Background
This consolidated putative class action challenges 3G Capital Inc.’s take-private acquisition of Skechers U.S.A. Inc., announced in May 2025 and closed in September 2025. The class plaintiffs allege that 3G and Skechers insiders breached fiduciary duties by undervaluing Skechers through a flawed process that provided unique benefits to purported controlling stockholders.
Four factions sought appointment as lead plaintiff and lead counsel. A related appraisal action was already pending. The applicants included FMI Common Stock Fund; ODS Capital and Local 39; Verition and Empyrean; and Pentwater-affiliated funds with North Collier Fire Control and Rescue District Firefighters’ Pension Plan.
The Court’s Holding
Vice Chancellor Will granted FMI’s motion, appointing FMI as lead plaintiff. The court appointed Saxena White P.A. and Labaton Keller Sucharow LLP as co-lead counsel, with Friedman Oster & Tejtel PLLC and Julie & Holleman LLP as additional counsel. The court denied the other three leadership applications.
Applying Court of Chancery Rule 23(d)(4), the court found counsel competence, resources, pleadings, performance, and proposed structures largely neutral. The dispositive considerations were conflicts, typicality, and economic stakes. Verition/Empyrean presented a potential structural conflict because its proposed counsel also represented appraisal petitioners in the parallel proceeding. The Pentwater/North Collier and ODS/Local 39 groups had overwhelmingly post-announcement holdings, exposing them to potential typicality defenses. FMI alone had a sizeable, entirely pre-announcement stake and no identified conflict or unique defense.
Key Takeaways
- A proposed class leadership team may be disfavored where its counsel also represents appraisal petitioners whose interests could diverge from those of the class.
- A large economic stake does not control when it was almost entirely acquired after announcement of the challenged merger.
- A sophisticated institutional investor with a substantial pre-announcement stake can provide the independent, typical anchor for class leadership.
Why It Matters
The decision emphasizes that Rule 23(d)(4)’s leadership factors are guideposts, not a scorecard. When otherwise qualified applicants are competing, the court will prioritize undivided loyalty and the absence of plaintiff-specific defenses over the nominal size of a proposed leader’s holdings.
For merger plaintiffs and counsel, parallel appraisal representation and post-announcement share purchases can materially affect a leadership bid even though appraisal rights and direct merger claims may remain legally available.