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Trulia and the Demise of “Disclosure Only” Settlements in Delaware

Business Law Today
February 2016, Peter J. Walsh, Jr. and Aaron R. Sims

In In re Trulia, Inc. Stockholder Litigation, 2016 WL 270821 (Del. Ch.), the Delaware Court of Chancery announced that it will no longer approve “disclosure only” settlements absent certain conditions. Going forward, the supplemental disclosures supporting a proposed settlement must address material misrepresentations or omissions, and the release defendants obtain in return must be narrowly tailored to the claims relating to the disclosures. Although the court’s criticism of disclosure settlements has been intensifying for some time, Trulia represents the most definitive statement to date of the court’s intention to carefully scrutinize and, when appropriate, reject settlements of stockholder class actions when the settlement consideration does not include any monetary recovery for the class. 

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