Title: In Re MCA, Inc. et al v. Matsushita Electric Industrial et al and Seymour Lazar et al
Citation: N/A
Docket Number: 448, 2000
State: Delaware
Issuer: Delaware Supreme Court
Date: November 16, 2001

IN THE SUPREME COURT OF THE STATE OF DELAWARE
IN RE MCA, INC.,
§
SHAREHOLDER LITIGATION,
§
§
LAWRENCE EPSTEIN and
§   No. 448, 2000
JOHN LINDER,
§
§ Court Below: Court of Chancery 
Petitioners Below,
§ of the State of Delaware in and 
Appellants,
§ for New Castle County
§ C.A. No. 11740
v.
§
§
MATSUSHITA ELECTRIC 
§
INDUSTRIAL CO., LTD.,
§
MATSUSHITA HOLDING CORP., §
MCA, INC., LEW W.
§
WASSERMAN, THOMAS V. §
JONES, ROBERT S. STRAUSS,
§
THOMAS WERTHEIMER,
§
HOWARD H. BAKER, JR., 
§
THOMAS P. POLLACK, FELIX G. §
ROHATYN, SIDNEY J.
§
SHEINBERG, HOWARD P.
§
ALLEN, MARY GARDINER 
§
JONES, and CHARLES S. PAUL,
§
§
Defendants Below,
§
Appellees,
§
§
and
§
§
SEYMOUR LAZAR, A. J. LOU,
§
MARION LORD, SHELDON
§
SHORE, HARRY OSGOOD,
§
BARNETT STEPAK, JULIUS
§
OSTREICHER, THOMAS E.
§
ACITO, DARREN SUPRINA,
§
2
SARA NAPHTALI, STEPHANIA
§
ZIEMAK, KENNETH POGROB,
§
ELRIEDE GLANCY, JACOB
§
GOTTLIEB and C. CHRISTOPHER §
MUTH as Trustee for THE CARL
§
H. MUTH TRUST,
§
§
Plaintiffs Below,
§
Appellees.
§
Submitted: July 24, 2001
Decided:
November 16, 2001
Before WALSH, HOLLAND, BERGER and STEELE, Justices, and RIDGELY,
President Judge.*
On Appeal from the Court of Chancery.  AFFIRMED.
Joel Friedlander, Esquire, Bouchard Margules & Friedlander, Wilmington,
Delaware, Stuart L. Shapiro, Esquire (argued), Shapiro Forman & Allen LLP, New
York, New York, Roger W. Kirby, Esquire and Peter S. Linden, Esquire, Kirby
McInerney & Squire, LLP, New York, New York, and Henry P. Monaghan,
Esquire, New York, New York, for Appellants Lawrence Epstein and John Linder.
Anne Foster, Esquire, Richards, Layton & Finger, Wilmington, Delaware and
Barry R. Ostrager, Esquire (argued), Mary Kay Vyskocil, Esquire, Joseph M.
McLaughlin, Esquire, Simpson Thacher & Bartlett, New York, New York, for
Defendants Below Appellees Matsushita Electric Industrial Co., Ltd. and Matsushita
Holding Corp.
_______________________
*Assigned pursuant to art. IV, § 23 of the Delaware Constitution and Supreme Court Rule
2(a).
3
Joseph A. Rosenthal, Esquire, Rosenthal, Monhait, Gross & Goddess, P.A.,
Wilmington, Delaware and Steven G. Schulman, Esquire (argued) and U. Seth
Ottensoser, Esquire, Milberg Weiss Bershad Hynes & Lerach LLP, New York, New
York, for Appellees.
Martin P. Tully, Esquire (argued), Morris, Nichols, Arsht & Tunnell,
Wilmington, Delaware and Theodore N. Mirvis, Esquire and Alexander Shaknes,
Esquire, Wachtell, Lipton, Rosen & Katz, New York, New York, for Appellees
Former MCA Directors.
WALSH, Justice:
4
This is an appeal from a decision of the Court of Chancery which rejected
efforts to vacate a 1993 judgment of that court approving a global settlement of
claims arising out of the acquisition of MCA, Inc. and Matsushita Electric Industrial
Company.  The appellants, original plaintiffs in one aspect of the multi-faceted
litigation which the merger spawned, contend the Court of Chancery erred in
viewing their attempt at intervention as untimely and in rejecting their claims that the
judgment approving the settlement was procured by fraud.
While we conclude that the appellants’ status as original parties to the
litigation does not require them to assert a timely intervention, we find no abuse of
discretion in the Court of Chancery’s determination that the settlement judgment was
not procured by fraud or void for a specific determination of adequacy of
representation.  Accordingly, we affirm.
I
The background of this litigation is extensive and is set forth in decisions of
the Court of Chancery, this Court, the 9th Circuit Court of Appeals and the United
1In re MCA, Inc., Shareholders Litig., Del. Ch., 598 A.2d 687 (1991) (MCA I); In Re
MCA, Inc., Shareholders Litig., Del. Ch., 1993 WL 43024 (Feb. 16, 1993) (MCA II); aff’d, Del.
Supr., 633 A.2d 370 (1993); Epstein v. MCA, Inc., 9th Cir., 50 F.3d 644 (1995) (Epstein I),
rev’d, Matsushita Elec. Indus. Co. v. Epstein, 516 U.S.  367 (1996); Epstein v. MCA, Inc., 9th
Cir., 126 F.3d 1235 (1997) (Epstein II), withdrawn and superseded on rehearing by Epstein v.
MCA, Inc., 9th Cir., 179 F.3d 641 (1999) (Epstein III), cert. denied 528 U.S. 1004 (1999); In re
MCA, Inc. Shareholders Litig., Del. Ch., 774 A.2d 272 (2001).
5
States Supreme Court.1  We recite only the facts pertinent to an understanding of the
present appeal.
On September 25, 1990, The Wall Street Journal reported that Matsushita
Electric Industrial Company (“Matsushita”), was negotiating a potential acquisition
of MCA, Inc. (“MCA”).   The following day three class action complaints were
filed in the Court of Chancery. These three actions, styled as individual and class
actions, were consolidated for all purposes by then Vice Chancellor Hartnett on
October 2, 1990 (the “Delaware Action”).  The Complaints alleged, inter alia, that
the proposed sale of MCA to Matsushita violated the fiduciary duties of the directors
of MCA.  Specifically, it was alleged that the board violated its Revlon duties by not
initiating an auction process to maximize shareholder value in a cash sale of the
company.  The Complaints further alleged that the defendant directors of MCA
violated their duties under Revlon by wrongfully using a poison pill to thwart other
potential bidders.  
6
On November 26, 1990, MCA and Matsushita announced that they had
entered into an agreement and plan of merger (the “Merger Agreement”).   The
Merger Agreement provided that Matsushita Acquisition Corporation (“Matsushita
Acquisition”) would make a tender offer for all of the outstanding shares of MCA
common stock at $66 per share (the “Tender Offer”).  Matsushita Acquisition was
to merge with and into MCA following successful completion of the Tender Offer.
MCA and Pinelands, Inc., (“Pinelands”), a subsidiary of MCA that held its
broadcasting rights, entered into a separate agreement pursuant to which 100% of
those broadcasting rights would be spun off to MCA shareholders.  This transaction
was estimated to provide $5 per share additional value to MCA’s shareholders.
MCA’s Chairman of the Board and Chief Executive Officer, Lew Wasserman
(“Wasserman”), was the owner of 4,953,927 MCA shares worth $351,728,817 at
the tender price.  To avoid a massive tax liability, Wasserman and Matsushita
entered into a separate Capital Contribution and Loan Agreement (the “Contribution
Agreement”) to exchange his MCA shares for preferred stock in a Matsushita
subsidiary, MEA Holdings.   This preferred stock paid an 8.75% annual cumulative
dividend, was secured by letters of credit, and was redeemable at the tender price
upon the death of either Wasserman or his wife.  The exchange was set to take place
7
immediately following the time at which shares of MCA were accepted for payment
pursuant to the Tender Offer.  
MCA also entered into other agreements with MCA’s President and Chief
Operating Officer, Sidney J. Sheinberg (“Sheinberg”), and record producer David
Geffen, MCA’s largest individual shareholder.  Sheinberg owned 1,179,635 shares
of MCA stock that he tendered into Matsushita’s Tender Offer.  Two days after
tendering his shares, Sheinberg received an additional $21 million in cash, which has
been attacked as a covert premium designed to induce Sheinberg to tender his shares.
On December 3, 1990, an action was filed in the United States District Court
for the Central District of California (the “District Court”) designated as Epstein v.
MCA, Inc. et al., No. CV-90-6451-R (the “federal action”).  Four additional
purported class actions alleging similar claims were also filed in the District Court
and were consolidated by the District Court on April 1, 1991. The  consolidated
complaint alleged that the Matsushita Tender Offer violated Section 14(d)(7) of the
Securities and Exchange Act of 1934 and SEC Rules 14d-19 and 10b-13 by offering
preferential treatment in the Tender Offer to Wasserman and Sheinberg.   These
claims had not been asserted in the complaints filed in the Delaware Action. 
2 The Court of Chancery order recited a certification for settlement purposes only. 
8
On December 14, 1990, plaintiffs in the Delaware Action filed an amended
complaint seeking preliminary injunctive relief against consummation of the Tender
Offer.  The plaintiffs alleged in the amended complaint that the Tender Offer
materials failed to disclose the preferential treatment allegedly given to Wasserman.
Moreover, the amended complaint challenged the Sheinberg transaction as violative
of Delaware law.  Finally, the amended complaint named Matsushita as a defendant,
alleging that Matsushita aided and abetted MCA in a breach of fiduciary duty by
entering into the transaction with Wasserman.  A preliminary injunction hearing was
scheduled for December 18, 1990.
On December 18, 1990, the Delaware Action was provisionally certified as
a class action2 by the Court of Chancery pursuant to Rule 23(b)(2) with the class to
consist of all owners of MCA common stock on September 25, 1990.  That same
day, the parties in the Delaware Action filed a Stipulation and Agreement of
Compromise and Settlement (the “Initial Proposed Settlement”).  The Initial
Proposed Settlement provided for the dismissal of the Delaware Action and the
release of all claims of any member of the class arising out of the Merger, including
the claims raised in the federal action, in exchange for the payment of attorneys’ fees
3 The modification provided that the “poison pill” would be automatically redeemable upon
the receipt of an all cash, fully financed tender offer for all of the shares of Pinelands that is held
open for 60 days and that has at least two-thirds of all outstanding shares tender into the offer.
Apparently, this was done to make Pinelands a more attractive acquisition target and potentially
provide more value to the MCA shareholders who received the Pinelands stock dividend.  The
altered pill was required to remain in effect for only one year. 
9
and the  modification of a “poison pill”3 in the charter of the Pinelands subsidiary.
A notice of the Initial Proposed Settlement was sent to all MCA shareholders who
were members of the class.   Andrew and David Minton, (the “Mintons”) entered
their appearance as objectors at the settlement hearing.  The Mintons objected to the
Initial Proposed Settlement in so far as it barred individual federal actions filed by
them in the District Court. 
On December 29, 1990, the Tender Offer was completed.  More than 90% of
all the outstanding shares were tendered in response to Matsushita’s offer.
Immediately following the Tender Offer, the Capital Contribution Agreement was
consummated when Wasserman exchanged his MCA common stock for preferred
stock in MEA Holdings.  On January 3, 1991, Matsushita acquired MCA for $6.1
billion.     
On April 22, 1991, the Court of Chancery rejected the Initial Proposed
Settlement as inadequate.  See In re MCA, Inc. Shareholders Litig., Del. Ch., 598
A.2d 687, 696 (1991)(“MCA I”).  The court first ruled that certification of the class
4  Despite this characterization, Matsushita did not move thereafter to dismiss the action.
10
pursuant to Chancery Rule 23(b)(1) and (2) was appropriate and that no opportunity
to opt out was required because the claims originally sought equitable relief when
filed.  See id. at 692.  Regarding the terms of the Initial Proposed Settlement, the
court found that the state law claims asserted in the amended complaint were “at
best, extremely weak.”4  Id. at 694.  The court did conclude that the federal
securities law claims had at least “arguable merit” since they had not yet been
definitively addressed by the District Court.  Id. at 695.  Furthermore, the court
found that “[t]he value to the Class from the Pinelands revised poison pill is
therefore illusionary and the revision apparently was proposed merely to justify a
settlement which offers no real monetary benefit to the Class.”  Id. at 696.  Because
the benefits to the class were minimal, the court determined that it would “be unfair
to compel the release of the federal claims by approving the settlement in its present
form,” which did not provide class members with the opportunity to opt out.  Id. at
696.
On April 1, 1991, the District Court rejected the plaintiffs' motion for class
certification in the federal action.  A second motion for class certification was
rejected on September 3, 1991.   On August 13, 1991, the District Court dismissed
5 None of the objectors raised the issue of the adequacy of the class representatives.  
11
the SEC Rule 10b-13 claims because it concluded that there was no private right of
action under that provision.  Thereafter, on February 10, 1992, Matsushita was
awarded summary judgment on all counts.  The District Court concluded that the
Wasserman transaction did not take place within the Tender Offer period and that
Wasserman did not receive a greater consideration than other shareholders.
Following this decision, the Epstein plaintiffs filed an appeal to the Ninth Circuit
Court of Appeals challenging the district court’s grant of summary judgment, as well
as prior decisions denying class certification and finding the Epstein plaintiffs and
counsel in contempt of a discovery order.  
On October 22, 1992, the parties in the Delaware Action filed the second
stipulation of global settlement releasing the federal and state claims (the
“Settlement”) for $2 million, less $575,000 in fees and expenses sought by class
counsel. The Settlement consideration for the class amounted to approximately two
to three cents per share and provided the class members with opt out rights.  Three
members of the class objected to the proposed settlement.5  Vice Chancellor Hartnett
concluded that the $2 million recovery was “barely” adequate to support the
Settlement.  See In re MCA, Inc., Shareholders Litig., Del. Ch., 1993 WL 43024
12
at *4 (1993) reprinted in, 18 Del. J. Corp. L. 1053 (“MCA II”).  The court approved
the Settlement over the arguments of the objectors, who contended that the plaintiffs
in the Delaware Action colluded with MCA and Matsushita to settle the dispute in
exchange for a de minimis benefit to the class and an award of attorneys’ fees.  The
Court of Chancery noted the District Court’s dismissal as an indication that the
federal securities law claims were of “minimal” value but that, in any event, “[t]he
availability of the right to opt-out of the class protects the ability of class members
. . .” who wish to continue the federal litigation.  Id. Indeed, due to concern that
some shareholders may not have received timely notice of the Settlement, the Vice
Chancellor extended the opt out deadline and requested that the proposed order
implementing the opinion be amended to reflect that extension.  See MCA II, 1993
WL 43024 at *7.  
On February 17, 1993, class counsel submitted an amended proposed order
and final judgment (the “Amended Order”) that extended the opt out deadline.  The
cover letter accompanying the Amended Order stated that it had been approved by
counsel for the settling parties and copies of the Order were sent to all counsel
involved, including objectors.  The Amended Order also contained a provision that
stated: “and it is hereby further determined that the plaintiffs in the Actions, as
13
representatives of the Settlement Class, have fairly and adequately protected the
interests of the Settlement Class and that the maintenance of the action as a class
action meets all the requirements of Rule 23(a) and (b)(3) of the Court of Chancery.”
The Judgment was signed by the Vice Chancellor on February 22, 1993.  
The Minton objectors appealed the Court of Chancery’s approval of the
Settlement to this Court.  In that appeal, the Objectors argued, inter alia, that the
Settlement should not have been approved because it compromised viable federal
securities law claims pending in California.  The objectors did not assert any claims
with regard to the adequacy of the class representatives.  After hearing argument,
this Court summarily affirmed the Vice Chancellor’s decision approving the
Settlement.  
On February 24, 1993, Matsushita sought dismissal of the Epstein Action in
the Ninth Circuit Court of Appeals based on the terms of the Settlement.  The
Epstein plaintiffs asserted, however, that the Court of Chancery lacked the authority
to approve the release of exclusively federal claims and that therefore the judgment
approving the settlement was not binding on parties to the federal action.  The Ninth
Circuit agreed, concluding that the Delaware judgment was not entitled to full faith
and credit.  See Epstein v. MCA, Inc., 9th Cir., 50 F.3d 644 (1995)(“Epstein I”)
6  Responding to the Epstein plaintiffs’ argument that inadequate representation deprived
the absent class members of due process of law, an argument that had not been raised in the court
below, the Supreme Court responded in a footnote that: 
Apart from any discussion of Delaware law, respondents contend that the
settlement proceedings did not satisfy due process because the class was
inadequately represented.  Respondents make this claim in spite of the Chancery
Court's express ruling, following argument on the issue, that the class
representatives fairly and adequately protected the interests of the class.  Cf.
Prezant v. De Angelis, 636 A.2d 915, 923 (Del.1994) ("[The] constitutional
requirement [of adequacy of representation] is embodied in [Delaware] Rule
23(a)(4), which requires that the named plaintiff 'fairly and adequately protect the
interests of the class' "). We need not address the due process claim, however,
(continued...)
14
rev’d Matsushita Elec. Indus. Co. v. Epstein, 516 U.S. 367 (1996).  The Ninth
Circuit  reversed the decision of the District Court and vacated the grant of summary
judgment in favor of Matsushita on all claims.  
Matsushita petitioned for a writ of certiorari, which was accepted by the
United States Supreme Court as to one question: “whether a federal court may
withhold full faith and credit from a state-court judgment approving a class- action
settlement simply because the settlement releases claims within the exclusive
jurisdiction of the federal courts.”  Matsushita Elec. Indus. Co. v. Epstein, 516 U.S.
367, 369 (1996).  The Supreme Court reversed, holding that “a federal court must
give the judgment the same effect that it would have in the courts of the State in
which it was rendered.”  Id. at 369.  Accordingly, the Court remanded the matter
to the Ninth Circuit.6  
6(...continued)
because it is outside the scope of the question presented in this Court.
Matsushita, 516 U.S. at 379 n.5(citations omitted).  In a separate opinion, Justice Ginsburg
addressed the inadequate representation argument and noted that the question “remain[ed] open
for airing on remand.”  Id. at 399 & n.11 (Ginsburg, J., concurring in part and dissenting in
part).  
7 On July 20, 2000, the Ninth Circuit panel issued an Order providing that those MCA
shareholders who opted out of the Settlement can proceed to trial against Matsushita.   
15
On October 22, 1997, a panel of the Ninth Circuit held that the class members
had been deprived of due process by inadequate representation at the Delaware
Settlement hearing.  See Epstein v. MCA, Inc., 9th Cir., 126 F.3d 1235
(1997)(“Epstein II”), withdrawn and superseded on rehearing by Epstein v. MCA,
Inc., 9th Cir., 179 F.3d 641 (1999).  On June 7, 1999, a reconstituted panel of the
Ninth Circuit withdrew  the Epstein II opinion.  See Epstein v. MCA, Inc., 9th Cir.,
179 F.3d 641 (1999)(“Epstein III”).  The court ruled that “the Delaware judgment
was not constitutionally infirm.”  See id. at 650.  On November 15, 1999, the
United States Supreme Court denied the Epstein plaintiffs’ petition for a writ of
certiorari.7  
On December 13, 1999, the Epstein plaintiffs filed a motion in the Court of
Chancery seeking to intervene and vacate the court’s settlement approval order in
MCA II.  Initially, the Court of Chancery denied Petitioners’ Motion to Intervene on
16
the ground that it was not timely.  See In re MCA, Inc. Shareholders Litig., Del.
Ch., 774 A.2d 272, 278 (2001).  The court noted that the Petitioners could have
appeared and objected to the settlement before it was approved by the court.  The
Court of Chancery seemed particularly troubled by the fact that Petitioners chose not
to participate in the Delaware proceedings, instead asserting in the District Court that
they were not bound by the settlement.  See 774 A.2d at 276 (“Even before that
ruling, however, the Epstein petitioners had abjured the courts of Delaware in favor
of litigating in federal court.”).  The court concluded that the Motion to Intervene
was untimely because the Epstein Plaintiffs had seven years to appear in Delaware
and challenge the Settlement and neglected to do so.  See id. at 278.  
Despite the finding of untimeliness, the Chancellor proceeded to address the
remaining claims raised by the Epstein plaintiffs.  See id. at 278 (“Despite my ruling
on the motion to intervene, I will, given the long history of this case, entertain some
of the Epstein petitioners’ arguments on the merits to resolve a few lingering
questions.”).  Addressing the Epstein plaintiffs’ contention that the Judgment
approving the Settlement was void “because it denied petitioners and the class due
process,” the Chancellor ruled that it was beyond doubt that the class was afforded
due process.  Moreover, the court held that it was bound by the law of the case
17
doctrine, stating that the Delaware Supreme Court “implicitly affirmed, albeit by
summary order, Vice Chancellor Hartnett’s adequacy determination.”  See id. at
279.  The Epstein plaintiffs’ final claim alleged that suspicious circumstances and
perhaps fraudulent conduct surrounded the entering of the Settlement Order and that
the Judgment should be reopened pursuant to Rule 60(b)(3).  The Chancellor rejected
this claim, holding that the charge of misconduct on the part of class counsel was
“not supported by any credible evidence.”  See id. This appeal followed.
II
Essentially, the Epstein plaintiffs make two major arguments.  First, they
contend that the judgment in this case is void because there was no finding by the
Court of Chancery in approving the Settlement that the named plaintiffs were
adequate representatives of the entire class.  This deficiency, it is argued, renders the
Settlement violative of due process of law and transgresses Court of Chancery Rule
23(a)(4).  They further argue that the Chancellor neglected to address this question
below.  Second, it is contended that the Court of Chancery erred in refusing to grant
their motion to vacate the Settlement Judgment for reasons of fraud perpetrated on
the court by class counsel. 
8 The Epstein plaintiffs contend that this Court should review the Chancellor’s dismissal
of their Rule 60(b)(4) motion de novo on the basis that whether a judgment is void is a question
of law.  For support, the Epstein plaintiffs cite State v. Moore, Del. Super., No. N91-07-1485M,
1992 WL 354194, Cooch, J. (Nov. 6, 1992), where the Superior Court granted the defendant’s
motion under Rule 60(b)(4) and vacated an order declaring the defendant an habitual offender
because it found that service was not proper.  The court stated that it had “no discretion under...
Rule 60(b)(4) to decline to vacate a void order, because a void order is legally ineffective from
its inception.” See 11 Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice
and Procedure § 2862 (1995)(hereinafter “Wright & Miller”)(“There is no question of discretion
on the part of the court when a motion is under  60(b)(4).... [e]ither a judgment is void or it is
valid. Determining which it is may well present a difficult question, but when that question is
resolved, the court must act accordingly.”).  The basis for the Epstein plaintiffs’ claim that the
judgment is void, however, is that Vice Chancellor Hartnett’s finding of adequate representation
was not supported by the record.  That assertion, when subsequently addressed by the Chancellor,
required the court to examine the conduct of the parties, as well as the perceived intention of the
court entering the judgment, a weighing process that necessarily requires deference from a
reviewing court. 
18
The class plaintiffs have joined their erstwhile foes, Matsushita and MCA, in
resisting the efforts of the Epstein plaintiffs to reopen the settlement judgment.  They
contend that the Settlement Approval Judgment was entered under terms which
afforded the class members due process and that the Chancellor did not abuse his
discretion in denying Appellants’ motion to reopen that judgment.  
A motion to reopen a judgment under Court of Chancery Rule 60(b) is
addressed to the sound discretion of the trial court.  This Court’s review of the grant
or denial of such a motion is for an abuse of discretion.  Battaglia v. Wilmington
Sav. Fund Soc., Del. Supr., 379 A.2d 1132, 1135 (1977); see also Wife B. v.
Husband B., Del. Supr., 395 A.2d 358 (1978)(same).8   “An abuse of discretion
19
occurs when ‘a court has ... exceeded the bounds of reason in view of the
circumstances, [or] ... so ignored recognized rules of law or practice so as to
produce injustice.’”  Lilly v. State, Del. Supr., 649 A.2d 1055, 1059 (1994)(quoting
Firestone Tire & Rubber Co. v. Adams, Del. Supr., 541 A.2d 567, 570 (1988)).
On appeal from the grant or denial of a motion for relief under Rule 60(b) a
party may attack only the propriety of the order; Rule 60(b) “does not permit the
appellant to attack the underlying judgment for an error which he could have
complained of on appeal from it.”  Swann v. Carey, Del. Supr., 272 A.2d 711, 712
(1970). 
Court of Chancery Rule 60(b) permits a party to seek relief from a final
judgment or order.  Rule 60(b) provides, in part, that:
On motion and upon such terms as are just, the Court may relieve a
party... from a final judgment, order, or proceeding for the following
reasons:  (1) Mistake, inadvertence, surprise, or excusable neglect;  (2)
newly discovered evidence;  (3) fraud (whether heretofore denominated
intrinsic or extrinsic), misrepresentation or other misconduct of an
adverse party;  (4) the judgment is void;  (5) the judgment has been
satisfied, released, or discharged, or a prior judgment upon which it is
based has been reversed or otherwise vacated, or it is no longer
equitable that the judgment should have prospective application;  or (6)
any other reason justifying relief from the operation of the judgment.
Ch. Ct. R. 60(b).  In addition, a trial court has the power “to set aside a judgment
for fraud upon the Court.”  See id.  A court does not have to wait for a party to
9 Counsel for the Class plaintiffs contend that in order to succeed on a Rule 60(b) motion
the moving party must show “extraordinary circumstances” require reopening or vacating the
judgment.  Such a showing is only required, however, where a party makes a motion under Rule
60(b)(6), the catchall provision of Rule 60(b).  See, e.g., Dixon v. Delaware Olds, Inc., Del.
Supr., 405 A.2d 117, 119 (1979)(“Federal case law under Rule 60(b) of the Federal Rules of
Civil Procedure holds that the standard or test for granting a (b)(6) motion is a showing of
‘extraordinary situation or circumstances’.”).  The standard required to succeed under other
sections of Rule 60(b) is not as exacting.  See Wright & Miller, § 2857(“the leading cases
speaking of a requirement of exceptional or extraordinary circumstances have been cases of
motions under 60(b)(6). That subdivision of the rule does require a very special showing by the
moving party and it does not assist sound analysis to repeat those phrases in cases brought
pursuant to the other portions of Rule 60(b), under which a less demanding standard applies.
Although ‘extraordinary circumstances’ should only be required under catchall clause (6) of the
rule, some courts have erroneously restricted relief under other provisions of the rule by reading
that requirement into earlier clauses”)(citations omitted).
10  See, e.g., Metlyn Realty Corp. v. Esmark, Inc., 7th Cir., 763 F.2d 826, 830 (1985),
where the Seventh Circuit stated that:  
Judgments in civil cases fix the rights of parties and entitle them to go about their
lives. They may be reopened only for extraordinary reasons....There are good
(continued...)
20
make a motion for relief under this section; rather a court may take independent
action to relieve a party from a judgment pursuant to this rule.  See id. 
There are two significant values implicated by Rule 60(b).  The first is
ensuring the integrity of the judicial process and the second, countervailing,
consideration is the finality of judgments.9  See Credit Lyonnais Bank Nederland,
N.V. v. Pathe Communications Corp., Del. Ch., 1996 WL 757274 at *1, Allen, C.
(Dec. 20, 1996).  Because of the significant interest in preserving the finality of
judgments, Rule 60(b) motions are not to be taken lightly or easily granted.10  A
10(...continued)
reasons for the stringent limits on reopening a final judgment....  If they know that
the judgment will establish their rights once and for all, they will bring to bear the
information and energies necessary to produce an informed decision. If they
believe that they can have a second try, they are more likely to skimp the first time
around, and as a result the judicial process will become less accurate.
21
proper standard must strike a balance between the interest in bringing litigation to
an end and the counterveiling concern that justice is carried out.  See Wright &
Miller, § 2851.
III
Our task, then, is to determine whether the Chancellor abused his discretion
in denying the Epstein plaintiffs’ motion to vacate the Judgment pursuant to Rule
60(b)(4).  The Epstein plaintiffs contend that the Judgment is void because the record
does not support a finding that the class was adequately represented.  The Chancellor
held that then Vice Chancellor Hartnett addressed the adequacy of representation
issue when he considered the Objectors’ collusion argument.  See MCA II, 774 A.2d
278.  In addition, the Chancellor found that he was bound by the law of the case
doctrine as to the adequacy issue because this Court affirmed the Vice Chancellor’s
approval of the Settlement.
11 Rule 23(a) provides that: 
One or more members of a class may sue... as representative parties on behalf of
all only if (1) the class is so numerous that joinder of all members is impracticable,
(2) there are questions of law or fact common to the class, (3) the claims or
defenses of the representative parties are typical of the claims or defenses of the
class, and (4) the representative parties will fairly and adequately protect the
interests of the class. 
Ct. Ch. R. 23(a).
22
Court of Chancery Rule 23(a) sets out four requirements that must be met in
order for a representative party to maintain an action on behalf of an entire class.11
Pursuant to Court of Chancery Rule 23(a)(4), it must be demonstrated that the
“representative parties will fairly and adequately protect the interests of the class.”
Ct. Ch. R. 23(a)(4).  This requirement is more than a procedural technicality.
Indeed, this requisite has constitutional dimensions rooted in the Due Process Clause
of the United States Constitution.  See Phillips Petroleum Co. v. Shutts, 472 U.S.
797, 812 (1985)(stating that the Due Process Clause requires “that the named
plaintiff at all times adequately represent the interests of the absent class members”).
In addition to adequate representation, absent class members must be afforded
notice, an opportunity to be heard, and a right to opt out in order to be bound by a
settlement.  Shutts, 472 U.S. at 812.  This is necessary to ensure that the interests
of individuals who are not directly participating in the action, but who may be bound
23
by the outcome, are sufficiently protected.  If the principles of due process are not
followed, members of the class cannot be bound by a judgment or settlement.   See
Matsushita Elec. Indus. Co. v. Epstein, 516 U.S. 367, 388 (1996)(Ginsburg, J.,
concurring in part dissenting in part)(“In the class action setting, adequate
representation is among the due process ingredients that must be supplied if the
judgment is to bind absent class members.”)(citing Phillips Petroleum Co. v. Shutts,
472 U.S. at 812; Prezant v. De Angelis, Del. Supr., 636 A.2d 915, 923-924 (1994)).
In Prezant v. DeAngelis, Del. Supr., 636 A.2d 915, 924 (1994), a case
decided after the Settlement was approved in the present case, this Court considered
whether adequate class representation was an indispensable requisite for approval of
a class action settlement.  This Court concluded that it was, stating that “[d]ue
process requires... adequate representation before an absent class member can be
bound by a settlement in a class action predominately for money damages.”  See id.
at 924 (citing Shutts, 472 U.S. at 812).  Because of the constitutional implications
regarding adequate representation, we determined that a finding of adequacy must
be made by the trial court, on the record, before absent class members could be
bound by a settlement.  See id. (stating that “when claims of absent class members
are being compromised, the appropriate course is for the Court of Chancery to make
24
an explicit finding on the record that the action satisfies the criteria of Rule 23 and
is thus properly maintainable as a class action”).  This Court rejected the argument
that approval of a settlement “carries with it an implicit determination that the action
complies with the Rule 23 criteria, including adequate representation.”  Id. at 924.
Rather,  we held that the Court of Chancery is required to make an explicit finding,
on the record, that the criteria for maintaining a class action have been met.  See id.
at 925.  Indeed, this Court stated that “a class action settlement could not
constitutionally bind absent class members without a judicial determination that the
adequate representation requirement of Rule 23(a)(4) has been satisfied.”  See id. at
924.
 Prezant, however, did not directly apply at the time of the Settlement in this
case.  While Prezant determined the proper approach to be taken where a class
action suit is being settled, its direction of explicit findings was not binding on the
Court of Chancery at the time the Settlement was approved in this case.  Therefore,
when the Second Settlement was approved by the Vice Chancellor there was no
requirement that a specific finding of adequacy be made on the record.  The due
process concerns embraced by this Court’s decision in Prezant, however, were
applicable at the time the Vice Chancellor approved the Settlement in this case.
25
The Epstein plaintiffs contend that the Court of Chancery failed to address
their contention that the record did not support a finding that the named plaintiffs
fairly and adequately protected the interests of the class, a finding required by
Prezant.  It is true that the Chancellor did not expressly address this argument.  The
Chancellor did determine, however, that the class was appropriately afforded due
process.  See MCA III, 774 A.2d at 278. In considering the Epstein plaintiffs’
argument that the Judgment was void under Rule 60(b)(4) because there was no
specific finding of adequacy on the record, the Chancellor found that “The Court
specifically addressed (and rejected) the objectors’ collusion argument – which went
to the heart of the adequate representation issue.”  See MCA III, 774 A.2d at 278.
As we indicated above, the Vice Chancellor was not required, pre-Prezant, to make
an explicit finding of adequate representation on the record at the Settlement
Hearing.  Considerations of due process, however, did require recognition by the
court of adequate representation by the named plaintiffs. 
Unfortunately, the Vice Chancellor did not make an explicit determination,
based upon any record evidence, that the plaintiffs were adequate representatives of
the class.  What he did consider and reject was the argument that plaintiffs and their
counsel were in collusion with the defendants.  The objectors who appeared at the
26
settlement hearing did not litigate the adequacy of their representation.  While two
of the objectors argued that the settlement was collusive, neither focused on the
much broader issue of whether representation was constitutionally adequate.  The
only mention of adequacy of representation is found in an affidavit submitted by
objector William Krupman stating that he opposed the settlement because "the
purported class representatives ... had proposed a settlement that benefitted no one
but their own attorneys.   They did not provide adequate representation."  In his
argument at the settlement hearing, however, objector Krupman did not address the
constitutional adequacy of the representation, but argued only that the terms of the
settlement were unfair.  Since the Chancery Court could have found that
representation was inadequate without also finding that it was collusive, litigation of
the collusion issue would not necessarily constitute  litigation of adequacy of
representation.  
In Prezant, this Court rejected defendants' assertion that court approval of a
class action settlement carries with it an implicit determination that the action
complies with the Rule 23 criteria, including adequate representation.  Id. at 924.
The problem with an implicit determination approach was illustrated by the trial
court in Prezant, which made specific findings from which it could have been
12  The Court of Chancery has observed that adequacy of representation under Rule
23(a)(4) is generally dependant not only upon the ability of the named representative to represent
the class fairly and adequately but also upon the qualifications, experience, and general ability of
the representative’s attorneys.  See Leon N. Weiner & Assoc. v. Krapf, Del. Supr., 584 A.2d
1220, 1225 (1991); Van de Walle v. Salomon Bros., Del. Ch., C.A. No. 9894, Steele, V.C.
(Sept. 30, 1997); Barbieri v. Swing-N-Slide Corp., Del. Ch., C.A. No. 14239, Steele, V.C. (May
7, 1996); Glosser v. Cellcor, Del. Ch., C.A. No. 12725, Allen, C. (Mar. 10, 1995). 
27
inferred that the plaintiff was an inadequate class representative, yet the settlement
was approved anyway.  Id.  In the present case, there were no findings by the trial
court from which it could be inferred that the plaintiffs were inadequate
representatives.  To the contrary, the court rejected the charge that plaintiffs were
in collusion with the defendants.  Furthermore, court-appointed counsel12 for the
plaintiffs included two of the most experienced shareholder litigation firms in the
nation.  Those attorneys conducted extensive pretrial discovery and their own
analysis of the governing law, permitting them to evaluate the merits of both the
Delaware and the federal claims.  Moreover, the Court of Chancery’s holding that
there was no collusion is the equivalent of saying that the parties negotiated the
settlement at arms length.   See Prezant, 636 A.2d at 924 (stressing the need for
“extensive document examination, depositions of adverse witnesses, securing expert
advice on complicated issues, and aggressive negotiation at arms-length.”). Finally,
inferring the adequacy of representation from the trial court’s finding that the
plaintiffs were not in collusion with the defendants is not the same as implying a
28
finding of adequacy from the mere fact that the settlement was approved, as was
criticized in Prezant.
Discovery had been conducted in this case by class counsel prior to the
settlement submission and counsel was knowledgeable of the state and federal
claims.  In fact, on December 14, 1990, the class plaintiffs filed an amended
complaint adding claims for violations of Delaware law arising out of the Wasserman
and Sheinberg transactions, which were the basis for the federal claims. There is no
doubt that the Vice Chancellor considered the viability of the federal claims,
implicitly considering the adequacy of the class plaintiffs’ representation.  Moreover,
as the Chancellor pointed out below, the Vice Chancellor specifically considered and
rejected the argument raised by the Objectors that the class plaintiffs had colluded
with the defendants in order to obtain a settlement.  Implicit in this finding is a
consideration of the adequacy of the representation by the class plaintiffs.  To allay
any concern on the issue, the Vice Chancellor required an opt out provision in order
to protect the interests of any member of the class who had reservations about having
their federal claims compromised through the efforts of the class plaintiffs.
Significantly, the Epstein plaintiffs did not seek to opt out.  The Chancellor’s  denial
13 A conclusion by this Court that the Chancellor did not abuse his discretion in
determining that the Epstein plaintiffs were not entitled to vacate the Judgment as void would
obviate the need to address the argument that the adequacy issue is settled by the law of the case.
29
of the Epstein plaintiffs’ motion to vacate on this ground does not constitute an abuse
of discretion.13  
IV
The Epstein plaintiffs next contend that class counsel procured the Settlement
in the Court of Chancery through misrepresentation and fraud.  Specifically, the
Epstein plaintiffs assert that class counsel misrepresented and concealed material
facts concerning the value of the federal claims, and thereby violated their obligation
of candor toward the tribunal as well as their fiduciary duty to protect the interests
of the class.  Furthermore, the Epstein plaintiffs contend that the Court of Chancery
applied an incorrect legal standard in ruling on their Rule 60(b)(3) motion alleging
fraud.
A Rule 60(b) motion is a “discretionary matter which requires the Trial Judge
to weigh the facts and circumstances of [the] case.” Bachtle v. Bachtle, Del. Supr.,
494 A.2d 1253, 1256 (1985).  As noted above, the grant or denial of a Rule 60(b)
motion is generally reviewed for an abuse of discretion.  A claim that the trial court
30
employed an incorrect legal standard, however, raises a question of law that this
Court reviews de novo.  Cf. Ison v. E.I. duPont De Nemours & Co., Inc., Del.
Supr., 729 A.2d 832, 847 (1999)(reviewing de novo a claim that the court applied
the incorrect legal standard in ruling on a motion to dismiss).  
A motion under Rule 60(b)(3) may be granted where it is demonstrated that
there was fraud, misrepresentation or other misconduct on the part of an adverse
party.  Ch. Ct. R. 60(b)(3).  The Chancellor found that there was no evidence to
support the accusation that class counsel duped the Vice Chancellor into signing the
final judgment or order without understanding it or reading it. Reviewing the claim
of fraud and misrepresentation, the Chancellor stated that “no evidence whatsoever
supports it, let alone evidence capable of meeting the high Rule 60(b) standard,
which requires ‘the most egregious conduct involving a corruption of the judicial
process itself.’” See id. at 280 (citing Wright & Miller, § 2870, at 418-19
(1995)(citation omitted)).      
A Rule 60(b)(3) motion is reserved for situations where a party has engaged
in fraud or misrepresentation that prevents the moving party from fairly and
adequately presenting his or her case.  See Wright & Miller, § 2860.  The Epstein
plaintiffs do not claim that the alleged fraud on the part of class counsel prevented
14  The Epstein plaintiffs, as members of the class, received notice of the proposed
settlement but declined to participate as objectors or, as noted above, to simply opt out.
15 Rule 60(b)(3) is generally employed in situations where fraud or misrepresentation
between the parties has occurred. See Wright & Miller, § 2870. 
31
them from adequately presenting their case.14  Rather, the Epstein plaintiffs’
contention is based on a theory that class counsel committed a fraud upon the court.
Rule 60(b) states that it does not limit “the power of a Court... to  set aside a
judgment for fraud upon the Court.”  The Epstein plaintiffs’ claim is more properly
characterized as a motion pursuant to Rule 60(b) that the judgment of the Vice
Chancellor should be set aside because there was a fraud upon the court, rather than
a motion under Rule 60(b)(3).15  So characterized, the Chancellor applied the
appropriate standard in ruling on the  Epstein’s plaintiffs’ motion.  Therefore, this
Court’s determination is limited to an inquiry into whether the Chancellor abused his
discretion.  
The Epstein plaintiffs contend that class counsel, at the Settlement hearing,
fraudulently procured the Vice Chancellor’s approval of the Settlement by: (i) duping
the Vice Chancellor into signing the Amended Order, which contained a statement
relating to the adequacy of representation; (ii) misrepresenting the merits of the
federal claims; (iii) stating that it was unlikely that the Ninth Circuit would find a
private right of standing to enforce SEC Rules 10b-13 and 14d-10; (iv) disparaging
32
the viability of the Wasserman claim; (v) neglecting to mention the Sheinberg claim;
and (vi) arguing that damages resulting from the Wasserman claim were highly
questionable. 
A party seeking to vacate an order on the ground that his or her opponent
effectuated a fraud on the court bears a heavy burden.  As the Chancellor pointed
out, to establish such a claim requires a showing of “the most egregious conduct
involving a corruption of the judicial process itself.”  See Wright & Miller, § 2870.
The claims put forth by the Epstein plaintiffs do not rise to this level of fraud.  It has
been recognized that there is an inherent conflict when class counsel seeks to settle
claims on behalf of a class whose claims have been asserted globally in different
jurisdictions on different grounds.  Some of those claims are not as meritorious as
others but a global settlement must, of necessity, embrace them all.  Class counsel
stands to collect a sizable fee from the settlement award and is thus eager to extend
the reach of the settlement as far as possible.  Courts have recognized the problem
inherent in this situation and have established standards to prevent class counsel from
selling out the class merely to collect that fee. See Prezant; Goodrich v. E. F. Hutton
Group, Inc., Del. Supr., 681 A.2d 1039, 1045 (1996).
33
While class counsel in this case may have been trying to downplay the
potential value of the federal claims in order to achieve a settlement, the record does
not reflect that his conduct at the Settlement hearing rises to the level of perpetuating
a fraud upon the court.  It is true that the Amended Order contained a provision
regarding the adequacy of the class representative.  The Vice Chancellor, an
experienced jurist with extensive familiarity with the intricacies of class and
derivative settlements, however, was free to reject that provision prior to signing it.
There is certainly no evidence that the provision was added after the Vice
Chancellor’s signature was obtained, conduct that clearly would rise to the level of
fraud on the court.  Nor does the record suggest that class counsel made affirmative
misrepresentations to the court in an attempt to induce the Vice Chancellor to
approve the Settlement.  The Vice Chancellor was free to independently review the
merits of the federal claims.  Moreover, the record reflects that class counsel merely
attempted to advance his position that the federal claims were of questionable value,
stating for instance that it was “unlikely that the Ninth Circuit” would find a private
right of standing to enforce the SEC Rules at issue.  Reasonable minds may differ
as to how a court is likely to rule on a given issue, but advocating a tenuous position
does not amount to a fraud on the court. 
34
As the Chancellor found, the record does not reflect that class counsel engaged
in any conduct constituting a corruption of the judicial process.  While class counsel
may have been advocating that the federal claims were of marginal value, whether
that is true or not, there is no evidence that class counsel committed a fraud upon the
court. The Chancellor did not abuse his discretion in denying the motion to vacate.
For the foregoing reasons, we AFFIRM the decision of the Court of
Chancery.