Delaware Chancery Court Limits Proposed Class in M&A-Related Lawsuit

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By Michael Greene

Jan. 14 — The Delaware Chancery Court ruled Jan. 13 that the class definition in a $70 million proposed settlement of a lawsuit concerning the acquisition of Jeffries Group, Inc. by Leucadia National Corp. should not include holders of Jeffries Deferred Shares.

Chancellor Andre G. Bouchard held that a reasonable person in the position of the parties would have thought that the agreed-upon class definition did not include this group.

Defining the Class

After the chancery court certified the class in this lawsuit, the parties signed a term sheet that provided for a net settlement. The term sheet additionally included an agreed-upon amended definition of the class.

After signing the term sheet, the parties disputed the definition of the class that would be included in the settlement agreement. The defendants claimed that it would be unfair to exclude holders of “Jeffries Deferred Shares” from the class because it would expose the defendants to possible additional litigation.

The court, however, agreed with the plaintiff's position that including these holders would be an improper expansion of the class because holders of Jeffries Deferred Shares were not included in the class definition of the operative complaint, the certification order or the term sheet.

Citing earlier precedent, Chancellor Bouchard noted that “when interpreting a contract, the role of a court is to effectuate the parties' intent,” and in doing so, the court must look at what a reasonable person would have thought the contract meant.

He found that “a reasonable person in the position of the parties would have thought that the class definition in the Term Sheet did not include holders of Jefferies Deferred Shares.”

He added: “This conclusion is supported by the fact that the definition of the class in the Term Sheet, which appears to have been carefully negotiated when one juxtaposes it against the class definition in the Certification Order, applies, on its face, only to holders of Jefferies ‘common stock.'”

To contact the reporter on this story: Michael Greene in Washington at

To contact the editor responsible for this story: Ryan Tuck at

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