In re Aruba Networks Inc. Stockholders Litigation

The End of Disclosure Only Settlements in M&A Cases? Not So Fast.

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Disclosure-only settlements have been popular in the past – last year, about 80% of settlements in M&A-related lawsuits were for disclosures only, according to Cornerstone Research – but lately they have come under scrutiny.  The Delaware Court of Chancery has issued opinions refusing disclosure-only settlement agreements before, noting that at times in these cases “there is simply little to commend the process of weighing the merits of a ‘settlement’ of litigation where the only continuing interest is that of the plaintiffs’ counsel in recovering a fee.”  The incentives of attorneys on both sides can be such that “the potential claims belonging to the class [are not] adequately or diligently investigated or pursued.”

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