Berman Tabacco is Plaintiffs’ Co-Lead Counsel representing Norfolk County Retirement System in a shareholder derivative action against Sinclair Broadcast Group’s controlling shareholders and Board of Directors in federal court in Maryland. Plaintiffs allege that Sinclair’s controlling shareholders and Board breached their fiduciary duties by knowingly and intentionally misleading the U.S. Federal Communications Commission in connection with certain related party transactions involved in a proposed merger between Sinclair and Tribune Media Company (“Tribune”). This allegedly resulted in the cancellation of the merger, as well as Sinclair paying $60 million in damages to Tribune and paying $48 million in civil penalties to the FCC.
The case has settled and provides far-reaching corporate governance benefits to Sinclair and its shareholders, including substantial controls over how the Company interacts with its regulators and oversight over related-party transactions. The settlement requires the Company to create two new Board committees and hire a Chief Compliance Officer. The settlement further provides in excess of $25 million in recovery for the Company, a significant portion of which will come from executive chairman David D. Smith repaying $4.36 million in stock awards. Plaintiffs’ motion for preliminary approval of the settlement was filed on July 23, 2020.
“This settlement is important because it implements very robust corporate governance reforms and holds an alleged wrongdoer personally accountable for injury to the Company,” commented Berman Tabacco partner Nathaniel L. Orenstein, “this settlement will help ensure the company follows the rules and protects minority shareholders.”
The cases are Fire and Police Retiree Health Care Fund, San Antonio v. Smith, et al., No. 1:18-cv-03670-CCB (D. Md.) and Norfolk County Retirement System v. Smith, No. 18-cv-03952 (D. Md.) (Sinclair Broadcast Group Derivative Actions). The litigation team includes Leslie Stern and Nathaniel L. Orenstein from Berman Tabacco’s Boston office.
For more information about the settlement, please read the following:
- July 20, 2020 – Stipulation and Agreement of Settlement, Compromise and Release dated July 20, 2020
- August 6, 2020 – Preliminary Approval Order
- August 6, 2020 – Proposed Final Order
- August 10, 2020 – Court Approved Notice to Stockholders