Filed 10/19/22 Bushansky v. Alliance Fiber Optic Products CA6

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for 

publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication

or ordered published for purposes of rule 8.1115. 

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SIXTH APPELLATE DISTRICT

STEPHEN BUSHANSKY,

Plaintiff and Respondent,

v.

ALLIANCE FIBER OPTIC PRODUCTS, 

INC. et al.,

Defendants and Respondents;

ERIC ALAN ISAACSON,

 Intervenor and Appellant.

 H047100

 (Santa Clara County

Super. Ct. No. 16CV294245)

BAHMAN KHAKI,

 Plaintiff and Respondent,

 v.

ALLIANCE FIBER OPTIC PRODUCTS, 

INC. et al.,

 Defendants and Respondents;

ERIC ALAN ISAACSON,

 Intervenor and Appellant.

 H047101

 (Santa Clara County

 Super. Ct. No. 16CV294833)
2

Intervenor Eric Alan Isaacson appeals from judgments entered in two shareholder 

class actions arising from Corning Incorporated’s acquisition of Alliance Fiber Optic 

Products, Inc. Isaacson contends the trial court erroneously granted final approval of the 

negotiated settlement: in Isaacson’s view, the court underestimated the materiality of 

insider trading by Alliance’s chief executive officer—discovered only after the 

acquisition—both to Alliance shareholders deciding whether to accept Corning’s tender 

offer and to the strength of shareholder claims released through the settlement. Finding 

no abuse of discretion, we affirm.

I. BACKGROUND

Alliance was a publicly traded Delaware corporation with its principal place of 

business in Sunnyvale, California. Alliance designed, manufactured and marketed a 

broad range of high-performance fiber optic components and integrated modules for the 

optical network equipment market. By at least mid-2015, Alliance’s earnings were 

trending downward. By at least late 2014, Alliance had attracted interest as an 

acquisition target. 

Four parties—Corning, Party A, Party B, and Party C— indicated interest in 

acquiring Alliance in late 2014 and early 2015. By May 2015, Parties A, B, and C had 

indicated to Alliance that they were no longer interested. Negotiations with Corning 

stalled in June 2015, with Corning’s bid at around $21 per share and Alliance’s 

counterproposal at around $22 per share, when Corning walked away based on its 

financial due diligence findings. Alliance made further overtures to Parties B and C, but 

in December 2015 and January 2016 was informed that each party, respectively, was not 

interested in a transaction. Corning, however, returned to negotiations with a valuation at 

between $17.25 and $18.50 per share. While negotiations resumed with Corning, 

Alliance’s financial advisor secured a meeting with a new interested party, Party D. 

Alliance ultimately negotiated a deal with Corning, without meeting Party D. 
3

Peter C. Chang was Alliance’s president and chief executive officer and the chair 

of its board of directors. According to the allegations a criminal complaint filed in the 

Northern District of California on September 14, 2017, which we incorporate below,

Chang engaged in insider trading and fraud in connection with a tender offer between 

October 2015 and April 2016.1 During that time period, Chang controlled brokerage 

accounts held in the names of his wife and brother and used those accounts to trade 

Alliance stock based on material nonpublic information. 

On September 30, 2015, the accounts held more than 183,000 shares of Alliance 

stock valued at more than $3 million. At that time, Chang had material information about 

Alliance’s quarterly earnings that would not be made public until October 28, 2015. 

Between September 30, 2015, and October 28, 2015, Chang sold more than 

150,000 shares of Alliance stock from the two accounts. On October 28, 2015, Alliance 

announced that its quarterly revenues were down 28 percent from the previous quarter. 

On October 29, 2015, Alliance’s stock price decreased to $13.50 per share, 23 percent

lower than the prior day’s close. Chang avoided substantial losses by selling Alliance 

stock in advance of the earnings announcement. 

On December 16, 2015, Chang received an offer from Corning to acquire Alliance 

in the range of $17.25 to $18.25 per share in cash. On January 11, 2016, Chang 

participated in an Alliance board meeting in which the Board agreed to enter an 

exclusivity agreement with Corning based on its revised indication of interest at $20.50 

per share. On January 13, 2016, Chang signed an exclusivity agreement with Corning 

and participated in discussions with Corning about the due diligence process and 

1 On June 14, 2018, the federal court entered judgment against Chang pursuant to 

a guilty plea to three counts of securities fraud based on insider trading and one count of 

fraud in connection with a tender offer on the basis of a superseding information filed in 

the criminal proceedings. The superseding information was not presented to the trial 

court. Accordingly, we draw our summary of Chang’s alleged illicit conduct from the 

original criminal complaint.
4

transaction timeline. Shortly after the events concerning the proposed transaction with 

Corning took place, Chang began purchasing tens of thousands of Alliance shares. By 

the end of January 2016, Chang held over 300,000 Alliance shares valued at more than 

$4.5 million in the brokerage accounts. 

Alliance’s year-end earnings announcement was scheduled for February 19, 2016. 

In the 10 days prior, Chang sold 129,000 Alliance shares for proceeds of over 

$1.9 million. After the close of market on February 18, 2016, Alliance released an 

earnings report that reflected a continued downward trend in revenues. On 

February 19, 2016, Alliance’s stock price decreased to $12.03 per share, 16 percent lower 

than the prior day’s close. Chang again avoided substantial losses by selling Alliance 

stock in advance of the earnings announcement. 

After the earnings announcement, communications between Corning and Alliance 

about the possible transaction continued. Over the course of March 2016, the 

negotiations with Corning progressed to a transaction at $18.50 per share, based in part 

on Alliance’s determination that it would be highly unlikely for another bidder to emerge 

with an equal or greater valuation. With at least one exception, Chang steadily increased 

his holdings of Alliance stock as the negotiations, in which he was involved, progressed. 

Chang did, however, sell 3,000 shares of Alliance stock while negotiations were 

suspended for Corning to review Alliance’s financial results, at a time that coincided with 

a meeting between Alliance and Corning representatives to discuss Alliance’s 

preliminary financial results for the first quarter of 2016. Ultimately, Chang held over 

300,000 shares of Alliance stock by April 2016. 

It was on April 7, 2016, that Corning and Alliance publicly announced that they 

had entered into a merger agreement. Pursuant to the agreement, on that day Corning 

commenced a tender offer to purchase all of the outstanding Alliance shares at a price of 

$18.50 per share in an all-cash transaction valued at approximately $305 million. Four 
5

days after the public announcement, Chang sold all of his Alliance stock. By selling his 

stock after the public announcement of the merger, he gained a substantial windfall. 

On April 21, 2016, Corning filed with the Securities and Exchange Commission a 

Tender Offer Statement on Schedule TO and a Solicitation/Recommendation Statement 

on Schedule 14D-9 relating to the tender offer. On April 22, 2016, Stephen Bushansky 

filed a shareholder class action challenging the merger in Santa Clara County Superior 

Court. Three additional shareholder class actions followed, the last of which was filed by 

Bahman Khaki on May 6, 2016. 

In Bushansky’s operative First Amended Complaint, which was filed on 

April 29, 2016, Bushansky alleged that Alliance’s directors negotiated an inadequate 

tender offer price. Specifically, Bushansky alleged that Alliance’s directors breached 

their fiduciary duties of care, loyalty, independence, candor, fair dealing, and good faith 

because, with a financial interest in securing a merger, they failed to take reasonable steps 

to ensure that stockholders received fair value for their shares and failed to provide 

shareholders with sufficient information about the tender offer to make an informed 

decision about the proposed transaction. Bushansky’s underlying theories included: 

(1) the directors failed to conduct a genuine auction or pre-signing market check, 

including by failing to meet with Party D; (2) the tender offer price failed to adequately 

compensate Alliance’s stockholders for the benefits Corning would receive from the 

merger, as Corning was attempting “to capitalize on the rapidly growing data center and 

telecommunications industry[;]” (3) the merger was “timed in an effort to curb any future 

increase in the share price of Alliance common stock, thus ensuring that Corning can 

effectuate its takeover on the cheap[;]” (4) the directors agreed to unfair deal protection 

devices the decreased the possibility that any other bidder would top Corning’s bid, 

including a no-solicitation provision, the extension of matching rights to Corning, a 

provision that required Alliance to pay Corning a termination fee if it decided to pursue a 

different offer, and a provision that precluded Alliance from waiving any material 
6

provision of any confidentiality agreements; (5) the directors had a financial conflict of 

interest because it would allow them to liquidate their Alliance holdings and their stock 

options and restricted stock units would be paid out upon the consummation of the 

merger, meaning that the directors were interested in a deal at any price rather than 

securing a deal at the best price; and (6) the disclosures failed to disclose material facts, 

including among other things whether the confidentiality agreements between Alliance 

and Parties A, B, and C contained standstill provisions that prevented those companies 

from making a topping bid for the company.2 Bushansky alleged that Corning and a 

subsidiary aided and abetted the breach of fiduciary duties. Khaki pled substantially 

similar claims. 

Between May 4, 2016, and May 25, 2016, Defendants3 produced to plaintiffs’ 

counsel confidential and non-public documents relating to the proposed transaction. 

These included minutes from Alliance board meetings, presentations Alliance’s financial 

2 A standstill agreement is a feature of some non-disclosure agreements entered 

prior to merger negotiations, which prevents the parties from negotiating during a 

determinate time-period. (See In re Appraisal of Columbia Pipeline Group, Inc. (Del. 

Ch. Aug. 12, 2019) 2019 WL 3778370, *7 (Columbia Pipeline); see also Apple Inc. v. 

Superior Court (2017) 18 Cal.App.5th 222, 247, fn. 11 [although an unpublished 

California appellate opinion may not be cited or relied upon pursuant to California Rules 

of Court, rule 8.1115, citing unpublished opinions from other jurisdictions does not 

violate this rule].) The intended benefit of a standstill provision is to motivate the 

potential bidder to make its highest and best offer before the standstill goes into effect—

enabling the target company to conduct a prompt market check before signing a merger 

agreement—because there will be no subsequent opportunity for the potential bidder to 

increase its offer. (Columbia Pipeline, supra, 2019 WL 3778370, at p. *36.) But, 

because the potential buyer is precluded by the standstill agreement from increasing its 

bid, such a provision could limit the effectiveness of the market check the target company 

undertakes after signing a merger agreement and before closing. (Ibid.)

3 The defendants named by Bushansky and Khaki are Alliance, Chang, GwongYih Lee, James C. Yeh, Richard B. Black, Ray Sun, Corning, and Apricot Merger 

Company. Each of these defendants, save Apricot Merger Company, joined in 

Defendants’ appellate brief.
7

advisor gave to Alliance’s board, presentations made by Alliance’s management, and 

financial projections prepared by Alliance’s management. 

On May 10, 2016, Plaintiffs initiated settlement negotiations by sending a demand 

letter to Defendants in an effort to resolve the actions through a settlement. On 

May 26, 2016, the parties reached a settlement agreement in principle, which they 

memorialized in a Memorandum of Understanding (MOU). Pursuant to the MOU, 

Alliance was required to waive a standstill agreement with Party B and make 

supplemental disclosures, including the existence of the standstill agreement and waiver 

thereof, through an amendment to the Schedule 14D-9 in exchange for a dismissal of the 

pending actions with prejudice and a release of claims. This means that Party B was 

permitted to make a confidential offer to acquire Alliance in the short period of time 

remaining before the tender offer closed, an option that would otherwise not have been 

available to it because of the standstill agreement,4and the shareholders were alerted to 

the pertinent negotiating dynamics, to the extent that informed their consideration of the 

tender offer. The MOU also provided for confirmatory discovery. In accordance with 

the MOU, Alliance filed with the SEC Amendment No. 5 to its Schedule 14D-9 the 

following day. 

The deadline for Alliance’s shareholders to decide whether to tender their shares 

was June 3, 2016. Corning’s tender offer was successful. On June 6, 2016, Alliance 

became an indirect wholly owned subsidiary of Corning. 

After completing confirmatory discovery, the parties executed a settlement 

agreement in August 2017. Pursuant to the settlement agreement, Alliance: (1) had 

made supplemental disclosures; (2) had waived a standstill provision in an agreement 

4 The confidentiality agreements Alliance entered with other parties did not have 

standstill agreements that remained in effect at the time of the settlement, so the other 

parties were not foreclosed from submitting confidential offers to acquire Alliance during 

the tender offer period. 
8

with a specific third party; and (3) would be responsible for the costs of disseminating 

notice to the settlement class for the purposes of securing settlement. In exchange,

Plaintiffs and the putative settlement class would be subject to a release of claims. 

Further, Plaintiffs agreed to cap their anticipated request for attorneys’ fees and litigation 

expenses at $2 million. Defendants retained the right to oppose the fee request. 

Plaintiffs filed their initial motion for preliminary approval of the proposed class 

action settlement on August 28, 2017. The trial court directed Plaintiffs to provide 

additional information bearing on the value of the consideration exchanged in the 

settlement, including the value of the supplemental disclosures, the value of the standstill 

waiver, and the potential value of the claims Plaintiffs were releasing, accounting for the 

risks presented by continued litigation. 

After Plaintiffs and Alliance filed belated supplemental submissions, the trial court 

denied Plaintiffs’ preliminary approval motion without prejudice. The court reasoned 

that: (1) a standstill waiver could have some value depending on the deal size, the 

likelihood of a topping bid, and the likely change in the value of the merger if a topping 

bid occurred, but the parties had failed to assess the relevant factors or otherwise provide 

contextual indicia that the standstill waiver generated value in this case; (2) disclosure of 

the standstill waiver could have some value, but the value could not be evaluated without 

the same contextual information regarding the value of the standstill waiver; (3) Plaintiffs 

had not shown that any of the remaining disclosures were valuable to shareholders; and 

(4) Plaintiffs needed to, but, in light of the foregoing, did not, demonstrate that the 

settlement “provided real value to shareholders” to “justify the broad release associated 

with the settlement.” 
9

Plaintiffs filed a renewed preliminary approval motion on November 13, 2018.5 

On December 7, 2018, the court directed supplemental briefing. Plaintiffs made a 

supplemental filing on January 8, 2019. 

The trial court granted preliminary approval of the proposed settlement on 

January 29, 2019. First, the court reasoned that Plaintiffs had provided an analysis 

sufficient to “support the conclusion that the standstill waiver provided some value to 

shareholders.” Plaintiffs provided information about the history of the discussions 

between Alliance and Party B and Party B’s general area of business. While the court 

was concerned by a lack of information regarding whether Party B had conducted 

sufficient due diligence to enable it to make a topping bid in an eight-day window, the 

court noted that the record supported the proposition that Party B had engaged in serious 

negotiations with Alliance before walking away when Alliance’s share prices increased

in 2015. Because the tender offer was 15 percent below Alliance’s 52-week high value,6

the court reasoned that there was some “uncertain” likelihood that Party B would have 

submitted a topping bid at the time of the waiver, even accounting for the termination fee. 

Further, Plaintiffs “submitted a valuation . . . based on [a non-scientific] methodology 

used by Vice Chancellor Laster in [two Delaware cases,]” which the court found 

“helpful.” The court found Plaintiffs’ conclusion that there was a 4.6 percent likelihood 

of a topping bid as a result of the waiver to be “probably too high given that the standstill 

waiver here impacted a single party” but was satisfied that the analysis and citations 

5 Two other plaintiffs who joined the initial preliminary approval efforts dismissed 

their actions after the court denied preliminary approval. 

6 Bushansky alleged that $18.50 tender offer price reflected a “discount of nearly 

14.9% to the Company’s 52-week high of $22.35 per share on July 23, 2015.” But, as 

noted above, the share price had dropped to $12.03 per share on February 19, 2016. 

Alliance’s asking price came down along with its share price. Although negotiations 

stalled with Corning’s bid at $21 per share in June 2015, Alliance accepted a bid from 

Corning at $18.50 per share in April 2016. 
10

supported the conclusion that the standstill waiver provided “some value to 

shareholders.” 

Second, the court preliminarily concluded that disclosure of the standstill provided 

“material value” to shareholders. The court was preliminarily satisfied, in light of the 

“challenges to achieving a financial recovery . . . , which are described in plaintiffs’ 

motion, and the impossibility of rewriting the history of the negotiations leading up to 

Corning’s offer,” that ensuring that the shareholder tender was “fully informed was 

probably the most important outcome this action could achieve,” such that informing 

shareholders about the standstill provided material value under persuasive Delaware 

authorities. 

Third, although the release was not “narrow,” Plaintiffs conducted an adequate 

investigation to enable them to determine that “shareholders do not likely possess any 

meritorious claims connected to the transaction, other [than] those addressed by the 

settlement. Significantly, the fact that no additional lawsuits have been filed since this 

case was settled over two years ago bolsters this conclusion and distinguishes the 

circumstances here from those present in the typical disclosure settlement.” 

After notice was given to the class, Plaintiffs moved for final approval of the 

proposed settlement and for an award of $500,000 in fees and expenses. 

Isaacson filed an objection to the final approval motion.7Isaacson argued that the 

settlement provided no substantial benefit to the class: (1) the standstill waiver was, “at 

best, a minor benefit[;]” and (2) because the standstill provision was waived, disclosure 

of the standstill provision provided no additional benefit to stockholders. Further, 

Isaacson asserted that Plaintiffs did not conduct an adequate investigation, such that they 

did not secure adequate assurance that the broad release would not extend to unintended, 

7

Isaacson and Defendants separately opposed the request for attorneys’ fees and 

expenses. 
11

and valuable, claims. In particular, Isaacson contended that Plaintiffs had failed to 

uncover claims related to Chang’s insider trading, which Isaacson contended were 

apparently within the scope of the release. 

Bushansky, Khaki, and Defendants replied to Isaacson’s objection. Nevertheless, 

on the eve of the final approval hearing, Khaki withdrew his support for the settlement. 

On the same day, Isaacson filed a motion to intervene. The express purpose for 

the motion was to preserve Isaacson’s appellate rights. 

Following the final approval hearing, the court entered a written order granting the 

final approval motion on May 2, 2019. As to Isaacson’s arguments, the court explained 

that: (1) it remained persuaded that the standstill waiver and disclosure had material 

value, albeit less value than argued by Bushansky; and (2) it was not persuaded that 

Bushansky’s investigation failed to uncover potentially viable claims related to the 

merger or that any such claims exist because (a) Isaacson appeared to agree that claims 

arising from Chang’s insider trading were derivative claims extinguished by the merger; 

(b) Bushansky was unlikely to have been able to uncover claims of insider trading

through a reasonable investigation when the settlement was negotiated given Chang’s 

efforts to conceal his misconduct; and (c) there were no lawsuits filed relating to Chang’s 

insider trading, and no opt outs from the settlement to preserve the right to pursue such 

claims, in the years following the revelation of Chang’s misconduct. 

The trial court awarded Bushansky $238,916.50 of his requested $500,000 in fees, 

with $1,000 of the reduced amount to be paid to Bushansky as an incentive award. In 

arriving at the fee award, the court fixed a reasonable lodestar and declined to apply any 

multiplier, explaining that the claims were straightforward and the litigation involved 

limited time and risk. 

On May 2, 2019, the court entered judgment in both the Bushansky and Khaki 

actions pursuant to its order finally approving the settlement. 
12

On June 14, 2019, the court granted Isaacson’s motion to intervene “for the sole 

purpose of preserving Isaacson’s standing to appeal.”8 Isaacson timely appealed in both 

the Bushansky and Khaki actions. This court ordered the appeals considered together for 

purposes of record preparation, briefing, oral argument, and disposition.

II. DISCUSSION

A. Legal Principles and Standard of Review

The requirement for court approval of a class action settlement (Cal. Rules of 

Court, rule 3.769) is intended for “ ‘ “the protection of those class members, including the 

named plaintiffs, whose rights may not have been given due regard by the negotiating 

parties.” [Citation.]’ ” (Luckey v. Superior Court (2014) 228 Cal.App.4th 81, 93.) 

Approval requires the court’s determination that “ ‘ “the agreement is not the product of 

fraud or overreaching by, or collusion between, the negotiating parties, and that the 

settlement, taken as a whole, is fair, reasonable and adequate to all concerned.” ’ 

[Citation.]” (Carter v. City of Los Angeles (2014) 224 Cal.App.4th 808, 820 (Carter).)

A settlement is subject to a rebuttable presumption of fairness “ ‘where: (1) the 

settlement is reached through arm’s-length bargaining; (2) investigation and discovery 

are sufficient to allow counsel and the court to act intelligently; (3) counsel is 

experienced in similar litigation; and (4) the percentage of objectors is small.’ 

[Citation.]” (Carter, supra, 224 Cal.App.4th at p. 820.) Moreover, “[d]ue regard should 

be given to what is otherwise a private consensual agreement between the parties. . . . 

‘Ultimately, the [trial] court’s determination is nothing more than “an amalgam of 

delicate balancing, gross approximations and rough justice.” [Citation.]’ [Citation.]” 

(Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794, 1801 (Dunk).)

8 We decline Respondents’ invitation to dismiss Isaacson’s appeal for lack of 

standing. (Hernandez v. Restoration Hardware, Inc. (2018) 4 Cal.5th 260, 267, 273

(Hernandez) [an unnamed class objector may challenge the judgment on appeal by 

intervening in the action or filing a motion to set aside the class judgment].) 
13

But the trial court must nonetheless assess the proposed settlement on its

substantive merits, particularly where class certification has been deferred to the 

settlement stage. (Carter, supra, 224 Cal.App.4th at p. 820.) “ ‘ “The most important 

factor is the strength of the case for plaintiffs on the merits, balanced against the amount 

offered in settlement.” ’ ” (Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 

116, 130 (Kullar).) Relevant considerations include “ ‘[1] the strength of plaintiffs’ case, 

[2] the risk, expense, complexity and likely duration of further litigation, [3] the risk of 

maintaining class action status through trial, [4] the amount offered in settlement, [5] the 

extent of discovery completed and the stage of the proceedings, [6] the experience and 

views of counsel, . . . and [7] the reaction of the class members to the proposed 

settlement.’ ” (7-Eleven Owners for Fair Franchising v. Southland Corp. (2000) 85 

Cal.App.4th 1135, 1146 (7-Eleven).) The trial court, however, does not “ ‘ “try out or 

attempt to decide the merits of the controversy.” ’ ” (Ibid.) It is sufficient that the 

settlement be “within the ‘ballpark’ of reasonableness.” (Kullar, supra, at 168 

Cal.App.4th at p. 133.) 

Because “ ‘ “so many imponderables enter into the evaluation of a settlement,” ’ ” 

we review the trial court’s approval of the class action settlement for clear abuse of 

discretion. (Carter, supra, 224 Cal.App.4th at p. 819; see also Wershba v. Apple 

Computer, Inc. (2001) 91 Cal.App.4th 224, 234-235 (Wershba), disapproved on other 

grounds by Hernandez, supra, 4 Cal.5th at pp. 269-270.) A trial court judgment is 

generally presumed to be correct; the burden is on appellant to demonstrate reversible 

error based on the record presented on appeal. (Jameson v. Desta (2018) 5 Cal.5th 594, 

608-609 (Jameson).) “ ‘In the absence of a contrary showing in the record, all 

presumptions in favor of the trial court’s action will be made by the appellate court.’ ” 

(Id. at p. 609.) We neither reweigh the relevant factors nor substitute our judgment for 

that of the trial court. (Wershba, supra, 91 Cal.App.4th at pp. 244-245; Kullar, supra, 

168 Cal.App.4th at pp. 127-128.) Moreover, like the trial court, we “ ‘ “need not and 
14

should not reach any dispositive conclusions on the admittedly unsettled legal issue.” ’ ” 

(7-Eleven, supra, 85 Cal.App.4th at p. 1146.)

B. The Trial Court’s Exercise of Discretion 

Well before Isaacson’s objection, the trial court signaled its concerns about the 

value to shareholders of the disclosure-only settlement.

9

 After requiring several iterations 

of supplemental briefing and evidence, however, the trial court independently satisfied 

itself that the settlement was fair to the class. (See Kullar, supra, 168 Cal.App.4th at 

p. 129.) At the heart of the trial court’s analysis were its determinations that a monetary 

recovery was improbable; the merger and the negotiations leading up to it could not be 

unwound; Chang’s insider trading was not reasonably discoverable before the tender 

offer closed; and the settlement provided “material value” to class members by 

compelling disclosure of the standstill agreement prohibiting Party B from increasing its 

offer during the standstill period, and “some value” to class members by compelling 

9

In its first order requiring supplemental briefing, the trial court directed the 

parties to address In re Trulia, Inc. Stockholder Litigation (Del. Ch. 2016) 129 A.3d 884 

(Trulia). Remarking on “the proliferation of disclosure settlements,” the Delaware Court 

of Chancery characterized these as “the most common method for quickly resolving 

stockholder lawsuits that are filed routinely in response to the announcement of virtually 

every transaction involving the acquisition of a public corporation.” (Id. at p. 887, fn. 

omitted.) The corporation agreed to give stockholders “some additional information that 

theoretically would allow the stockholders to be better informed in exercising their 

franchise rights. In exchange, plaintiffs dropped their motion to preliminarily enjoin the 

transaction and agreed to provide a release of claims on behalf of a proposed class.” 

(Ibid.) And “[t]he only money that would change hands is the payment of a fee to 

plaintiffs’ counsel.” (Ibid.) The court noted “concerns” that such disclosure settlements

“rarely yield genuine benefits for stockholders” who might lose “potentially valuable 

claims that have not been investigated with rigor.” (Ibid.) The trial court thus recognized 

its special responsibility to carefully evaluate disclosure settlements, consistent with its 

obligations under Kullar. But the concerns noted in Trulia do not necessarily render a 

particular settlement unfair, any more than structural incentives for “professional 

objectors” to oppose a settlement to extract a fee render a particular objection unfounded. 

(See, generally, Hernandez, supra, 4 Cal.5th at pp. 272-273 [discussing policy concerns 

presented by “professional objectors”].)
15

Alliance’s waiver of the prohibition. We discern no abuse of discretion in its evaluation 

on either side of the Kullar balancing.

1. The Value of the Release of Class Claims

Through its preliminary and final approval orders, the court focused on

“challenges to achieving a financial recovery” and “the impossibility of rewriting the 

history of the negotiations leading up to Corning’s offer.” The challenges contemplated 

by the court included (1) the likely application of the business judgment rule,10 rather 

than enhanced scrutiny, to examine the directors’ actions in connection with the merger; 

and (2) the likelihood that, even under enhanced scrutiny, case-specific facts supported 

the reasonableness of the transaction, making the chances of securing damages “slim”: 

(a) the Board engaged an experienced, qualified, and unconflicted financial advisor to 

assist with the transaction; (b) Alliance’s revenues and share price were declining, such 

that the transaction achieved shareholder value that could otherwise have taken several 

10 “ ‘The business judgment rule is a “ ‘ “presumption that in making a business 

decision the directors of a corporation acted on an informed basis, in good faith and in the 

honest belief that the action taken was in the best interests of the company.” ’ [Citation.] 

It ‘posits a powerful presumption in favor of actions taken by the directors in that a 

decision made by a loyal and informed board will not be overturned by the courts unless 

it cannot be “attributed to any rational business purpose.” ’ [Citation.]” (Central 

Laborers’ Pension Fund v. McAfee, Inc. (2017) 17 Cal.App.5th 292, 314, quoting Unocal 

Corp. v. Mesa Petroleum Co. (Del. 1985) 493 A.2d 946, 954 & Cede & Co. v. 

Technicolor, Inc. (Del. 1993) 634 A.2d 345, 360, decision modified on reargument by 

Cede & Co. v. Technicolor, Inc (Del. 1994) 636 A.2d 956, 957.) The directors’ actions in 

connection with a merger or acquisition that will result in a change of control are 

typically subject to “enhanced scrutiny,” an intermediate standard of review, in 

determining whether the directors have met their duty to shareholders. (Omnicare, Inc. v. 

NCS Healthcare, Inc. (Del. 2003) 818 A.2d 914, 928.) But when the majority of 

shareholders accept a tender offer, the acceptance has a “cleansing effect”—unless the 

stockholders were “interested, coerced, or not fully informed”—by which “the business 

judgment rule irrebuttably applies.” (In re Volcano Corporation Stockholder Litigation

(Del. Ch. 2016) 143 A.3d 727, 747, 749-750.)
16

years to recover; and (c) after the tender offer and the standstill waiver were announced, 

clearing the way for any interested party to come forward with a superior offer, none did. 

Accordingly, the trial court fulfilled its proper role in evaluating a range of 

potential risks and weaknesses in the plaintiffs’ claims, rather than purporting to render a 

judgment based on a final determination of one potential weakness and disregard for the 

others. (See Kullar, supra, 168 Cal.App.4th at p. 130.) Although we cannot say with 

certainty which considerations the trial court deemed weightiest, it is incumbent on 

Isaacson, as the appellant, to affirmatively demonstrate an abuse of discretion. (See 

Jameson, supra, 5 Cal.5th at pp. 608-609.) 

2. The Value of the Settlement Consideration

The trial court found that the standstill waiver and disclosure provided some 

material value to the class. The court did not precisely quantify the value of the standstill 

disclosure and waiver but determined that it was sufficient to justify the release 

considering the objectives of the litigation and the value of the release. The court acted 

within its discretion in determining that the standstill waiver and disclosure provided 

some material value to the class. Moreover, consistent with our conclusion that Isaacson 

has not shown that the court abused its discretion in assessing the strengths and 

weaknesses of the released claims, the court acted within its discretion in determining 

that this material value was sufficient to justify final approval.

As Isaacson concedes, the settlement consideration has some value. The trial 

court acted within its discretion in this case in determining, based on its independent 

analysis of the settlement approval record, that the standstill waiver had “some value” 

and the standstill disclosure had “material value.” 

A standstill waiver that permits a previously restrained party to submit a topping 

bid may benefit shareholders to the extent that it increases the likelihood that a topping 

bid will actually be submitted, such that an increased transaction price will be obtained. 

(See Columbia Pipeline, supra, 2019 WL 3778370, at pp. *7, *36; In re Compellent 
17

Technologies, Inc. Shareholder Litigation (Del. Ch. Dec. 9, 2011) 2011 WL 6382523, 

*19-*20.) Here, the trial court scrutinized the relevant contextual circumstances in 

determining that the standstill waiver in this case had “some value,” and only “some 

value.” 

Similarly, disclosure settlements that cause the disclosure of material information, 

information that significantly alters the total mix of information made available, may 

provide a meaningful benefit to stockholders. (Trulia, supra, 129 A.3d at p. 899.) Here, 

the trial court independently evaluated the disclosures Bushansky obtained and 

determined that the disclosure of the standstill agreement pertaining to Party B was 

material, such that the disclosure of the same provided “material value” to shareholders. 

Accordingly, the trial court fulfilled its obligations in independently evaluating the 

reasonableness of the settlement. (See Kullar, supra, 168 Cal.App.4th at pp. 129-130.) 

None of the challenges Isaacson raises indicates that the trial court abused its discretion 

in conducting the required analysis. Rather, Isaacson suggests that we reweigh the 

factors on which the trial court relied, on the theory that it erred as a matter of law in 

assessing the significance of Chang’s insider trading to both the value of the class claims 

and the value of the settlement disclosures. Isaacson’s arguments misapprehend our 

deferential review and misconstrue the trial court’s order.

C. Chang’s Insider Trading

Isaacson’s fundamental contention is that Chang’s undisclosed insider trading 

compelled rejection of the settlement because of its impact on both sides of the Kullar

balancing. Isaacson’s arguments all begin with a common premise—that the trial court 

was required to treat Chang’s insider trading as material to shareholders evaluating 

Corning’s tender offer. According to Isaacson, the failure to disclose Chang’s insider 

trading increased the value of the plaintiffs’ actual or potential claims, in that the 

omission of information material to shareholders evaluating the offer would disentitle the 

board of directors from deference to its business judgment and potentially gave rise to 
18

other claims. Isaacson further considers Alliance’s failure to disclose Chang’s insider 

trading to render meaningless its disclosure and waiver of its standstill agreement with 

Party B, because shareholders were not “fully informed.” But because Isaacson does not 

demonstrate that Chang’s undisclosed insider trading necessarily altered the balance of 

relevant factors before the trial court, he demonstrates no abuse of discretion on this 

record. (See Jameson, supra, 5 Cal.5th at pp. 608-609.)

1. Materiality to the Value of the Released Claims

Bushansky’s core claims were that Alliance’s former directors breached their 

fiduciary duties the shareholders in connection with the Corning transaction, including

breach of their duty of candor. Isaacson contends that the post-settlement revelation of 

Chang’s insider trading strengthened these claims. Isaacson reasons that Chang’s insider 

trading would have been material to a stockholder deciding whether to tender, such that 

(1) Chang’s nondisclosure gave rise to a distinct direct theory for breach of the duty of 

candor; and (2) Chang’s nondisclosure meant that the merger transaction would not be 

scrutinized using the business judgment rule, but under enhanced scrutiny. Isaacson 

contends that the court erred in approving the settlement because it did not appreciate 

these implications. To the contrary, we are not persuaded that the revelation of Chang’s 

insider trading required the trial court to alter its discretionary determination that none of 

the released claims were likely to yield damages, such that the best result Bushansky 

could achieve through this action were the disclosures reasonably obtainable before the 

tender offer closed. 

As a threshold matter, trial courts in their fairness inquiry do not decide contested 

issues as to the merits of the class action. (See Kullar, supra, 168 Cal.App.4th at 

pp. 129-130; 7-Eleven, supra, 85 Cal.App.4th at p. 1146.) Rather, trial courts consider 

the range of potential outcomes on such issues in the course of the broader fairness 

analysis. (See Kullar, supra, 168 Cal.App.4th at pp. 129-130; 7-Eleven, supra, 85 

Cal.App.4th at p. 1146.) Accordingly, the proper course was for the trial court to 
19

consider the impact of Chang’s insider trading had on the range of potential litigation 

outcomes, without deciding ultimate issues of fact or law, such as whether Chang’s 

insider trading was material to evaluating the merger. The trial court considered 

Isaacson’s objection and determined that the objection did not “materially impact” its 

analysis of the settlement. We understand this to mean that the court considered the 

insider trading in its evaluation of the settlement and determined that the associated 

potential did not warrant rejecting the settlement.

11

 We discern no abuse of discretion in 

this determination.

Isaacson has not shown that Chang’s insider trading would necessarily be material 

to shareholders evaluating Corning’s tender offer, such that the trial court was required to 

treat the insider trading as material to shareholders in conducting its analysis. Materiality 

is measured by the function to be served or the harm to be avoided. Chang’s insider 

trading was, of course, material to his fitness as a fiduciary, to his disclosure obligations 

to the Securities and Exchange Commission, to the investing public with whom he 

surreptitiously traded his own shares to his personal profit, based on insider information. 

(See United States v. O’Hagan (1997) 521 U.S. 642,659 [noting the “inhibiting impact on 

market participation of trading on misappropriated information”]; United States v. Goffer

(2d Cir. 2013) 721 F.3d 113, 132 [insider trading defendant’s “corrosive influence on the 

integrity of the financial markets and on the expectation of trust and confidence”]; see 

also 15 U.S.C. §§ 78c(15), 78p.) But Isaacson has identified no authority that would 

compel his conclusion that Chang’s insider trading as Alliance sought to be acquired is 

material to shareholders deciding whether to accept Corning’s share price. 

11 We do not adopt Isaacson’s characterization of the order as conclusively 

determining that Chang’s insider trading was not material, or that the former Alliance 

directors would therefore have been entitled to application of the business judgment rule: 

this was not the trial court’s role. (7-Eleven, supra, 85 Cal.App.4th at p. 1146.)
20

On appeal, Isaacson cites Morrison v. Berry (Del. 2018) 191 A.3d 268 (Morrison). 

In Morrison, the Delaware Supreme Court explained that “ ‘[a]n omitted fact is material 

if there is a substantial likelihood that a reasonable investor would consider it important 

in deciding how to vote.’ Framed differently, an omitted fact is material if there is ‘a 

substantial likelihood that the disclosure of the omitted fact would have been viewed by 

the reasonable investor as having significantly altered the “total mix” of information 

made available.’ ” (Id. at pp. 282-283, fns. omitted.) Morrison, however, involved the 

failure to disclose a founding shareholder’s request that the company be sold to one 

particular private equity buyer, his warning that he would sell his shares if the company 

was not sold “ ‘ “at this time,” ’ ” and his rationale for both: the Delaware Supreme 

Court held that reasonable shareholders would consider the information important in 

deciding whether to tender their shares or seek appraisal. (Id. at pp. 286-287.) 

After appellate briefing closed, Isaacson directed our attention to Goldstein v. 

Denner (Del. Ch. May 26, 2022) 2022 WL 1671006 (Goldstein I), where the Delaware 

Court of Chancery found that the specific character of one director’s insider trading in 

connection with a tender offer and another director’s abetting of those machinations 

rendered the transaction subject to enhanced scrutiny. In Goldstein I, Sanofi S.A.

approached two of the company’s directors, Denner and Posner, with an interest in 

buying the company for around $90 per share, more than $30 dollars per share above the 

price at which it was then trading. (Id. at p. *1.) The two directors delayed reporting to 

the rest of the board Sanofi’s initial overture. In the interim, Denner caused a hedge fund 

he controlled to octuple its holdings of the company’s stock, in violation of the 

company’s insider trading policy. (Ibid.) Denner and Posner then stalled Sanofi, 

including by failing to report Sanofi’s repeated overtures, until nearly six months had 

passed from the hedge fund’s purchase of company stock to skirt “[s]ection 16(b) of the 

Securities Exchange Act of 1934, which requires that an insider disgorge short-swing 

profits from any sale that takes place less than six months after the purchase.” (Ibid.) 
21

After the necessary time had elapsed, and “[w]ithout authorization from the Board, 

Denner invited Sanofi to make a preemptive bid that could result in a single-bidder 

process.” (Id. at *35.) Denner accelerated the Sanofi transaction to consummation at a 

transaction price nearly a third below the company’s internal valuation of $150 per share 

under its long-range plan, when “[n]othing about the Company’s trajectory warranted 

Denner’s volte face” and in fact “the Company’s standalone prospects had continued to 

improve.” (Id. at *1, *35) The Court of Chancery found that this insider trading was an 

undisclosed material fact, because Denner “played a central role in the Transaction” and 

the insider trading at issue “shed[] light on [his] financial interests and motivations” in 

negotiating the timing and terms of the deal. (Id. at pp. *23-*24, *30.)

Here, however, it is not obvious what information shareholders would glean from 

Chang’s insider trading or how that information would in turn be material to their 

consideration of the tender offer. As alleged in the criminal complaint, Chang sold shares 

when he had advance knowledge of information that would soon lower the share price, 

and bought shares when he had advance knowledge of information that would soon raise

the share price. Isaacson has not established that it was unreasonable for the trial court to 

anticipate that Chang’s insider trading might be construed differently than the 

information in Morrison and Goldstein I—i.e., not as information going to the objective 

merits of selling the company or conflicts of interest in the negotiation process, but 

merely as information that one shareholder had leveraged the delay between negotiation 

of a tender offer and the eventual public disclosure that would predictably increase the 

share price. Accordingly, we are unable to fault the trial court to the extent, in addressing 

settlement approval, it considered it at least uncertain whether Chang’s insider trading 

would have been material to reasonable shareholders evaluating the tender offer. 

For the first time on appeal, Isaacson offers a single conclusory argument that

shareholders would have considered material “Chang’s decision to sell [3,000 of 

300,000 shares] when it looked like Corning might walk away, rather than hold out for an 
22

offer from Party B,” because it would have suggested that Chang considered a topping 

bid unlikely. In deciding whether this one transaction would be material to shareholders 

considering the Corning tender, however, the trial court was entitled to consider not just 

the fact and timing of Chang’s trades but also the low volume of the transaction in 

comparison to the total holdings Chang had amassed in anticipation of sale. Although the 

trial court did not expressly analyze the asserted materiality of Chang’s insider trading in 

its written opinion, we do not believe this fact has special significance; Isaacson never 

articulated a specific argument for the trial court to address.12 We understand the trial 

court to reasonably have considered it possible that Chang’s insider trading, in a trial of 

plaintiffs’ claims, would be deemed immaterial to shareholders in deciding whether to 

tender their shares. (See Kullar, supra, 168 Cal.App.4th at pp. 129-130; 7-Eleven, supra, 

85 Cal.App.4th at p. 1146; Morrison, supra, 191 A.3d at pp. 282-283, 286-287.) Because 

the trial court was not required to treat Chang’s insider trading as material to shareholders 

evaluating the merger, we reject Isaacson’s contention that the trial court committed legal 

error by not doing so. 

Although Isaacson’s appellate briefing drew attention to Chang’s insider trading, it 

did not reach the central issue presented by his appeal—whether the trial court’s 

evaluation of the value of the released claims in comparison to the benefits secured 

through settlement constituted an abuse of discretion. We are reviewing a trial court’s 

“ballpark” determination that a monetary recovery was improbable based on a 

combination of several considerations. Isaacson has not demonstrated that the trial 

court’s conclusion was wrong on the record then before it. Assuming that breach of 

12 In his written objection, Isaacson presumed that Chang’s insider trading was 

undisclosed material information and argued that it would prevent Defendants from 

invoking the business judgment rule. Isaacson did not explain the basis for his 

presumption that Chang’s insider trading would be material to consideration of Corning’s 

tender offer. 
23

fiduciary duty claims relating to the merger would be subject to enhanced scrutiny

because Chang’s undisclosed insider trading would have been material to shareholders

(see Goldstein I, supra, 2022 WL 1671006, at pp. *23-*24, *30), Isaacson did not 

identify a theory by which, in this case, those claims would probably lead to monetary 

damages relating to the merger.

13 At most, Isaacson argues that, as a general matter of 

litigation tactics, Bushansky might have been able to extract a better settlement had he 

pushed defendants to test his claims—and those theories identified by Isaacson—and 

survived a motion to dismiss. But it is the potential strength or weakness of the released 

claims on their merits—not the marginal gains attributable to litigation tactics—that the 

trial court had to gauge. It is Isaacson’s burden to demonstrate that the trial court abused 

its discretion, including by developing a reasoned argument supported by legal authority 

in support of his position. (Hewlett-Packard Co. v. Oracle Corp. (2021) 65 Cal.App.5th 

506, 565; Lee v. Kim (2019) 41 Cal.App.5th 705, 721; see also Jameson, supra, 5 Cal.5th 

at p. 609.) Isaacson has not satisfied his burden.

Again for the first time on appeal, Isaacson argued that, as a result of Chang’s 

insider trading, stockholders could have a direct claim against Corning for unjust 

enrichment because Corning secured what Isaacson characterizes as “an award of 

$792,141.50 from Chang’s breaches of duty to [Alliance] stockholders.” Isaacson 

forfeited his argument that shareholders had a valuable claim for unjust enrichment 

against Corning as a result of Chang’s insider trading, because the parties had no 

opportunity to contest it and the trial court had no opportunity to consider it in evaluating 

the settlement. (See Quiles v. Parent (2018) 28 Cal.App.5th 1000, 1013 (Quiles); see 

13 In Goldstein I, the plaintiff offered a concrete theory of damages. The damages 

were the difference between the company’s internal valuation of its future share price, 

about $150 per share, and the actual sale price. (Goldstein I, supra, 2022 WL 1671006,

at p. *56.)
24

also In re Marriage of Brewster & Clevenger (2020) 45 Cal.App.5th 481, 510.)14 Even if 

not forfeited, Isaacson’s theory of liability is unsupported by the record before the trial 

court. The criminal judgment required Chang to pay $782,141.50 to Corning in 

“restitution.” Nothing in the record before the trial court disclosed the basis for the award 

of restitution, let alone that the restitution to Corning was compensation for injuries 

suffered by Alliance’s shareholders. Accordingly, Isaacson’s contention that Corning 

received a windfall as a result of the restitution award is without support. Isaacson has 

not shown that the trial court had any reason to treat the potential claim as likely to 

generate monetary value in its settlement approval analysis, much less that the trial court 

abused its discretion by failing to do so.

In the trial court, Isaacson argued only that Chang was subject to a derivative 

claim for misuse of confidential corporate information by a fiduciary, and conceded that, 

because it was a derivative claim, it was “likely” extinguished by the merger. Faced with 

this argument, the trial court unsurprisingly wrote that Isaacson “appear[ed] to agree with 

plaintiffs that any claims arising from Chang’s insider trading were derivative claims 

extinguished by the merger.” 

After the close of briefing, however, Isaacson directed our attention to Goldstein v. 

Denner (Del. Ch. June 2, 2022) 2022 WL 1797224 (Goldstein II). There, following a 

line of authority flowing from Parnes v. Bally Entertainment Corp. (Del. 1999) 722 A.2d 

14 Defendants request judicial notice under Evidence Code section 459 of the 

superseding information and a sentencing memorandum in Chang’s federal criminal 

proceeding, to establish that the order for restitution was to reimburse Corning for 

expenses Corning incurred complying with the criminal investigation, rather than for 

Chang’s breaches of fiduciary duty vis-à-vis Alliance shareholders. We deny the request 

to judicially notice matters not before the trial court, given the absence of exceptional 

circumstances warranting such a measure. (Haworth v. Superior Court (2010) 50 Cal.4th 

372, 379, fn. 2.) Moreover, we further observe that judicial notice does not extend to the 

truth of hearsay statements within judicially noticeable documents. (See In re Vicks

(2013) 56 Cal.4th 274, 314.)
25

1243, the Delaware Court of Chancery ruled that a shareholder had standing to raise a 

derivative claim for disgorgement of the profits a director obtained through insider 

trading in connection with a tender offer, on the ground that the insider trading could 

have tainted the sale process. (See Goldstein II, 2022 WL 1797224, at pp. *4, *10-*12.) 

A plaintiff shareholder who has pled a viable underlying derivative claim, the value of 

which is material in the context of the merger, may “challenge[] a merger based on a 

board’s alleged failure to obtain value for an underlying derivative claim that existed 

prior to and independent from the merger.” (Id. at p. *10.) Moreover, a shareholder may 

also “assert a direct claim challenging a merger if the facts giving rise to what otherwise 

would constitute a derivative claim led either to the price or the process being unfair.” 

(Id. at p. *11.) A plaintiff who thus directly attacks the fairness or validity of a merger is 

not alleging an injury to the corporation but to its shareholders “ ‘and may pursue such a 

claim even after the merger at issue has been consummated.’ [Citation.]” (Id. at p. *10.) 

Accordingly, at oral argument, Isaacson contended that Goldstein II supports the theory 

that shareholders here retained a valuable claim for disgorgement of the profits obtained 

through insider trading against Chang even after the consummation of the merger. 

Because this argument was not before the trial court, however, it would be 

inappropriate for us to consider it in our deferential review for abuse of discretion. In the 

trial court, Isaacson obliquely conceded that any derivative claims arising out of Chang’s 

insider trading were “likely” released, and he identified no direct claims. Even as 

recently as his appellate reply brief, Isaacson stopped short of taking the position that 

shareholders could pursue a post-merger disgorgement claim, asserting instead that the 

record was “too sparse”—given plaintiffs’ failure to investigate—to assess whether the 

value of a disgorgement claim was material in the context of the merger.15 If Isaacson 

15 In Morris v. Spectra Energy Partners (DE) GP, LP (Del. 2021) 246 A.3d 121, 

136 (Morris), the court explained that “a $10 million derivative claim could not 
26

believed that the record before the trial court did not support approval of the settlement 

because Bushansky, post-merger, may have been able to pursue directly what otherwise 

would have been a derivative claim for insider trading, Isaacson needed to make, and 

could have made, that point in the trial court. (See Quiles, supra, 28 Cal.App.5th at 

p. 1013.) In reviewing for abuse of discretion, however, we cannot expect the trial court 

to expressly address a claim Isaacson himself only articulated for the first time at oral 

argument on appeal.

Isaacson did surmise in the trial court that Bushansky “may well have missed 

other issues” if he “missed Chang’s insider trading” due to an inadequate investigation. 

But as the trial court noted, the failure of any entity other than the plaintiffs involved in 

these proceedings to raise any claim in the three years since the merger made unlikely the 

existence of potentially valuable claims other than those considered in the litigation to 

that point.

16 None of Isaacson’s arguments to the trial court pointed to the disgorgement 

theory Isaacson articulated at oral argument, the materiality of that claim in the context of 

reasonably be expected to be material to a $1 billion merger value. The same derivative 

claim would be material to a $20 million merger.” Here, the transaction price was about 

$305 million. Consistent with Morris, if the insider trading claim against Chang were

valued at less than one percent of this sum, a trial court might legitimately assess as low

the likelihood of the claim being deemed material to the transaction price. Isaacson has 

not argued that the disgorgement claim could be so valuable as to be material to the 

transaction price in this case. We note that the criminal complaint alleges that Chang 

profited in an amount exceeding $800,000 by trading on his insider knowledge of the 

anticipated merger and avoided losses of $980,000 by trading on his insider knowledge of 

Alliance’s anticipated earnings reports. 

16 Addressing the contention that Bushansky’s investigation may have missed 

meaningful claims, the trial court wrote that it was “not persuaded that plaintiffs’ 

investigation failed to uncover potentially viable claims related to the merger or that any 

such claims exist now.” We understand the reference to “viable” claims in the context of 

the court’s order and the court’s limited role at final approval. (See Kullar, supra, 168 

Cal.App.4th at p. 133.) That is, we understand the reference to “viable” claims to mean 

claims that had a probability, through continued litigation, of generating a monetary 

recovery.
27

the merger, or its effect on the fairness of the merger price or process. (See Goldstein II, 

supra, 2022 WL 1797224, at pp. *10-11.) In his appellate briefing, Isaacson argued there 

must be some other remedy available to shareholders, even if he was unable to identify it. 

For support, Isaacson cited only the general proposition that “ ‘equity will not suffer a 

wrong without a remedy.’ ” (Shawe v. Elting (Del. 2017) 157 A.3d 152, 159, fn. 

omitted.) Isaacson has identified no principled basis by which we should now explore 

the potential for distinct equitable claims that had no meaningful exposition in the trial 

court and have been raised only in passing on appeal. Chang’s criminal conviction and 

sentence tend to undermine Isaacson’s suggestion that this particular wrong has gone 

unremedied, and Isaacson has not articulated a theory by which Alliance shareholders 

could probably have achieved a monetary recovery in the civil action.

2. Materiality to the Settlement Consideration

Isaacson contends that the trial court incorrectly determined that shareholders were 

“fully informed” at the time of the tender, when in fact shareholders were unaware of 

Chang’s insider trading. This line of argument is undermined by our determination above 

that the trial court was entitled to consider the potential risk that Chang’s insider trading 

might not be found to be material to consideration of the tender offer. It also 

misconstrues the trial court’s order. The subsequent revelation of Chang’s insider 

trading, which the trial court determined could not have been reasonably uncovered 

before the tender offer closed, did not render the consideration Bushansky obtained 

during the tender offer period worthless.

Initially, we reject Isaacson’s unsupported contention that a disclosure settlement 

may only provide a benefit to the class if a court determines that the result of the 

disclosures is that the shareholders were fully informed—meaning, at least, that no piece 

of material information was omitted from the disclosures. While the goal of a plaintiff 

negotiating a disclosure settlement is undoubtedly to ensure that all material information 

is disclosed, settlements are not required to be perfect as a condition of approval. Rather, 
28

they are required to be fair. (See Clark v. American Residential Services LLC (2009) 175 

Cal.App.4th 785, 799, 803 (Clark) [“ ‘the operative word is “settlement” ’ ”]; Kullar, 

supra, 168 Cal.App.4th at pp. 129-130, 133.) We acknowledge the possibility that errors 

may reduce the value of the disclosures that are obtained and may increase the value of 

the release. But trial courts are well equipped to weigh the benefits of any disclosures 

secured through a settlement in light of all of the circumstances. (See Dunk, 48 

Cal.App.4th at p. 1801 [trial court’s determination is an “ ‘ “amalgam of delicate 

balancing, gross approximations, and rough justice” ’ ”].) Indeed, that is precisely how 

the Delaware Court of Chancery analyzed materiality in Trulia. (Trulia, supra, 129 A.3d 

at pp. 899-907.)

We further reject Isaacson’s contention that the trial court’s determination that the 

settlement consideration was sufficient to justify the release of claims rested on the 

premise that the shareholders were, in hindsight, fully informed. In making this 

argument, Isaacson selectively excerpts from the trial court’s analysis of preliminary 

approval—prior to learning of Chang’s insider trading—and Bushansky’s request for 

attorney’s fees. 

At preliminary approval, the court reasoned that the likely impediments to 

monetary recovery meant that “ensuring that the shareholder vote on the merger was fully 

informed was probably the most important outcome this action could achieve.” Thus, the 

limited non-monetary consideration provided by the settlement was, in context, a fair 

return for the released claims. 

At final approval, the court “st[ood] by” that analysis, explaining that although the 

value of the standstill waiver and disclosure was less than what Bushansky contended, 

their value was sufficient to support the settlement. That a “fully informed” shareholder 

decision was the most important potential benefit to be gained by litigation of the class 

action does not demonstrate that the trial court must therefore have deemed settlement to 

have met that objective. Rather, it reflects that the settlement sufficiently furthered that 
29

objective, to the extent practicable in context, so as to render the settlement consideration 

a fair exchange for the release of claims. Thus, the final approval order rests on the 

determination that the standstill disclosure had material value, the standstill waiver had 

some value, and the release did not sacrifice any claims that were likely to yield anything 

other than disclosures—which could only assist the class in the time before the tender 

offer closed. The final approval ruling does not rest on any express, necessary, or 

implicit ultimate determination that the shareholder vote was fully informed or that 

Chang’s insider trading was immaterial to shareholders evaluating the tender offer.

In granting Bushansky’s request for fees, the court determined that “an award 

under the substantial benefit doctrine [was] appropriate.” The court reasoned that the 

“standstill waiver and associated disclosure prevented the merger from proceeding based 

on an uninformed shareholder vote, protecting an essential shareholder right.” Reasoning 

that a shareholder vote is either “fully informed” or “uninformed,” Isaacson asserts that 

the trial court decided that Chang’s insider trading was not a material fact that needed to 

be disclosed to shareholders. We reject the binary strictures of his premise and his 

interpretation of the trial court’s fee award.

In reply, Isaacson contends that the standstill waiver and disclosure did not 

provide sufficient value to support the settlement. As to the standstill waiver, Isaacson 

offers only a superficial argument to the effect that one standstill waiver is categorically 

insufficient to justify a settlement, even if two standstill waivers may be. But there was 

only one standstill agreement to waive, and the trial court duly considered that there was 

only one waiver in assessing the value to the class. As to disclosure of the standstill 

agreement, Isaacson does not contend that it had no value, only that its value was 

insufficient relative to the release of the claims in this case. Isaacson’s invitation to 

reweigh factors legitimately considered by the trial court exceeds the scope of our 

deferential review. (Wershba, supra, 91 Cal.App.4th at pp. 244-245; Kullar, supra, 168

Cal.App.4th at pp. 127-128.)
30

At bottom, the trial court concluded that the value produced by the settlement, 

though limited, was sufficient to support the settlement because the consideration 

constituted a fair exchange for the release of claims in all of the circumstances. Isaacson 

has not shown that the trial court abused its discretion in making that determination.

III. DISPOSITION

The judgments are affirmed.
____________________________

LIE, J.

WE CONCUR:

____________________________

GREENWOOD, P.J.

_____________________________

GROVER, J.

Bushansky v. Alliance Fiber Optic Products

H047100

Khaki v. Alliance Fiber Optic Products

H047101