A shareholder leading a class lawsuit over the J Crew Group Inc buyout has taken the unusual step of fighting his attorneys, accusing them of settling the case for a pittance, according to court documents.
J Crew investor Martin Vogel accused the attorneys representing him and other lead plaintiffs of conflicts of interest and rushing to settle, and asked Delaware's Chancery Court to reject the settlement.
When "lawyers tell you that you absolutely must settle this case for a smidgeon of additional money which in no way begins to address the actual damages, one cannot help but wonder whether a fatal conflict of interest has arisen between counsel and the class," Vogel said.
Vogel and the other plaintiffs had sued the board of J Crew for approving the $3 billion sale of the retailer to two private equity firms, saying the $43.50 per share price was too low.
He asked Delaware Chancery Court judge Leo Strine to reject a proposed settlement that provided $16 million to the shareholders in the class action, or about 27 cents per share.
In addition, Vogel asked Strine to fire the attorneys representing the plaintiffs and allow Vogel to litigate the case, rather than settle.
He also accused the plaintiffs' attorneys handling the case, led by Stuart Grant of Grant & Eisenhofer PA, of not informing him and other plaintiffs that they had signed a tentative settlement deal.
The attorneys disputed Vogel's accounts and said he was invited to help draft the settlement, attend depositions and review evidence from the case, according to court documents.
The plaintiffs attorneys said Vogel declined those offers.
Grant did not immediately reply to a request for comment.
The buyout was approved in March, but about a third of shareholders voted against it. Proxy advisory firms had recommended rejecting the deal because of concerns that J Crew chief executive Millard Drexler favored the buyers, TPG Capital and Leonard Green & Partners, rather than seeking rival bidders.
Vogel was among the half dozen shareholders who sued in Delaware, where J Crew was incorporated, and argued that the Drexler and the board had violated their duty by agreeing to an unreasonably low price.
Vogel's objection is one of many unusual twists in the case. The plaintiffs briefly became defendants after the board members sued the shareholders for not honoring an initial agreement to settle.
While the defendants agreed to the eventual settlement, they are opposed to the request for $9 million of fees sought by the plaintiffs' attorneys.
The settlement and the fee request will be considered by Strine at a hearing on Wednesday.
The case is In Re J Crew Group Inc Shareholder Litigation, Delaware Chancery Court, No 6043.
(Reporting by Tom Hals in Wilmington, Delaware; Editing by Gary Hill)