Justia U.S. 7th Circuit Court of Appeals Opinion Summaries

Joy Global and Komatsu agreed to merge. Joy sent its investors disclosures required under the Securities Exchange Act, 15 U.S.C. 78n. Subsequent suits contended that Joy violated the Act by not disclosing some internal projections of Joy’s future growth that could have been used to negotiate a higher price, rendering the proxy statements fraudulent, and that Joy’s directors violated their state law duties by not maximizing the price for the shareholders. The suits settled for $21 million.The district court held that the $21 million loss is not covered by insurance. The policies do not require indemnification for “any amount of any judgment or settlement of any Inadequate Consideration Claim other than Defense Costs.” An “inadequate consideration claim” is that part of any Claim alleging that the price or consideration paid or proposed to be paid for the acquisition or completion of the acquisition of all or substantially all the ownership interest in or assets of an entity is inadequate.The Seventh Circuit affirmed. The suits assert the wrongful act of failing to disclose documents that could have been used to seek a higher price and are within the definition of “inadequate consideration claim.” The claims do not identify any false or deficient disclosures about anything other than the price. The only objection to this merger was that Joy should have held out for more money, and that revealing this would have induced the investors to vote “no.” View "Joy Global Inc. v. Columbia Casualty Co." on Justia Law

In 2012 Walgreens acquired a 45 percent equity stake in Alliance, plus an option to acquire the rest of Alliance’s equity for a mixture of cash and Walgreens stock. Walgreens later announced its intent to purchase the remainder of Alliance and engineer a reorganization whereby Walgreens would become a wholly-owned subsidiary of a new corporation, Walgreens Boots Alliance. Within two weeks after Walgreens filed a proxy statement seeking shareholder approval, a class action was filed; 18 days later, less than a week before the shareholder vote, the parties agreed to settle. The settlement required Walgreens to issue several requested disclosures and authorized class counsel to request $370,000 in attorneys’ fees, without opposition from Walgreens. The Seventh Circuit reversed approval of the settlement, calling the supplemental disclosures “a trivial addition to the extensive disclosures already made in the proxy statement.” “The oddity of this case is the absence of any indication that members of the class have an interest in challenging the reorganization.... The only concrete interest suggested … is an interest in attorneys’ fees.... Certainly class counsel, if one may judge from their performance in this litigation, can’t be trusted to represent the interests of the class.” View "Hays v. Berlau" on Justia Law