Faruqi & Faruqi, LLP Announces Final Approval of a Settlement on Behalf of DPW Holdings, Inc. and its Shareholders


Faruqi & Faruqi, LLP, sole lead counsel, is pleased to announce that the Court granted final approval of a settlement in Ethan Young et al. v. Milton C. Ault, III et al., No. 2:18-6587-PA (C.D. Cal.), a shareholder derivative action brought on behalf of DPW Holdings, Inc. (“DPW”).  The Honorable Percy Anderson of the United States District Court for the Central District of California issued an Order and Judgment granting final approval.

The Court previously held that, “Plaintiffs sufficiently alleged claims for breach of fiduciary duty related to certain transactions, and adequately pled a claim for unjust enrichment.”  The breach of fiduciary duty claims were based on related party transactions, financing, and stock issuances. A copy of the Court’s order denying in large part the motion to dismiss plaintiffs’ first amended complaint can be found here.

The Court found that the settlement is “fundamentally fair, adequate, and reasonable.”  The settlement provides for DPW’s Board of Directors to implement corporate governance reforms including: (1) removal of a non-independent director from DPW’s Board of Directors and appointment of two new independent directors, so that the board is composed of five independent directors and two non-independent directors; (2) instituting heightened independence requirements for directors to qualify as independent; (3) appointing two new independent directors to a three-member Governance Committee, which will be charged with reviewing related party transactions in accordance with a newly created related party transaction policy; (4) instituting an enhanced definition for identifying related parties; (5) tasking the Governance Committee with reviewing DPW’s issuance of stock; (6) requiring DPW’s Audit Committee to review all debt financing, including loans and future receipts agreements, and (7) amending DPW’s Bylaws, Audit Committee Charter, whistle-blower policy, and compensation clawback policy. 

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