Opinion ID: 1560325
Heading Depth: 1
Heading Rank: 4

Heading: The Inclusion of Transferees in the Class

Text: The Chancellor's Order and Final Judgment certifies a class that relevantly includes all class A common stockholders of the [Exchange] . . . on April 20, 2005, and their transferees or successors in interest through June 20, 2007. . . . This class definition is claimed to be fatally flawed because it includes transferees of persons who owned Class A shares at the time of the alleged wrongdoing, and because it includes groups that have inherently conflicting interests. None of these arguments is sufficient to preclude certification of the class as defined in the Final Order. We start with the proposition that it is commonplace for a certified class to include persons who held shares as of a given date, and their transferees, successors, and assigns. [28] The Objectors argue that the certified class should not include transferees, because the holders at the time of the transactions have a greater interest in the claims being compromised in the settlement than do the subsequent transferees. Even if true, that would not establish that the Chancellor abused his discretion by including transferees within the class of persons who would be bound by the settlement. To exclude from the class any persons who contend that they have rights in the claims being settled, would create the risk that those persons would be free to sue in another foruma risk that the Appellees are unwilling to take. Nor did any rule of law require the Chancellor to impose that risk upon the Appellees. The case law supports his determination. For example, In re Triarc Cos., Inc. Class and Deriv. Litig. [29] involved a settlement of a shareholders class and derivative action. A person who held shares at the time of the alleged wrong but later sold those shares, objected to the settlement, which provided benefits only to the corporation. Those benefits were enjoyed indirectly by the current stockholders, but not at all by the former stockholders. The Court of Chancery held that the former stockholders could properly be bound to the settlement yet receive nothing, because where claims are weak or of little or no probable value . . . it is fair to bar those claims as part of the overall settlement. The Court also observed that there is nothing unfair or unreasonable about a judgment that bars [a] later assertion of an insubstantial claim. . . . [30] If, as is argued, the transferees' rights in the disputed claims are weak, the weakness of their rights will be taken into account in allocating the proceeds of the settlement, by distributing little (or possibly none) of the proceeds to them. [31] In short, even if (as Objectors argue) the transferees' rights are insubstantial, that would not justify excluding the transferees from a judgment that would bar them from asserting claims against the settling defendants. Rather, that insubstantiality would give the Objectors grounds to argue, in the allocation proceeding, that the transferees should receive little or none of the settlement proceeds.