Disclosure-Only Settlement Over Walgreens Boots Deal Nixed
Bloomberg BNA reports on CEI's Center for Class Action Fairness's win in their objection against a settlement that granted huge attorneys fees but left class members with only worthless merger details.
The settlement of a shareholder class action over the deal that created Walgreens Boots Alliance Inc. was rejected by a divided federal appeals court Aug. 10 ( In re Walgreen Co. Stockholder Litig. , 2016 BL 258303, 7th Cir., No. 15-3799, 8/10/16 ).
The U.S. Court of Appeals for the Seventh Circuit, in a 2-1 decision, reversed a lower court's approval of the settlement that released the shareholder plaintiffs' disclosure claims and awarded $370,000 in fees to the plaintiffs' counsel.
The decision may be the first by a federal appeals court to apply the Delaware Chancery Court's In re Trulia Inc. Stockholder Litig. standard.
In such settlements, shareholders agree to broadly release the company from their lawsuit in exchange for supplemental disclosures. While they don't receive any money in the resolution, their lawyers are paid attorneys' fees by the defendants.
Ted Frank, director of the Competitive Enterprise Institute’s Center for Class Action Fairness, which objected to the settlement, described the Seventh Circuit decision as a “tremendous victory” for shareholders.
Lawsuits challenging proposed mergers that are brought for the purpose of quickly obtaining fees for plaintiffs’ lawyers rather than producing any benefit for shareholders cost companies millions of dollars, Frank said in a statement. “We hope other courts follow Delaware and the Seventh Circuit in taking steps to shut down this racket,” he said.
Read the full article at Bloomberg BNA.