There seem to be a good number of people trying to figure out what is going on in the securities class action suit in the New York State Supreme Court Gordon v. Verizon Communications, Inc., Index No. 653084/2013. That is the case in which Judge Melvin Schweitzer famously rejected a proposed “merger tax” settlement in an opinion that received some attention. It was a matter of some interest that a member of the New York State Bar, Gerald Walpin, filed successful papers in the case objecting to the settlement on policy grounds when the defense lawyers from the Wachtell Lipton firm stood mute in the effort to pay off the plaintiff’s counsel to allow the merger to proceed. See Commentary on Abusive State Law Actions Following M&A Deals.
Some time ago I provided an update on developments in that case (Update on Status of Proposed Settlement in Gordon v. Verizon Communications, Inc.), in which I noted that the plaintiff filed a notice of appeal, and that attorney Walpin sought to intervene in the case to pursue a motion for summary judgment, arguing that the defense lawyers in the case were conflicted by having agreed to the settlement.
Here is another update. I provide this because it seems like a lot of class members are floundering around with no understanding of what is happening.
On August 3, 2015, Judge Anil Singh rejected several motions in the case, including the motion by Mr. Walpin to intervene and seeking summary judgment on behalf of the defendants, and a motion by by the plaintiff to introduce a new expert report addressing the proposed settlement and for reconsideration of Judge Schweitzer’s December 19, 2014 order denying the motion to approve that proposed settlement. A copy of that decision is available here: Decision on motions in Gordon v. Verizon Communications. On September 14, 2015, the plaintiff filed a Notice of Appeal of that order. See Notice of Appeal in Gordon v. Verizon Communications.
That is pretty much all that the case docket sheet reveals. By all outward appearances, the case is otherwise in stasis.
Since Judge Schweitzer’s decision, the “disclosure only” settlements of merger challenges — referred to by Judge Schweitzer as “merger tax” settlements — have come under attack and disrepute in a number of court decisions. Most recently, several decisions in the Delaware Chancery Court have rejected such proposed settlements. See Delaware Judge Tells Plaintiff Lawyers: The M&A ‘Deal Tax’ Game Is Over; Game Over?: Del. Chancery Court Rejects Disclosure-Only Settlement in H-P/Aruba Networks Merger Objection Lawsuit; and Transcript of Del. Chancery Court Hearing in Aruba Networks Stockholder Litigation, in which Vice Chancellor Laster addressed a proposed disclosure-only settlement in the H-P/Aruba merger challenge.
It seems that this sordid practice may be on the wane because judges finally are doing their jobs. But in the meantime, the supposed beneficiaries of these cases — the shareholders — are kept totally in the dark about these developments. Plaintiff’s counsel should be keeping these putative clients informed but, at least in this case, are obviously failing to do so, presumably because they see no vigorish in it. What a “profession”!
October 16, 2015
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