In re Riverbed Technology, Inc., Stockholders Litigation, Cons. C.A. No. 10484-VCG (Del. Ch. Sept. 17, 2015). This Delaware Court of Chancery opinion is noteworthy because it provides notice to corporate litigators in Delaware that any future requests for court approval of a class action settlement, or for attorneys’ fees in connection with a class action settlement–in which the benefit is “disclosures only,” will be met with more intense scrutiny than in the past.

This short opinion, relative to other Chancery decisions, deserves a lengthy analysis and no doubt many learned commentators will provide that analysis. Some have already written about its potential for being labeled as a watershed moment or a landmark decision.  See, e.g., two articles already written here and here, by respected court watchers, as well as the unparalleled expert insights and analysis provided in The Chancery Daily.  For present purposes, I will highlight two or three key points that Court of Chancery observers must be aware of:

The court in this case was hesitant to approve the fee request that it ultimately allowed, but did so based in part on the reliance by the parties on the past practice of the Court of Chancery in which settlements were approved and fees were awarded when the parties negotiated a remedy in good faith that was limited to mere disclosures only.  Because the settlement was consummated on that basis with a reasonable expectation that the court would approve terms as it had done in the past, the court reluctantly approved it but also provided a warning for future litigants that there were two major problems that would be subject to further scrutiny in the future that might make it more difficult to obtain court approval in the future in these types of cases.

Litigants are now on notice regarding the following two points:  First, the release negotiated in connection with the consideration provided was extremely broad.  The breadth of that release has sometimes been referred to in the past as inter-galactic.  Footnote 20 observed however, that whether it was inter-galactic or, perhaps merely “solar-systemic, Jovian or just global, it is a broad release of existing claims arising from the merger, known and unknown.”  The court was very concerned that the release extended far beyond the necessary scope of the modest claims made in proportion to the release granted.  The court noted that many recent Chancery decisions expressed the same concern about overly broad releases.  See footnote 21 (listing those recent Chancery decisions).

The court observed that:  “The breadth of the release is troubling.  It is hubristic to believe that upon this record I can properly evaluate, and dismiss as insubstantial, all potential Federal and State claims.  If it were not for the reasonable reliance of the parties on a formerly settled practice in this court, which I have found above, the interests of the Class might merit rejection of a settlement encompassing a release that goes far beyond the claims asserted and the results achieved.”  See slip op at 15.

A second notable aspect of this case that also provides notice for future litigants, was the request for attorneys’ fees in the context of what the court referred to as a “peppercorn amount of benefit.”

The court conducted the classic analysis of the prerequisites for seeking approval of attorneys’ fees in connection with the settlement of a class action, and the factors, well known to readers of this blog, the court will consider based on the Sugarland case.  The requested fees of $500,000 were discounted to an approved amount of $329,881.61.  The court discounted the fee request in “consideration of the modest benefit conferred” albeit after considerable effort.  The parties engaged in expedited discovery including two depositions and document requests.  Based on a January 15 amended complaint and a motion to expedite filed on Feb. 15, the parties reached an agreement on Feb. 26 in principle.

The court provided thoughtful reasoning in connection with the public policy considerations and the “near-ubiquity” of litigation in connection with public company mergers.  See footnote 29.  It remains safe to say, based on this decision, that fee requests in connection with settlements of class actions when the benefit is mere additional disclosure will be subject to more increased scrutiny in the future – – which will likely to result in reduced, if any fee awards, depending on the circumstances, at least for requests presented to the author of this opinion.