In Off v. Ross, et al., (Del. Ch., Nov. 26, 2008), read opinion here, the Delaware Chancery Court rejected a proposed class action settlement (and related request for attorneys’ fees), in a derivative and putative class action that challenged the fiduciary duties of the Board of Trustees of a Delaware statutory trust. The complaint sought to prevent an interested transaction and to have its terms offered to all stockholders of Centerline Holding Company.
Here are a few highlights of the issues addressed by the Court in its 36-page opinion.
- Satisfying DGCL Section 144 does not automatically entitle one to protection of the Business Judgment Rule. (i.e., it creates a "floor" and not a "ceiling" for behavior). See footnote 43.
- Prior Delaware cases have raised issues of independence when members of a board are connected to charities to which the company has made generous donations. (footnote 41).
- Chancery Court Rules 23(e) and 23.1, as well as cases construing those rules, were discussed in the context of standards employed by the court when requested to approve settlements in either derivative actions or class actions.
There were two objectors to the settlement. The court stayed further proceedings pending resolution of a related pending action in New York. The court made no specific findings regarding the reasonableness of the amount of fees requested.