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Goosehead Insurance, Inc.

Case Details

Date Filed: November 10, 2022
Case Number: C.A. No. 2022-1018-JTL
Jurisdiction: Delaware Chancery
icon-casetype Case Type: Shareholder Class Action

Case Summary

On November 10, 2022, Saxena White filed a class action complaint alleging that Goosehead Insurance, Inc. had entered into a Stockholders Agreement that improperly entrenched and perpetuated certain favored minority stockholders’ control over Goosehead’s affairs. These arrangements violated the statutory and common law rights of Goosehead’s other public stockholders and their duly-elected representatives on the Company’s Board of Directors to control and make the key decisions for the Company. Plaintiff sought declaratory relief in the Delaware Court of Chancery that the stockholder agreement violated Delaware law and is unenforceable.

As alleged in the Complaint, the stockholders agreement violated Delaware law by providing certain favored minority stockholders with contractual veto power over the most important decisions and functions properly entrusted to the Board. Indeed, the stockholders agreement between the Company and these minority stockholders goes so far as to even deny the Board its due power over certain business strategies and core directorial functions such as the hiring, firing, and compensation of the Company’s CEO, CFO, and other most senior executive officers. The stockholders agreement also violated Delaware law by providing the same favored minority stockholders with a contractual right to designate the nominees for a majority of the seats on the Company’s Board, including the Chair of the Board, so long as they continue to hold a mere 10% of the Company’s total outstanding shares.

On August 8, 2023, after the parties engaged in extensive negotiations, the parties executed the stipulation of settlement documenting the proposed settlement.

First, the settlement does away with the stockholders agreements’ granting to the favored minority stockholders’ the exclusive power to designate nominees for a majority of board seats. It amends the stockholders agreement to guarantee the right of Goosehead’s other stockholders to nominate a full competing slate of nominees and clarifies that Goosehead’s directors may exercise their fiduciary duties in determining whether to support the favored minority stockholders’ designated nominees for election.

Second, the settlement amends the provisions of the stockholders agreement granting the favored minority stockholders’ veto power over essentially every significant category of corporate action. The settlement removes certain categories of action— such as the hiring and firing of senior executives—from the provision entirely. As to all that remains, the settlement amends the relevant provision to guarantee the ability of Goosehead’s Board to exercise its fiduciary duties to override the veto power provided in the stockholders’ agreement.

The stipulation of settlement was filed with the Court on September 12, 2023. On December 18, 2023, Plaintiff filed its motion for final approval of the settlement and award of legal fees and expenses. On January 17, 2024, Goosehead filed its brief in response to Plaintiff’s motion for final approval and award of attorneys’ fees and expenses. Plaintiff’s reply papers were filed on February 1, 2024. Supplemental briefing is due on April 24, 2024.

The complaint and information about the proposed settlement are posted here.