After Millennial merger, the legal challenge

Listen to this article

Four out-of-state law firms wasted little time in soliciting free, initial consultations with shareholders of Baltimore-based Millennial Media Inc. after the company announced last week that it agreed to be bought by AOL Inc. for $238 million, or $1.75 per share.

The firms, in press releases sent the same day the proposed sale was announced, said the shareholders have been shortchanged. Each firm also said they are investigating potential breaches of fiduciary duty by Millennial’s board of directors for allegedly failing to get a better price.

Such solicitations, which similarly popped up in June after Under Armour Inc. announced a change to its stock structure, apparently do not violate the Maryland Lawyers’ Rules of Professional Conduct. The most closely related rule, 7.3, permits contact with prospective clients so long as the advertisements or solicitations are free of claims that are false, misleading or overreaching.

The rule states that written communications “make it possible for a prospective client to be informed about the need for legal services, and about the qualifications of available lawyers and law firms, without subjecting the prospective client to direct in person, telephone or real-time electronic persuasion that may overwhelm the client’s judgment.”

Legal-ethics professor Russell McClain said he has no objection to the press releases aimed at shareholders. He said the releases do not appear to be misleading and validly inform the public of the availability of attorney services.

The timing of the solicitations – within hours of the Sept. 3 announcement of the proposed sale – might appear to be unseemly but is not unethical, said McClain, who teaches at the University of Maryland Francis King Carey School of Law.

“This is no different than the other lawyers who advertise on the side of a bus,” he said.

The solicitation of shareholders, he added, also is akin to the attorney solicitations viewers of late-night television receive regarding potential asbestos-related mesothelioma claims.

AOL and Millennial Media announced the proposed sale last Thursday in a joint press release.

Questioning the sale

“By joining AOL, we will be adding additional mobile expertise to AOL’s growing technology,” Michael Barrett, Millennial’s president and CEO, said in the statement.

The four law firms, however, quickly distributed press releases via PRNewswire critical of the purchase price and questioned the circumstances of the sale, which remains subject to regulatory approval.

New York-based Tripp Levy PLLC stated it would provide a free consultation to any Millennial shareholder who “would like additional information as to how the acquisition may affect your rights as a shareholder and how you may be eligible to obtain a higher price for your shares.”

The law firm said the sale price “unfairly undervalues the true going forward inherent value” of Millennial.

“Indeed, the book value alone of MM is $1.63 per share, an analyst has projected the target price of MM stock to be worth $2.15 per share, and the stock hit a high of $2.29 within the past year,” Tripp Levy said. “The investigation further seeks to determine whether the senior management of MM are entering into this deal for their own self-interest to the detriment of the company’s shareholders.”

Harwood Feffer LLP, also of New York, meanwhile, said its “investigation concerns whether the Millennial Media board of directors is fulfilling its fiduciary duties, maximizing the value of the company, disclosing all material benefits and costs, and obtaining full and fair consideration for company stockholders.”

Louisiana-based Kahn Swick & Foti said it wanted to is investigate share sales price “and the process that led to it are adequate or whether the consideration undervalues the company.” The firm asks shareholders to contact the firm if they “believe that this transaction undervalues the company and/or if you would like to discuss your legal rights regarding the proposed sale.”

The fourth law firm, Robbins Arroyo LLP, of San Diego, stated its investigation is focusing on “whether the board of directors of Millennial Media is undertaking a fair process to obtain maximum value and adequately compensate its shareholders.” The firm adds shareholders have the option to file a class-action lawsuit “to ensure the board of directors obtains the best possible price for shareholder and the disclosure of material information.”

Attorneys for the four firms did not respond to email messages seeking comment on their press releases.

McClain, the law professor, said a lawyer’s solicitation “doesn’t always reflect well on the profession [but] it’s not per se unlawful or unethical…. There is a First Amendment right.”