Background
IsZo Capital LP, Emisphere Technologies, Inc.’s largest unaffiliated stockholder, joined other stockholders in challenging Novo Nordisk A/S’s acquisition of Emisphere. IsZo alleged that Emisphere’s directors, officers, and controlling stockholder, MHR, breached their fiduciary duties by approving an unfair process and price and by allowing MHR to obtain an improper side benefit.
The Court of Chancery appointed another group of stockholders as co-lead plaintiffs and certified a non-opt-out class under Court of Chancery Rule 23(b)(1) and (b)(2). After discovery and mediation, the parties reached a $32 million settlement. IsZo did not challenge the settlement’s approval on its merits but objected to being bound by it, seeking a discretionary opt-out so it could pursue its own claims. The Court of Chancery approved the settlement and denied that request.
The Court’s Holding
The Delaware Supreme Court affirmed. It declined IsZo’s request to require Rule 23(b)(3) certification or an opt-out whenever a settlement releases monetary-damages claims without providing class-wide equitable relief. The court held that its decision in In re Celera Corp. Stockholder Litigation remained workable: courts may grant discretionary opt-outs from a Rule 23(b)(2) class when inadequate representation, materially distinct claims, or other exceptional circumstances make one appropriate, but Celera does not establish a general opt-out right.
The court also held that Wal-Mart Stores, Inc. v. Dukes did not require an opt-out here. Unlike the individualized backpay claims in Wal-Mart, the fiduciary-duty claims arose from one transaction at one price, with the same alleged per-share shortfall and a uniform per-share recovery. IsZo received constitutionally sufficient process because it obtained the discovery record, fully briefed its objection, and was heard at length.
Finally, the Court of Chancery did not abuse its discretion under Celera. The record supported findings that class counsel vigorously litigated the case, secured a substantial recovery, and adequately represented the class; IsZo identified no documentary evidence establishing overlooked claims or supporting its assertion that the settlement left billions of dollars unrecovered. The trial court also properly considered the risk that allowing an opt-out could jeopardize the settlement.
Key Takeaways
- Delaware stockholder classes certified under Rule 23(b)(1) or (b)(2) do not automatically receive opt-out rights merely because a settlement releases monetary claims.
- A discretionary Celera opt-out remains available in exceptional circumstances, including inadequate representation or materially distinct and supportable claims.
- Uniform per-share fiduciary-duty claims arising from a single transaction differ from claims requiring individualized monetary determinations under Wal-Mart.
Why It Matters
The decision preserves Delaware’s framework for binding non-opt-out stockholder classes when merger-related fiduciary claims concern a single transaction and homogeneous per-share injuries. Objectors seeking to pursue separate litigation must show case-specific circumstances outweighing the benefits of a unitary adjudication and global settlement.
The ruling also confirms that an objector’s opportunity to review the record, brief objections, and receive a meaningful hearing can satisfy due process even when the court ultimately refuses to permit an opt-out.