Another result with Layn Phillips and Clay Cogman mediating for Phillips ADR:
Article originally published here: https://www.law360.co.uk/corporate/articles/1888863/chancery-oks-125m-deal-fees-in-discovery-merger-suit
By Jeff Montgomery
Law360 (October 10, 2024, 6:28 PM EDT) — Declaring it “a great settlement,”a Delaware vice chancellor approved on Thursdaya near chart-topping, $125 million deal to end stockholder challenges to Discovery Inc.’s $43 billion merger with AT&T in 2022, an amount eclipsed only bya $148.2 million pretrial deal in a 2016 case.
Vice Chancellor Travis Laster approved the deal, including a 524.5 million attorney fee and $5,000 incentive award to each offour lead stockholders, with few questions and multiple kudos.
“You guys were, as far as I was concerned, straight down the middle,” with the attorney fee total, the vice chancellor said, noting that the “outcome was reached after both sides had extensive information, with the assistance of a very skilled mediator.”
The suit alleged breaches of fiduciary duty in the run-up to the 2021 mega-merger of Discovery Inc. and AT&T’s WarnerMedia business, which created Warner Brothers Discovery Inc.
While attorneys for the class said in a supporting brief that they believed that the case could settle for between $100 million and $300 million, they settled on 5125 million based on a risk that the court also could reject any payout.
The only larger class settlement approved at a similar stage in Court of Chancery history was a $148 million agreement that ended in 2016 a class suit challenging the sale of Dole Food Co.
“I think it’s one of the largest class settlements of all time. There’s not a lot of nine-figure settlements in this court, despite the perception of some commentators,” said Ned Weinberger of Labaton Keller Sucharow LLP, counsel to the class.
Weinberger told the vice chancellor that Discovery potentially involved “legitimate questions about the standard of review” for judging the claims and concerns over risks during trial and appellate review.
An alleged breach of Discovery’s charter, Weinberger said, was a “potential kill shot,” leaving no defenses that could invalidate the claims.
Although a brief in support of the settlement said that class attorneys suspected duty breaches by “various fiduciaries,” a books and records demand and investigation focused the case ona side deal lined up by large discovery stockholder and controller Advance/Newhouse Partnership and Advance/Newhouse Programming Partnership, referred to in the case as A/N.
“I think we leveraged that claim pretty effectively,” Weinberger said.
Under the agreement, $100 million must be paid by Advance/Newhouse Partnership and Advance/Newhouse Programming Partnership and $12.5 million a piece by Robert Miron, the now-retired chairman of Advance/Newhouse Communications, and his son, Steven Miron, A/N Partnership’s CEO.
Steven Miron stepped down from his director role at Warner inApril after the U.S. Department of Justice’s announcement that it was investigating whether his service on the board of Warner Bros. Discovery and that of Steven Newhouse violated Section 8 of the Clayton Antitrust Act.
Two groups of shareholders led by The Bricklayers Pension Fund ofWestern Pennsylvania and Monroe County Employees’ Retirement System filed back-to-back complaints over the merger in December 2022, alleging company insiders made off with $1 billion in side deals and “staggering” compensation packages at the expense of public stockholders.
Attorneys for former Discovery stockholders and the company notified Vice Chancellor Laster in June that a deal had been reached to end the case, pending agreement on final terms. The tentative agreement followed a settlement recommendation in May from former federal judge and mediator Layn R. Phillips.
In a brief filed ahead of the hearing, the stockholders reported that the most-realistic outcome was an award ranging between $100 million and $300 million, with an upper end of $500 million.
“Pricing in the probability that the Court would award no damages — because the business judgment rule applied or because the side deal was entirely fair — Plaintiffs determined that the $125 million settlement compared favorably to the case’s expected value.”
In a settlement brief, attorneys for the stockholders “alleged that the charter prevented A/N from extracting differential consideration, but if A/N nonetheless intended to seeka premium for relinquishing its Special Rights, it should have recused its designees from the broader merger deliberations upfront and negotiated with an independent special committee.”
A/N also knew, the brief said, “that negotiations with AT&T focused on the relative post-closing ownership percentages of Discovery’s and AT&T’s respective shareholders, meaning that any premium for A/N would come directly from other Discovery stockholders.”
Counsel for Advance/Newhouse and others named in the suit did not comment on the settlement.
Co-lead plaintiff Bricklayers Pension Fund of Western Pennsylvania is represented by Ned Weinberger, Brendan W. Sullivan, Jiahui (Rose) Wang, Domenico Minerva, John Vielandi and Joshua M. Glasser of Labaton Keller Sucharow LLP.
All class members are represented by Gregory V. Varallo, Andrew E. Blumberg and Daniel E. Meyer of Bernstein Litowitz Berger & Grossmann LLP.
Key West Police and Firefighters’ Pension Fund is represented by Jeroen van Kwawegen of Bernstein Litowitz PC.
City Pension Fund for Firefighters & Police Officers in the City of Pembroke Pines is represented by Lee D. Rudy, 1. Daniel Albert, Grant D. Goodhart, Kevin M. Kennedy and Cameron N.Campbell of Kessler Topaz Meltzer & Check LLP and Robert D. Klausner of Klausner Kaufman Jensen& Levinson.
Steve Silverman is represented by Jeremy Friedman, David Tejtel and Christopher M. Windover of Friedman Oster & Tejtel PLLC and D. Seamus Kaskela and Adrienne Bell of Kaskela Law LLC.
The case is In re Warner Bros. Discovery Inc. Stockholders Litigation, case number 2022-1114, in the Court of Chancery ofthe State of Delaware.
–Editing by Alex Hubbard.
