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Tracy v. Telemetrix Inc.

United States District Court, D. Nebraska

November 16, 2017

MICHAEL J. TRACY, an individual and Derivatively as a shareholder of Telemetrix and Convey; Plaintiff,
v.
TELEMETRIX, Inc.; WILLIAM W. BECKER, LARRY BECKER, GAYLE BECKER, GARY BROWN, BECKER CAPITAL MANAGEMENT, LLC, GREEN EAGLE COMMUNICATIONS, INC., GREEN EAGLE NETWORKS, INC., DIANE LARKOWSKI, and MITCHELL BENNETT, Defendants.

          FINDINGS AND RECOMMENDATION

          Cheryl R. Zwart United States Magistrate Judge

         This matter is before the court on parties stipulated motion to approve settlement. (Filing No. 372). After conducting a hearing today, (Filing No. 359), the undersigned magistrate judge recommends that the terms of the parties' proposed settlement (Filing No. 373-1) be approved.

         BACKGROUND

         The parties have been litigating for years. In 2004, a Telemetrix Shareholder's Agreement was executed - the result of litigation with creditors of Telemetrix. Pursuant to the Shareholder's Agreement, Plaintiff Michael J. Tracy lost control of Telemetrix and became a minority shareholder. Since assuming this status, Tracy has alleged various acts of malfeasance on the part of the controlling shareholders.

         The above-captioned case was removed to this court on October 8, 2012. (Filing No. 1). The suit involves various loans and the transfer of Telemetrix assets, including its FCC broadcasting license. Plaintiff Tracy brought his claims against all Defendants, both individually and derivatively on behalf of Telemetrix. The crux of the case is based on allegations that Defendants mismanaged and defrauded Telemetrix for the benefit of the individual defendants and the defendant companies. Plaintiff's operative complaint seeks recovery under the Racketeer Influenced and Corrupt Organizations (“RICO”) Act and on common law theories of conversion, civil conspiracy, breach of fiduciary duty, unjust enrichment, an accounting, and constructive trust against Telemetrix and numerous officers, directors, and managers of Telemetrix. (See Filing No. 290).

         After engaging in extensive motion practice and discovery, the parties participated in mediation at least twice with the assistance of a highly experienced mediator. These attempts at settlement were unsuccessful, but the parties continued to negotiate.

         On or about December 9, 2016, the parties reached a settlement of all claims. (Filing No. 373-1). Among other things, the parties agreed as follows:

1. Pending this Court's approval, and in exchange for Green Eagle's agreement to pay Plaintiff the principal sum of $800, 000, Plaintiff will (a) assign all Telemetrix stock owned by Plaintiff to a holding company and (b) will dismiss, with prejudice, his direct claims asserted in this action; and
2. Pending this Court's approval, Plaintiff will voluntarily dismiss, with prejudice, his derivative claims.

(Filing No. 373 at CM/ECF p. 6).

         With the court's approval, notice of the foregoing settlement was published in the Omaha World-Herald and the Daily Record once a week for three consecutive weeks (on September 25, 2017, October 2, 2017, and October 9, 2017). (Filing No. 376). The notice stated the material terms of the settlement, advised that any objections must be made on or before November 13, 2017, and stated that the hearing for court approval of the settlement was scheduled for November 16, 2017 at 12:00 p.m. in Courtroom 2 at the United States District Courthouse in Lincoln, Nebraska. (Filing No. 376, at CM/ECF p. 3).

         No objections to the settlement were timely received prior to the hearing. The hearing was held today as scheduled. Counsel for the parties appeared telephonically. No one else attended the hearing or raised any objection to the settlement.

         ANALYSIS

         Courts will approve derivative settlements only if they are fair, reasonable, and adequate. Weiner v. Roth, 791 F.2d 661, 662 (8th Cir. 1986). The court's role is to “determine whether the proponents of the settlement have shown that it fairly and adequately serves the interests of the corporation on whose behalf the derivative action was instituted.” Republ ...


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