The First Department, in a full-fledged opinion by Justice Kahn, with a concurring opinion, reversing Supreme Court, determined a nonmonetary settlement of a shareholders’ class action suit should have been approved. The matter was sent back to determine appropriate attorneys’ fees. The opinion is too comprehensive to fairly summarize here. The court revisited the factors to be considered in analyzing nonmonetary settlements, adding two new factors to those announced in Woodrow v Colt Industries in 1990. This action involved the propriety of the purchase of Verizon Wireless by Verizon Communications:
The rise of nonmonetary class action settlements began in the 1980s and continued into the 1990s, when complaints of corporate misconduct in the context of mergers and acquisitions prompted calls for corporate governance reforms. Often, the perceived need for reform led to the commencement of litigation as a means to address the misfeasance, which would result in settlements with provisions for corporate governance reform or other forms of equitable relief, such as additional disclosures to shareholders in proxy statements, and would be accompanied by an award of reasonable attorneys’ fees to shareholders’ counsel. * * *
In the ensuing decades, however, the use of nonmonetary settlements became increasingly disfavored. Complaints arose that the remedies of “disclosure-only” and other forms of non-monetary settlements themselves proved problematic because they provided minimal benefits either to shareholders or to their corporations. Both courts and commentators came to view the shareholder class action in this context as a “merger tax” and as a cottage industry for the plaintiffs’ class action bar, used to force settlements of nonmeritorious suits and to generate exorbitant attorneys’ fees, causing waste and abuse to the corporation and its shareholders. * * *
… [W]e now refine our Colt standard of review to add to the five established factors to be used by courts to ensure appropriate evaluation of proposed nonmonetary settlements of class action suits these two additional criteria: whether the proposed settlement is in the best interests of the putative settlement class as a whole, and whether the settlement is in the best interest of the corporation. Gordon v Verizon Communications, Inc., 2017 NY Slip Op 00742, 1st Dept 2-2-17
CORPORATION LAW (NONMONETARY SETTLEMENT OF A SHAREHOLDERS’ CLASS ACTION SUIT APPROVED, NEW ANALYTICAL CRITERIA ANNOUNCED)/SHAREHOLDERS’ CLASS ACTIONS (NONMONETARY SETTLEMENT OF A SHAREHOLDERS’ CLASS ACTION SUIT APPROVED, NEW ANALYTICAL CRITERIA ANNOUNCED)/CLASS ACTIONS (SHAREHOLDERS, NONMONETARY SETTLEMENT OF A SHAREHOLDERS’ CLASS ACTION SUIT APPROVED, NEW ANALYTICAL CRITERIA ANNOUNCED)/NONMONETARY SETTLEMENTS (SHAREHOLDERS’ CLASS ACTIONS, NONMONETARY SETTLEMENT OF A SHAREHOLDERS’ CLASS ACTION SUIT APPROVED, NEW ANALYTICAL CRITERIA ANNOUNCED)