Document: Off v. Ross, et al., C.A. No. 3468-VCP, Parsons, V.C. (Del. Ch. Nov. 26, 2008)

Plaintiff brought a class action and derivative suit against the board of trustees of a Delaware statutory trust for breach of fiduciary duty in connection with a convertible preferred stock offering that would effectively benefit two members of the board already holding a substantial amount of stock.  The parties settled, agreeing to extend the offering on the same terms to the other stockholders of the trust.  The Court of Chancery denied Plaintiff’s motion for approval of the settlement because: (1) the consideration received was not conditioned on approval of the settlement and the stockholders would have received the benefit without the settlement; (2) Plaintiff’s counsel reviewed the prospectus at issue but Plaintiff could not show that this input actually resulted in any supplemental disclosures to the stockholders; and (3) released claims pursuant to the settlement affected stockholders’ remedies in two other derivative actions.