In re Trulia, Inc. Stockholder Litigation
129 A.3d 884
| Del. Ch. | 2016Background
- Zillow announced a stock-for-stock acquisition of Trulia (July 2014); the merger closed Feb. 17, 2015. Plaintiffs were four Trulia stockholders who sued, alleging fiduciary breaches and defective disclosures.
- Plaintiffs focused their preliminary injunction briefing on disclosure claims; limited expedited discovery followed (≈3,000 pages and three depositions).
- The parties negotiated an in‑principle disclosure settlement: Trulia issued Supplemental Disclosures before the vote and plaintiffs agreed to dismiss and release claims in exchange (initial release was very broad and included "Unknown Claims").
- Trulia stockholders overwhelmingly approved the merger; parties later narrowed the release to exclude unknown, foreign, and antitrust claims but it remained broad. Plaintiffs’ counsel sought up to $375,000 in fees.
- The Court (Chancery Court) independently reviewed the settlement, held a fairness hearing, requested supplemental briefing, and received an expert affidavit from plaintiffs. The Court found the supplemental disclosures immaterial/not helpful and concluded the disclosure-only consideration did not justify the requested release.
- Holding: Court denied approval of the proposed settlement as not fair or reasonable to the absent Trulia stockholders.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Were the Supplemental Disclosures material under Delaware law? | Supplemental details concerning synergy figures, transaction multiples, trading multiples, and implied terminal EBITDA multiples were material and would alter the "total mix" for reasonable stockholders. | The Proxy already provided a fair and more-than-adequate summary of J.P. Morgan’s analyses; the added minutiae were immaterial or redundant and in some instances already disclosed. | Held: The supplemental disclosures were not material and did not meaningfully alter the total mix of information. |
| Did the Supplemental Disclosures provide adequate consideration to support a broad release of claims? | The disclosures justified settling and releasing claims because they remedied alleged proxy omissions. | The disclosures had little or no value to stockholders and therefore did not justify the broad release sought. | Held: The "get" was insufficient to justify the "give"; settlement approval denied. |
| Are disclosure-only settlements generally appropriate and what scrutiny is required? | (Plaintiffs) Disclosure settlements provide a practical remedy and can be acceptable; counsel sought approval here. | (Court) Past practice of approving marginal disclosure settlements has incentivized frivolous filings and broad releases; greater judicial scrutiny is needed. | Held: Court criticized routine disclosure settlements, endorsed stricter review, suggested litigating disclosure claims adversarially or using mootness-fee procedures rather than settlements that obtain broad releases. |
| What standard governs materiality and fair‑summary of banker analyses in proxies? | Plaintiffs relied on the TSC/Delaware materiality standard and Pure Resources fair-summary principles to show omissions. | Defendants argued the fair-summary standard does not require disclosure of all underlying data or minutiae, only methodology, key assumptions, and range of values. | Held: Applied Delaware materiality (TSC/Arnold); fair‑summary does not require all underlying data or minutiae—here the Proxy was a fair summary and supplemental minutiae were immaterial. |
Key Cases Cited
- Stroud v. Grace, 606 A.2d 75 (Del. 1992) (Delaware rule requiring full and fair disclosure of material information).
- Arnold v. Society for Savings Bancorp, 650 A.2d 1270 (Del. 1994) (adopting materiality standard for disclosure as substantial likelihood to alter total mix).
- Rosenblatt v. Getty Oil Co., 493 A.2d 929 (Del. 1985) (application of the federal materiality standard).
- In re Pure Resources, 808 A.2d 421 (Del. Ch. 2002) (boards relying on banker advice must provide a fair summary of substantive work performed).
- In re Netsmart Technologies, 924 A.2d 171 (Del. Ch. 2007) (fair-summary standard for investment banker analyses).
- In re MONY Group, 852 A.2d 9 (Del. Ch. 2004) (additional minutiae—like missing transaction multiples—can be immaterial as a matter of law).
- Corwin v. KKR Financial Holdings LLC, 125 A.3d 304 (Del. 2015) (business judgment rule applies when a transaction is approved by a fully informed, uncoerced, disinterested stockholder majority).
- In re Rural/Metro Corp. Shareholders Litigation, 102 A.3d 205 (Del. Ch. 2014) (example where claims that might have been released in a disclosure settlement later produced substantial recoveries).