Google-On2 Merger Deal Held Down On Appeal

     MANHATTAN (CN) — New York’s top appeals court refused Thursday to sign onto a settlement that would have left out-of-state class members out of a resolution ending protests to Google’s $107 million acquisition of On2 Technologies five years ago.
     The tech companies announced their merger on Aug. 4, 2009, and some nine days later, On2 shareholders told judges in Queens and Delaware that the company sold out too cheaply to Google.
     On2 developed the video compression and related technologies that became the core of Google’s WebM video file format.
     In a class-action lawsuit, lead plaintiff Michael Jiannaras accused On2 and its directors of misleading shareholders that they would receive 60 cents worth of Google common stock for each On2 share.
     The parties settled Jiannaras’ case and others into an overarching deal, which drew more than 200 shareholder objections.
     A state supreme court judge and a divided panel of an intermediate appellate court stopped the deal from going forward until the companies let out-of-state class members opt out.
     On Thursday, all seven judges of New York’s Court of Appeals agreed the proposed settlement was unfair.
     “We hold that because the proposed settlement in this instance would deprive out-of-state class members of a cognizable property interest, the courts below properly refused to approve the settlement,” Judge Eugene Pigott, Jr. wrote for the panel in a seven-page opinion.
     Martin Karlinsky, who represents the settlement’s objectors, said in an email that his clients are “gratified that the Court of Appeals has recognized that they have a due process right to opt out of the class.”
     “They (and we) are considering our options,” he added.
     An attorney for the appellants, who sought to maintain the settlement, did not respond to an email request for comment.

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