Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Du v. Blackford

United States District Court, D. Delaware

September 28, 2018

VINH DU, derivatively on behalf of ENTEROMEDICS, INC. and individually and on behalf of himself and all other similarly situated stockholders of ENTEROMEDICS, INC., Plaintiff,
v.
GARY BLACKFORD, DAN W. GLADNEY, CARL GOLDFISCHER, BOBBY I. GRIFFIN, LORI C. MCDOUGAL, NICHOLAS L. TETI JR., JON T. TREMMEL, NAGEEB A. ANSARI, PETER M. DELANGE, PAUL F. HICKEY, SCOTT YOUNGSTROM, and ENTEROMEDICS, INC. Defendants, and ENTEROMEDICS, INC., Nominal Defendant.

         JURY TRIAL DEMANDED CLASS ACTION

          MEMORANDUM

          EDUARDO C. ROBRENO, J.

         Presently before the Court is the parties' “Joint Motion for Preliminary Approval of Class Action and Derivative Settlement and Notice to Stockholders.” If approved, the settlement will resolve the instant matter, in which Plaintiff alleges that the Defendants, executive officers and members of the board of directors of Enteromedics, Inc. (“Enteromedics” or the “Company”), breached their fiduciary duties to the stockholders. For the reasons that follow, the Court will grant the motion, conditionally certify the class, preliminarily approve the proposed class action settlement, and approve the form, content, and manner of giving notice to the class.

         I. BACKGROUND

         A. Factual Background and Procedural History

         On February 24, 2017, Plaintiff filed a derivative class action complaint on behalf of EnteroMedics, alleging claims for breach of fiduciary duty and unjust enrichment against Defendants. Plaintiff alleged that Defendants breached their fiduciary duties by: (1) making false and misleading statements in connection with soliciting stockholder approval of: (a) an amendment to EnteroMedics's Certificate of Incorporation to effect a reverse stock split of the Company's outstanding and issued shares of common stock (the “Reverse Stock Split”); and (b) an amendment to the Company's Second Amended and Restated 2003 Stock Incentive Plan (the “Stock Plan”) that increased the No. of shares available for issuance under the Stock Plan; and (2) granting and receiving stock options in February 2017 after the Reverse Stock Split and Stock Plan were approved by stockholders.

         Defendants moved to dismiss, and after a hearing, the Court denied the motion. The parties then engaged in significant discovery. Towards the end of discovery, after more fully understanding the strengths and weaknesses of their positions, the parties began settlement discussions and negotiated the current proposed settlement agreement. The Court held a hearing on the motion for preliminary approval of the settlement on September 24, 2018.

         B. The Proposed Class Action Settlement

         The terms of the proposed class action settlement agreement are set forth in the Stipulation of Settlement and Compromise (the “Settlement Agreement”). Mot. Ex. A, ECF No. 36-1. The basic terms are outlined below.

         1. The Class

         The class is defined as:

a non-opt-out class for settlement purposes of all record holders and beneficial owners of common stock of EnteroMedics who held or owned such stock during the Class Period (defined below), including any and all of their respective successors-in-interest, successors, predecessors-in-interest, predecessors, representatives, trustees, executors, administrators, estates, heirs, legatees, devisees, assigns and transferees, immediate and remote, and any other person or entity acting for or on behalf of any of the foregoing. Excluded from the Class are Defendants and their immediate family, any entity in which any Defendant has a controlling interest, and any successors-in-interest thereto.

Id. at 5. The class period is defined “the period of November 3, 2016 through February 24, 2017, inclusive.” Id.

         2. The Proposed Settlement Terms

         The Settlement Agreement provides for the cancellation and rescission of the stock options at issue, and stockholders will have the opportunity to vote on any additional stock options for Defendants made in connection with the rescission. Second, the board of directors is required to make proportional adjustments to the Stock Plan and other Company equity plans to account for any changes in EnteroMedics's capitalization, thus protecting stockholders from unanticipated dilution. Third, the board of directors is amending the Company's equity plan to add a specific provision imposing an annual cap on equity compensation for non-employee directors and will seek stockholder approval of this amendment.

         All costs associated with notice to the class will be borne by EnteroMedics. The Settlement Agreement also provides for an award of attorneys' fees and expenses of $190, 000, [1]and a $4, 000 incentive award for Plaintiff which will be paid out of the attorneys' fees.

         In exchange for the benefits provided by the settlement, class members agree to release all claims that they alleged or could have alleged in the action.

         II. DISCUSSION

         Under Federal Rule of Civil Procedure 23(e), the settlement of a class action requires court approval. Fed.R.Civ.P. 23(e)(2). A district court may approve a settlement agreement only “after a hearing and on finding that it is fair, reasonable, and adequate.” Id. When a court is presented with a class settlement agreement before the district court has issued a class certification order - a procedural posture that results in what is often termed a “settlement class” - the Advisory Committee's notes to the 2003 ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.