Stricter Standards Applied to Disclosure Settlement Review
A Florida Appeals Court decided as a matter of first impression to adopt a stricter standard for review of “disclosure settlements. ” The standard was originally crafted by the Delaware Court of Chancery in an attempt to stem the tide of litigation abuse through such deals, which many believe has contributed to a proliferation in shareholder litigation related to M&A transactions. The court concluded that when a Florida trial court is asked to approve a disclosure settlement in a class action merger lawsuit, in order for a disclosure settlement to pass muster, the supplemental disclosures must address and correct a plainly material misrepresentation or omission. Also, the subject matter of the proposed release must be narrowly circumscribed to encompass nothing more than disclosure claims and fiduciary duty claims concerning the sale process, if the record shows that such claims have been investigated sufficiently.