07 Mar 2014 Cases

In Re Rural/Metro Corporation Shareholders Litigation

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Compass Lexecon was retained by Joel Friedlander of Bouchard, Margules and Friedlander, P.A. and Randy Baron of Robbins, Geller, Rudman & Dowd LLP (“Counsel”) on behalf of the plaintiff class in litigation before the Delaware Chancery Court regarding the sale of Rural/Metro Corporation (“Rural/Metro”) to private equity firm Warburg Pincus. Compass Lexecon expert Kevin Dages submitted an affidavit in support of Counsel’s opposition to former lead plaintiff’s proposed settlement for enhanced disclosures, opening and rebuttal expert reports, and testified before Vice Chancellor Laster at trial concerning the fair value of Rural/Metro, the reasonableness of the financial advisors’ valuations, and Rural/Metro’s proxy disclosures regarding those valuations. The individual director defendants and Moelis & Company LLC, one of two financial advisors, settled on the eve of trial for what the Court concluded was a “significant” common fund for the plaintiff class. Following a trial against the remaining defendant, RBC Capital Markets, LLC (“RBC”), Rural/Metro’s other financial advisor, the Court found RBC liable for aiding and abetting the individual director defendants’ breaches of duty of care and duty of disclosure. In a 91 page opinion the Court did not immediately rule on damages, but did find “Dages’s [Discounted Cash Flow, or DCF] valuation to provide persuasive evidence of fair value and adopt[ed] it as the general framework” for purposes of determining its damages remedy. The Court ordered the experts to submit revised analyses identifying a range of fair value for Rural Metro at the time of the merger and specifically employing “the explicit method of extending the [management] projections” utilized by Dages as well as Dages’ choice of CAPM, a risk-free rate, and size premium while recalculating beta using Dages’ method but with a shorter measurement period. Upon receipt of the revised expert submissions the Court will address Rural Metro’s fair value and establish the scope of remedy. Mr. Dages was supported by a team in Compass Lexecon’s Chicago office headed by Jennifer Milliron and Tim McAnally.

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