Chimicles & Tikellis LLP has filed a shareholder lawsuit, derivatively on behalf of Barnes & Noble Inc. (“B&N” or the “Company”), in the Court of Chancery of the State of Delaware (the “Action”). The Action alleges wrongdoing by the B&N directors for recklessly causing the Company to acquire Barnes & Noble College Booksellers, Inc. (“College Books”) (the “Transaction”) from B&N’s founder, Chairman and controlling stockholder, Leonard Riggio (“Riggio”) at a grossly excessive price, subjecting B&N to excessive risk.
On September 1, 2009, the Court appointed Chimicles & Tikellis LLP as Co-Lead Counsel in the Action.
On August 7, 2009, B&N agreed to acquire the privately-held College Books from Riggio, in a transaction valued at $596 million. In the Acquisition, B&N received the “Barnes & Noble” trade name, which was owned by College Books and which B&N licensed from College Book and College Books’ brick and mortar operations. The Transaction was completed on September 30, 2009.
The Action alleges that as a controlling stockholder of B&N, Riggio is obligated to sell College Books at a price entirely fair to B&N’s stockholders and engage in a process that is also entirely fair. The Action further alleges that the B&N Board members acted disloyally and caused B&N to waste valuable corporate assets by allowing the B&N Chairman and 32.1% shareholder, Riggio, to force B&N to acquire his company, College Books, at an unfairly high price, exposing B&N to substantial increased risk.
A public version of the Co-Lead Plaintiffs Verified Consolidated Shareholder Derivative Complaint, which was filed under seal, is available below.
On October 21, 2010, ruling from the bench, the Court allowed most of Co-Lead Plaintiffs’ claims for breach of fiduciary duty to survive against Riggio and all but two of the remaining B&N directors.
On December 23, 2011, all Defendants except for Leonard Riggio, the Company’s founder, Chair and controlling shareholder, filed motions for summary judgment and supporting briefs. On March 27, 2012, the Court heard oral argument on Defendants’ motions for summary judgment. Ruling from the bench, the Court allowed Co-Lead Plaintiffs’ claims for breach of fiduciary duty to proceed to trial against Riggio and two of the remaining B&N directors.
On the eve of a trial scheduled to commence June 18, 2012, the parties reached an agreement to settle the case. The settlement terms, which are subject to Court approval, include the reduction of the purchase price by $22,750,000 by reducing the principal balance of an outstanding junior seller note between the Company and Riggio and forgoing the payment of any interest that may otherwise have been payable thereafter for an additional savings to the Company of $6,256,250. The settlement consideration totals $29 million. To view the Notice of Pendency of Derivative Action, Proposed Settlement of Derivative Action, Settlement Hearing, and Right to Appear, click here. The settlement was approved by the Court on September 4, 2012.