REPORTED 

IN THE COURT OF SPECIAL APPEALS

OF MARYLAND 

No. 2620 

September Term, 2014 

_________________________ 

ROBERT SHENKER, ET AL.

v. 

BERNICE POLAGE, ET AL. 

_________________________ 

 Wright, 

Nazarian,

Hotten,*

 

JJ.

_________________________ 

Opinion by Nazarian, J.

_________________________ 

 Filed: February 1, 2016 

*Michele D. Hotten, J., participated in the 

hearing of this appeal while still an active 

member of this Court but did not 

participate in either the preparation or 

adoption of this opinion. 
 This appeal arises from the Circuit Court for Baltimore City’s approval of a class 

action settlement of claims against Cole Real Estate Investments, Inc. (“CREI”), American 

Realty Capital Properties, Inc. (“ARCP”), and both companies’ directors and officers, 

relating to their February 2014 merger. Certain CREI shareholders brought derivative and 

class action claims alleging that the CREI board breached its fiduciary duties in negotiating 

and completing due diligence for the merger. The parties reached a settlement that the 

circuit court approved preliminarily, but before the circuit court conducted its settlement 

approval hearing, ARCP announced that certain financial results had been misstated and 

that others were not (yet) reliable. After further negotiations, the parties agreed to an 

amended settlement that, among other things, released CREI’s officers and directors from 

future liability, but carved the officers and directors of ARCP out of the release. Five class 

members, including Robert Shenker, objected to the amended settlement, arguing that the 

release was overbroad because it precluded the objecting shareholders from bringing 

federal securities claims against CREI’s officers and directors. The circuit court held a 

hearing and approved the amended settlement. Mr. Shenker appeals and we affirm. 

I. BACKGROUND 

CREI is incorporated in Maryland and maintains its principal executive offices in 

Phoenix, Arizona. CREI was previously known as Cole Credit Property Trust III (“CCPT 

III”) and operated as a non-traded real estate investment trust that acquired commercial 

retail properties throughout the country. Christopher H. Cole is chairman of CREI and was
2

CEO of CCPT III until the first merger (which we describe in greater detail below) in April 

2013. Mark Nemer became CEO and President of CREI after the first merger. 

ARCP is a Maryland corporation that maintains its principal offices in New York 

City. It became a public company in September 2011. ARCP acquires and owns singletenant freestanding commercial real estate, principally subject to medium-term net leases. 

A. The First Merger: CCPT III Acquires Its Subsidiary. 

In early 2013, ARCP approached CCPT III with a proposal to merge, but a special 

committee of CCPT III’s board decided not to pursue a merger with ARCP at that time. 

Instead, on March 6, 2013, CCPT III announced that its board had unanimously approved 

the acquisition of one of CCPT III’s subsidiaries, Cole Holdings Corporation. The 

combined company would be called CREI. As consideration for the acquisition, CCPT III 

would make upfront payments of $20 million in cash, subject to adjustment, as well as 

10,711,225 shares of CCPT III common stock, plus 2,142,245 shares of common stock 

after listing on the New York Stock Exchange. Additional shares of common stock were 

potentially payable in 2017 as an earn-out, contingent on the new company’s financial 

success.

During March 2013, CCPT III shareholders filed, in the Circuit Court for Baltimore 

City, three separate putative derivative and class action lawsuits challenging the proposed 

acquisition. These suits were ultimately consolidated; two federal securities claims were 

filed as well in the United States District Court for the District of Arizona. Opposing 

shareholder Bernice Polage also served what came to be known as “The Polage Demand” 
3

on CCPT III’s board in April 2013. She alleged that CCPT III directors breached their 

fiduciary duties to shareholders by pursuing the internalization merger rather than merging 

with ARCP. CCPT III’s board formed a special committee to investigate these allegations, 

as well as the opposing shareholders’ demands: disgorgement of the cash and shares that 

Defendant CEO Mr. Cole received in connection with the transaction; rescission of Mr. 

Cole and Mr. Nemer’s employment agreements entered into in connection with the 

transaction, and damages to compensate shareholders for losses sustained as a result of the 

transaction.

The acquisition ultimately closed in April 2013, and the circuit court dismissed the 

actions challenging it after the parties reached a settlement that reduced the contingent 

payments to Messrs. Cole, Nemer, and other CREI executives. The shareholders filed a 

Notice of Appeal in this Court, and the appeal was dismissed on July 31, 2014 after the 

defendant executives agreed to reimburse $100,000 to the shareholder plaintiffs. 

B. The Second Merger: ARCP Acquires CREI. 

In late August or September 2013, ARCP’s CEO again approached Messrs. Cole 

and Nemer and expressed interest in a potential merger. CREI retained Goldman Sachs to 

advise the Board about ARCP’s business, to review ARCP’s financial results and financial 

projects, and to review the terms of the merger proposal. CREI also retained the law firm 

Morris Manning & Martin LLP to conduct due diligence on ARCP’s real estate 

investments, including leases and portfolio information, as well as environmental, tax and 

litigation issues; the law firm Venable to advise the Board on the applicable law in 
4

Maryland; and the accounting firm Deloitte & Touche LLP to conduct a financial and 

accounting due diligence investigation of ARCP. The companies announced a merger 

agreement on October 23, 2013, under which ARCP would exchange 1.0929 shares of 

ARCP common stock or $13.82 in cash for each share of CREI common stock (the cash 

option was available for up to 20% of CREI’s outstanding shares). The transaction was 

valued at $11.2 billion. 

In response to the announcement, eight new class action and derivative 

complaints—including one action by Ms. Polage—were filed in the Circuit Court for 

Baltimore City between October 30, 2013 and November 14, 2013. These lawsuits alleged 

that CREI’s directors breached their fiduciary duties to the stockholders and sought, among 

other things, an order enjoining the transaction. The court consolidated these actions as 

Polage v. Cole on December 12, 2013, and a few days later, the Polage plaintiffs filed a 

consolidated complaint that, again, asserted both derivative and class action claims 

challenging the merger. Several federal securities class action complaints were also filed 

in the United States District Court for the District of Arizona in October and November 

2013.1

The parties also engaged in negotiations regarding a possible settlement, and on 

January 10, 2014—the day of the injunction hearing—the plaintiff shareholders and CREI 

 

1 These federal cases were stayed in February 2014 pending a ruling from the circuit court 

on settlement of the state class actions. 
5

directors entered into a Memorandum of Understanding containing the material terms of a 

settlement. Among other things, the agreement permitted the plaintiff shareholders to 

engage in additional discovery to confirm that the settlement was fair and adequate. The 

CREI stockholders voted to go through with the merger at a special meeting on January 

23, 2014, and the merger closed in February of that year. 

The parties submitted a settlement agreement for approval to the circuit court on 

August 18, 2014. As consideration for dismissing the claims against them, the CREI 

directors and executives agreed to relinquish $50 million in personal payments, and to 

establish a $14 million settlement fund for distribution to class members. In addition, the 

CREI executives agreed to provide shareholders with previously undisclosed material 

information concerning the merger via a Form 8-K they would file with the Securities and 

Exchange Commission (“SEC”). The CREI defendants also agreed not to oppose the 

plaintiff shareholders’ application for $7 million in attorney’s fees and reimbursement of 

expenses, and the settlement released both CREI and ARCP from future liability. The 

court issued a preliminary approval of the settlement on August 25, 2014, preliminarily 

certified the class, and ordered that notice be distributed to CREI’s shareholders. 

C. The October Surprise. 

On October 29, 2014, ARCP announced that it had overstated the operating funds 

and understated the net losses it reported in its first and second quarter 2014 financial 

results. According to ARCP, financial information as far back as 2013 could no longer be 
6

relied upon. The announcement spurred an investigation by the SEC, and the company’s 

stock price dropped from $12.38 per share to $7.85 per share within two trading days.

The announcement also spurred a series of federal securities lawsuits against ARCP 

in the United States District Court for the Southern District of New York. The consolidated 

class action complaint alleges that ARCP director defendants prepared, reviewed, and 

disseminated false and misleading proxy statements in order to get shareholder approval 

for the merger with CREI, and in violation of § 14(a) and 20(a) of the Securities Exchange 

Act of 1934, 15 U.S.C. § 78n(a), in addition to alleging that ARCP officers and directors 

fraudulently induced class members to purchase ARCP stock for artificially inflated prices 

in violation of § 10(b), 15 U.S.C. § 78j(b). It also asserts claims under § 11 of the Securities 

Act, 15 U.S.C. § 77k, alleging that statements and prospectuses issued in connection with 

ARCP’s stock offerings contained material misstatements and omissions about ARCP’s 

financial statements; under § 12(a)(2), 15 U.S.C. § 771(a)(2), alleging that ARCP officers 

and directors who assisted in the sale of those securities to class members did so for 

personal gain, including direct payments; and under § 15, 15 U.S.C. § 77o, asserting that 

ARCP officers and directors who controlled the content of those prospectuses should be 

held jointly and severally liable for the underlying § 11 and § 12(a)(2) violations. The 

complaint asserts that the defendant-directors’ wrongful conduct inflated ARCP securities 

prices and resulted in the subsequent decline in value of those securities when the fraud 

was revealed.
7

The parties resumed their negotiations, and agreed in November 2014 to amended 

settlement language that carved ARCP’s director and officers out of the release. As in the 

original settlement, the amended settlement language still released CREI’s officers: 

“Released Claims” means . . . [any] claims, demands, rights, 

actions, causes of action, liabilities, damages, losses, 

obligations . . . against any Released Persons, relating to or 

based upon the ARCP Announcement or ARCP Financials 

except that nothing in this clause (ii) shall impair the 

completeness of the release of any of the Director Defendants, 

former CREI officers or outside advisors to CREI and/or to the 

Director Defendants for conduct occurring before the Merger 

closed on February 7, 2014 to the extent such Director 

Defendants, former officers or outside advisors were acting in 

their capacity as directors or officers of CREI . . . .

(Emphasis added.) As a condition for releasing CREI’s officers from liability, the parties 

agreed that the plaintiff shareholders could take discovery to ensure that they had no 

knowledge of or role in ARCP’s preparation of its misstated financial statements. To that 

end, the plaintiffs deposed CREI’s former CEO, Mr. Nemer, on December 2, 2014, and 

examined him regarding the steps CREI’s board took to ensure that ARCP’s financials 

were solid and that its stock was worth the market price. Stated generally, Mr. Nemer 

responded that CREI retained and relied on outside advisors, including Goldman Sachs and 

Deloitte, to conduct CREI’s due diligence for the ARCP merger and to advise CREI’s 

board and officers. 

 Five shareholders, including Mr. Shenker, objected to the amended settlement. 

They argued that because CREI’s officers made false statements about ARCP’s finances 
8

in the Joint Proxy to shareholders, those officers, and especially Mr. Nemer, should not be 

released from future liability for claims arising from ARCP’s financial fraud.

The circuit court held an all-day settlement hearing on December 12, 2014, then 

issued a written order approving the amended settlement, including the modified release 

language:

The Court has closely reviewed and considered each objection, 

cited legal authorities, and the entire arguments offered by the 

parties and objectors on December 12, 2014, in view of the 

nature, issues, context, and circumstances of the litigation. The 

Court has also carefully reviewed and considered the terms and 

disclosures of the Joint Proxy (filed December 23, 2013); 

timing, terms and conditions of the Memorandum of 

Understanding (“MOU”) dated January 10, 2014; the 

Transaction closing date on February 7, 2014, the ARCP 

Forms 8-K and 10-K, with a filing date on February 27, 2014 

(for the Fourth Quarter and the Fiscal Year that ended 

December 31, 2013); the Court’s August 25, 2014 Order and 

preliminary approval of the settlement terms reached on 

August 14, 2014; the motion papers with Amended Stipulation 

and Release and Agreement of Compromise and Settlement; 

and the December 2, 2014 deposition testimony of CREI 

Director Marc Nemer.

(Footnote omitted.) 

The court found the amended settlement fair, adequate, and reasonable, and that “the 

scope of the revised Release, in the aftermath of ARCP’s announcement, reasonably 

‘carve[d] out’ potential claims against ARCP directors and officers arising out of or relating 

to” ARCP’s October 2014 announcement. Moreover, the court concluded that the 

amended settlement language “d[id] not and need not address any such claims against Cole 

directors and officers.” The court cited “the chronological sequence of CREI and advisors’ 
9

examination of ARCP financial disclosures and certain audited reports in advance of the 

Joint Proxy, in advance of the MOU, and in advance of the Transaction date” in deciding 

to approve the settlement. Mr. Shenker filed a timely notice of appeal.2

II. DISCUSSION 

Mr. Shenker’s three appellate contentions (which we will address in a slightly 

different order)3 boil down to a core complaint that the amended settlement was unfair to 

the class. First, he argues that the court failed to make adequate factual findings or 

 

2

In addition to Mr. Shenker, four other shareholders objected: Simon Abadi, Jill B. Carter, 

Gary Wunsch, and the California Public Employees’ Retirement System. Only Mr. 

Shenker appealed to the circuit court’s settlement approval, however. 

3 Mr. Shenker phrased the issues as follows in his brief: 

1. Is the Settlement unfair and inadequate where it releases 

defendants and their agents and affiliates from liability 

of valuable unrelated federal claims that arose after a 

preliminary settlement, based on limited discovery, and 

without adequate consideration?

2. Did the Circuit Court fail to conduct a careful 

assessment of the facts and a thorough analysis of 

applicable law by concluding the Release is 

“reasonable” without making factual findings, 

articulating any standard for determining 

reasonableness or considering the merits or value of 

released claims?

3. Does the Settlement violate Due Process because it 

released individual defendants from liability for federal 

claims that are not based on the same factual predicate 

as the Settlement’s underlying state claims and did so 

for meager consideration? 
10 

articulate the standard of reasonableness on which it based its conclusions. Second, he 

contends that the settlement’s release of potentially valuable claims against CREI’s 

officers, particularly Mr. Nemer, render the settlement unfair and inadequate. And third, 

in his view, those same defects demonstrate that the settlement violated the class’s due 

process rights. 

Unlike most settlements of civil actions, class action settlements must be approved 

by the court. See Md. Rule 2-231(h) (“A class action shall not be dismissed or 

compromised without the approval of the court.”). Our Rule does not state a specific 

standard for the court to apply. See Boyd v. Bell Atlantic-Md., 390 Md. 60, 70-71 (2005) 

(acknowledging that Rule 2-231 does not articulate any standards against which a court 

should evaluate the fairness and adequacy of a settlement proposal). But “[w]hen 

interpreting a Maryland Rule that is similar to a federal rule of Civil Procedure, we may 

look to federal decisions construing the corresponding federal rule for guidance.” Bond v. 

Slavin, 157 Md. App. 340, 358 n. 30 (2004) (quoting Pleasant v. Pleasant, 97 Md. App. 

711, 732 (1993)). And Federal Rule of Civil Procedure 23(e), the federal analogue to Rule 

2-231(h), does set forth a process for evaluating class action settlements and requires the 

court, as part of that review, to find the settlement “fair, adequate, and reasonable”:

Settlement, Voluntary Dismissal, or Compromise. The claims, 

issues, or defenses of a certified class may be settled, 

voluntarily dismissed, or compromised only with the court's 

approval. The following procedures apply to a proposed 

settlement, voluntary dismissal, or compromise: 
11 

(1) The court must direct notice in a reasonable manner to all 

class members who would be bound by the proposal. 

(2) If the proposal would bind class members, the court may 

approve it only after a hearing and on finding that it is fair, 

reasonable, and adequate.

(3) The parties seeking approval must file a statement 

identifying any agreement made in connection with the 

proposal. 

(4) If the class action was previously certified under Rule 

23(b)(3), the court may refuse to approve a settlement 

unless it affords a new opportunity to request exclusion to 

individual class members who had an earlier opportunity to 

request exclusion but did not do so.

(5) Any class member may object to the proposal if it requires 

court approval under this subdivision (e); the objection may 

be withdrawn only with the court’s approval. 

Unlike Maryland Rule 2-231(h), Federal Rule 23(e) has been applied and analyzed 

thoroughly in reported decisions of Maryland’s federal district courts and the Fourth 

Circuit, as well as nationally. See, e.g., Berry v. Schulman, 807 F.3d 600 (4th Cir. 2015);

In re Jiffy Lube Securities Litig., 927 F.2d 155 (4th Cir. 1991); Flinn v. FMC Corp., 528 

F.2d 1169 (4th Cir. 1975); In re Mid-Atlantic Toyota Antitrust Litig., 564 F.Supp. 1379 (D. 

Md. 1983); In re Montgomery Cty. Real Estate Antitrust Litig., 83 F.R.D. 305 (D. Md. 

1979). Not surprisingly, then, the parties’ arguments follow Federal Rule 23’s analytical 

path, and we will do the same. 
12 

The federal courts evaluate proposed class action settlements in two steps: first, by 

evaluating the procedural fairness of the settlement process, and second, by evaluating the 

settlement’s substantive fairness and adequacy. When reviewing a trial court’s decision to 

approve a class action settlement, “there is a strong presumption in favor of finding a 

settlement fair.” Decohen v. Abbasi, LLC, 299 F.R.D. 469, 479 (D. Md. 2014). We afford 

the trial court’s decision substantial deference, and reverse only upon clear showing that 

the court abused its discretion. See Berry, 807 F.3d at 614 (quoting Flinn, 528 F.2d at 

1172); Jiffy Lube, 927 F.2d at 158. 

A. The Circuit Court Sufficiently Articulated Its Reasoning. 

Mr. Shenker argues that the court did not make adequate factual findings or 

articulate any standard for determining that the settlement was reasonable. He 

characterizes the court’s approval of the settlement as conclusory, and contends that the 

court “failed to carefully assess the facts and law as required.” It’s true that the court did 

not state, in so many words, which particular standard it used to evaluate the amended 

settlement and release language, nor did the court undertake the step-by-step analysis for 

settlement approval that we explain below and that appears in the federal cases analyzing 

Federal Rule 23(e). Ultimately, though, we disagree that the court’s decision was 

conclusory or preordained, and we discern an appropriately thorough analysis from the 

court’s written order and the transcript of the full-day fairness hearing. 

Although a trial court may not give a settlement boilerplate approval, it need not 

“turn the settlement hearing into a trial or a rehearsal of the trial, nor need it reach any 
13 

dispositive conclusions on the admittedly unsettled legal issues in the case.” Flinn, 528 

F.2d at 1172-73 (footnotes, internal citations, and quotations omitted). 

So long as the record before it is adequate to reach an 

intelligent and objective opinion of the probabilities of ultimate 

success should the claim be litigated and form an educated 

estimate of the complexity, expense, and likely duration of 

such litigation, and all other factors relevant to a full and fair 

assessment of the wisdom of the proposed compromise, it is 

sufficient. 

Id. at 1173 (footnote and internal citations omitted). As a procedural matter, this settlement 

complied both with Md. Rule 2-231(h) and the process outlined in Federal Rule 23. Notice 

of the proposed settlement was sent to all class members; the parties filed and the court 

reviewed briefs in support of and against the revised settlement; and the court heard 

objections from opposing class members, both in writing and at a hearing (without subject 

or temporal limitation) designed to address the settlement’s reasonableness, fairness, and 

adequacy. 

The court’s written decision approving the settlement is not lengthy, and only a 

portion of the court’s memorandum analyzes the substantive merits of the settlement. For 

that reason, our appellate task would be easier if the court had, either from the bench or in 

its written order, undertaken a full-blown, step-by-step Rule 23-style analysis, as the 

federal courts typically do. Then again, our review of numerous (although many 

unreported) cases from the federal trial courts reveals that they undertake the analogous 

Rule 23(e) analysis in widely varying levels of detail, depending on the facts and 

circumstances of each case. See, e.g., Boyd v. Coventry Health Care, Inc., 299 F.R.D. 451, 
14 

460-61 (D. Md. 2014). Above all, our task is to determine whether the circuit court was 

well-informed to determine the fairness and adequacy of the settlement, and that it reached 

a well-reasoned decision. And in this case, we can see from the written memorandum and 

from the transcript of the fairness hearing that the circuit court considered and analyzed 

this settlement in a manner consistent with the requirements of Federal Rule 23(e), and 

reached its ultimate conclusion that the settlement was fair, reasonable, and adequate on a 

fully informed basis. See United States v. North Carolina, 180 F.3d 574, 581 n.5 (4th Cir. 

1999) (holding that the district court abused its discretion by refusing to approve the 

settlement, but declining to base its decision on the fact that the district court did not 

explicitly go through the step-by-step analysis articulated in Flinn v. FMC Corp).

Mr. Shenker argues that the circuit court failed to take proper account of Mr. 

Nemer’s testimony on the extent of CREI’s due diligence (or the lack thereof). But in the 

course of the fairness hearing, the circuit court demonstrated that it had carefully reviewed 

and considered all of the evidence, including Mr. Nemer’s deposition and the “‘reverse due 

diligence’ undertaken by outside advisors” in association with the merger. Moreover, this 

complaint is really more a complaint about the relative weight the court afforded that piece 

of evidence, and that point of view, over any other. As we explain next, the circuit court’s 

conclusions as to the settlement’s substantive fairness and adequacy are supported by the 

record.
15 

B. The Circuit Court Did Not Abuse Its Discretion By Approving The 

Settlement. 

Mr. Shenker argues next that the amended settlement releasing CREI officers from 

future liability is unfair and inadequate because it releases valuable claims shareholders 

have against those officers under Section 14(a) of the Securities Act—claims worth far 

more, he says, than the value of the settlement itself. The circuit court’s job in assessing 

the settlement was to weigh the relief awarded to class members against the claims they 

give up in exchange, thereby protecting “class members whose rights may not have been 

given adequate consideration during the settlement negotiations.” In re Jiffy Lube, 927 

F.2d at 158. Mr. Shenker contests the circuit court’s decision on both fairness and 

adequacy grounds, but we see no abuse of the circuit court’s discretion in its decision to 

approve the amended settlement.

1. Fairness

Mr. Shenker argues that the settlement, and more specifically the release, was unfair 

to class members because it was rushed after ARCP announced the accounting 

irregularities. He claims that post-settlement discovery was too limited and too hurried to 

ensure a fair settlement, and that the rush to settle left the circuit court unable to determine 

the strength of the plaintiffs’ case. Keeping in mind that the release the parties settled on 

releases claims only against CREI’s officers, and not against the ARCP officers that 

actually committed the accounting fraud, we conclude that the circuit court made no error 

in finding the terms of the settlement fair. 
16 

In approving a settlement, the court must ascertain that it was reached “as a result 

of good faith bargaining at arm’s length.” Id. at 159. To determine if the proposed terms 

are fair, the court should consider factors tending to show “the presence or absence of 

collusion among the parties.” In re Mid-Atl. Toyota, 564 F.Supp. at 1383 (quoting 

Montgomery Cty., 83 F.R.D. at 315). That is, “the posture of the case at the time settlement 

is proposed, the extent of discovery that has been conducted, [and] the circumstances 

surrounding the negotiations and the experience of counsel.” Id. at 1383-84 (quoting 

Montgomery Cty., 83 F.R.D. at 315); see also Carson v. American Brands, Inc., 654 F.2d 

300, 301 (4th Cir. 1981) (en banc) (per curiam); Flinn, 528 F.2d at 1173 (articulating the 

fairness factors as “the extent of discovery that has taken place, the stage of the 

proceedings, the want of collusion in the settlement, and the experience of counsel who 

may have represented the plaintiffs in the negotiation”). 

There is no allegation here that the settlement is the product of collusion. Rather, 

Mr. Shenker complains that the settlement was reached too soon after ARCP’s 

announcement, without enough discovery to allow a full evaluation of the potential 

culpability of CREI insiders under the federal Securities Acts. Beyond a general complaint 

that more depositions weren’t taken and new searches for documents or email weren’t 

made, though, nothing in the record indicates that the information available to the court, 

most importantly Mr. Nemer’s testimony, was inadequate to assess the merits of the 

potential claims against CREI’s officers. To the contrary, the record allowed the objectors 

to argue about the evidence that wasn’t there, i.e., the absence of evidence of more 
17 

extensive due diligence. And in any event, the circuit court accounted for the timing of the 

amended settlement as well as the contents of Mr. Nemer’s deposition in its conclusion 

that the settlement was fair.

2. Adequacy

Under the amended settlement, the class members relinquished the right to bring 

suit against CREI officers for any false statements made on the Joint Proxy, in exchange 

for the ability to bring claims against ARCP’s officers (claims that were released in the 

original settlement), a $14 million cash payment, and the relinquishment by Messrs. Cole 

and Nemer of $50 million in personal payments. In evaluating the adequacy of a proposed 

settlement, the trial court should “‘weigh the likelihood of the plaintiff’s recovery on the 

merits against the amount offered in settlement.’” In re Mid-Atl. Toyota, 564 F.Supp. at 

1384 (quoting Montgomery Cty., 83 F.R.D. at 315). In so doing, the court should consider: 

“‘(1) the relative strength of the plaintiffs’ case on the merits, (2) the existence of any 

difficulties of proof or strong defenses the plaintiffs are likely to encounter if the case goes 

to trial, (3) the anticipated duration and expense of additional litigation, (4) the solvency of 

the defendants and the likelihood of recovery on a litigated judgment, and (5) the degree 

of opposition to the settlement.’” Id. (quoting In re Montgomery Cty., 83 F.R.D. at 316). 

As for “the relative strength of the plaintiffs’ case on the merits,” In re Mid-Atl. 

Toyota, 564 F.Supp. at 1384, the record before the circuit court revealed a theoretical, but 

highly uncertain, claim against CREI’s officers under § 14(a) of the federal Securities Act. 

15 U.S.C. § 78n(a). Mr. Shenker argues that Mr. Nemer’s testimony proves that CREI 
18 

“failed to conduct a meaningful assessment of ARCP’s financial controls, processes or 

reporting practices.” However, there is nothing in the record to indicate the value of the 

potential Securities Act claims, nor does Mr. Shenker attempt to estimate one. The parties 

argue vigorously over the scienter requirement for a § 14(a) claim, but even if we assume, 

as Mr. Shenker argues, that a plaintiff need only prove negligence, the record makes it far 

from clear that these claims would survive that low threshold. In addition to testifying that 

he could not recall whether CREI’s accountants reviewed ARCP’s financial controls, Mr. 

Nemer also testified that CREI retained several outside financial and legal advisors to 

review the terms of the merger and ARCP’s financial statements, and we see no abuse of 

discretion in the circuit court’s decision to credit that testimony for its purposes. 

More to the point, though, and even assuming that the class could readily prove 

liability against the CREI directors under § 14(a), it is not unreasonable for the court to 

wonder if those claims have any marginal damages value given the class’s ability to bring 

the same claims against ARCP and its directors and officers. Damages in § 14(a) claims 

are measured by market loss, see, e.g., Maldonado v. Flynn, 477 F.Supp. 1007, 1009 

(S.D.N.Y. 1979), and it appears that the same market loss at issue here could be recovered 

from a successful claim against the CREI defendants—the alleged misstatements were 

communicated to CREI’s shareholders through ARCP’s section of the joint proxy, and, as 

the CREI directors point out, “the merger agreement requires ARCP to indemnify CREI’s 

former officers and directors for any such liability, [so] the CREI defendants would not 

even provide a potential source of recovery separate and distinct from ARCP.” In re Mid-
19 

Atl. Toyota, 564 F.Supp. at 1384 (directing courts to consider the likelihood of recovery on 

a litigated judgment). 

We don’t purport to resolve these disputed securities law questions definitively. It 

is enough for our purposes that the record and competing legal arguments before the circuit 

court raised serious uncertainties about the likelihood of success on the merits of any claims 

the objectors might have had against the released CREI parties, or the marginal value of 

those claims in light of the claims that survived the release. And as such, the circuit court 

did not abuse its discretion in finding that the settlement consideration—most notably, the 

reinstatement of the class’s claims against ARCP and its directors and officers—was 

adequate under the circumstances.

C. Approval of the Amended Settlement Agreement Poses No Due Process 

Violation.

Finally, Mr. Shenker seems to argue, based on a repackaging of the claims discussed 

above, that the amended settlement violated the due process rights of the absent class 

members, whom he argues were not adequately represented by the plaintiff class members’ 

counsel. He relies on Matsushita Elec. Indus. Co., Ltd. v. Epstein, for the proposition that 

“a court may permit the release of a claim based on the identical factual predicate as that 

underlying the claims in the settled class action, even though the claim was not presented 

and might not have been presentable in the class action.” 516 U.S. 367, 376-77 (1996) 

(citation and quotation omitted). He argues that Matsushita should have prevented the 

circuit court from releasing the potential Securities Act claims against CREI officers and 
20 

directors because the facts underlying those claims did not arise from the same operative 

facts as those asserted in the current action. 

Putting aside the defendants’ arguments that Mr. Shenker failed to preserve this 

issue in the circuit court, the argument fails for the same reasons as his other arguments. 

Moreover, Mr. Shenker’s reliance on Justice Ginsburg’s concurrence in Matsushita is 

misplaced. While there may be a due process problem if the class representatives are 

willing to “release federal securities claims within the exclusive jurisdiction of the federal 

courts for a meager return to the class members,” id. at 388, that is not what happened here. 

Beyond the terms of the original settlement, the amended settlement gave class members 

the ability to bring Securities Act claims against ARCP officers and directors, who 

otherwise would have been released, and it was entirely reasonable on this record for the 

circuit court to conclude that this trade-off was fair, especially considering the uncertainty 

of any federal claims against CREI officers. 

The dispositive question in a due process challenge to a class action settlement is 

whether class counsel adequately represented the interests of the class. Md. Rule 2-

231(a)(4). The trial court explicitly found that “Plaintiffs and their counsel are adequate 

representatives of the class,” and indeed, produced a fair and adequate amended settlement. 
21 

We see no abuse of discretion in the court’s finding in this regard, or in any element of its 

decision to approve this settlement. 

JUDGMENT OF THE CIRCUIT COURT 

FOR BALTIMORE CITY AFFIRMED. 

COSTS TO BE PAID BY APPELLANT.