On Friday, February 16, 2018, the Maryland Circuit Court, Montgomery County, approved a $17.5 million settlement that plaintiffs achieved as additional consideration on behalf of a class of shareholders of American Capital, Ltd. In Re American Capital, Ltd. Shareholder Litigation., C.A. No. 422598-V (2018). The settlement resolved Plaintiffs’ claims regarding a forced sale of American Capital.
Pomerantz LLP filed an action challenging the sale of American Capital, a Delaware corporation with its headquarters in Maryland. Among other things, American Capital’s board of directors (the “Board”) agreed to sell the company at a price below what two other bidders were willing to offer. Worse, the merger price was even below the amount that shareholders would have received in the company’s planned phased liquidation, which the company was considering under pressure from Elliott Management, an activist hedge fund and holder of approximate 15% of American Capital stock. Elliott was not originally named as a defendant, but after initial discovery showed the extent of its involvement in the Board’s breaches of fiduciary duty, Elliott was added as a defendant in an amended complaint under the theory that Elliott exercised actual control over the Board’s decision-making. Elliott moved to dismiss on jurisdictional grounds and additionally challenged its alleged status as a controller of American Capital.
In June 2017, minutes before the hearing on defendants’ motion to dismiss, a partial settlement was entered into with the members of the Board for $11.5 million. The motion to dismiss hearing proceeded despite the partial settlement, but only as to Elliott. In July 2017, the court denied the motion to dismiss, finding that Elliott, “by virtue solely of its own conduct, … has easily satisfied the transacting business prong of the Maryland long arm statute.” The court also found that the “amended complaint in this case sufficiently pleads that Elliott was a controller with respect to” the sale, thus implicating a higher standard of review. Elliott subsequently settled the remaining claims for an additional $6 million.
Pomerantz served as co-lead counsel.