A lawyer representing Fordham Law School Professor (and Riverbed Technology shareholder) Sean Griffith argued in Delaware court that a class action settlement related to Riverbed Technology's  $3.6 billion sale to private equity firm Thoma Bravo was bad for shareholders and good for the lawyers involved, Reuters reports.  

Prof. Griffith told Reuters that "he has been buying stock of companies that have announced merger deals and intends to object to settlements if he feels the litigation is not serving stockholders." He asserts that the shareholders' attorneys "are in cahoots" to reach a settlement, without regard to value.  

This raises some interesting questions of law and policy with regard to the Professor's role here.  As a shareholder, Griffith has the right to object (assuming his time of ownership satisfies the applicable statute).  But how should a court assess the objection of a shareholder who has admitted that he bought stock for the purpose of objecting to settlements not in the interests of shareholders, when that shareholder has expressed ideological concern about the value of all disclosure-only settlements? 

Is Prof. Griffith's desire to protect shareholders a desire to enhance short- or long-term wealth of the entity from greedy lawyers and bad managers? Or is it a desire to punish those who abuse class action lawsuits to their own ends? Both would be reasonable motivations (though, for now, I reserve judgment on whether either assessment is accurate), but it seems that the law might view such motivations differently. 

Take, for example, Pillsbury v. Honeywell, Inc., 191 N.W.2d 406 (1971), which strikes me as similar in concept, if not law.  In that case, the court rejected Charles Pillsbury's request to access the company shareholder list and review books and records of Honeywell.  The request was expressly related to Pillsbury's anti-war efforts, and Pillsbury made clear that he sought the records because he thought Honeywell's activities in weapons were immoral.  The court denied access stating that 

petitioner had already formed strong opinions on the immorality and the social and economic wastefulness of war long before he bought stock in Honeywell. His sole motivation was to change Honeywell's course of business because that course was incompatible with his political views. If unsuccessful, petitioner indicated that he would sell the Honeywell stock.

We do not mean to imply that a shareholder with a bona fide investment interest could not bring this suit if motivated by concern with the long- or short-term economic effects on Honeywell resulting from the production of war munitions. Similarly, this suit might be appropriate when a shareholder has a bona fide concern about the adverse effects of abstention from profitable war contracts on his investment in Honeywell.

If Prof. Griffith is looking to protect the long-term interests of all companies by protecting merging companies from harmful class action settlements, and his mechanism is buying shares in companies that he has reason to believe will merge, then perhaps his Robin Hood-like actions (in that the actions seek to return funds to the rightful owners) have value for shareholder wealth maximization and entity wealth maximization. The fact that he holds out the possibility that he won't object to settlements where the litigation serves the purposes of the shareholder suggests he might be in this camp.  

But what if he will object to all settlement proposals? Or perhaps all disclosure-only settlement proposals, even where such settlements are allowable under the law?  Does this convert his actions to more of a Charles Pillsbury-like feel in that his actions are about opposing class actions settlements, regardless of whether settlement is in the best interest of the parties? 

Of course, his motivations don't necessarily matter under current law in this area, but I can't help but think the motivations will influence how a court views (and eventually decides upon) Prof. Griffith's objections. And I think they should.  If, in any given case, Prof. Griffith is right that the settlement is not in the best interest of the shareholders, the court should uphold his objections. But, under current law, it's possible that a disclosure-only settlement might still be the most efficient outcome.  It's the court's job to assess that in each case.