## Facts

- Trulia, Inc. agreed to be acquired by Zillow, Inc. in a stock-for-stock merger that closed in February 2015.
- After the merger was announced, Trulia stockholders filed consolidated class actions alleging fiduciary breaches, including claims that the exchange ratio was unfair.
- Plaintiffs sought expedited proceedings and focused primarily on alleged proxy disclosure deficiencies, with limited attention to sale-process flaws or deal protections.
- The parties conducted limited discovery (fewer than 3,000 pages of documents and two depositions).
- Within months, the parties reached a proposed “disclosure-only” settlement memorialized in a memorandum of understanding.
- Trulia agreed to issue supplemental proxy disclosures, largely about the financial advisor’s analyses and deal-related metrics and projections.
- In exchange, plaintiffs agreed to drop efforts to enjoin the transaction and to provide a broad class-wide release of all transaction-related claims, known or unknown.
- The settlement provided no monetary recovery to the class; the only anticipated payment was an attorneys’ fee (unopposed up to $375,000).
- The merger closed after the supplemental disclosures were made, and the court was asked to approve the settlement class, the release, and the fee request.

## Issues

1. Whether the proposed disclosure-only class settlement was fair, reasonable, and adequate given the value of the supplemental disclosures and the breadth of the release.
2. What standard should govern court approval of disclosure-only settlements in merger litigation going forward, including requirements for disclosure materiality and release scope.

## Decision

- The Court of Chancery denied final approval of the proposed class settlement.
- The court found the supplemental disclosures did not provide meaningful consideration to stockholders sufficient to justify the sweeping release.
- The court denied the related application for attorneys’ fees and expenses.
- The court announced that disclosure-only settlements would receive more exacting scrutiny and would remain disfavored unless disclosures are plainly material and releases are narrowly drawn.

## Legal Principles

- A class settlement must provide consideration that is commensurate with the claims being released; immaterial disclosures cannot support a broad class-wide release.
- For disclosure-only settlements, supplemental disclosures should be “plainly material,” meaning they significantly alter the total mix of information available to stockholders deciding how to vote.
- Releases in disclosure-only settlements must be narrowly circumscribed, generally limited to disclosure claims and closely related process claims, not unknown or uninvestigated theories.
- Courts should be skeptical of settlements that exchange marginal information for “deal insurance” through expansive releases, particularly where limited discovery prevents testing the merits.
- Mootness-fee practice (voluntary supplemental disclosures followed by a fee request) may be preferable to class settlements because it can compensate counsel without extinguishing class claims through a broad release.

## Conclusion

The Court of Chancery rejected a disclosure-only settlement of merger claims because the additional proxy disclosures were not plainly material and the proposed class-wide release was excessively broad, and it set a stricter framework under which such settlements will be approved only when material disclosures are exchanged for narrowly tailored releases.


In re Trulia, Inc. Stockholder Litig., 129 A.3d 884 (Del. Ch. 2016)