Court Opinion

ID: 8943807
Source: CourtListenerOpinion
Date Created: 2022-11-27 08:10:55.432078+00
Date Added: 2024-06-11T17:09:47.863452
License: Public Domain

JON O. NEWMAN, Circuit Judge,
concurring:
I concur in Judge Van Graafeiland’s thorough opinion for the Court and add these words merely to clarify the nature of the appellant’s grievance and to indicate why it might have had merit in the absence of the Delaware derivative action.
Since appellant remains a stockholder of Warner, though owning only a few shares, the allocation of the settlement price among the various defendants can have economic significance for him. Every dollar contributed to the settlement by the individual defendants is a dollar of gain to appellant and those in his circumstances. Every dollar contributed by the corporate defendants is partially offset by the pro rata decrease in the value of appellant’s stock due to the payment. Appellant’s position is to be distinguished from two other groups: (1) current Warner shareholders who lack a securities fraud claim, whose only interest lies in minimizing the amount contributed to the settlement by the corporation and (2) previous Warner shareholders with a fraud claim who sold their shares, whose only interest lies in maximizing the total amount of the settlement.
I fully agree with Judge. Van Graafeiland that normally, once a district court is satisfied that the total compensation paid to class members in settlement of a class action is fair and reasonable, the court need not be concerned as to how the defendants apportion liability for the settlement among themselves. However, in a case such as this, where the apportionment between corporate and individual defendants can have economic significance for a shareholder-claimant, some scrutiny of the portion contributed by a corporate defendant normally would be appropriate. In such circumstances, a settlement might well be shown to be unreasonable to a shareholder if the corporate defendant contributed so much more than a fair share as to cause a discernible incremental pro rata decline in the value of the shareholder’s stock below the reduction attributable to a fair contribution. That possibility is not present in this case because the Delaware Court of Chancery, in approving the settlement of the derivative action, determined that the allocation of burdens between the corporation and the individuals was fair. In the absence of adjudication or judicially approved settlement of a parallel derivative action, however, assessment of the fairness of a shareholder’s action would require some scrutiny of the fairness of the corporation’s contribution.