WILMINGTON, Del., Dec 14 (Reuters) - A judge
approved a shareholder class action settlement over the
controversial buyout of J Crew Group Inc on Wednesday, and
blasted the retailer's sale process as "icky."
The settlement caps a buyout in which J Crew Chief
Executive, Millard Drexler negotiated the $3 billion sale before
telling his board. Shareholders approved the deal narrowly, in a
The settlement provides $16 million for shareholders. J Crew
also agreed to reduce barriers that were meant to protect the
deal for the two private equity buyers, TPG Capital and Leonard
Green & Partners.
Delaware Chancery Court Judge Leo Strine also took the
unusual step of removing two of the six shareholders who were
acting as lead plaintiffs representing the rest of the class.
The New Orleans Employees' Retirement System was removed as
a lead plaintiff because it had voted for the sale, which Strine
said "doesn't make them look good."
The only individual acting as a lead plaintiff, Martin
Vogel, was also removed because he opposed the settlement.
The plaintiffs had sued J Crew's board for agreeing to sell
the retailer too cheaply. The sale closed in March and
shareholders agreed to settle their lawsuit in September.
Mark Vogel, a New Jersey lawyer and investment adviser who
represented his father Martin Vogel at Wednesday's hearing, said
the class action process was driven by attorneys who "confined
me to a silo" and "steamrolled" him.
"Lead counsel's game is to intimidate the one individual who
managed to find his way into their cozy club," Mark Vogel said.
For example, he said he learned that attorneys had agreed to
an initial settlement three days after it had been signed.
He also criticized the other plaintiffs, which were pension
funds, noting that only one of them had voted against the deal
they were litigating over. Four abstained from voting.
"The class should be represented by members who take an
active interest," he told the court.
Stuart Grant of Grant & Eisenhofer PA, who represented the
class of shareholders, told the court that no one had more input
than Vogel in the process, but that did not give him a right to
control the case.
"With six lead plaintiffs, one doesn't get a veto," Grant
The case has taken several odd turns. At one point the
defendants sued the plaintiffs for backing out of an initial
agreement to settle.
A large part of Wednesday's two-hour hearing was spent in an
argument between Mark Vogel and Strine over J Crew's value, with
Vogel saying it was worth as much as $9 billion.
"I'm somewhat suspicious that the world will go gangbusters
for J Crew," said Strine, who kept noting that no one else bid
for the company.
Strine also criticized the behavior of J Crew's directors
and chief executive for allowing TPG Capital, one of the buyers,
to get a head start in the sale process, which he said may have
eliminated potential rivals.
"It's icky stuff," said Strine. "This was not good corporate
Strine also approved fees for the plaintiffs' attorneys of
The case is In Re J Crew Group Inc Shareholder Litigation,
Delaware Chancery Court, No 6043.
(Reporting by Tom Hals)
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