Johnson Fistel Helps Secure $38.0 Million Along with Valuable Corporate Reforms for Twitter, Inc.
— Johnson Fistel, LLP (@JF_LLP) July 30, 2021
On July 27, 2021, Vice Chancellor Paul A. Fioravanti granted final approval of a stockholder derivative settlement which resolves stockholder derivative litigation pending in the Delaware Court of Chancery, as well as in the U.S. District Court for the District of Delaware. Johnson Fistel serves as co-lead counsel for plaintiffs in the consolidated derivative action pending in the District of Delaware.
The derivative actions were brought against certain current and former directors and officers of Twitter and allege that these individuals breached their fiduciary duties by issuing materially false and misleading statements about Twitter’s user growth and user engagement prospects, including by misrepresenting and concealing relevant user metrics. The derivative actions also allege that certain defendants sold their Twitter stock before the truth was finally revealed to the public.
The settlement approved by the Vice Chancellor resolves all of the derivative actions by providing releases to the defendants named in the derivative actions in exchange for a payment to Twitter in the amount of $38.0 million. In addition to the cash consideration, Plaintiffs, through counsel, successfully negotiated robust governance reforms tailored to address and prevent the recurrence of such misconduct, including, inter alia, the: (1) imposition of internal review and assessment obligations on the Disclosure and Audit Committees in connection with the Company’s publicly disclosed, non-financial user metrics and additional or alternative measures of user activity for disclosure, addressing allegations that are at the heart of the Derivative Actions and the Related Securities Class Action; (2) creation of a Chief Compliance Officer responsible for managing and overseeing the Company’s ethics and compliance programs, internal controls, and employee training in risk assessment and compliance; (3) enhancements to the Company’s insider trading policy, including the prohibition of short sales, trading in publicly-traded options and other derivative securities, pledging Twitter securities as collateral for loans, and trading by Section 16 officers during quarterly blackout periods and special blackout periods as determined by a Compliance Officer; (4) maintenance of a clawback policy; (5) establishment of procedures and criteria for selection of future independent director nominees, including consideration of underrepresented populations; and (6) adoption of stock ownership guidelines for directors equal to at least two times the director’s annual cash retainer in the prior year.
Attorneys Frank J. Johnson, Michael I. Fistel, Jr., and Mary Ellen Conner led the prosecution of the litigation for Johnson Fistel and helped achieve this superb result on behalf of plaintiffs and Twitter.
In re Twitter, Inc. Shareholder Derivative Litigation, No. 1:18-cv-00062-VAC-MPT (D. Del.)
Verma v. Costolo, et al., No. 2018- 0509-PAF (Del. Ch.)
Bassett Family Trust v. Costolo, et al., No. 2019-0806-PAF (Del. Ch.)