On November 20, 2020, the U.S. District Court for the District of Maryland granted final approval of the settlement in the Sinclair Broadcast Group derivative action. The settlement 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.
Berman Tabacco was Plaintiffs’ Co-Lead Counsel representing Norfolk County Retirement System in this shareholder derivative action against Sinclair Broadcast Group’s (“Sinclair”) controlling shareholders and Board of Directors in federal court in Maryland. Plaintiffs alleged 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 a proposed merger between Sinclair and Tribune Media Company (“Tribune”). Specifically, Sinclair and its controlling shareholder attempted to divest certain assets to companies with undisclosed relationships with Sinclair’s controlling shareholder. 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.
In approving the settlement, the Court was very complimentary of the plaintiffs, including the Norfolk County Retirement System, noting that “[w]ithout the participation of these sophisticated institutional plaintiffs, it is not likely that a significant recovery benefitting all of Sinclair’s shareholders would have materialized.” Likewise, the Court recognized Berman Tabacco’s “substantial experience” and “skilled” representation in prosecuting this action.
“The excellent results achieved in this case demonstrate how sophisticated clients and skilled counsel can work together to hold corporate officers and directors accountable,” commented Berman Tabacco partner Nathaniel L. Orenstein. “We are proud and grateful for the opportunity to represent the Norfolk County Retirement System and shareholders from across the country in this important work.”
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.