Professor Sean Griffith’s victory in a pro-bono case on disclosure settlements in merger lawsuits has been featured in a D&O Diary article.
In May 2015, Quality Distribution announced that it had entered an agreement to be acquired by Apax Partners. In June 2015, Richard Delman, a Quality Distribution shareholder, filed a class action lawsuit against Quality Distribution, its board, and Apax, alleging that Quality Distribution’s board had engaged in a flawed sales practice and agreed to an inadequate sales price. Delman also alleged that the proxy materials about the proposed transaction omitted material information.
In August 2015, the parties reached a settlement agreement.
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While the settlement approval process was pending, Sean Griffith, a Fordham University Law School professor and activist investor who owns Quality Distribution shares, submitted an objection to the settlement. Griffith objected to the settlement on several grounds, including his contentions that the additional disclosures were not material; that the released claims had not been adequately investigated by plaintiffs’ counsel; and the plaintiffs’ fee request should be rejected because the litigation did not provide substantial benefit to the shareholders. Griffith urged the trial court to adopt the Delaware test under the Trulia decision for the review of disclosure only settlements. (Griffith has actively been fighting disclosure only settlements in various courts; indeed, he filed an amicus brief in Delaware in the Trulia case itself.)
The trial court ultimately approved the settlement, despite acknowledging that Trulia is “good law in Florida.” Among other things, the trial court ruled that the parties’ proposed release was “narrowly tailored to match the scope of issues in the case.” With respect to the supplemental disclosures, the trial court said that even if they were immaterial, the settlement is “the better choice among the alternatives,” citing the Florida courts’ strong interest favoring the resolution of cases. Griffith appealed.