Chancery Court: When Stockholder Of Delaware Corporation Files Suit As Lead Plaintiff, Plaintiff Assumes Role Of A Fiduciary For The Class

Chancery Court: When Stockholder Of Delaware Corporation Files Suit As Lead Plaintiff, Plaintiff Assumes Role Of A Fiduciary For The Class

Steinhardt v. Howard-Anderson, C.A. No. 5878-VCL (Del. Ch. Jan. 6, 2012), read opinion here.

Issue Addressed

This opinion addressed the issue of whether representative plaintiffs in a putative class action should be in sanctioned for trading on the basis of confidential information obtained in the litigation. The motion was granted.

Background

On November 21, 2011, the Court held an evidentiary hearing on the Motion for Sanctions and heard live testimony.  The paper record included depositions, affidavits and additional deposition transcripts and documents from the injunction phase of the case.

This action was originally filed in October 2010 challenging a merger between Occam Networks, Inc. and Calix, Inc.  In November 2010, the Court approved the Stipulation and Order governing the production and exchange of confidential information.  In December 2010, the Plaintiffs moved for a preliminary injunction against the merger and expedited discovery ensued.  After the discovery was nearly complete, Steinhardt began short-selling Calix's stock.  He intended to and later did use the shares of Calix stock he would receive when the merger closed to cover his short sales, even though Steinhardt and his co-plaintiffs where asking the Court to enjoin the closing of the merger.

According to published reports, Steinhardt has a net worth of approximately $500 million and has been described in some reports as one of the most successful investors in the history of Wall Street.  In January 2011, after a hearing open to the public, the Court granted the Motion of the Plaintiffs for a Preliminary Injunction.  After the issuance of supplemental disclosures and the deposition of one of the lead investment bankers, which were conditions of the injunction, a special meeting of stockholders was held, additional disclosures where made, and the merger was approved in February 2011.

Click here to read the entire post.

Read more Delaware business litigation case summaries and commentary on Delaware Corporate and Commercial Litigation Blog, a blog hosted by Francis G.X. Pileggi, of Eckert Seamans.

Lexis.com subscribers can access the Lexis enhanced version of the decision with summary, headnotes, and Shepard's, Steinhardt v. Howard-Anderson, 2012 Del. Ch. LEXIS 1 (Del. Ch. Jan. 6, 2012).

For more information about LexisNexis products and solutions, connect with us through our corporate site.