Kevin LaCroix recently tackled the question Is Deal Litigation in Delaware Done? According to Kevin, “deal litigation has been shifting from Delaware Chancery Court to courts in other states and to federal courts”. He attributes this shift to decisions by the Delaware courts, including Chancellor Andre G. Bouchard’s refusal to approve a disclosure-only settlement of a merger lawsuit. In re Trulia, Inc. Stockholder Litig., 129 A.3d 884 (Del. Ch. Jan. 22, 2016). Migration of deal litigation to other states as a result of Trulia will be slowed if courts in those other states follow Chancellor Bouchard’s lead, as happened recently in one judge’s courtroom in California’s Silicon Valley.
In Drulias v. 1st Century Bancshares, Inc., (Cal. Super. Ct. Case No. 16-CV-294673, Nov. 18, 2016), the plaintiff filed a putative class action challenging the sale of 1st Century Bancshares to Midland Financial Co. Eventually, the parties entered into a “disclosure-only” settlement and sought court approval. Judge Peter H. Kirwan declined to approve the settlement in large part based on Trulia:
The Court also finds it very troubling that – despite urging that Delaware law governs the materiality of the disclosures in this case . . . – plaintiff does not discuss or even acknowledge a crucial new published opinion by the Delaware Court of Chancery on this subject, In re Trulia, Inc. Stockholder Litig., (Del. Ch. 2016) 129 A.3d 884.
Judge Kirwan has also applied Trulia in refusing to approve a disclosure-only settlement in Anderson v. Alexza Pharmaceuticals, Inc. (Cal. Super. Ct. Case No. 16-CV-295357). Judge Kirwan, however, has overruled Fordham University School of Law Professor Sean J. Griffith’s Trulia based objections in In re Pharmacyclics, Inc. Shareholder Litig., (Cal. Super. Ct. Lead Case No. 115-CV-278055).