Opinion ID: 1487782
Heading Depth: 1
Heading Rank: 6

Heading: Release Bars Claims Based on Same Operative Facts

Text: Nottingham's final argument also relates to the terms and conditions of the release. Specifically, Nottingham argues that a release executed as part of a class action settlement may not extinguish claims based on different operative facts which were never asserted in the Complaint. In support of its position, Nottingham relies primarily upon National Super Spuds, Inc. v. N.Y. Mercantile Exch., 660 F.2d 9 (2d Cir.1981). In response to that position, Trans-Lux argues that the operative facts in the Nottingham action are identical to those which are pleaded in the Dana action. Trans-Lux also submits that Nottingham's reliance on a different nondisclosure theory to challenge the same transaction does not cause Nottingham's claims to arise from a different set of operative facts. In support of its position, Trans-Lux relies upon the case of TBK Partners, Ltd. v. Western Union Corp., 675 F.2d 456 (2d Cir.1982). The decision of the Second Circuit Court of Appeals in National Super Spuds, Inc. held that a general release given by a class plaintiff who represented only those persons who had liquidated their positions in potato future contracts between April 13 and May 7, 1976, could not extend to the claims of persons outside of the class holding unliquidated contracts after May 7, 1976. The Second Circuit subsequently applied its holding in National Super Spuds, Inc. to the facts presented in TBK Partners, Ltd. v. Western Union Corp., 675 F.2d 456, 460 (2d Cir.1982). For the purposes of this case, it is significant that in TBK, the Court of Appeals was required to construe the meaning of the phrase identical operative factual predicate that had been used in National Super Spuds, Inc. Id. In TBK, a class action attacked the short-form merger between Western Union and Gold & Stock on several grounds, some of which were: (1) the information Statement sent to Gold & Stock shareholders omitted or misstated material facts; (2) Western Union would violate state law fiduciary duties owed to Gold & Stock if it effectuated a merger undervaluing Gold & Stock's reversionary lease interest, and (3) the merger deprived the shareholders of Gold & Stock of the full value of their reversionary interest in a lease with Western Union. Id. at 458. The stockholders objecting to the class settlement in TBK were the plaintiffs in a New York State Court appraisal proceeding challenging the adequacy of the merger consideration because of the undervaluation of the Gold & Stock reversionary interest. Id. at 457-60. Despite the different state and federal theories of recovery in the two actions, the Court ruled that the operative factual predicate was identical because the gravamen of both the class action and the appraisal proceeding was the proper valuation of the reversionary lease interest. Id. at 460-61. In its opinion in TBK, the Court of Appeals expressly upheld the power of a court to approve the release of claims pending in another forum where the released claim rests on the same factual predicate as the class action claim: As long as the overall settlement is found to be fair and class members were given sufficient notice and opportunity to object to the fairness of the release, we see no reason why the judgment upon settlement cannot bar a claim that would have to be based on the identical factual predicate as that underlying the claims in the settled class action. We have previously assume[d] that a settlement could properly be framed so as to prevent class members from subsequently asserting claims relying on a legal theory different from that relied upon in the class action complaint but depending upon the very same set of facts. .... We therefore conclude that in order to achieve a comprehensive settlement that would prevent relitigation of settled questions at the core of a class action, 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. Id. at 460 (footnote omitted). In this case, the Court of Chancery carefully examined both complaints. The Court of Chancery found that the gravamen of the Dana action and the Nottingham action was the nondisclosure of material facts in the Proxy Statement which was issued prior to the 1986 stockholder meetings. The Vice Chancellor held that although the two actions did not allege the identical nondisclosure claim, both actions arose under the same set of operative facts. [37] The Vice Chancellor concluded that since the Nottingham action challenged the same proxy statement which led to adoption of the proposals at the 1986 annual stockholders' meeting that was at issue in the Dana action, albeit on a different nondisclosure theory, the release approved in Dana could properly include Nottingham's claims. We find that the Vice Chancellor's findings are supported by the record and that his conclusions are correct as a matter of law. Id. at 460.