For years, following the announcement of a corporate merger or acquisition, courts could expect to see shareholder class action suits that, in the main, were resolved by “disclosure-only” settlements. Plaintiff shareholders would allege that the officers of the merging entities failed to adequately disclose the material terms of the transaction, and failed to carry out their fiduciary duties of care and loyalty when they entered into the deal. The parties typically chose to settle these cases early on rather than litigate them. The resulting settlements generally required that defendants pay plaintiffs’ attorney fees and make additional disclosures, as opposed to changing the economic terms of the deal (hence the name, “disclosure-only” settlements).

As we have previously described, Delaware courts have come to disfavor disclosure-only settlements, expressing concerns that such settlements are significantly more beneficial to the plaintiffs’ attorneys than to the plaintiff class, and allow defendants to be released from a broad array of potential future claims at little cost. See Margaret A. Dale & Mark D. Harris, The Effect of ‘Trulia’ on Takeover Litigation, N.Y.L.J. (Oct. 25, 2016). In In re Trulia Shareholder Litigation, 129 A.3d 887, 891-92 (Del. Ch. 2016), the Delaware Chancery Court noted that “far too often,” disclosure-only settlements serve only to “generate fees for certain lawyers who are regular players in the enterprise of routinely filing hastily drafted complaints on behalf of stockholders on the heels of the public announcement of a deal and settling quickly on terms that yield no monetary compensation to the stockholders they represent.” After Trulia, Delaware courts have largely stopped approving disclosure-only settlements.