Class Action Settlement of Lawsuits Challenging Merger of Schering-Plough and Merck Warranted Approval where Terms Required Declaratory Relief for Class in the Form of Additional Disclosures by Schering-Plough Prior to Shareholder Vote on Proposed Merger and Payment of $3.6 Million to Class Counsel in Attorney Fees and Costs New Jersey Federal Court Holds
Following the announcement of a planned merger, various plaintiffs filed several class action lawsuits in New Jersey state and federal courts against Schering-Plough and its Board of Directors seeking to block the company’s merger with Merck. In re Schering-Plough/Merck Merger Litig., U.S.D.C. Case No. 2:09-cv-01099-DMC-MF (D.N.J. March 26, 2010) [Slip Opn., at 1-2]. According to the allegations underlying the various class action complaints, “the Schering board members had breached their fiduciary duties to shareholders by approving the Merger, because the terms of the Merger were insufficiently favorable to Schering’s shareholders and/or the Board had failed to perform appropriate due diligence before approving the Merger.” Id., at 3. The New Jersey district court appointed Class Counsel, and consolidated all of the federal class actions and denied a request to abstain from considering the class actions during the pendency of the state court class actions. Id., at 2-3. The state court dismissed the state class actions, id., at 3. Defendants denied any wrongdoing, id. Following the filing of a consolidated class action complaint, id., at 3-4, and after conducting discovery, id., at 4-5, the parties agreed upon a proposed class action settlement, id., at 5-6. The proposed settlement called for Schering to make additional disclosures to shareholders in advance of a vote on the proposed merger with Merck, id., at 5; Schering made the disclosures agreed upon by the parties and its shareholders “voted overwhelmingly” in favor of the merger, id., at 6. The district court gave preliminary approval to the proposed class action settlement, id., at 6-7. The parties then moved the district court to give final approval to the class action settlement, id., at 1. In an unpublished order, and noting that “only five Class members objected to the Settlement, representing a minuscule .00001% of the Class,” id., at 7, the district court granted the motion.
The federal court first analyzed whether the class action requirements of Rule 23 had been satisfied, and concluded that class action treatment was warranted. In re Schering-Plough, at 11-16. The court then considered the proposed terms of the settlement, and found them to be fair, reasonable and adequate. See id., at 16-23. The court discussed the handful of objections filed against the class action settlement and found them inadequate to reject the settlement. See id., at 23-28. The most interesting aspect of the settlement was its provision for payment of $3.5 million to Class Counsel, which the district court affirmed under the “common benefit doctrine,” despite the relief secured for the class. See id., at 28-34. The federal court also award Class Counsel costs in the amount of $131,777.16. Id., at 35. Accordingly, the district court granted final approval to the class action settlement and awarded Class Counsel in excess of $3.6 million in fees and costs. Id.
Comments are closed.