The class action settlement would resolve claims that Dell and his company engineered a deal leveraging their greater than 90% voting control over VMWare and Pivotal to unfairly transfer value from Pivotal, in which they held only a 62% economic stake, to VMWare, of which they owned 81%. The lawsuit also named Pivotal’s former CEO and chief financial officer as defendants.
The Pivotal ex-investors leading the case agreed to settle based on the “risks of litigation,” without conceding “any infirmity” in their claims, according to settlement papers filed in Delaware’s Chancery Court. Dell, VMWare, and the others continue to “deny all allegations of wrongdoing, fault, liability, or damage,” the filings said.
The proposed class action, filed in June 2020, stemmed from Dell’s partial acquisition of both VMWare and Pivotal when it bought their former mutual parent, EMC Corp., in 2016. The suit accused the tech giant of “pouncing” on the chance to take Pivotal private in mid-2019, when it knew from inside information that Pivotal shares were about to bounce back from a temporary slump.
The buyout, which closed in December 2019, made Pivotal a wholly owned VMware subsidiary.
The settlement comes about five weeks before a trial that had been scheduled to start July 6. Because the case is a class action, the agreement requires the approval of Chancellor Kathaleen St. Jude McCormick, who let it move forward in June 2021 against Michael Dell, both companies, and one of the two former Pivotal executives.
The two sides reached a deal in principle in early May, according to the settlement filings Friday.
Bernstein Litowitz Berger & Grossmann LLP and Block & Leviton LLP are co-lead counsel for the investors, who are also represented by the Weiser Law Firm PC.
Michael Dell and Dell Technologies are represented by Richards, Layton & Finger PA and Alston & Bird LLP. VMWare is represented by Young Conaway Stargatt & Taylor LLP and Gibson, Dunn & Crutcher LLP. The former Pivotal executives are represented by Connolly Gallagher LLP and Davis Polk & Wardwell LLP.
The case is In re Pivotal Software Inc. Stockholders Litig., Del. Ch., No. 2020-0440, stipulation and agreement filed 6/3/22.
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