Monday, May 16, 2011
That's a real "man bites dog" headline, but it looks like J Crew has sued the shareholder plaintiffs who challenged the going private deal. You'll remember that the shareholder plaintiffs and defendants reached a settlement agreement. Later the plaintiffs walked away from that agreement arguing that the defendants broke the spirit of the agreement. Even though most the derivative claims will have disappeared following the closing of the transaction, J. Crew is looking to get the benefit of its bargain. From the J. Crew_complaint against its former shareholders (Corrected link: Download JCrew_Complaint):
39. In exchange for these concessions, the Defendants agreed to provide, on their own behalf and on behalf of the Settlement Class, “a full and appropriate release of all claims that were asserted or that could have been asserted” in the Underlying Shareholder Action. (MOU ¶ 12.)
40. The Defendants never negotiated for: (a) a provision requiring J.Crew to schedule its stockholder vote only on or after a certain time period, or (b) a provision requiring J.Crew to mail its Proxy Statement only on or after a particular date. Additionally, the Defendants stated that they didn’t need confirmatory discovery.
41. In addition, while the MOU limited TPG’s and Leonard Green’s “contractual information rights” (see Exhibit F (emphasis added)), the Defendants never negotiated for a term restricting the disclosures that the Special Committee (or the J.Crew Board of Directors) could make to J.Crew’s stockholders and to the market based on the Special Committee’s (or the Board’s) considered business judgment.
J. Crew is arguing that a deal is a deal and that they lived up to their end and relied on the settlement agreement before it closed the transaction. They want the court to order performance of the settlement.