In the recent decision of In Re Trulia Inc. Stockholder Litigation, C.A. No. 10020-CB (Del. Ch. Jan. 22, 2016), which we discussed here, the Court made clear that disclosure-only settlements will be subject to a high level of scrutiny, and the disclosures must be "plainly material" for the Court to approve the settlement.
In Trulia, Chancellor Bouchard explained "plainly material" as follows:
In using the term "plainly material," I mean that it should not be a close call that the supplemental information is material as that term is defined under Delaware law. Where the supplemental information is not plainly material, it may be appropriate for the Court to appoint an amicus curiae to assist the Court in its evaluation of the alleged benefits of the supplemental disclosures, given the challenges posed by the non-adversarial nature of the typical disclosure settlement hearing.
The interpretation of "plainly material" has been provided in a recent decision, In re BTU International, Inc. Stockholders Litigation, Consol. C.A. No. 10310-CB (Del. Ch. Feb. 18, 2016)(Transcript). As reported by The Chancery Daily, the Court of Chancery found that management free cash flow projections satisfy Trulia's "plainly material" standard.
In addition, the Court's bench ruling in BTU constitutes the first post-Trulia decision in which disclosures were found to be "plainly material," accepting the proposed release for defendants as sufficiently narrow, and approving of the merger class action settlement.
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