Sean Griffith was quoted in a Reuters article about M&A shareholder litigation.
Fordham professor Sean Griffith, who has been in the vanguard of disclosure-only settlement detractors and submitted an amicus brief urging the chancellor to reject the Zillow agreement, said it’s significant that Bouchard laid out Chancery’s new expectations in an opinion refusing to approve a proposed settlement. (As you may recall, Vice-Chancellor Sam Glasscock warned the Delaware bar in his Sept. 17 opinion in In re Riverbed Technology that the court would frown on disclosure-only deals going forward, but his discussion was dicta because he approved the Riverbed settlement, albeit reluctantly.) I learned from Bouchard’s opinion that plaintiffs’ lawyers have been receiving fee awards from disclosure-only settlements since at least 1996, so the Zillow decision marks the end of a 20-year trend.
The opinion outlined two ways in which plaintiffs’ lawyers can still ask Chancery Court to judge disclosures that supposedly benefit the class – just not in the context of settlements. The first is in a contested preliminary injunction hearing. Until the new crackdown, Bouchard explained, too many plaintiffs’ lawyers used the threat of injunction hearings to push defendants into quick disclosure-only settlements. (You can discern the chancellor’s recent experience as a practitioner in his understanding of such tactics; he cites a soon-to-be-published paper by his former law partner Joel Friedlander that details how second-tier law firms gamed the system to settle quickly and cheaply.) Bouchard said plaintiffs’ lawyers who forced defendants to beef up disclosures in adversarial injunction proceedings could have a shot at persuading the court that the disclosure matters to shareholders. It won’t be easy, though: The chancellor’s opinion, according to Fordham professor Griffith, sets a high bar for materiality.
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The chancellor strongly implied that Chancery Court isn’t going to award a whole lot of money in mootness fees tied to defendants’ voluntary disclosures, and Griffith said defendants may not even agree to these deals because they don’t include broad releases.