Merger Litigation

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One of the most significant phenomena in the world of corporate and securities litigation has been the rise of merger objection litigation. As has been well-documented, merger objection litigation reached the point in recent years that virtually every public company merger transaction drew at least one lawsuit. The circumstances surrounding merger objection litigation began to change after the Delaware courts evinced their displeasure with this kind of litigation in a series of rulings that culminated in the 2016 decision in Trulia, in which the court rejected the kind of disclosure only settlement that had characterized the resolution of these kinds of cases. Since then, the merger objection lawsuits have shifted to federal courts. Moreover, these cases, now in federal court, increasingly are not settled; rather, they are dismissed in exchange for the defendants’ willingness to pay the plaintiffs’ counsel a so-called “mootness fee.”

In a May 29, 2019 paper entitled “Mootness Fees” (here), Matthew Cain and Steven Davidoff Solomon of UC Berkley Law School, Jill Fisch of Penn Law School, and Randall Thomas of Vanderbilt Law School take a look at the recent rise of mootness fee dismissals in merger objection litigation. Their paper documents that the rise of mootness fee settlements has turned merger objection litigation into a process for a small number of lower tier plaintiffs’ firms to in effect extract a toll from companies involved in M&A transactions, largely without court scrutiny or even minimal disclosure requirements. The authors suggest a number of procedural mechanisms to try to provide some scrutiny  and transparency over these kinds of settlements.
Continue Reading Mootness Fees: The Latest in the Merger Objection Litigation Phenomenon

Between 2010 and 2016, the number of shareholder appraisal actions filed in Delaware courts increased every year, but in 2017 and again in 2018, the number of appraisal actions declined, according to a recent report from Cornerstone Research. The decline arguably is a result of recent Delaware Supreme Court decisions in which the court reversed lower court rulings holding that the fair value exceeded the deal price and instead indicated that the deal price should be given substantial weight, at least where the sales process was “robust.” The report, entitled “Appraisal Litigation in Delaware: Trends in Petitions and Opinions, 20016-2018” can be found here. Cornerstone Research’s February 13, 2019 press release about the report can be found here.
Continue Reading Cornerstone Research: After Years of Increases, Number of Delaware Appraisal Actions Decline

As I have previously noted on this blog, merger objection litigation imposes significant costs on the defendant companies and their insurers. In the following guest post, Patrick Gallagher of the integrated communications and investor relations firm Dix & Eaton takes a look at recent developments in the merger objection litigation arena. I would like to thank the author for allowing me to publish the article as a guest post on this site. It was originally published on the Dix & Eaton Blog. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Pat’s guest post follows below.
Continue Reading Guest Post: Merger Objection Lawsuits Getting Tougher for Plaintiffs’ Attorneys

The percentage of M&A transactions valued over $100 million attracting at least one merger objection lawsuit continued to decline in 2017, according to a recent Cornerstone Research study. The July 18, 2018 study, entitled “Shareholder Litigation Involving Acquisitions of Public Companies: Review of 2017 M&A Litigation” (here), also reports that the average number of lawsuits filed per M&A deal and the percentage of M&A deal litigation voluntarily dismissed declined in 2017, as well. Cornerstone Research’s July 18, 2018 press release about the report can be found here.
Continue Reading Percentage of M&A Deals Attracting Litigation Continued to Decline in 2017

In a series of rulings that culminated in the January 2016 decision in the Trulia case, the Delaware courts evinced their hostility to the disclosure-only settlements that so often characterize the resolution of merger objection lawsuits. Since that time claimants have been filing the merger objection suits in courts outside Delaware. The question has been whether the other courts where the merger objection cases are now being filed would follow Delaware’s strict Trulia standard when reviewing disclosure-only settlements. In a ruling late last week, an intermediate appellate court in Florida expressly adopted Delaware’s Trulia standard. The Florida ruling does raise hopes that other courts might follow as well, which in turn could help stem the tide of proliferating merger objection litigation. The Florida District Court of Appeal, Second District’s July 13, 2018 decision in the Quality Distribution case can be found here.
Continue Reading Florida Court Adopts Delaware’s Strict Standard for Review of Disclosure-Only Settlements

As most readers are aware, litigation involving objection to mergers and acquisitions transactions has been proliferating in recent years, to the point that virtually every deal draws at least one lawsuit. While many of these actions are nuisance lawsuits, they are not without their costs. Indeed, according to one recent study, the costs to defend and settle these suits are growing.
Continue Reading The Growing Costs of Merger Objection Litigation

In prior posts (for example here), I noted that a series of Delaware court decisions culminating in the Court of Chancery’s January 2016 opinion in the Trulia case signaled the state’s courts’ hostility to disclosure-only settlements in merger objection lawsuit, which in turn has encouraged merger objectors to file their lawsuits in other jurisdictions. The Trulia line of cases is in fact only one of several recent judicial developments in Delaware that constrain shareholder claimants. So is stockholder litigation in trouble in Delaware? In a March 22, 2018 post on the Delaware Business Litigation Report (here), Edward McNally of the Morris James law firm take a look at this question, discussing where things stand while Delaware’s courts look to find the proper balance.
Continue Reading Is Shareholder Litigation in Delaware in Trouble?

In a series of rulings culminating in the January 2016 decision in Trulia (about which refer here), Delaware’s courts have evinced their hostility to the kind of disclosure-only settlement in which merger objection suits are frequently resolved. Since that time, plaintiffs’ lawyers increasingly have filed merger-objection lawsuits outside of Delaware, either in federal court or courts in other states. The question since then has been whether other jurisdictions’ courts would follow Delaware’s courts’ lead in rejecting disclosure-only settlements. Many courts have followed Delaware, but others have followed a different path. In particular, New York, in an intermediate appellate court decision in Gordon v. Verizon (about which refer here), set a lower standard than Delaware’s courts for accepting disclosure-only settlements.

However, the apparently more lenient New York standard did not stop New York Supreme Court Judge Shirley Werner Kornreich from rejecting a proposed disclosure-only settlement of a lawsuit challenging Martin Marietta’s 2014 acquisition of Texas Industries. In a scathing February 8, 2018 opinion (here), Judge Kornreich rejected the proposed settlement as “utterly useless to shareholders.” Her opinion shows that even under New York’s seemingly more lax standard, disclosure only settlements could face significant scrutiny and could be rejected where the additional disclosures do not provide benefits to shareholders.
Continue Reading New York Court Rejects “Utterly Useless” Disclosure-Only Merger Objection Suit Settlement

In the following guest post, Delaware partners Edward Micheletti, Paul Lockwood and associate Chad Davis of the Skadden Arps law firm take a look at the Delaware Supreme Court’s December 14, 2017 opinion in Dell, Inc. v. Magnetar Global Event Driven Master Fund Ltd. (here), which examined important appraisal action valuation issues. I would like to thank the authors for allowing me to publish their article. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is the authors’ guest post.
Continue Reading Guest Post: Dell Strongly Reinforces Importance of Merger Price

delawareAs documented on this site (for example, here and here) and elsewhere, deal litigation has been shifting from Delaware Chancery Court to courts in other states and to federal courts. This shift is largely the result of two Delaware court decisions, the Delaware Supreme Court’s 2015 decision in Corwin v. KKR Financial Holdings LLC  (here) and the Delaware Chancery Court’s January 2016 court decision in the In re Trulia Shareholder litigation (here). Though these court decisions are relatively recent, they are already having measurable impact on the amount of litigation in Delaware. Indeed, as detailed in a May 19, 2017 Law 360 article entitled “Delaware Plaintiffs’ Attorneys Fear Exodus of Chancery Deal Suits” (here, subscription required), the effect from these two cases has been sufficiently substantial that plaintiffs’ lawyers active in Delaware are now concerned that the future of deal litigation in Delaware is under threat.
Continue Reading Is Deal Litigation in Delaware Done?