A New York federal judge has granted final approval to a $12 million settlement in a securities class action brought by REIT investors against Jernigan Capital, now NexPoint Storage Partners Inc., over alleged omissions of material information in a 2020 merger with NexPoint Advisors.
U.S. District Judge Jennifer L. Rochon of the Southern District of New York signed off on the settlement, concluding nearly four years of litigation that began in November 2020. Judge Rochon found the $12 million deal to be fair, reasonable, and adequate, and confirmed that lead plaintiffs and counsel properly represented the class.
In addition to approving the settlement, Judge Rochon awarded $3.9 million in attorneys’ fees and litigation expenses to lead counsel for their work prosecuting the case.
The class action alleged that the defendants violated securities laws by omitting critical details about the involvement of Extra Space, a competing real estate investment trust, during the sale of Jernigan Capital to NexPoint Advisors LP, valued at approximately $900 million. Investors argued that this omission affected the agreed per-share price of $17.30.
The plaintiffs contended that the proxy materials used to obtain shareholder approval were materially false and misleading because they failed to disclose Extra Space’s participation in the transaction, including a $300 million investment that secured board seats and property rights.
The approved settlement represents 62% of the estimated $19.38 million in potential recoverable damages. The investors faced substantial risks if the defendants had succeeded in summary judgment motions, which argued that the financing and involvement of Extra Space were not material to the merger.
Representatives for both parties have not provided comment.
The investor class is represented by Robbins Geller Rudman & Dowd LLP, while defendants are represented by Winston & Strawn LLP.
