Ehrenhaus v. Baker
216 N.C. App. 59
| N.C. Ct. App. | 2011Background
- Wachovia faced a liquidity crisis in fall 2008 and negotiated a merger with Wells Fargo; the Wachovia board approved the merger in late 2008 under time pressure from the FDIC and market conditions.
- Ehrenhaus filed a class action on behalf of Wachovia shareholders challenging the merger protections and disclosures; a settlement was reached in December 2008, with disclosures enhanced and fees to counsel.
- The settlement released claims related to the merger but did not preclude Lipetz v. Wachovia and related actions; final approval occurred in February 2010 after objections were heard in August 2009.
- The trial court certified the class as non-opt-out and approved the settlement, including a fee award to class counsel; objectors appealed challenging class adequacy, opt-out rights, and settlement fairness.
- The North Carolina Court of Appeals affirmed in part and reversed in part, upholding class certification and most settlement terms while remanding for additional fee findings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Class representative adequacy | Ehrenhaus adequately represents the class | Concerns about Ehrenhaus's interest and conflicts | Adequate representation found |
| Class counsel adequacy | Counsel is experienced and represents class interests | No demonstrated conflict or incompetence | Counsel deemed adequate |
| Non-opt-out class due process | Non-opt-out class appropriate where monetary relief not dominant | Opt-out rights required for money-dominated claims | Non-opt-out class permissible; due process satisfied |
| Settlement fairness and court’s approval | Settlement fair, reasonable, adequate given uncertainties | Settlement too favorable to defendants or insufficient discovery | Settlement approved; some fee findings remanded for development |
| Omission of evidence record challenge | Record omitted critical evidence | Record adequate; issue inadequately briefed | Issue dismissed for lack of citation and detail |
Key Cases Cited
- Crow v. Citicorp Acceptance Co., 319 N.C. 274 (1987) (class certification prerequisites; notice and due process considerations)
- Frost v. Mazda Motor of Am., Inc., 353 N.C. 188 (2000) (abuse of discretion standard for class certification and fairness review)
- In re Wachovia Shareholders Litig., 168 N.C.App. 135 (2005) (precedent on attorney fees and class settlements in NC)
- Omnicare, Inc. v. NCS Healthcare, Inc., 818 A.2d 914 (Del. 2003) (fiduciary duties; deal protections; fiduciary out and coercion analysis)