In In re Trulia, Inc. Stockholder Litigation, C.A. No. 10020-CB (Del. Ch. Jan. 22, 2016), the Delaware Court of Chancery rejected a proposed disclosure-only settlement because the proposed disclosures were not “plainly” material and the settlement lacked sufficient consideration to warrant the broad release sought by defendants. The court stated that litigants who pursue disclosure-only settlements can expect “increasingly vigilant scrutiny” of the fairness of the “give” and “get” of such settlements. The court also used the opinion to discuss, more broadly, the dynamics that have led to the proliferation of disclosure settlements; focusing mainly on the concern that these settlements rarely yield genuine benefits for stockholders.
This action arose from the acquisition of Trulia, Inc. (“Trulia”) by Zillow, Inc. (“Zillow”) pursuant to a stock-for-stock merger. Following the announcement of the merger, certain Trulia stockholders brought actions in the Court of Chancery, alleging that the Trulia directors breached their fiduciary duties by approving the proposed merger at an unfair exchange rate and by disseminating inadequate disclosures in connection with the solicitation of the stockholder vote on the merger.