Dutiel v. Tween Brands, Inc., No. 4743-CC (Del. Ch. Oct. 2, 2009), read letter decision here.
This letter decision of the Court of Chancery addresses the issue of who should be appointed as lead counsel in this consolidated class action.
The different plaintiffs in the two different cases sought the appointment of two different firms as lead counsel.
Initially, three separate putative class actions were filed in the State of Ohio to challenge a proposed merger between Tween Brands Corporation and Dress Barn, Inc. The parties in those three Ohio cases agreed to consolidate them and have the combined cases filed in Delaware, which they did. However, several weeks before the Ohio plaintiffs filed their combined putative class action complaint in Delaware, but subsequent to the filing of the Ohio actions, a new putative class action challenging the merger was filed in Delaware by a fourth plaintiff.
The parties agreed on the factors that the Court should consider when ruling on a motion to designate a lead plaintiff or to appoint lead counsel, which include but are not limited to the following:
“(1) The quality of the pleading that appears best able to represent the interests of the shareholder class and derivative plaintiffs; (2) Weight to the shareholder plaintiff that has the greatest economic stake in the outcome of the lawsuit; and (3) Weight to whether a particular litigant has prosecuted its lawsuit with greater energy, enthusiasm or vigor than have other similarly situated litigants.” (citing TCW Tech. Ltd. P’ship v. Intermedia Comm’s, Inc., 2000 WL 1654504 at *4 (Del. Ch. Oct. 17, 2000)).
The Court rejected the argument that the first to file a lawsuit in Delaware “wins some advantage in the race to represent the shareholder class . . . .“ The Court also observed that the economic interest of the Ohio plaintiffs together was approximately $11,000 at stake, while the economic interest of the Delaware plaintiff was about $900.
Also rejected by the Court was the idea that “a firefighter who arrives second to a fire is any less committed to dousing the flames.” Nor did the Court regard idioms as appropriate, reasoning that: “While the early bird may get the worm, sometimes it is the second mouse that gets the cheese.” See footnote 11.
In conclusion, the Court held that the combined cases between the Ohio plaintiffs and the Delaware plaintiff should be consolidated, and that the Ohio plaintiffs would be the lead plaintiffs and their counsel would be appointed as the lead counsel.