Two class action lawsuits that alleged the Warner Music Group board of directors breached their fiduciary responsibilities by agreeing to sell the company for unfair and inadequate compensation will be settled.
According to a WMG proxy statement filed June 13, the company signed a memo of understanding on June 8 with the counsels for the litigants to settle the lawsuits, which were filed separately on May 12 by Barbara A. Varipapa, and Derek Cournoyer on May 19.
Beyond the sale price, the suits alleged that the WMG board of directors breached their fiduciary responsibilities by agreeing to sell the company through a flawed process that unfairly favored the winning bid. The suits further alleged that Access Industries, which was named the winner of the auction for WMG, aided and abetted in the WMG directors' breach of their fiduciary duties.
But the memo sets forth an agreement in principle to settle the two class action lawsuits "for a reasonable award of fees and expenses," which still must be negotiated in good faith.
The settlement is conditioned on the closing of the merger, at which time one of the plaintiff has agreed it will file a voluntary notice of dismissal, while the counsel for the other plaintiff has "indicated that they do not object to the memo of understanding," according to the proxy statement.
The MOU additionally provides, among other things, that the parties to the MOU will use their best efforts to obtain final approval of the settlement by the New York Supreme Court, which will result in dismissal of the suits a complete release of the company defendants "from any and and all claims that were or could have been brought in the Varipapa Action or the Cournoyer Action," including those relating to the merger.