Chancery Court Scrutiny of Nonmonetary Settlements Continues

At a July 8 hearing in Acevedo v. Aeroflex Holding, C.A. No. 9730-VCL, Delaware Court of Chancery Vice Chancellor J. Travis Laster declined to approve a proposed settlement of shareholder litigation challenging the acquisition of Aeroflex by Cobham PLC, a Great Britain-based manufacturing company. The proposed settlement involved supplemental disclosures and modifications to deal protections, including a 40 percent drop in the breakup fee and a reduction in the buyer’s matching rights from four to three days. The defendants agreed not to object to an award of attorney fees to plaintiffs counsel up to $825,000. The plaintiff, on behalf of a putative class, agreed to a broad and general release of claims that were asserted or could have been asserted against the defendants.

Laster ruled the proposed settlement brought no value to the putative class. At the settlement hearing, the plaintiff conceded that discovery did not uncover any “divergence of interest” between Aeroflex’s 76 percent stockholder and the interests of stockholders as a whole. In the vice chancellor’s words, “This was not a conflicted board” and therefore the deal protection modifications were “cosmetic” and insufficient to support the settlement.