Judge Blasts Plaintiff's
Lawyers in Talbots Deal Case
Says Disclosure Settlement
Benefited the Attorneys More Than Shareholders
Dec. 26, 2013 4:29
shareholders who sued for a higher price received no more. Their
lawyers collected $237,500. Bloomberg
Delaware's top corporate-law judge blasted the lawyers who challenged
last year's takeover of retailer Talbots Inc., saying the settlement
they negotiated benefited their firms more than the shareholders they
Still, Chancellor Leo E. Strine Jr. approved the requested $237,500
fee for the lawyers representing a group of Talbots shareholders,
saying it wasn't his place to reject a negotiated settlement.
said he "easily" could have awarded as little as $50,000 for the work,
about one-tenth of the going rate for M&A lawsuits, according to a
recent study by Cornerstone Research.
social utility of cases like this continuing to be resolved in this
way is dubious," the chancellor said at a Dec. 16 hearing, according
to a transcript.
added: "If it were a perfect world, this case would have simply been
graciously withdrawn by all the plaintiffs' lawyers...and [they would
have] said, 'Our bad, and our apologies to the directors.'"
Lawyers, led by Juan Monteverde from Faruqi & Faruqi LLP and Shannon
Hopkins from Levi & Korsinsky LLP, sued Talbots after it agreed to
sell itself to private-equity firm Sycamore Partners LLC for $2.75 a
share, or about $193 million. The suit alleged that the company's
board failed to get a fair price.
spokesman for Sycamore declined to comment. Messages and emails to Mr.
Monteverde and Ms. Hopkins weren't returned on Thursday.
the settlement approved by Mr. Strine, existing shareholders didn't
receive a higher price for their shares. Instead, Talbots agreed to
disclose some additional details about the deal, including one
analyst's bullish outlook for the company and assurances that
Talbots's financial advisor, Perella Weinberg Partners LP, didn't have
any conflicts of interest.
cannot get anywhere close to finding that these things are a material
disclosure," Mr. Strine said, suggesting the information didn't mean
much to shareholders, who approved the deal in August 2012.
number of private lawsuits over mergers and acquisitions has soared in
recent years. In 2007 shareholders challenged 53% of transactions over
$500 million, according to Cornerstone Research. Through the first
three quarters of 2013, the figure was 98%. The average deal now draws
six lawsuits filed in different state and federal courts, Cornerstone
80% of these cases settle as the Talbots case did, with no additional
money for shareholders. Instead, companies agree to make more
disclosures and pay the plaintiffs' legal fees. In return, they get to
close their deal without the threat of a long court battle.
Chancellor Strine, a member of the chancery court since 1998 and its
chief judge for the last year and a half, has shown thinning patience
for these "disclosure-only" settlements. In March, he rejected such a
pact to end litigation over the sale of reinsurer Transatlantic
Holdings Inc., saying the plaintiffs had "achieved nothing substantial
for the class."
Write to Liz Hoffman at
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