Last December, when Vice-Chancellor Travis Laster of
Delaware Chancery Court appointed lead counsel in shareholder
litigation to block the private equity buyout of Del Monte, he
gave quite a shout-out to Grant & Eisenhofer and Robbins Geller
Rudman & Dowd. Those firms, the judge said, had proved their
willingness to fight M&A cases all the way to trial, not just
settle and take home nominal fees. (Laster also included
Bernstein Litowitz Berger & Grossmann; Prickett, Jones &
Elliott; and Bouchard Margules & Friedlander on his A-list.)
"The results achieved by G & E and Robbins Geller demonstrate
that they have the ability and resources to litigate the case
competently and vigorously," Laster wrote, in a ruling
appointing the two firms as co-lead counsel in the Del Monte
case. "There is no guarantee that they will succeed, but at
this stage of the proceeding, I am convinced that they are the
firms best qualified to represent the class."
Laster's judgment was vindicated -- in spades -- on
Thursday, when Del Monte and Barclays agreed to an $89.3 million settlement with shareholders, one of the biggest
settlements shareholders have ever won in post-deal M&A
litigation. What's more, according to Stuart Grant of G&E and
Randall Baron of Robbins Geller, the Del Monte litigation has
changed the way Wall Street does business. Last February,
before the Del Monte deal went to shareholders for a vote, the
plaintiffs' firms exposed the dual role Barclays had played as
Del Monte's financial adviser and a lender to the KKR
consortium that had agreed to buy the company. That had been a
standard practice in buyout deals, Grant and Baron told me, but
it isn't anymore.
"We took a Wall Street practice that had been very
prevalent and shined a spotlight on it," Grant said. Added
Baron: "I have been in conferences where people have said the
entire director community knows it has to ask these questions
of its financial advisers. This case very much changed the way
investment banking is practiced."
Grant and Baron both said the Del Monte case is a reminder
that not all shareholder M&A litigation is of the sort that has
set Delaware Chancery judges fuming. These days, companies
can't announce a deal without opportunistic plaintiffs' lawyers
announcing "investigations" and filing suits against the
directors who approved the merger -- often in multiple
jurisdictions. The Chancery Court has grown increasingly
irritated with the rash of M&A shareholder suits, especially
when plaintiffs' lawyers get fees for settlements that offer
little or no value to shareholders, such as enhanced proxy
disclosures.
The Del Monte case, in contrast, was intensely litigated.
G&E and Robbins Geller didn't know going into the litigation
that Barclays was playing both sides -- not even the Del Monte
board knew it. But the firms dug into depositions and document
review, and emerged with enough evidence to persuade
Vice-Chancellor Laster to temporarily enjoin a shareholder vote
on the buyout last February. The judge later awarded G&E and Robbins Geller $2.75 million in interim fees for exposing
Barclays' dual role. (They wanted $12 million; maybe they'll
get all of it now.)
G&E and Robbins Geller pushed on with the case after the
KKR-led buyout went through. The odds of recovery against
individual directors were slim, given Delaware's holding that
board members have to breach their duty of loyalty to be liable
for personal damages. Nevertheless, the shareholders were about
to begin a series of depositions, including testimony from
board members, Barclays bankers, and members of the buyout
consortium, when they reached the deal. Under the settlement,
Barclays will pay $23 million; the buyout consortium will pay
the rest. The Del Monte directors signed the deal, but they're
not paying anything. (I left messages with Sullivan & Cromwell,
which represented Barclays, and Covington & Burling, which
represented Del Monte, but didn't hear back; Gibson, Dunn &
Crutcher, which represented the Del Monte directors, declined
comment.)
Baron and Grant said the lesson of the Del Monte case is
that plaintiffs' lawyers have to do the hard work of actually
litigating M&A shareholder suits. That's how you make a
difference, Grant said. "There are too many players in the
field who are not trying to achieve real results -- just get
in, get out, get paid," Baron added. "I'm not offended when
suits get filed. I'm offended when the cases get settled
without anyone finding out whether there's value there. The
criticism should be of particular players as opposed to the
concept of filing a case."
(Reporting by Alison Frankel)
Follow Alison on Twitter: @AlisonFrankel
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