A Delaware Chancery Court hearing on resolving class and derivative claims over Illumina fiduciary data breaches connected to the company's $8 billion acquisition of Grail Inc. was sidelined Monday by questions over a private settlement.

Vice Chancellor Paul A. Fioravanti said during a brief teleconference hearing that he was leaning toward requiring public notice and settlement proceedings for a part of the deal that would end claims lodged by Icahn Partners LP and two affiliates, which culminated in releases of financial liabilty by both parties.

Illumina Inc. reacquired Grail in 2021 for $8 billion, then spun the business off in 2024 after scrutiny by the Federal Trade Commission and European regulators.

Icahn's interests alleged in a securities class and derivative action filed in October 2023 that Illumina and its board of directors caused millions of dollars in losses to the biotech company by pushing the Grail deal through. Several stockholders have since challenged the company's actions, although details of Icahn's settlement remained under wraps.

"I am strongly inclined to require notice and a formal settlement process, but I will take the counsel up on your offer to provide some research and authority as to why this case can be settled and dismissed without court approval and without notice to the class," Vice Chancellor Fioravanti told Eric A. Veres of Abrams & Bayliss LLP, counsel to Illumina's individual directors and officers, and Michael A. Hanin of Pallas LLP, counsel to the Icahn parties.

The vice chancellor added that the court has discretion to require notice of any dismissal, and it unsuccessfully sought citations authorizing the Icahn parties' view that no hearing would be required.

Kevin J. Orsini of Cravath Swaine & Moore LLP, counsel to Illumina, said the parties were "very explicit" in agreeing that other derivative claims that overlap those potentially being settled by the Icahn agreement "are not being released as part of this settlement."

The Icahn parties submitted a stipulation and proposed order of dismissal on September 19. The vice chancellor directed their counsel on Monday to submit supplemental information and said the court should be contacted in a month if the request is still pending.

The FTC ordered Illumina to unwind the reacquisition in April 2023. In December, Illumina said it would divest Grail after the Fifth Circuit largely upheld the FTC's findings.

Icahn, who has called the Grail reacquisition "ill-advised" and "frankly inexplicable," launched a proxy battle against Illumina in March 2023, proposing three new director candidates. One of his candidates — Andrew Teno of Icahn Capital LP — won a seat on the biotech's board.

Some of Icahn's objections already have found their way to the Delaware Supreme Court. In a mid-case appeal that was shot down in April 2024, Justice Karen L. Valihura found at the time there were no "exceptional circumstances" warranting the early review.

San Diego, California-headquartered Illumina, which develops tools and systems for genetic analysis, formed Grail in 2015 and then spun it off in 2017. In 2020, shortly after Grail went public, Illumina announced it would reacquire its former subsidiary, sparking scrutiny from the FTC and European regulators.

In August 2024, New York state Comptroller Thomas DiNapoli sued nine Illumina directors and two officers in Delaware's Chancery Court on behalf of state retirement funds holding the company's stock. The complaint claimed that the biotechnology company's leaders rushed into the doomed deal recklessly and with full knowledge they were violating a European regulation requiring companies to pause mergers pending antitrust review.

"The damage to Illumina from this disastrous acquisition cannot be overstated," the complaint said. It observed that, on Aug. 16, 2021 — two days before the Grail deal closed — Illumina's stock had dropped from an all-time high of $524.84 per share to $128.80 on Aug. 15 of this year, with market capitalization plunging 75%, from $77 billion in 2021 to $20.5 billion in 2024.

Icahn Partners, Icahn Partners Master Fund and Matsumura Fishworks are represented by C. Barr Flinn and M. Paige Valeski of Young Conaway Stargatt & Taylor LLP, and Michael A. Hanin, Anastasia Cembrovska and Andrew W. Breland of Pallas LLP.

Illumina is represented by Peter J. Walsh, Michael A. Pittenger and Justin T. Hymes of Potter Anderson & Corroon LLP, and Kevin J. Orsini and Brittany L. Sukiennik of Cravath Swaine & Moore LLP.

Charles Dadswell and Sam Samad are represented by Thomas A. Uebler, Adam J. Waskie and Sarah P. Kaboly of McCollom D'Emilio Smith Uebler LLC, and Koji Fukumura, Ryan Blair and Heather Speers of Cooley LLP.

Francis deSouza and the other directors are represented by A. Thompson Bayliss and Eric Veres of Abrams & Bayliss LLP, and William Savitt, Jonathan M. Moses, Lauren M. Kofke and Emily R. Barreca of Wachtell Lipton Rosen & Katz.

The case is Icahn Partners LP et al, v. DeSouza, et al, case number 2023-1045, in the Court of Chancery of the State of Delaware.