraction for existing management. The litigation arose out of a merger transaction involving two companies controlled by the same shareholder. Plaintiffs alleged that the directors of a Delaware corporation breached their fiduciary duties by favoring the acquiring party in the transaction at the expense of the shareholders of the target corporation.
At the conclusion of discovery and on the eve of summary judgment briefing, the Company elected to appoint a special litigation committee consisting of two independent and disinterested directors. Those directors chose Morris James LLP as their counsel to provide advice concerning Delaware law.
After an expedited review of an extensive documentary record, scores of deposition transcripts, a thorough legal analysis of the potential claims and defenses, interviews of counsel for the plaintiffs, the financial advisor for the subject company, and the inside and outside director defendants, and the retention of a forensic expert to assist in evaluating the parties’ positions on damages, the special litigation committee determined that it would best advance the company’s interests if the special litigation committee could broker a settlement. At the same time Morris James developed a detailed analysis for the special litigation committee’s consideration concerning the strength of the claims and the possible actions of the special litigation committee in the event the parties could not settle, including dismissing some of the claims, assuming the defense of the litigation or allowing the plaintiffs to continue with prosecution of some or all of the claims.
Following settlement discussions mediated by the special litigation committee in Morris James’ offices, the parties achieved a settlement. The court in which the underlying litigation was pending approved the settlement following notice to the stockholders. The settlement resulted in a substantial monetary payment to the company, including forgiveness of debt. The case involved complex issues regarding the difference between direct and derivative claims, the applicable standard of review, calculation of damages, and potential liability of financial advisors. The settlement enabled the company to continue with its business and avoid legal fees that would have been incurred at a trial and subsequent appeals.
In short, Morris James counseled the special litigation committee regarding its fiduciary duties and in how to achieve a court-approved settlement that enabled the company to concentrate on its business while achieving substantial monetary compensation for the company and its shareholders.