Serion v. Nuance Communications, Inc.

Background

Nuance Communications, Inc. entered into an agreement to merge with Microsoft Corporation. Under the agreement, Nuance shareholders would receive $56.00 per share. After Nuance filed a proxy statement with the Securities and Exchange Commission, Albert Serion, identified as a Nuance shareholder, sued Nuance and individual defendants under Sections 14(a) and 20(a) of the Securities Exchange Act. He alleged that the proxy statement omitted material information.

Nuance later filed a supplemental disclosure with the Securities and Exchange Commission. The supplemental disclosure provided additional information about a nondisclosure agreement and about the financial analysis performed by Evercore Group LLC, including information related to issues raised in Serion’s complaint. Nuance stated that it made the disclosures to reduce the cost and distraction of defending the lawsuits. The parties acknowledged that the supplemental disclosure made Serion’s claims moot.

Serion’s counsel, Monteverde & Associates PC, moved for $250,000 in attorney’s fees and expenses under the common-benefit doctrine. That doctrine can allow reimbursement when litigation provides a substantial benefit to an identifiable group. Monteverde argued that its lawsuit caused the supplemental disclosure and benefited Nuance shareholders.

Court’s analysis

The court concluded that Nuance had not shown that there was no connection between Serion’s lawsuit and the supplemental disclosure. Nuance identified the lawsuits, including Serion’s action, in the supplemental filing, indicating that the lawsuits together prompted the additional information.

The court nevertheless found that Monteverde had not shown that the disclosures provided a substantial benefit. First, Monteverde argued that the supplemental disclosure revealed individual revenue, earnings-before-interest, taxes, depreciation, and amortization, and cash-flow multiples that Evercore calculated for peer companies. The court rejected this argument because Nuance’s original proxy statement already provided a detailed summary of Evercore’s analysis, including the selected companies, calculations, mean and median multiples, reference ranges, and implied per-share values. The court also noted that individual multiples were publicly available and that investors were not entitled to enough information to perform their own independent valuation of the stock.

Second, Monteverde argued that the supplemental disclosure revealed individual research analysts’ price targets, rather than only a range from $45.00 to $65.00. The court rejected this argument as well. It held that the range was a fair summary of Evercore’s work and that disagreements with a financial adviser’s analysis could not support a disclosure claim. Because the court found no substantial benefit, it did not decide whether the requested $250,000 fee was reasonable.

Disposition

Judge J. Paul Oetken denied Monteverde’s motion for attorney’s fees and expenses. Because the parties acknowledged that Serion’s underlying claims were moot, the court dismissed the action. The Clerk of Court was directed to close the motion and the case.