Food For Thought:
The unique procedural posture of shareholder derivative suits often requires court approval of settlements.
Settling parties must be diligent in satisfying the settlement prerequisites to ensure the settlement is approved by the court.
Despite the important policy considerations favoring settlements, the law will sanction such an agreement only if reached fairly, that is, free from any collusion or improper conduct.
After the settlement agreement is executed, it is generally submitted to the court for approval with the plaintiffs petition for attorney fees and a request for a hearing on the settlement's substantive fairness.
Prior to the settlement hearing, however, notice of the terms of the settlement, including any counsel fees petitioned for by the plaintiff, is mailed to the shareholders of record. If the court approves the settlement, a consent order is issued
and the judgment precludes further litigation of such claims by the
corporation and its shareholders. Both judicial rejection and approval of a proposed settlement are appealable decisions.
