Kudos to Sean Griffith for his campaign to object to disclosure-only settlements of mergers and acquisitions litigation, which typically benefit only the lawyers on both sides. Although Sean lost this round, the court's opinion bodes well for a future crackdown on abusive M&A lawsuits and these lousy settlements. Alison Frankel has the details:
On Thursday, Vice Chancellor Sam Glasscock issued a written opinion reluctantly approving a settlement in which a class of Riverbed Technologies shareholders challenging Thoma Bravo’s $3.6 billion acquisition of the company granted broad litigation releases in exchange for meager disclosures in proxy materials. As you may recall, Fordham law professor Sean Griffith had formally objected to the settlement, arguing that the additional disclosures didn’t benefit shareholders. Plaintiffs’ lawyers led by Block & Leviton defended the disclosures and asserted that Griffith didn’t have standing because he bought Riverbed shares after the deal was announced, specifically so he could object to a prospective disclosure-only settlement.
Glasscock ruled Griffith did have standing, a boon for the law professor’s announced campaign to object to similar settlements in M&A cases. The judge also agreed the disclosures obtained by plaintiffs’ lawyers weren’t worth much to Riverbed shareholders. He decided to approve the settlement – albeit cutting the deal’s fees for plaintiffs’ lawyers – mostly because when the agreement was negotiated, both sides had a reasonable expectation, based on Delaware precedent, that it would be approved. ...
But the vice chancellor said that shouldn’t be anyone’s expectation going forward. His written opinion is the culmination of a summer of discontent for Chancery Court judges evaluating disclosure-only M&A settlements.
As Frankel further explains:
Chancellor Andre Bouchard, in a series of hearings, confirmed that Chancery Court is going to give “more scrutiny on some of the give and the get of these things.”
After musing from the bench about his “concern that a lot of the stuff that has been occurring historically is very fluffy,” and warning that “everybody would be well-advised to make sure you have got something real before you package one of these up and bring it in to the court" ....
On Wednesday, the chancellor finally declined to approval a settlement, instead asking lawyers for both shareholders and defendants in In re Trulia Stockholder Litigation for additional briefing on the standard for evaluating the materiality of the disclosures plaintiffs’ lawyers obtained and on the scope of the releases they agreed to. “We’re talking about the underbelly of settlements,” Bouchard said. “It’s easy to go back to ‘it’s standard,’ and I’m not faulting you for that … But then again, when I started practicing, very few people sued on every deal, and we never dealt with the kind of volume of this stuff that we see nowadays. And it just can’t be that this is socially useful.”
Fordham professor and Riverbed objector Griffith said the Riverbed written opinion crystallized the message Chancery judges have been sending from the bench all summer: The days of reflexive approval for disclosure-only settlements (and accompanying lawyers’ fees of several hundred thousand dollars) are over. “Once they clear the pipeline, they are going to do something different going forward,” Griffith said.
