In re Jefferies Group, Inc. Shareholders Litigation
Date Submitted: December 22, 2014
Michael J. Barry, Esquire Grant & Eisenhofer P.A.
Gregory V. Varallo, Esquire Richards, Layton & Finger, P.A.
I have reviewed your letters dated December 22, 2014, in which you jointly requested on behalf of all parties that, based on those submissions, the Court resolve a dispute concerning the definition of the class to be included in the documentation of the proposed settlement of this action. For the reasons explained below, I agree with the class definition Plaintiffs have proposed.
By way of background, this action concerns the acquisition of Jefferies Group, Inc. ("Jefferies") by Leucadia National Corporation ("Leucadia") through a stock-for-stock merger that closed on March 1, 2013 (the "Merger"). On May 30, 2014, the Court entered an Order (the "Certification Order") certifying a class under Court of Chancery Rules 23(a), 23(b)(1) and 23(b)(2) consisting of:
all record and beneficial holders of Jefferies common stock as of November 11, 2012, together with their successors and assigns, and excluding the Defendants in this action and each of Defendants' associates, affiliates, legal representatives, heirs, successors in interest, transferees and assigns.
On October 31, 2014, about five weeks before trial was scheduled to begin, the parties signed a term sheet providing for, among other things, the payment of $70 million in net settlement consideration to the class (the "Term Sheet"). In Paragraph 2 of the Term Sheet, the parties agreed "to ask the Court to amend the definition of the class" in the Certification Order to read as follows:
All persons or entities who or which held Jefferies common stock at any time during the period from November 11, 2012 through and including the exchange of shares of Jefferies common stock for shares of Leucadia on March 1, 2013 (the "class period"). Excluded from the class are Jefferies and Leucadia and any persons who served as one of their Directors (on or after April 1, 2012) or Section 16 Officers (on or after April 1, 2012), as well as the Individual Defendants and any members of their immediate family, and any person or entity which is or was an affiliate of any of the Defendants at any time during the class period, and each of the Defendants' (and the other aforementioned excluded persons' and entities') heirs, legal representatives, successors in interest, transferees and assigns of Jefferies stock.
Paragraph 11 of the Term Sheet states that the "Term Sheet is intended to be a binding, legal obligation of each of the Parties."
Since signing the Term Sheet, the parties have been working on preparing a Stipulation and Agreement of Settlement (the "Settlement Agreement") and related papers to formally document the proposed settlement. The present dispute concerns the definition of the class to be included in the Settlement Agreement.
Defendants contend that the class should be defined in the Settlement Agreement to include holders of "Jefferies Deferred Shares" as well as holders of Jefferies common stock. Specifically, under Defendants' proposal, the definition of the class would include, with the relevant additional language in bold and the exclusion of Defendants and their affiliates omitted, "all Persons who or that held Jefferies common stock or Jefferies Deferred Shares at any time during the period from November 11, 2012 through and including the exchange of shares of Jefferies common stock for shares of Leucadia common stock on March 1, 2013." Defendants further propose to define the term "Jefferies Deferred Shares" in the Settlement Agreement to mean "restricted stock units, deferred shares, or similar rights granted" under various Jefferies compensation plans.
In support of their proposed class definition, Defendants contend that it would be "unfair" to exclude holders of Jefferies Deferred Shares from the class and "would expose Defendants to possible additional litigation." Defendants argue that the holders of Jefferies Deferred Shares should be included in the class definition because:
(i) Plaintiffs' alleged damages theory is that the exchange ratio was too low; (ii) under the Merger Agreement, the exchange ratio was applied exactly the same to common stock and Jefferies Deferred Shares; and (iii) the amount of Settlement Consideration each eligible class member will receive will be based on the number of shares he or she exchanged at the ...