Plaintiff John Moss (“Moss”) is the named plaintiff in a putative class-action arising out of a merger agreement entered on July 20, 2016, between Defendants Yadkin Financial Corporation (“Yadkin”) and F.N.B. Corporation (“FNB”), whereby FNB would purchase all of Yadkin’s outstanding stock. Moss, a Yadkin shareholder at the time of the transaction, brought direct and derivative claims against Yadkin’s directors and FNB for breach of fiduciary duty and aiding and abetting breach of fiduciary duty, respectively. Yadkin was named as a nominal defendant.
On November 22, 2016, Moss filed a motion for preliminary injunction, requesting that the court enjoin a potential shareholder vote until after Yadkin disclosed additional valuation and financial information. On November 29, 2016, the parties entered into a settlement agreement to settle all claims in the action, contingent on Yadkin making additional disclosures before Yadkin’s shareholders voted to approve the transaction. Yadkin made the disclosures on the same day that the parties entered into the settlement agreement. The merger was approved by Yadkin’s shareholders on December 9, 2016, and it closed on March 11, 2017. The parties filed a Stipulation and Agreement of Compromise, Settlement, and Release, as well as a Motion for Preliminary Approval of Settlement, Certification of Class, and Approval of Class Notice on October 20, 2017. The court then entered an order preliminarily certifying the class under Rule 23, subject to a fairness hearing, and approved the form and method of notice required to be sent to class members. After providing notice to the class members, Plaintiff filed a Motion for Final Approval of Settlement. The court held a settlement hearing to evaluate whether a settlement class should be certified and whether the settlement was fair, reasonable, and adequate. The court now rules on the parties’ Motion for Final Approval of Settlement.
- In evaluating a disclosures-based settlement, the court must be satisfied that the supplemental disclosures are material and provide reasonable consideration for a class release.
- “An omitted fact is material if there is a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote. . . . It does not require proof of a substantial likelihood that disclosure of the omitted fact would have caused the reasonable investor to change his vote.” Op. ¶ 34 (first alteration omitted) (second alteration in original) (quoting TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976)).
- The supplemental disclosures, which provided additional material about the background of the merger and about Yadkin’s financial projections, were plainly material and served as reasonable consideration for the release.
- One of the supplemental disclosures informed shareholders of “don’t ask, don’t waive” (“DADW”) standstill provisions contained within nondisclosure agreements between Yadkin and three of the four entities interested in purchasing Yadkin. The DADW provisions precluded interested parties from offering to purchase Yadkin without a written invitation from Yadkin’s board. There is precedent that would support an argument in favor of an injunction due to the presence of a DADW standstill provision in a merger agreement.
- Because the settlement does not depend on the award of attorneys’ fees, costs, or expenses, the court defers ruling on the reasonableness of the request for attorneys fees pending the parties’ submission of additional materials.
- [Author’s Note: This opinion reads like a step-by-step procedural guide for North Carolina disclosure-only settlements within the class-action context.]
Motion for Final Approval of Settlement: GRANTED
Settlement class: CERTIFIED
All claims: DISMISSED with PREJUDICE.
The court retains jurisdiction to rule on a pending request for fees.
For more detail, you can read the full opinion HERE.
Cite: Moss v. Towell, No. 16 CVS 11038, 2018 WL 1189088 (N.C. Super. Ct. Mar. 6, 2018).