Twitter Settlement With Diversity Pledge Gets Nod on Second Try

July 28, 2021, 6:55 PM

Twitter Inc. investors won approval from a Delaware Chancery Court judge for a settlement calling on the company’s board to pay $47 million, and adopt diversity measures, to resolve claims that the social media giant’s leaders misled investors about its user engagement and growth.

Vice Chancellor Paul A. Fioravanti Jr. signed off on the agreement Tuesday, four months after deferring a ruling in early April, reportedly over concerns the deal effectively sought to recoup damages that might never be awarded in a separate securities case involving parallel allegations.

The proposed securities fraud class action is proceeding in the U.S. District Court for the Northern District of California.

The settlement, disclosed in November, ends derivative litigation in state and federal court over the alleged scheme to inflate user metrics, which included claims against Twitter CEO Jack Dorsey and ex-CEO Dick Costolo.

The agreement requires the board’s insurers to pay $38 million into the company’s coffers and cover nearly $9 million in attorneys’ fees.

It also involves multiple governance reforms, including pledges to appoint new independent directors, consider female and minority board candidates, add a chief compliance officer, hold mandatory training sessions, and put in place stronger policies against insider trading.

The deal doesn’t call for admissions of liability by the board members, who have insisted in court filings that they “have meritorious defenses” and “continue to deny” any wrongdoing “whatsoever.”

Fioravanti issued the written ruling shortly after approving the settlement from the bench during a Zoom hearing earlier Tuesday. No transcript of the hearing was immediately available.

The plaintiffs are represented by McCollom D’Emilio Smith Uebler LLC, Smith Katzenstein & Jenkins LLP, Kahn Swick & Foti LLC, and Glancy Prongay & Murray LLP. Twitter and its board are represented by Richards, Layton & Finger PA and Simpson Thacher & Bartlett LLP.

The case is Verma v. Costolo, Del. Ch., No. 2018-0509, 7/27/21.

To contact the reporter on this story: Mike Leonard in Washington at mleonard@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Patrick L. Gregory at pgregory@bloomberglaw.com

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