Item 8.01 Other Events.
On January 25, 2019, two purported class action complaints were filed against Medley Capital Corporation (the “Company”), Brook Taube, Seth Taube, Jeffrey Tonkel, Arthur S. Ainsberg, Karin Hirtler-Garvey, John E. Mack, Mark Lerdal, Richard T. Allorto, Jr., Medley Management Inc. (“MDLY”), Sierra Income Corporation (“Sierra”), and Sierra Management, Inc. in the Supreme Court of the State of New York, County of New York (the “Court”) . The complaints were captioned Helene Lax v. Brook Taube, et al., Index No. 650503/2019, and Richard Dicristino, et al. v. Brook Taube, et al., Index No. 650510/2019 (together with the Lax Action, the “New York Actions”). The complaints in each of the New York Actions alleged that the individuals named as defendants breached their fiduciary duties in connection with the proposed merger of the Company with and into Sierra, and that the other defendants aided and abetted those alleged breaches of fiduciary duties. Compensatory damages in unspecified amounts were sought.
On December 20, 2019, the Delaware Court of Chancery entered an Order and Final Judgment approving the settlement of another purported stockholder class action that was commenced in the Court of Chancery of the State of Delaware by FrontFour Capital Group LLC and FrontFour Master Fund, Ltd., captioned as FrontFour Capital Group LLC, et al. v. Brook Taube et al., Case No. 2019-0100 (the “Delaware Action”) against defendants Brook Taube, Seth Taube, Jeffrey Tonkel, Mark Lerdal, Karin Hirtler-Garvey, John E. Mack, Arthur S. Ainsberg, MDLY, Sierra, the Company, MCC Advisors, Medley Group LLC, and Medley LLC.
The plaintiffs in the New York Actions have acknowledged that the settlement of the Delaware Action rendered the New York Actions moot; however, the attorneys for the plaintiffs in the New York Actions have asserted that they have the right to seek an order awarding them fees and recovery of expenses on account of their purported contributions to the settlement of the Delaware Action.
Following a period of negotiations, the Company has reached an agreement with the respective plaintiffs to resolve the New York Actions. While the Company continues to believe that the allegations in the New York Actions are without merit, to avoid the nuisance, potential expense, burden and delay due to continued litigation, the Company has agreed to pay $50,000 in attorneys’ fees and expenses to plaintiffs’ counsel in connection with the mooted claims asserted. This amount will be covered by the Company’s insurance carrier.
Settlement of the New York Actions is expressly not to be construed as an admission of wrongdoing, fault or liability by any defendant. The defendants have vigorously denied, and continue to vigorously deny, any wrongdoing or liability with respect to the facts and claims asserted, or which could have been asserted, in the New York Actions, including that they have committed any violations of law or breach of fiduciary duty, aided and abetted any violations of law or breaches of fiduciary duty, acted improperly in any way or have any liability or owe any damages of any kind to the plaintiff or to the purported class.
A copy of the Stipulation and [Proposed] Order dismissing the New York Actions is attached hereto as Exhibit 99.1.