James Hays v. John Berlau, 2016 U.S. App. LEXIS 14684

In 2014 Walgreens announced a reorganization to acquire the remainder of Alliance Boots and form Walgreens Boots Alliance, prompting a proxy statement and a shareholder vote.
A class action was filed soon after the proxy was issued seeking additional disclosures; parties settled 18 days after filing and less than a week before the shareholder vote.
Settlement required Walgreens to provide six supplemental disclosures (fewer than 800 words total) and allowed class counsel to request $370,000 in fees without Walgreens' opposition.
The supplemental disclosures added trivial or readily derivable information (board nominee discussions, post-merger share allocations, an executive’s resignation and suit, expanded risk factors, and explanations for recusals/qualifications).
The reorganization was approved by 97% of shareholders who voted; the district court approved the settlement despite expressing misgivings about the disclosures’ value.
The Seventh Circuit reversed, finding the supplemental disclosures immaterial and class counsel inadequate; remanded with directions to consider new counsel or dismissal.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Materiality of supplemental disclosures	Disclosures would inform shareholders and could affect vote	Disclosures were minor clarifications or derivable from proxy	Reversal — disclosures were not material under TSC standard; unlikely to affect vote
Value of disclosure-only settlement (reasonableness of give/get)	Settlement provided meaningful corrective disclosures and justified fees	Settlement produced negligible benefit to class while yielding attorneys’ fees; typical deal-litigation concern	Reversal — disclosure settlements must correct plainly material misrepresentations or omissions; here benefit was nil
Adequacy of class counsel & fee award	Counsel performed necessary work and fees were reasonable	Counsel’s work (less than a month) produced no class benefit; conflict of interest risk in disclosure settlements	Court found counsel inadequate under Rule 23(g); remand to consider appointing new counsel or dismissing case
Scope of release in settlement	Release was narrow and limited to disclosure claims	Even a narrow release with zero class benefit should not be approved if disclosures immaterial	Settlement approval vacated; release not permitted where consideration is worthless to class

TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438 (1976) (materiality requires substantial likelihood a reasonable shareholder would consider omitted fact important)
Crawford v. Equifax Payment Servs., Inc., 201 F.3d 877 (7th Cir. 2000) (court must assess whether settlement benefits class)
Eubank v. Pella Corp., 753 F.3d 718 (7th Cir. 2014) (warning about self-interested disclosure settlements favoring counsel and defendants)
Robert F. Booth Trust v. Crowley, 687 F.3d 314 (7th Cir. 2012) (rejecting settlements that yield fees to counsel with no class benefit)
In re Trulia, Inc. Stockholder Litig., 129 A.3d 884 (Del. Ch. 2016) (adopts stricter standard: supplemental disclosures must address plainly material misrepresentations or omissions)
Appert v. Morgan Stanley Dean Witter, Inc., 673 F.3d 609 (7th Cir. 2012) (materiality standard discussion in securities context)
In re Aqua Dots Prods. Liab. Litig., 654 F.3d 748 (7th Cir. 2011) (class representative must protect class interests and justify costs incurred for class)
In re Revlon, Inc. Shareholders Litig., 990 A.2d 940 (Del. Ch. 2010) (court’s duty to scrutinize class counsel adequacy in fiduciary-related settlements)
Werner v. Werner, 267 F.3d 288 (3d Cir. 2001) (disclosure that merely repeats or derives from proxy adds no value)