THE FOLLOWING RECITATION DOES NOT CONSTITUTE FINDINGS OF THE COURT. THE COURT HAS MADE NO FINDINGS WITH RESPECT TO THE FOLLOWING MATTERS AND THESE RECITATIONS SHOULD NOT BE UNDERSTOOD AS AN EXPRESSION OF ANY OPINION OF THE COURT AS TO THE MERITS OF ANY OF THE CLAIMS OR DEFENSES RAISED BY ANY OF THE SETTLING PARTIES.
On July 29, 2013, it was announced that Saks, HBC, and an HBC subsidiary named Harry Acquisition Inc. (“Merger Sub”) had entered into an Agreement and Plan of Merger (the “Merger Agreement”) dated July 28, 2013 pursuant to which HBC would acquire Saks for a total enterprise value of approximately $2.9 billion, including $16 in cash for each share of Saks common stock (the “Merger”).
The Individual Defendants were members of Saks’ board of directors at the time of the Merger. Goldman Sachs served as a financial advisor to Saks in connection with the Merger.
Between August 2, 2014 and August 30, 2014, seven putative class actions were filed in the Court by Saks shareholders alleging, among other things, that the Individual Defendants breached their fiduciary duties in connection with the Merger, and that HBC and Merger Sub aided and abetted those breaches.
These related actions, and their filing dates, were: Samuel T. Cohen v. Saks Inc. et al., Index No. 652724/2013 (filed Aug. 2, 2013); Thomas H. Jennings v. Fabiola Arredondo et al., Index No. 652725/2013 (filed Aug. 2, 2013); Robert Oliver v. Saks Inc. et al., Index No. 652758/2013 (filed Aug. 6, 2013); Joshua Teitelbaum v. Fabiola Arredondo et al., Index No. 652793/2013 (filed Aug. 8, 2013); Michelle Sabattini v. Saks Inc. et al., Index No. 652817/2013 (filed Aug. 9, 2013); Jack Oliver & Wanda Oliver v. Saks Inc. et al., Index No. 652854/2013 (filed Aug. 14, 2013); Sharon Golding v. Fabiola Arredondo et al., Index No 653036/2013 (filed Aug. 30, 2014) (collectively, the “Related Actions”).
By order dated September 5, 2013, the Court granted a motion to consolidate the Related Actions. No order was entered formally consolidating the Related Actions, but the Related Actions were nevertheless thereafter litigated together under the Cohen index number.
On September 17, 2013, the plaintiffs in the Related Actions (the “Original Plaintiffs”) filed an Amended Complaint in the Related Actions, which asserted claims against the Individual Defendants for breach of fiduciary duty and claims against HBC and Merger Sub for aiding and abetting the Individual Defendants’ breaches.
On October 22, 2013, following initial discovery and arm’s-length settlement negotiations, the parties to the Related Actions entered into a Memorandum of Understanding (“MOU”) agreeing in principle to settle the Related Actions. The MOU provided that Saks would supplement certain disclosures in the proxy statement for the Merger and that HBC would forbear from exercising certain rights under the Merger Agreement. The proposed settlement embodied in the MOU was subject to the completion of confirmatory discovery.
On October 21, 2013, Saks filed a Form 8-K with the U.S. Securities and Exchange Commission containing the supplemental disclosures contemplated by the MOU.
On October 30, 2013, Saks shareholders approved the Merger. On November 4, 2013, the Merger was consummated.
Following the consummation of the Merger, the Original Plaintiffs engaged in confirmatory discovery from approximately November 2013 to October 2014, including depositions of two Individual Directors and a representative of Goldman Sachs.
On October 22, 2014, the parties to the Related Actions entered into a Stipulation of Settlement reflecting the terms originally embodied in the MOU (the “Original Stipulation”) contingent on approval by the Court as contemplated by CPLR 908. On the same date, the Original Plaintiffs filed a motion asking the Court to approve notice of the settlement to class members and to schedule a fairness hearing.
On November 24, 2014, it was publicly reported that HBC had borrowed $1.25 billion from a syndicate of lenders including Goldman Sachs, secured by Saks’ Fifth Avenue flagship store, which had been newly appraised at $3.7 billion (the “Mortgage Transaction”).
At a conference on January 5, 2015, the Original Plaintiffs informed the Court of their concerns about the fairness, reasonableness, and adequacy of the settlement in light of the Mortgage Transaction, and the Court permitted the Original Plaintiffs to withdraw their motion to schedule a fairness hearing.
On March 13, 2015, the Original Plaintiffs filed a motion to compel additional discovery, and thereafter took certain additional discovery as agreed by the parties, including the deposition of a second Goldman Sachs representative.
On October 18, 2016, the Original Plaintiffs filed a motion for leave to file a Second Amended Complaint. The Second Amended Complaint alleged that the Individual Defendants had breached their fiduciary duties in connection with the Merger and that Goldman Sachs aided and abetted those breaches. HBC and Merger Sub were not named as defendants in the Second Amended Complaint.
On December 9, 2016, the Individual Defendants, the Companies and Merger Sub cross-moved to enforce the Original Stipulation.
On July 27, 2017, the Court denied the Original Plaintiffs’ motion to amend and denied without prejudice the Individual Defendants’, the Companies’ and Merger Sub’s cross-motion to enforce. Plaintiffs thereafter appealed to the Appellate Division, First Department (the “First Appeal”). One of the Original Plaintiffs, Michelle Sabattini, did not file a Notice of Appeal of the July 27, 2017 order or join the First Appeal. The Individual Defendants, the Companies and Merger Sub did not appeal the Court’s denial of their cross-motion to enforce the Original Stipulation.
On July 26, 2018, one of the Original Plaintiffs, Michelle Sabattini, filed a Notice of Discontinuance as to her claims.
On February 14, 2019, the Appellate Division modified the Court’s July 27, 2017 order to grant Plaintiffs’ motion to amend except as to allegations that the Individual Defendants breached their duty of loyalty with respect to the accelerated vesting of equity and change of control benefits they received in connection with the Merger, and as so modified, affirmed..
On March 8, 2019, Plaintiffs filed the Second Amended Complaint.
On March 21, 2019, the Individual Defendants, the Companies and Merger Sub moved the Appellate Division for reargument or, in the alternative, for leave to appeal to the Court of Appeals. On June 18, 2019, the Appellate Division denied that motion.
On July 18, 2019, the Individual Defendants and Goldman Sachs filed answers to the Second Amended Complaint. The Individual Defendants also asserted a counterclaim against Plaintiffs for breach of contract based on their efforts to continue prosecuting their claims notwithstanding the Original Stipulation (the “Counterclaim”).
On July 31, 2019, the Court (Borrok, J.) issued a preliminary conference order directing, among other things, Plaintiffs to file a Note of Issue and Certificate of Readiness for trial on or before October 26, 2020.
On August 6, 2019, the Court issued an order formally consolidating the six remaining Related Actions (i.e., excluding the action brought by Michelle Sabattini, who previously filed a Notice of Discontinuance) under the consolidated caption first set forth above.
On August 16, 2019, Plaintiffs filed a motion to dismiss the Counterclaim.
From approximately August 2019 through March 2020, the parties engaged in additional discovery, including the receipt of over 50,000 pages of documents from six third parties in response to subpoenas served by Plaintiffs.
On December 3, 2019, counsel for the Settling Parties participated in a full-day mediation session before Hon. Layn R. Phillips of Phillips ADR. Prior to the mediation, the Settling Parties exchanged mediation statements and exhibits, which addressed issues pertaining to liability and damages. The mediation did not result in a resolution of the Action at that time, but the Settling Parties thereafter continued to participate in informal settlement discussions overseen by Judge Phillips.
On March 26, 2020, the Court granted Plaintiffs’ motion to dismiss the Counterclaim, and the Individual Defendants thereafter filed a notice of appeal to the Appellate Division, First Department (the “Second Appeal”).
Following extensive arm’s-length negotiations involving counsel for the Settling Parties as well as the insurers for Saks and the Individual Defendants (the “Insurers”), which negotiations were overseen by Judge Phillips, the Settling Parties reached an agreement in principle on June 10, 2020 to settle the Action for $21,000,000 in cash, subject to Court approval. The Settling Parties thereafter engaged in further arm’s-length negotiations regarding the terms of the Stipulation.
On December 11, 2020, the Court entered an order (the “Preliminary Approval Order”) preliminarily approving the Settlement, directing that notice of the Settlement be provided to potential Class Members, and scheduling the Settlement Hearing to consider, among other things, whether to grant final approval to the Settlement.
Plaintiffs, through Plaintiffs’ Counsel, have conducted an investigation and pursued extensive discovery relating to the claims and the underlying events and transactions alleged in the Action. Plaintiffs’ Counsel have analyzed the evidence adduced during such investigation and discovery, and have also researched the applicable law with respect to the claims asserted in the Action and the potential defenses thereto. Additionally, the mediation statements prepared and exchanged by the Settling Parties, as well as the Settling Parties’ extensive discussions about the merits of their positions regarding liability and damages, have provided Plaintiffs with a detailed basis upon which to assess the relative strengths and weaknesses of their position and Defendants’ position in the Action.
Based upon their investigation and prosecution of the Action, Plaintiffs and Plaintiffs’ Counsel have concluded that the terms and conditions of the Settlement and the Stipulation are fair, reasonable, and adequate to Plaintiffs and the other members of the Class and in their best interests.
Based on their direct oversight of the prosecution of this matter, along with the input of Plaintiffs’ Counsel, Plaintiffs have agreed to settle the claims raised in the Action pursuant to the terms and provisions of the Stipulation, after considering: (i) the substantial benefits that Plaintiffs and the other Class Members will receive from the resolution of the Action; (ii) the risks of litigation; and (iii) the desirability of permitting the Settlement to be consummated as provided by the terms of the Stipulation. The Settlement and the Stipulation shall in no event be deemed to be evidence of a concession by Plaintiffs of any infirmity in the claims asserted in the Action.
Plaintiffs and Plaintiffs’ Counsel believe that all allegations of wrongdoing, fault, liability, or damage to Plaintiffs and each and every other Class Member were well founded and that each claim against the Defendants was valid. Defendants deny all allegations of wrongdoing, fault, liability, or damage to Plaintiffs and each and every other Class Member, and further deny that Plaintiffs have asserted a valid claim as to any of them. Defendants further deny that they engaged in any wrongdoing or committed, or aided or abetted, any violation of law or breach of duty and believe that they acted properly, in good faith, and in a manner consistent with their legal duties and assert that they are entering into the Settlement and Stipulation solely to avoid the substantial burden, expense, inconvenience, and distraction of continued litigation and to resolve each of the Released Plaintiffs’ Claims as against the Released Defendant Parties. Plaintiffs deny that they engaged in any wrongdoing or committed any breach of contract and believe that they acted properly, in good faith, and in a manner consistent with their legal duties with respect to the claims asserted by Defendants in the Counterclaim. The Settlement and the Stipulation are not, and shall in no event be deemed to be, evidence of or an admission or concession on the part of any of the Defendants with respect to any claim or factual allegation or of any fault or liability or wrongdoing or damage whatsoever or any infirmity of the Counterclaim or the defenses that any of the Defendants have or could have asserted.
Each of the Settling Parties believes that they have litigated the Action in good faith and further that the Settlement Payment to be paid, and the other terms of the Settlement as set forth herein, were negotiated at arm’s-length, in good faith, and reflect an agreement that was reached voluntarily after consultation with experienced legal counsel and with the assistance of Judge Phillips.