Posner opinion blasts class actions that are 'no better than a racket'
A shareholder lawsuit settled 18 days after filing benefited the lawyers who would receive $370,000, but the disclosures required by the deal in advance of a merger were of little value, a federal appeals court has found.
The Aug. 10 opinion (PDF) by the Chicago-based 7th U.S. Circuit Court of Appeals overturned a federal judge’s approval of the settlement involving Walgreens’ combination with a Swiss company, the Cook County Record reports.
Judge Richard Posner wrote the majority opinion finding the value of the required disclosures to shareholders voting on the combination “appears to have been nil.” One judge dissented in an opinion that “will be issued separately in due course,” the decision said.
“In this case the benefit for the class was not meager; it was nonexistent,” Posner wrote. “The type of class action illustrated by this case—the class action that yields fees for class counsel and nothing for the class—is no better than a racket. It must end. No class action settlement that yields zero benefits for the class should be approved, and a class action that seeks only worthless benefits for the class should be dismissed out of hand.”
On remand, Posner said, the district should give “serious consideration” to either appointing new class counsel or dismissing the suit.
Hat tip to How Appealing.