In the second half of 2015, the Delaware Court of Chancery seemed to say “enough” with respect to so-called “disclosure-only” settlements in M&A class actions. Having previously voiced concerns over class settlements that provided stockholders with non-monetary consideration in exchange for all-encompassing releases, while compensating plaintiffs’ counsel for what the court considered to be underwhelming results, last year, the court began rejecting such settlements. The question going forward is whether developments in Delaware will simply divert the routine rush of litigation that follows a public company merger announcement to other states or actually stem the tide.
‘Deal Tax’ or ‘Deal Insurance’?
Disclosure-only settlements have become “the most common method for quickly resolving stockholder lawsuits that are filed routinely in response to the announcement of virtually every transaction involving the acquisition of a public corporation.”1 In such settlements, the company to be acquired typically agrees to “supplement the proxy materials disseminated to its stockholders before they vote on the proposed transaction to include some additional information that theoretically would allow the stockholders to be better informed in exercising their franchise rights. In exchange, plaintiffs drop their motion to preliminarily enjoin the transaction and agree to provide a release of claims on behalf of a proposed class of [the target's] stockholders.”2 Last but not least, the plaintiffs’ lawyers get paid some modest fee for their “efforts.”
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.
For questions call 1-877-256-2472 or contact us at [email protected]
