BVF Partners L.P. v. New Orleans Employees' Retirement System

Summary

The Delaware Supreme Court reviewed the certification of a shareholder class and approval of a non-opt-out settlement arising from Quest Diagnostics’ acquisition of Celera Corporation. The court held that New Orleans Employees’ Retirement System had standing to represent the class despite selling its shares before the merger closed, and that the Court of Chancery did not abuse its discretion in certifying the class. However, the court held that BVF Partners should have been permitted to opt out under the circumstances, affirming in part and reversing in part.

Holdings

1. A shareholder class representative in a breach-of-fiduciary-duty action is not required to own stock continuously through final class certification or merger consummation. NOERS had standing because it owned Celera stock when the merger was approved and fell within the settlement class definition.
2. The Court of Chancery did not abuse its discretion in finding NOERS an adequate and typical class representative despite its sale of shares, alleged susceptibility to equitable defenses, status as a repeat class representative, lack of BVF's support, and alleged lack of control over litigation.
3. A shareholder class challenging director conduct in a corporate transaction may be certified under Rule 23(b)(1) and (b)(2), even when monetary damages are also sought, so long as equitable relief predominates and the class members' rights and interests are homogeneous.
4. The Court of Chancery abused its discretion by denying BVF a discretionary opt-out right under the particular facts of this settlement.

Questions Presented

1. Whether NOERS retained standing to represent the shareholder class after selling its Celera shares before the merger closed.
2. Whether NOERS was an inadequate or atypical class representative because of potential equitable defenses, its prior litigation activity, lack of support from BVF, or alleged abdication of control to counsel.
3. Whether the Court of Chancery properly certified the settlement class under Court of Chancery Rule 23(b)(1) and (b)(2).
4. Whether the Court of Chancery abused its discretion or violated due process by denying BVF a discretionary right to opt out of the non-opt-out class.
5. Whether the settlement was unfair because it released BVF's potential monetary claims for inadequate consideration; the court did not reach this issue after ruling that BVF should have been allowed to opt out.

Disposition

reversed_and_remanded