On January 3, 2023, Chancellor Kathaleen St Jude McCormick of the Delaware Court of Chancery granted the plaintiffs’ class certification motion, certifying as a class all public stockholders of MSG Networks Inc. (“MSGN”) who relinquished their shares in the 2021 merger between MSGN and Madison Square Garden Entertainment Corp. (“MSGE”). Excluded from the class are the defendants and their affiliates. The complete class definition is described in the Court’s Class Certification Order.
In its Order, the Court appointed Wolf Popper LLP and three other firms to serve as class counsel, finding that they are all “are highly qualified, have significant relevant experience and are capable of conducting the litigation.”
The plaintiffs in this consolidated action allege, among other things, that MSGE Executive Chairman and CEO James L. Dolan used his control of both MSGN and MSGE to effectuate a merger whereby MSGN was acquired at a bargain basement price, harming the company’s unaffiliated stockholders in the process. The plaintiffs also allege that certain of MSGN’s directors acquiesced to Dolan’s demands in approving the merger, thereby breaching their fiduciary duties. Trial is set to commence later this year.
There has been considerable recent news coverage of this lawsuit. For example, Reuters reported on plaintiffs’ counsel’s efforts to obtain discovery from a terminated high-ranking internal audit employee following MSGE’s disclosure to the Court that it had erased her electronic files and could not recover them. MSGE’s decision to ban all of plaintiffs’ counsel from entering its venues—including Madison Square Garden, Radio City Music Hall, and the Beacon Theatre—has also attracted considerable media attention. Specifically, the ban, which is enforced using biometric facial recognition technology and which Chancellor McCormick criticized as “the stupidest thing I’ve ever read,” has drawn the scrutiny of regulators and elected officials. For example, the New York Attorney General, the Manhattan District Attorney, and the New York State Liquor Authority, are currently investigating MSGE’s ban policy, while State Senator Brad Hoylman-Sigal has introduced legislation to amend the civil rights law in order to include sporting venues within the definition of public places prohibited from refusing entry to any person presenting a valid ticket. The ban has also jeopardized MSG’s application for a permanent zoning permit.