NEW YORK (The Deal) -- J. Travis Laster is a bold judge, and the Delaware vice chancellor was at his most aggressive in a Feb. 21 order where he asked very probing questions of the shareholders and lawyers who brought a fiduciary duty lawsuit challenging the $68 million sale of Theragenics to Juniper Investment. Several lawyers not involved in the matter say they've never seen anything like Laster's order, which may be the latest salvo in the Delaware courts' effort to rein in the shareholder litigation that follows virtually every merger or acquisition of a Delaware public company.
As is common, Theragenics shareholders sued to challenge the deal soon after it was announced Aug. 5 on the grounds that in approving the transaction the company's directors had violated their fiduciary duties. The parties agreed to a settlement, which requires judicial approval because the matter is styled as an action on behalf of the entire class of Theragenics shareholders, who approved the deal. Over 96% of the shares cast - a total of 64% of the total float - were voted in favor of the deal, which closed Oct. 29. Theragenics was a surgical device company.
On Friday, Laster issued an order in which he scheduled a May 5 hearing to approve the settlement and the attorneys' fees that the shareholders' counsel at Rigrodsky & Long PA are seeking. Most of the order was boilerplate, but one portion was not. Laster required Rigrodsky to answer several questions that reflect a deep skepticism about the conduct of the Theragenics litigation and similar cases. His order could indicate he's considering a reduction in how much Rigrodsky is paid.
The judge did ask similar questions in an order consolidating the shareholder litigation arising from the Activision Blizzard's (ATVI) buying back a control stake from Vivendi last year. But the answers there were meant to help Laster appoint lead counsel for the shareholder plaintiffs and that case isn't much help in pointing to how Laster's plans to use the information in the Theragenics proceeding.
Critics of suits like Theragenics' - a group that occasionally includes the Delaware judges who hear such matters - believe that the shareholder plaintiffs are mere figureheads and that their counsel choose to bring the cases and determine when to settle them. Shareholders themselves almost never receive additional payment. Instead, the companies agree to disclose additional facts about the merger negotiations or the way bankers arrived at a valuation for the company and as part of the settlement pay shareholders' counsel a fee that's generally hundreds of thousands of dollars per case.