Ionni v. Bergera et al
MEMORANDUM ORDER directing the parties to submit supplemental briefing addressing the scope of the proposed release. Each party is directed to submit a letter brief within ten days of this order. Signed by Judge Richard G. Andrews on 5/11/2017. (nms)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
EDWARD IONNI, derivatively on behalf of
ITERIS, INC. and individually and on
behalf of himself and all other similarly
No. 16-cv-807 (RGA)
JOE BERGERA, RICHARD CHAR, KEVIN C.
DALY, GREGORY A. MINER, ABBAS
MOHADDES, GERARD M. MOONEY,
THOMAS L. THOMAS, MIKEL H.
WILLIAMS, and ITERIS, INC.,
The parties have requested preliminary approval of their proposed class
settlement. (D.I. 10). The settlement ends litigation claiming breach of fiduciary
duty and unjust enrichment. (D.I. 1).
Plaintiffs allegations are as follows. In 2014 and 2015, the stockholders of
Iteris were asked to approve amendments to a 2007 Omnibus Incentive Plan,
increasing the number of common stock shares "reserved for issuance under the
Plan .... " (D.I. 1 at if 2). The proxy statements represented that "no person could
receive more than 500,000 stock options or stock appreciation rights" in a fiscal year
under the Plan. (Id. at if 3). In fact, however, "the Board had provided itself with
unilateral authority to disregard the purported per-participant fiscal year limits .... "
(Id. at i! 4). Then, in September 2015, the Board issued 1,350,000 stock options to
Joe Bergera, the incoming CEO. (Id. at ilil 6, 12).
Based on these allegations, on September 15, 2016, a stockholder filed the
complaint in this case, derivatively on behalf of the company and representatively
on behalf of a class of all similarly situated stockholders. (D.I. 1). Less than a month
later, on November 8, the parties reached a preliminary settlement. (D.I. 10-1 at 4).
Defendants were never required to file an answer (D.I. 9), and no motion practice,
and seemingly no litigation activity unrelated to settlement, occurred.
Related to the preliminary settlement, in December, Defendants presented to
the stockholders a Supplemental Proposal asking for ratification of the grant of
stock options to Bergera. (Id. at 19-20). The Supplemental Proposal was not
contingent on settlement but was motivated by it. (See id.). The submission of the
Supplemental Proposal to the stockholders along with an acknowledgement that it
occurred because of the lawsuit is the primary consideration offered by Defendants
for settlement. (See id. at 9-10). Defendants will make no admission of wrongdoing.
(Id. at 9). In exchange, Plaintiff has agreed to, what appears to be, a very broad
release of claims, including a release of all class claims related to the Plan. (Id. at
Now, the parties ask me to give preliminary approval of the proposed
settlement. (D.I. 10). I am concerned that the release of claims is overbroad. Cf. In
Re Trulia, Inc. Stockholder Litig., 129 A.3d 884, 898 (Del. 2016) ("[P]ractitioners
should expect that disclosure settlements are likely to be met with continued
disfavor in the future unless ... the subject matter of the proposed release is
narrowly circumscribed to encompass nothing more than disclosure claims and
fiduciary duty claims concerning the sale process .... "). Under Federal Rule of Civil
Procedure 23(e), I am tasked with the independent duty to ensure any class
settlement is "fair, reasonable, and adequate." Towards that aim, the parties are
directed to submit supplemental briefing addressing the scope of the proposed
release. Each party is directed to submit a letter brief within ten days of this order.
IT IS SO ORDERED this
ll_ day of May 2017.
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