Gordon v Verizon Communications, Inc.

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Gordon v Verizon Communications, Inc. 2014 NY Slip Op 33367(U) December 19, 2014 Supreme Court, New York County Docket Number: 653084/13 Judge: Melvin L. Schweitzer Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various state and local government websites. These include the New York State Unified Court System's E-Courts Service, and the Bronx County Clerk's office. This opinion is uncorrected and not selected for official publication. [* 1] SUPREME COURT OF THE STATE OF NEW ¥QRK c'OiJNTY OFNE:W YORK : PART 45 . NATALIE GQRDON~ o.nbehl,llf ~fflerselfancl ~T$ Similarly S1tuared) • .. . . In<l~x'No.. 65~084113 . . .a~~t~ VERIZON COMMUNICATIONS,, INC.~ LOWELL C. ¥cADAM, RlCHAJOJL. CARRJONREXACtl:~ DECISION AND ORDER Motion ,Sequ¢nce iqQ .. OQl M.ELANIEt.. HEA.LEY•. MARTHA FAANCBS-lCEETH, ROBERT W~ LAglE,: M.tt, S'ANDRA 0. MOOSE~ M~D~~ JQ&E.PH'NEUBA.tJER~ DONALJJT. NICQLAlS-EN~ ClARENOE-OTl~,.JR:, HUGHB. PRICE. RdDNEYEARt SLATER,: KATHRYN A, TESUA> and G{lEGQRY D~ WASSON, Defendants, MELVIN L. SCHWEITZER, J.: i.•ckgl'Q_.nd Thi~ isa PtJ~V~ cla$s ®tiqn litigatioIJ centered on an acquisition by· Vetizan C.ommanications, Inc. (the Company) ofa substantial, minority int~est itf~ wii:elrss caniey. Plaintiff teqµesb tb~Ohe, court gtanffi~l-approvatofa settlement set f4rth in th~ Stipulation atid A.greem,nt afCompromise,. '.Settlt<ment. and Release, dated July 31~ 2014 (Settletj:ient).. Plaintiff and ,plaintiffs counsel believe th~t the Settlement is i!i 'ht.lbest i~t~rest$ of the propb$ed C1$s. On Sc;ptemb~r.::t 2Q}j, tbe Company publicly announced that it had enter~d irtf(Ht 4dinitiveStockPurchaseAgreement with 'Vodafone Group Plc tVo<Iafone) fo ac(ri~~reYodafo.ne. .subsidianes holding a$ t}leirprincipal assets a 45%. interest.'in Cell~o Partnership tl/lJ/:a Veri2.on [* 2] Wireless (Veric.On Wireless) fora purchase (:)rice of apptox,imately $130 biJtipn; consisting prifuttrily of cash and Qompapy C01llt1lO.n stock (Transaction,). On .September S,. 2013, plaintiff filed an action (Action) challenging theTransactibn. The cote of.the Action was the allegation that the Com,pany~s.f:>oar4 of directors brea¢hed its· fid:uciary dut¥ to its $hitteholder~iili <?onnection with the T!:ansactiort.cm.1$.ing the CotJ+pany to pay an aUegedly e:s~essive and dilutive pr±ee in the Transaction• . OCtpber ~~ 2013. the Crimpany tiled with tl1~ Se¢µtities an9,Exch~e.Commis~ion On (the SEC) a Preliminary Proxy State~ntpn Sched\lle t:4A (Preliminary PcroxyJ.aetaiHngthe terms and backgl'oun.d.oftlte Transaction and certain analyses perfotmed by JPMorgan Secl.lrities LLC(JPMorgan)in coilileetion With the Tra,nsa,ction. On 0Gtober 22,2013 .. plaintifffiled an Amended Ciass A.etionComplaintand asSerted additional ·claims. for breaches .of fidueiafy duty resulting ftoltl' defendants' failure to disclose material infurmation ooncernirtg theTrar:u~ac.tjon in the Preliminary Proxy. In November and Pecem.b~r2Ql 3, the parties ene;aged in ne~oti:ations in.an effort: to reach a resolution otthe Actfon. On Deceniber 6i 2013.1 counselt~ched anagreementi.in..:prihcipJ¢ to settle theAetidn whereitu.iefehdfm.ts w(}µld {l) ~;re~.tq di~minate,tQ: the,·Compuny1s ~harehPld,ers.certajn ~diti{')n~ disclosµresand (2) ~fora.period of:tibree·(S)yearsthereafter~ in the evenHhe Comy.;t11y engages.in a transaction involving the sale tq athit'd ~ pqrp}Jt\Serqr spin.. off of assets.of Venzon WireleS$ h;aving (.\ bo.o.k va.I\le.ofin exeessof$14:4 billion (i.e. a;pptoxima,ely $% of $28$.9 pi11ion, .the im:plf~ equity value of fOO% ofVerizan Wireless referenced under tM heading ~"'rtansacdon Overview'' on p'l-Se 38 of the Ptell;nu®fY Proxy Statement), thatthe'Gompany·~haB obu,rin a fairness opjnjo11..froui ~ lnd~pendent finarndal [* 3] advisot(or h1 the case of~ spih-otf, financial:adviee from'an inde~ridentfinancial ndvispr). Pla.infiffha(j dc;cidedtha.tthestrength,and wea,knesses oft'he claims) balanced ~nst the benefits of the $e,ttlement,. fa.voted settlement. On December lO, 2013, the C(>.ntpany filed a.definitive ..P:l'.oxy Statement on Schedule 14A With ~be SEC (DefiJl.itive,.Proxy) to sqlicit:sbareholders fQ vote infavor ofthe Transaction and ~ht!duled a shareholder vote for January 28, 2()14. The Defimtive Proxy focludea a number of additional diselo:Stifes :ii()t contained in the Prelin1in~ty :Proxy. (t)le Supplemental. Disc I(:)$~$). The Corripany's sha,cholders. th~n ypted to approve the issuance ofshares for the·. Company to Ml:JUitt .Vodafone's.45% interest in Verizon Wireless. on:Ja:rtumy Z81 2014. On October 6:. ~.Ol 4, the court issu~d a Scheduling O~dt.'lr which, (i) preliminarily certified the Action as.a class action, .(ii) .prelimin~rily a,pproved the Settlement an.d {lit) scheduled a hearing to detennhte whetherthe Settlement should receive the final appfuva.l ofthe court as being fair~· reasonable,~ adeqµate and ltt the. ~stinterestl' ·oHheclass; The. h~irtg wasbeld on Det;ember 2, 2014, T~ obJectors appeared and spoke~ asweff as Professpr Sef.Hl Griffith~ TJ. MaJo~y PIOfessor ofLaw at f~ordham UnNersityS.Chool oftaw~ ·wbJJ spoke on behalf: of one of the t:tbJectots. The stfong/QpJX>sitiqnto the! proposed settl.em:ent voi~ed by the ob}ettors at the fairness be~and in their submlssions has moved the court to take a®cond: lQQk ~t th¢ ,e.rms ofthe 3 [* 4] The court is dealing here with a settlementrela.tingto a n:egotla.ted acquisition involving remedial disch.Jsut¢ (kQown as a disclesute;.only ~ttlemetjt), :accompanied by' a substantive undertaki~g with respect tQ futur~ asset sa:les. The clisclosute:.;onfy settlement is a prncedural device used to oondude litigation that invariably oceompan:ies acquisitfons of publicly traded oorporatioo~, In. fact~ ()Ver ninety seven Nrcent ofsuch fra.n~tiQns: a.ttrru::t at 1east Gne s.ha~eb,older 1~wsui:t, and many :attract ~veral sueh suits, o.ften filed in multiple jurisdictions. 1 Most ofthis litigation settles; but pec11niary::feHefis rm:e~. Settletnentstypi~aJly are b3$ed on a Enhanced or corrected disclosure, to be adequateto support a settlement, must be a material improvement over.what had previously been discl9secl~ The cl8$s is being divested.of valuable rights in the'form ofa broad release ofclaitns executed by the plaintiff. Such action cannot be justified by trivial disel osU:re adjustments,; but rather only if "the aqditional di~clos,utes materially enhtini;i:e[dl'the [!:!OOeholctersJ lcn.awl~ge a}l,qut th~ me.rg~:r. '' tJ~CShJu:ehcJ}der U.ti:gatton, No. 82$4..VCN at32 Inr~ Copgrio En~rgy, (bel Clt2013), Jn te Sauet~JJanfosslnc; S'holdets. L'itig., 65 Ald. ll l 6., 1127 (Del Ch 2011 ). ~icall;\ ma~etj.Al d,j:;.'C~osures~ullcov~r 1Jilllfi~h, S~ Griffin a11q St~ven Scilomon, Confronting the Peppercomf96 Texas Law Rev. (fo{tiu::0,ming 2014). · 2 It P.id,nes & 0, ·KQtm;U'ian, $narehQ~~r Litigatiqn(P~Q. 2Q 13)at 6, .4 ' [* 5] analyzing p.dor tases·mvolving suppl~mental disclosµrc;ist,tbat tµaterial dil,;closures tended to focus on "previoqslywithbefd projections or undisclosed contlic.tsfaced byfidud:aries ortheir adVis<>r$-'). See. also Jn re PAETEC Holding Cotp. Sharehoitilet;~· LiligaUcn, CA No. 676.1..;VCG ·{Mar. 19, 2013) (en;kp.basizing importance of disclosing previously unreported ~ontliets). Merely providihg additional infonnatiott ~unless the additfonal infortnatiot1 offers a contrary; perspect(ve an what has previously been disclosed - does 11ot constitute maten!').} disclosure. For examples ofadditional det~U$ fajlirig .t.CI ri~ tQ .tbc sta,ndard.otmat~rjality~ see A.~rqru v ;Al(aree1 91 l .A2d' 8'0.$. 813 (Del Ch 2006) (~tconsist~t and redundant facts do not alter· Smilh v Curaget1 Corp. CA, No. 4670~VCS, at 21 (Del Ch Nov 9, 2()Q9.) (TS)(court ·~reluctant .to .. ,. reward settlements simply because tthere~s rncm~infonnation disclosed whicli gfves.people a reason to vote in accordance: with the board~s origi11:,:tl recorfuii~rid3:tjol1."), Even whenthe additional infonnation goes to the sensitivedetails·of a finan~ial advisor1s fairness analysis~ the Jn re Amylin. Pharmaceuticals S'holdets Litig., C.A. 7()13..cs1 at· 9 (Tntt1Scriph Febl:uw."Y 5, 20{3) number i;\fe $~ ttivialor oJ,vi~qsly red,undant {SS to add nothing of material value fr6m a disclo~w;e standpoint. They need not bedealtWithfo this decision whicil seeicsto. grMY,pl~ with the essence of the Settl~ment. Itl this :t¢gatd~ there really ~te ft)ur main ·supplemental Disclosures [* 6] that. becatise'they gQto valuatfon:, could potentially materially e:nhance the disd9sure CQnt~ned in the Pre:Hmi nl;lry Proxy. and the c-0urt chooses fo focus, on these four as: the 'predi¢afo for the Supplanental Disclbsutesportion of,its opinion. These are (1}the di5cfo$Ur<>on page 30 of the Definitive Proxy stating that the Omnitel valuation was the product <:)fa negotiat:ion 1*tween the Co1llpany and V0,d;afi;me, (2) the disclosure on page 40 ufthe befini:tive Pro:xy of details tonccm:ing the :fi:ttattcfat advisor~s comparable companies anaiysi~, (~J fufth,er detail, on page 42 afthe Definitive, Pre.xy~ of.the financial adviSQf s cornpataple tr~~tions a,na.lysii*. and,(4) the tal>ular p~~ntation, un page 4'5 pf the,Oefufrtiv~. Proxy, of valuation tartgesfor Verizon Corporate Mid Wfretine based on FVIEBITDA multiples. Allbtitthe first ~e contai'ned in the, sectio11 of the Dt;tfinitive Proxy tit!~d "Opini9ns ()fVeri'z<:m is Financial AdviS()rs." Th~· court now examines these disclosures as potent1alty•providing enhanced or corrected disclosute. Qrnrtitel V@Uatibg ]pclt;td~d]£l the<package of consideration being paid by Verizon to Vodafone wa8 Verizon')s interestht Omnitel. Page 30 otthe DeftnitiveProxyc9ntairis a new sen~~nce. "1Jte $3Sbilli¢l'l valµati<;m pf Verizon/~ Q.nµlj~l jm~~~ ~ det~i,ned'.~~ on the pattiest respective financial ana1ys~'an0. r¢~te.d a n~gotj~t~ c:o,mpnm1·i~ l>y each party in connection with the overatrnegotiatiofis betWeen Verizon ~rid Voi:latone. '' ' Pll.lintiff asserts'thatdisclesu:re of the fact tha:dhe vafue was ttegotiated, bythe transacting patties rather than estimated by the financial advisor$ adds value: beeause it introduces a reason tQ be skepfica1 a.bout'the fin~cial adv:isorf valuati<?n d¢cisk1ns, Th~ ®tm:does notacc~t this [* 7] hypothesis at all. ndoes n:otprovideany reas<:>n·to bes~eptfoalaj:)qutanythiQg. It merely sets fQrth a trivi~Lpiece Qfinfqnnation>that provides noincremental value~ Who e0:uld~ss1hly bewueem.ed.withWhetJ:ferlhe transaction\\laS va1ti«l.byt}le parli~s alone, or only afteH;onsilltation With their financial advisors. Whattndy matters is the agreed upon price whfoh WB.$ determined at the epd ofthe,daybythe p~ies, as wer" alLthe other terms of the transaqtion. Yet, the. plaintiff sees value in thauhis dis<=iosure somehow obliquely alerts 'the readetto be skeptfoal of the ffoanciatadvisors~ The. Dt:ifinitivt! Proxy S:U:.tement c:qntains n~arly twenty pages of descriptj:on ofthework:done.bythefina:rtcial advisors.. It forms the basis for m;anagement;s conclusion that ithas ·appropriately priced ·the adqUisiti<Jn. The Definitive: Proxy Statement eont~irus the formal fairness opinjom1 ofthe financ.~al oovisors, reference to which is to be ma4<l bytbe sharehold~ in deciding how to vote. The Settlement is based· on the disclosure related to the .financial advisors' wC>tk. The c~mrt is of the view that plaintiff!,\ lawyers brieffor skepticis1,11~$iU founded. Af~Q. the add}itj9nai dj~c[osureaads nothing to the infotmationthat·was already.plainl)' n:v.ai1able else"vhere in' the pnt~.y~ which eXpressly states tJiat neither pril'lcip~.Jin~~ai .adviSQr w<ts asked t0 value OmniteL For example, on pag~31 oftbe ,PreUR)iruuy Pro~y) the. re.adtf is told th~t''J.P~Motgan was~not reqµested to pr<>vide its t1pinfon with respectto~and its opinion does not address~ :tne fairness from a financial paint of vfow of the,Ornnitel tr@:m,i;tjqn." Tpe s.ame information is repeated. ~ith .respe~f tq Jvfotg~ .Stanl~y at page 36 ofth~ Origin.al ·Proxy. This i.nf0rrna1Jo11 is af~Q avaB~bJe in. the full text. fairne:;,s opmions filed as exhibits to the Original PrQxy tQ which tbe reader istegu.larly referred' (as, fot exam.,ple 1 qn page 4 of .the :Prelimini,try Proxy)" Because the reader is repeatedly told that tbe pri11dpal fi1'ancial advisors had no p~utin 7 [* 8] provjding a value for Omrtit~l, the stateme!)t that fbe parties chose the value themselves is plainly immaterial. W~re e,ls«:~~ wotild the value have come· from? Verizon· Wireless :public. !radintt Benchttwks TheDetiniti:Ve· Pro~y dii3¢l9ses that the finano4tl advisors compared sel«ted financial data of Verizon Wireless with three other publiely trru:led ·c-0mpan.ie~\vhich did not include AT&':t Going on~ it lists the operating anclfi nan¢ial metriJ.'.ls i~ ~ fp c\)mp~ Verizori \\fireless to the three, cqmpanies. These inclutied firm>value,.EBITDA, chum.:rate, postpai.d s~bseri~rs and :revenue estimates. It then lists the actual. tnellics in tabular fotlll, The Preliminary Proxy did. noti'nclude this tab~e. Th(! plaintiffs expert as~~ds that.this disQloSUt<! ~·puts quantitative detail"tothe financial ~dvisors, conclusion that Verizon Wireless is a "premium assee~ While these details do provide more· information c.oncetriing the financfa] advisor• s comparable companies analysis, th~y fail iri any w.ay to contradict pr otherwise alter tb.e substance of that aha'lysis. The court is of the view that this disclosure adds no wlue for sllare.hol\i¢rs. rfinzjngtables to complement every bitof wlys.iS' by .flttanciaj. advisors was: .considered. valuable and material~ the.te woµld sur~ly ,be ·i:m.· SEC rule ma~thlg.justthat. Us absence.ftorri d,iscl()suf;e regulations demonstrates ti!J degree of adminfatr:ative mercy on analysts ~d share,holdel.'$ who CQmb disclosure documents fur items of merit Plaintit'r s e:xpert also. asserts that. the inforn)ation .might fu1~ .b.ee,n valual;lle ;to allow shareholciet$ to ~s w.b.ether AT&J was currectJy ex¢lucied frondhe comparable companies analysis. 8ut tl)efa'?t that AT ~T was excluded was expressty s.tated tri the Preliminary Proxy. Th.:! additional disclosure, at best, provokes a ~'quibble" \\!ith ~ fini,m~iaLanalySl ':&Judgment - th.at is~ the dec:isfon t9 ~xt:lµdc AT&'f. It docsnotaitedhevaluation range. Nor does itcontradicta [* 9] prior assertion or un®ver a hidden conflict.· Pree¢dent is clear that m~re quibbles wiih investtrrent bankers~ j:@gments do 1I0t materially alter the tot~l mix ofinft>rmation. In rti JCC Hldg. Cn.~ 843 A2d7l3.12l (llel Ch 2003) (noldingtb:atadiselosure suggesting. umis~sin subjective judgment~ even though ~hose judgment' were disdlosed to the ... stockhold~rs·~ repl'ese!4ts a "quibble with t4~ sUbstailce ofa banker's opinion (and] does not constitute a dis<;fosµre cJaim;). Illustrative M.mofu;y:··Buy~tn Ptecederi.ts A3filn1.ptaintiff"and its expertasc.ribe greatval.ue.tothe·inoortion, attheif insistence. ofa table containing pribHcly·available information with re5¢ct ·to p.~m.iµms paid in minority bµy~i:tis consummated si11ce·2005which th(,':; financial t,ldvfoors btl,d reviewed. The court is of the.view thatthere is no added value here. The Preliminary Proxy said the bankers had.~viewed these -it }ust did not give the Ul,Ullbers. All the table lists are public compani~s Jn a \Yid~. range of unrelated. businesses ~.entertainment, .copper, financial services and f(}()d retaiL The table gives tu<iitnetitary•mfotfu.iltion.suehasd~lva1ue~·considenrnon,.PercenmgeoWn.ership,.and.p{emtmn. Bfitself ihis infonnation simply does notinfonn.a.s~ehOJder w~tl:Lt~s~t ~Q a.ninvestment <lecisi<nt. No complementary' infol'rttation wit}i respect tp the financial condition or busine.ss·of the companjes is ptoVided. Nothing is said ~out their.competltive p0sltiun. Surely~ th~~ factors are neces~ to evaluate. a percentage prell1iUf1l or to giv~ ~t any meanh1g. A&lltionally, the Definitive Proxy it$Clfdisparag~s the va.lue qfthe crx~rcise of'presenting an:d analyzing preruiurns:pnid'.iri ~:O.onlrbuy~iQs; The financja1 ~dvisots. noted pree~ents were presented'for reference only, and weteno,t r~lied 9nf~t Valtt~t.19.n pUEP.oses. that the buy~in preµliun1 [* 10] Undatnited; the plaintiffs~ expert defends the diselosure eve,tj t}l()ugh the fitl3tleial advisors find ituseless;, f)e argµes that "granular: ana)ysisr' ofthls type may provide fora mote meaningful perspectiv~ on valuation. Precedent·unrunbiguo~ly rejects. the addition of granular detailasa basis ot':rnmeriaHty. ln re Therage11,tcs Corp, Stocklwlilers' Lftig(JiiQn. C.A. No. 8790~VC~, tr. tuling, at42 (Del Ch May 5 2Ql4)rejecting supplemental disclosures- that 0 "w,3.d n9thit1$Jnortr~han further gram:ilar detail'~). ·T'here .is rte· confl.fot.or COI:ltradiction here. .More<:>v¢rj an of this informattdn (along with the further detail. c,ri th~ c~:nY.1parC\ble comp~ies analysis diseussed:abQve) is p4bii¢Ly available e)sewbere •.Pr~timinary Proxy'at 38-.39,,41-4.2 (notiµg pub,lipavailahility elsewhere'.). Because ·an investor easily coulq. have construi;ted.the tablti himself from public data sources (should .h~ have m:>thing of consequence to do with his timeJ~ reprod®itig if in (he Defmitiv.e Proxy clearly provides no new information and no material di.sclosure enhan9emci:it. . . . .. ' On :P~ge44 QftllQ DefirutiveProxy, 1t is disQlosed that'the.financiaJ advisors~ using eertain. mathematicn,tanalysi~, compared selected financiahiata· of V¢rizon C<}rpors,te .and WireUne with ·similar data fur.selected publicly-'trade(i ¢Qil:tp8p~e~ in the sameJine of business. The.DefinitivePr<>X'.y .go~s on to explain the advisoxs m¢th®ology in· great detaiL Plaintiff ·assel'fs 'it adde4 v.alu<t by' insisting on the insertion. ;of:atable sho\Vin$ ttie partic.tjlar data for Verizon Corporate and Wireline, notjusfthe bo~tQm. Hn~ i~plic;d. t(Quit:y va{u~s. The table is stark in its laok: of'®ti$i;qq~nce be<;ause. it merely adds 1119re· unnecessary detail. without mat~riQ.lly ehangingibe textual presentatibn that had previously appeare(l in th~ J;>r¢1irninacy Proxy; :Preliminary Proxy) at43. Indeed~. e)i;actfyitt:e 10 same val\lation method,o.logy (without [* 11] tabular preserttati61'lis used t-0 value Verizon. Wire1¢ss, and plaintiff h"5 t10t Q'Qjecied either to themethodolQgyQrto.the lack of tabular presentation .. Preliminary Proxy at39. Ifplaintifffinds this meth.pdolpgy and. presentation unobjectionable for Verltcin Wirel¢S$ - which, l:lS the ~set being sold, is clearly the mostimpertant val~tioQ inthe transa~tlo,i ~s whole -then, it $houlo be equally ungbj~cti9na1'Je forVerizon Corporate and WfreHne. ·.The addition.al information. 11?l«iv~rs nu contradiction and no conflict In the court• s view if simply pro:vid~ anPtf:tertabular Even 111orc ~mpelling fo showing the lack ofmat¢riality of tliiS, ~cti(lll~ witti Qr Vvithol!t the·table. js the fillancialadvisars' disclaimer: No con:ip~yinthe.above·analysis is identicaltoVerizon•s Corporate.and Wireline hu8iness .. Iri evaluating.the peer gtQup_. J.P.Morgan and.Mo.rgan Stanley made judgments and assumptions with regard toindl1sfry. perfqnnance> general business, economic,. markc;:t~d financial c;onditions;:and other matters~ many of which are beyond the contr<:>l ofVeriZ<>n~ ·Si}C:h. as the impa<::t of competition on Yerjz~n·~ httsihess or the industry gene'rallydndus~tygtowth t):u; ?bsence of an)' mat~d~l cli~g~ in the .ijnan~ialconditionand"prospects ofVeri:z-On or the indusft1 or'm :the financial marJ<:t'!tSin g~ti~r~. M~thematic~l.:ana1)'si$, such as detetminiug the av~rage or median, is notin i~elfa inean;ihgf'Ul metho(t Qfu~fug .Pt:er gr()up da~~~ and WJllCh leads 'th~ C01,1rf t() WOndet why thJs section. beirigildqtitte4,ly D()t tpe;'lriingful, foupd.#s way into the Definitive Prox.~rS.tatem~f at a!L Io sum, these<~:Uppl~m~nt.al Qisclos:m;esindi¥iduallyand c-0llectively fail to materially eilhm'.lce the shareholders' knowledi;e abourthe merg~; They ate ~ecess;iry surp)l.lS<lge "dded to a disclosure document already filled 'With ll'lt1ch th<J.t is detaU for the.,sake 0,fdetail. They ll [* 12] pro\tide no legally cogn.i:zable benefit to th~ shareholder class, an.d c;;tnnQt ~mpport a detennination that the Settlement is fair~ adequate. reasonable and in the· best interests of the class members; Boards ofditectprs and ()fficers of public coritpanie~ we.re }'iistericaJty ~bivalent with tes~ctto the Jl_eed for an investment banker's fairness opinion a--; a. condition to closing. a. merger. business corporate officers and directcn-S knew little about. A& tp the compan-y';$ value, n1any di~fot~ believed mvestment hankers, b¢ing strangers to the companf·s business~ addecl little to the equation. Additionally.. some prominentinvestment banking ljqq~s re$i.Sted i~u~ faiTI1~~s . opiniOns except to long$mding ¢1it.!nts. Th.is a~1J1.ospbere changed signi.ficantly with the Delaware Supreme Court's decision inSmith. v van Gorkom) 488 A2d 858 (Del 1985). There, .one ofthe numerous, factors taken into accountin the C(}urtts holding that the directqrs of ihe acquired eoqmtation had violated their duty of care was the absenc.e of afaimess opinion; No CQurt has since :held th~t obtaining.~· foirness opinion in conuection With a :rhergetis req\,lited in Qrder to, satisfy the directors~ duty of care, althqugh courts have, vi¢w(!d il favorably fa scrutfo:izing director& ~havlO:ri For obvi¢us ~oµs, since van. Gorkom1 fairness.opinions have ~nrotitinely obtained in merger fran$acffons. They are not, howevyr., seen wiih the ~~me £reqµ~ncy in i~9ti0.I1s jn whi-ch a company diwsts m;sets, and certainly not when the div~stitur~ constitutes a srnall percentag¢ ofa eqmpanfs assets, Whether or not to obtain one Is still viewed a5 an appropriate .area ·for e:xemlse Qfthe;directors~ businessjudgment: Fr&imess op~h.i()ns are ~~pensive and~ in a situation where the boatd of dire~to~s is cot1lfortable, \Vith'r~e.ctlo the value cf.the disposed 12 [* 13] assets, can reptesent an additfonal. 1ayer ofunnecessaey cost (Q~urred .fQr no vah.~e.. In. fact, the plaintiff~s~rts t;hat 5% is not acustomarytriggeringtbr¢sfi:old for obtairtin.g.a.faimess opinio11, anaanobjectot''s stibmission.notesthat only6 of f8:asset:~i.vestitili'es valued. at over $10 biUiQn (the approxima~ v&u¢ of5% pfthe Compatiy's as.s¢ls) ln the l~ l{).years are r~pQrted to have been opined µp(fn.by,~n investm~nt b~~er. After oonsideta:ble:retlectfon,it is tlte. cotirfs.Ju4gment that the. pmwse<J feat\.lte of the Settlement.tela,titjg to ffi.ancfa.wry t8,ime$5 opiriiop$.m~y actually opera~ to ourtail tbi: .Company's directors' flexibility am! ability to employ their coUective trusiness experience in connection with ·minimal~5%) assei:digpositions, ·it looks in an·additional layer ofcost witbputany·a$Sl.ltanoe that real value Will be obtained for the: expenditure. It seems to be based on~ misreading ufvan Gorkem: That decision never said :fafmess opinions were mtlfonnly beneficial or reqµired in mergers, let alone ht connection with diSpositions ofas little as $% ofa company's ass~ts. Indeed, the fairiiess opinion feature pf the St}ttlement may be said to undermine best practices relating t() CQf,POrafe gQVefI1t\l}~e. .Jn tfle c,ourrs view~ then~ l\i too, cannot provide a basis fQr a determination that·fhe Settlement is rair~ adequa.te.t.te~O!Jable, an4t11.tbe ~t in~$t of the class metnbers. Conclusion An inC.reasingbodyof commentazy has.decried th~ :mtn'lltli of litigation,. and a~~nc,la.nt ·suspectdiselosute-only settlem¢n~t p.ssoci1:1.ted: with. publi{\ acquisitions today, Anyone. objectively l.l(U.l}JZiJ:18 this phenom~non will flnd its ront cause in thejudicihl precedents of the 13 [* 14] last rwenty•fiv~ yem. dea1ing. with corporate gov:ern@ce in cqnne.etiqh with mergers.3 A body .of law meanNocprotectsha,reholder interests from the absence of due. care. by the corporation;s managers.has been turned .on its head to diminish;;shareholder vaf.ue by diVestibgthem of valuable rights v~a the broad releases that plaintiffs haye fashiQn~ at :th¢ ~mand ofwncemed defendants a~ their ~el and imposing additional .gratuitous· oosts~ i.e; attor:neys1 ·1:e:ga1 feel Also in thi~(co~~tiqn, the tema,rkable par;ide oftb.e mo.~1 experien~ea~ hi.ghlyregardei.l ~ corp<mtte merg~ lawyers wb:Q ostensibI)T are. 'failiri$ to draft me.rger discfosur.e documents whiCh do notrequfre ellhaneement or correction strikes tfo~ cburt (lS inipfausibie~. CQrporate la\Vyets drafting complex disclosure qocuments in c<mnectionwith the.sale ofsecurities in p\Jblic capiOil markets., experience no such problem. ·They do ·notneed Jttigationlawyers to teach them how to correctly craft disclosure doetiments, Why do merger lawyers? The tQ:tality qfthe situation h~ i~ capture,d by the courfin Creative Mtmtessori Leaming Centers v 4sh}ord Oea.r LLC, 6ti2 FJd .9l 3~ 9J 8 (7th C1r201. l); •i[W)e and other courts have often remarked theincetrtive of c~$ c9Uilseh in cll!tSsbyagreeingwith·ihe. qeff;pq~t tP r~C.oiJlmerid tl'lat the judge: ~pprQV~ a ~etffem~n,t involving meaget' recovery fut the. class but generous compensation for the laW)'ers·.- the deal· that promot~ the'$elf•interest9fboth class counsel and1he defundant.and.istherefare .optimal from the stan<.fpoiht of theirpriv~t~;interests. n ~mplici~ywitb the·defendant~s counsel.~ to~ll,outthe a l Unocal C'<irp v Mraa P~troleuin Co, 1 493 AZd. 946 (Del 1985); ReVlon v MacAµdi'nv$ & ,Forbes Htildfn~; lite.,. 306 A2d. 1'71 '.(Del 1986); and Paramotint Coipmuniaqftr;nsinc, v QJl(i, 63"1Ald ·34 (Pel l~l). '$e,at;l1,. Gd:ff1th, Corr.eeting Corpor:ate • Ben~ru: How t0 Fix: ~mareho!derUtiptionhy Shifting die D0ctrit1e on Fe~ 'S6 S.C;J.., Rev. 1 (forthcoming 2015) available at'WWWssftl.cortt/author"'132'766. 4 : 14: [* 15] lt is the court~ s Judgment· here, after further ·study. and tefle(;tfont that wei·e it l(l appr()ve the Settleme11t ·based on either ofits ·~mpo.nents diScUS,..t;CtL~bove> it woutd be au enabler of'an unwarrant~dive$tltureofshareholder rights by virtue of plaint1f'rs.release~ as well as>a misuse of corporate assets were plaintifr s Jegal foes to. be awarded. Ac~uri:lin,gly, the eoµrt $imply cartnpt;an.d thus daes:nqt, appr:ove tqisSettlement. ORQ]{REJlt;bat the motion for a.final Approval o:fSettlementofC1a&s Action fs denied~ Dated: December lf,2014. M~~V1N l~ CCMVVEITZER 15

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