SEAN J. GRIFFITH v. QUALITY DISTRIBUTION, INC.

CourtDistrict Court of Appeal of Florida
DecidedJuly 13, 2018
Docket17-3160
StatusPublished

This text of SEAN J. GRIFFITH v. QUALITY DISTRIBUTION, INC. (SEAN J. GRIFFITH v. QUALITY DISTRIBUTION, INC.) is published on Counsel Stack Legal Research, covering District Court of Appeal of Florida primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
SEAN J. GRIFFITH v. QUALITY DISTRIBUTION, INC., (Fla. Ct. App. 2018).

Opinion

NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION AND, IF FILED, DETERMINED

IN THE DISTRICT COURT OF APPEAL

OF FLORIDA

SECOND DISTRICT

SEAN J. GRIFFITH, ) ) Appellant, ) ) v. ) Case No. 2D17-3160 ) QUALITY DISTRIBUTION, INC.; GARY R. ) ENZOR; THOMAS R. MIKLICH; RICHARD ) B. MARCHESE; ALAN H. SCHUMACHER; ) ANNETTE M. SANDBERG; APAX ) PARTNERS LLP; APAX VII-A L.P.; APAX ) VII-B L.P.; APAX VIII-I L.P.; APAX VIII-2 ) L.P.; GRUDEN ACQUISITION, INC.; ) GRUDEN MERGER SUB, INC.; and ) RICHARD DELMAN, on behalf of himself ) and all others similarly situated, ) ) Appellees. ) )

Opinion filed July 13, 2018.

Appeal from the Circuit Court for Hillsborough County; Steven Scott Stephens, Judge.

Adam M. Schachter and Christian G. Montelione of Gelber Schachter & Greenberg, P.A., Miami; and Anthony A. Rickey of Margrave Law LLC, Georgetown, Delaware, for Appellant.

Ernest J. Marquart of Schumaker, Loop & Kendrick, LLP, Tampa; and Peter L. Simmons of Fried, Frank, Harris, Shriver & Jacobson, LLP, New York, New York, for Appellees Qualify Distribution, Inc.; Gary R. Enzor; Thomas R. Miklich; Richard B. Marchese; Alan H. Schumacher; and Annette M. Sandberg.

Bryan D. Hull and J. Carter Anderson of Bush Ross, P.A., Tampa; and Edward P. Welch and Jenness E. Parker of Skadden, Arps, Slate, Meagher & Flom LLP, Wilmington, Delaware, for Appellees Apax Partners LLP; Apax VIII-A L.P.; Apax VIII-B L.P.; Apax VIII-I L.P.; Apax VIII-2 L.P.; Gruden Acquisition, Inc.; and Gruden Merger Sub, Inc.

John F. Keating, Jr., of The Brualdi Law Firm, P.C., New York, New York; and Kenneth J. Vianale and Julie Prag Vianale of Vianale & Vianale LLP, Boca Raton, for Appellee Richard Delman.

MORRIS, Judge.

Sean J. Griffith appeals an order certifying a class and approving a class

action settlement in a case brought by shareholders of Quality Distribution, Inc.

(Quality), against the corporation for breach of fiduciary duty and failure to disclose

relevant information relating to a proposed acquisition by Apax Partners, LLC (Apax).

We have jurisdiction pursuant to Florida Rules of Appellate Procedure 9.030(b)(1)(A)

and 9.130(a)(3)(C)(vi). We affirm the trial court's certification of the class without further

comment; however, we reverse the trial court's approval of the class action settlement

and the denial of Griffith's request for fees.

I. Background

On May 6, 2015, Quality, a Florida corporation, announced that it had

entered into a merger agreement whereby Apax would acquire Quality for $16 per share

-2- of its publicly-traded stock. This price "represent[ed] an approximate premium of . . .

62% to the $9.85 closing price per share" on May 5, 2015, the day before the merger

was announced. The transaction was valued at $800 million, including the assumption

of Quality's debt by Apax. On June 8, 2015, Quality filed a preliminary proxy statement

with the Securities and Exchange Commission (SEC).

On June 17, 2015, Richard Delman, a shareholder of Quality, filed a class

action complaint against Quality, its board members, and Apax. Delman alleged a

count against the board members for breach of fiduciary duties, a count against Quality

and the board members for failure to disclose, and a count against Apax for aiding and

abetting in the breaches of fiduciary duties. Delman alleged that Quality and its board

members engaged in a flawed sale process and agreed to an inadequate sale price.

Delman also alleged that Quality and its board members failed to include in the proxy

statement information that is material to the shareholders' decisions on whether to

approve the merger.

On July 24, 2015, Delman filed a motion for preliminary injunction. Also in

July, Quality filed a definitive proxy statement with the SEC and the parties began to

engage in expedited discovery. Quality and Apax agreed to produce additional

documents, and Delman conducted two depositions, one of Quality's chief executive

officer and one of an executive from Quality's investment banker, RBC Capital Markets,

LLC (RBC). The parties engaged in settlement negotiations, and Delman notified the

court that there was no need to hold a hearing on his motion for preliminary injunction in

light of the settlement negotiations. By August 2015 the parties had reached a

settlement agreement. The agreement required Quality to serve its shareholders with

-3- supplemental disclosures containing information regarding the following: (1) potential

conflicts of interest of Quality's senior management and Apax's expressed intention to

retain Quality's management team as employees; (2) the potential conflicts of interest of

Quality's investment banker, RBC, and its connection with Apax; and (3) the sale

process and alternatives to the merger. On August 10, 2015, Quality filed the

supplemental disclosures with the SEC.

On August 18, 2015, 98.8% of the shareholders voted to approve the

merger with Apax.

On October 28, 2016, the parties entered into a formal stipulation of

settlement. On December 16, 2016, the parties filed a joint motion for entry of an order

granting joint motion for all parties for notice and hearing for settlement. The trial court

entered the requested order on January 20, 2017. The order directed Quality to serve

its shareholders with notice of the settlement, and it conditionally certified the

shareholders as a class of plaintiffs. The order also designated Delman as the class

representative, preliminarily approved the settlement, and set a hearing for April 24,

2017.

On April 3, 2017, Griffith filed an objection to the proposed settlement. He

had purchased $160 worth of Quality's shares after the merger was formally

announced. Griffith described himself as "an activist investor who has served as a

watchdog in the movement to curtail abusive [merger and acquisition] litigation."1 He

1Griffithis a professor of law at Fordham University School of Law. He has coauthored various law review articles on the subject of disclosure settlements that arise in the context of litigation involving corporate mergers. See, e.g., Jill E. Fisch, Sean J. Griffith & Steven Davidoff Solomon, Confronting the Peppercorn Settlement in Merger Litigation: An Empirical Analysis and a Proposal for Reform, 93 Tex. L. Rev. 557

-4- objected to the proposed settlement and class certification on four main grounds: (1) the

supplemental disclosures were not plainly material to the shareholder's decision on

whether to approve the merger, (2) the released claims had not been adequately

investigated by plaintiffs' counsel, (3) questions remain regarding the adequacy of class

counsel, and (4) plaintiffs' fee request should be rejected because the litigation did not

provide a substantial benefit to the shareholders. Griffith argued that Florida should

adopt the test for approval of "disclosure settlements" set forth in In re Trulia, Inc.

Stockholder Litigation, 129 A.3d 884 (Del. Ch. 2016). Last, Griffith asked the trial court

to retain jurisdiction so that he could submit a request for fees he incurred in objecting to

the settlement.

Delman filed memorandums of law in support of the proposed settlement

and in response to Griffith's objection. He also filed an affidavit from a financial analyst,

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