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Investigating Opportunities to Negotiate an Extra $.88 per Share
Need to know what was offered to ineligible clients
Making use of whatever is learned
Reactions to confusion
Reactions to the issues in the Dell appraisal case reported last week[1]
have become focused on two essential concerns about the “secret
settlement” between Dell and the former T Rowe Price petitioners that
the Court had determined were ineligible for appraisal rights:
Ø
whether the appraisal claimants that satisfied eligibility
requirements should be offered the same – or possibly higher –
payments in excess of what the Court determined was due;
and
Ø
what services Lead Counsel provided for the benefit of the eligible
appraisal claimants, as distinguished from services to their clients
that were ineligible, to justify the firm’s proposed fees.
Need to know what was offered to ineligible clients
Surprisingly little has been learned about the Dell settlement with T
Rowe Price, which has in itself fueled speculation.
A transcript of the private Monday morning teleconference was
obtained,[2] but actually raised more
questions than it answered. Stuart Grant of Grant & Eisenhofer
(“G&E”), the appointed Lead Counsel for eligible appraisal claimants,
was in the teleconference acting as counsel for the ineligible T Rowe
Price petitioners that had been dismissed from the appraisal case. He
and Dell’s counsel verbally summarized an agreement they had
negotiated to pay the ineligible “Settling Petitioners” $.88 per share
simply to give up whatever rights they had to appeal, and Mr. Grant
explained that it was urgent to get court approval quickly, without
delays that might be involved in an open review by all claimants, “so
that it could be accounted for in the second quarter for all of my
clients, which, understanding that they are various funds, quarters
matter to them.”[3]
No mention was made of a written agreement during the teleconference,
and there was no reference to any documented agreement in the Court’s
subsequent Order approving what had been summarized.[4]
Based on what is known, and more importantly what is not
known, I sent Mr. Grant a letter yesterday morning requesting a copy
of the executed settlement agreement between Dell and his ineligible
clients.[5]
Making use of whatever is learned
Yesterday’s letter to Mr. Grant also informed him that Cavan, the
Forum’s representative petitioner that initiated the Dell appraisal
case, wishes to consider the same or better terms for giving up rights
to appeal that he negotiated for his ineligible clients, and that the
offer should be made available to all eligible claimants.
There are of course issues for lawyers to argue about whether Dell is
obligated to make the offer available to all claimants in the case, or
whether G&E had a duty to make the offer available to all the
claimants the firm was appointed to serve as Lead Counsel. But in any
event, business logic would suggest that if Dell could realize some
benefit that justified a $28 million payment for the dismissed
ineligible parties to waive whatever rights they might have had to
appeal, Dell would welcome the opportunity to pay at least the same
amount per share for the more meaningful rights of eligible claimants
to appeal. And if there are reasons why this simple business logic
does not apply, we need to know what those reasons are.
What we learn about Dell’s settlement with the ineligible G&E clients,
and naturally also what G&E is able to accomplish in negotiations of
similar settlement opportunities for the eligible claimants, will
obviously be relevant to consideration of the firm’s controversial fee
application.
Reactions to confusion
Less than seven hours after last Wednesday’s Forum report addressing
delays in a final order for distribution of payments to eligible
claimants and other burdens relating to controversies about Lead
Counsel’s services,[6]
Mr. Grant demonstrated his ability to act quickly by filing a proposed
order for a final judgment “resolving the entire Dell Appraisal” with
a provision for G&E to hold unresolved payments in escrow.[7]
The Court responded one hour and eight minutes later with a filing
that denied the proposed order, commenting “This submission is
premature, ill-conceived, and unhelpful,” briefly summarizing the
issues concerning Lead Counsel’s fee application that need to be
resolved before a final judgment can be prepared, and stating “No one
need respond to this proposed form of final order.”[8]
Professional and academic observers have generally viewed the current
issues as unusually confused and complicated. Some have focused on
what they consider extraordinary, such as refusing to explain charges,
and others have focused on questions for practitioners, such as
whether Court approval was needed when the Court had already dismissed
the “Settling Petitioners” from the case so that they could simply
agree not to appeal what the court had already decided, or acknowledge
the expiration of their rights to appeal. These issues are of course
important to all of us concerned with managing appraisal cases.
What may be more important, though, is how this confusion is viewed by
a “real” investor who looks at the appraisal process as an essential
right to realize the fair value of personal savings. One of the
individual appraisal claimants who had communicated with me in the
past to ask questions has for the first time offered views, and has
asked me to present them. I’ve appended the letter (here)
without editing other than redaction of the person’s name to respect
requested anonymity, and encourage you to consider how this articulate
example of an ultimate investor views the issues that must be
resolved.
GL – July 12, 2016
Gary Lutin
Chairman, The Shareholder Forum
575 Madison Avenue, New York, New York 10022
Tel: 212-605-0335
Email:
gl@shareholderforum.com
APPENDIX:
Letter from eligible Dell appraisal claimant
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From:
[REDACTED]
Sent: Saturday, July 09, 2016 8:04 PM
To: gl@shareholderforum.com
Subject: Compensation for G&E
Mr. Lutin:
When I first
chose to pursue the DELL appraisal rights process, I sent several
emails to you regarding the benefits of enlisting legal
representation in that process. I decided to opt out because I
failed to see any benefit. Now that we seem to be moving into
the closing phases of said process, I am more convinced than ever
that I made the right decision and would like for you to do what
you can to let my views about this issue be known to the powers
that be.
It would appear
that G&E, the attorneys for T. Rowe Price and many of the others
they represent are a rogues' gallery of gold-plated dunces with a
sense of entitlement which they would probably tacitly attribute
to the fact that they managed - by hook or crook - to get the
best American legal educations the dollar can buy. In spite of
that, they have repeatedly demonstrated a level of operational
incompetence and ignorance of the law which could make a casual
observer question their functional literacy.
More troubling
than that is the attempt G&E now appears to be making to leverage
that incompetence into a 7-figure payday by seeking authorization
to extract money from the settlements of DELL shareholders whose
interests it has not represented. As you mentioned in your most
recent shareholder forum message, G&E has not represented
non-client interests in its dealings with DELL. In fact, it has
represented the interests of its ineligible clients over those of
eligible claimants and now has the gall to try to stake a claim on
non-client settlements. G&E's "secret settlement" with DELL, its
non-compliance with the Consolidation Order, and its categorical
refusal to provide documentation of charges are all compelling
reasons for a rightful claimant who has not enlisted its services
to resist any attempt it makes to lay claim to any settlement
amount from non-client accounts. G&E's behavior smacks of
undisclosed dual agency and malfeasance.
When I decided
to pursue appraisal rights, it was my clear understanding that if
I did not enter into an agreement to secure legal representation,
I would receive the fair portion of the eventual settlement
amount due me prorated according to the number of DELL shares I
own. With that in view, I ran what has been acknowledged to be a
rather formidable gauntlet of legal obstacles set up by DELL in
order to discourage its shareholders from seeking redress through
the appraisal rights process. In the end, one of the press
releases you forwarded reported that only about 20 claimants
were successful in negotiating that process. Without any
complications and absolutely no help from G&E, I was able to
single-handedly accomplish what its contingent of gilded morons
was incapable of. And now G&E feels entitled to claim a portion
of my settlement as its own...?
The naked,
unbridled greed currently on display by G&E is shocking - even by
Rumsfeldian standards. G&E does not deserve a single red cent of
any settlement that I receive.
If G&E feels
that it is not being compensated for its efforts, it should cozy
up to DELL a bit more and hope that DELL will throw it another
bone for services rendered.
Sincerely,
[REDACTED] |
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