Chancery Scrutinizes Fee Request in Disclosure-Only Settlement

In a recent memorandum opinion, In re Riverbed Technology Stockholders Litigation, Cons. C.A. No. 10484-VCG (Del. Ch. Sept. 17, 2015), the Delaware Court of Chancery indicated that approval of class action settlements would be subject to heightened scrutiny going forward, especially where, as here, additional corporate disclosures were the only benefit obtained in the action.

Riverbed arose out of a merger in which all of the outstanding shares of Riverbed Technology Inc. were acquired by third parties. The plaintiffs, who were shareholders of Riverbed, sought to enjoin the merger on the grounds that the company was undervalued and the process was tainted by conflicts of interest. The plaintiffs also raised a number of disclosure claims, some of which were mooted by the filing of a definitive proxy. The parties then settled the balance of the action, in which the company agreed to provide supplemental disclosures before the stockholder vote, in exchange for a broad release. The parties also agreed that the defendants would not oppose the plaintiffs’ request for a fee award of $500,000.