By now, virtually every lawyer who litigates merger cases knows that the “disclosure-only settlement” is either dead or at least on life support in Delaware following several recent decisions rejecting such settlements, including In re Trulia Stockholder Litigation, 129 A.3d 884 (Del. Ch. 2016), In re Aruba Networks Stockholder Litigation, C.A. No. 10765-VCL, transcript op. (Del. Ch. Oct. 9, 2015), and Acevedo v. Aeroflex Holding, C.A. No. 9730-VCL, slip. op. (Del. Ch. July 8, 2015). And few would say, given the ubiquity with which merger cases have been pursued in recent years, that the “deal tax” that most such settlements represented will be missed. There are, however, likely to be several consequences, both intended and otherwise, that leave the typical defendants in merger litigation subject to the same “perverse incentives” that the Delaware Court of Chancery is attempting to eradicate.
In Trulia, Chancellor Andre G. Bouchard declined to approve a disclosure-only settlement of litigation challenging Zillow Inc.’s 2015 stock-for-stock acquisition of Trulia Inc., finding based on the limited record that the defendants’ “give” in the form of supplemental disclosures to the parties’ joint proxy statement was inadequate to support the “get” of broad releases from the proposed settlement class of “‘any claims arising under federal, state, statutory, regulatory, common law, or other law or rule’ held by any member of the proposed class relating in any conceivable way to the transaction.”
