June 15, 2016

From Aeroflex to Trulia: A Seismic Shift

A discussion of the Delaware Chancery Court's recent jurisprudence on disclosure-only settlements in deal litigation

Peter Adams, Jeffrey Kaban, and Jeffrey Walker

On January 22, 2016, Chancellor Bouchard rejected a proposed disclosure-only settlement in In re Trulia, Inc. Stockholder Litigation, 129 A.3d 884 (Del. Ch. 2016), marking the culmination of what has been a seismic shift over the past several months in the Delaware Chancery Court’s treatment of disclosure-only settlements in lawsuits challenging mergers. While the Chancery Court had expressed increasing skepticism of the value of disclosure-only settlements with broad, “intergalactic” releases over the past couple years, the recent change in the court’s jurisprudence on this issue gained critical momentum on July 8, 2015, after Vice Chancellor Laster rejected the proposed disclosure-only settlement in Acevedo v. Aeroflex Holding Corp. Since Aeroflex, the pressure for change within the Delaware Chancery Court has only increased as the other members of the court signaled their desire to reconsider how the court treats disclosure-only settlements going forward. And Chancellor Bouchard’s Trulia opinionat the beginning of this year appears to confirm that the likelihood of approval for most disclosure-only settlements in the future is bleak. We briefly discuss the Delaware Chancery Court’s recent shift in jurisprudence on disclosure-only settlements and what this might mean for deal litigation in the future.

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