Through reforms enacted in the PSLRA, Congress intended for lead plaintiffs and courts to exercise some control over the plaintiffs’ law firms that pursue securities class action lawsuits. The securities laws also require courts to determine the amount of plaintiffs’ counsel’s fee awards. Yet, as the authors of recent academic paper suggest, the lead plaintiffs and the courts often lack the tools they need to execute these functions.

To try to derive the kinds of information that would allow lead plaintiffs and courts to fulfill their intended roles, the authors reviewed case records of thousands of cases, as a way to identify important indica of law firm performance as well as to extract detailed information about the fee awards. With the benefit of this information, the authors — Professor Stephen Choi of the New York University Law School, Professor Jessica Erickson of the University of Richmond Law School, and Professor Adam Pritchard of the University of Michigan Law School – suggest a variety of ways that lead plaintiffs and courts can better serve their intended functions under the PSLRA. The authors’ February 2023 paper, entitled “The Business of Securities Class Action Lawyering,” can be found here.Continue Reading The Plaintiffs’ Law Firms’ Securities Litigation Business

In a prior post, I noted recent academic research detailing the rise of mootness fee dismissals in federal court merger objection litigation. In these merger-related lawsuits, the plaintiffs agree to dismiss their suit based on the defendants’ agreement to make changes to the merger documents – thus, making the merger suit moot – and to pay the plaintiffs’ attorneys a mootness fee. An October 4, 2019 Law 360 article entitled “Plaintiffs Firms Follow Easy Merger Money to Federal Court” (here, subscription required) takes a look at the small group of plaintiffs’ law firms that the most active in filings these kinds of cases and obtaining mootness fees, in a process that at least one federal district judge has characterized as no better than a “racket.”
Continue Reading Plaintiffs’ Lawyers, Merger Objection Litigation, and Mootness Fees

As discussed in prior posts, after the Delaware courts evinced their distaste for the type of disclosure-only settlements that had until then typically resolved merger objection lawsuits, the plaintiffs’ lawyers changed their game. They began filing their merger objection lawsuits in federal court rather than in state court, and then rather than settling the cases, agreed to dismiss their cases in exchange for supplemental proxy disclosures, after which the plaintiffs would seek to recover a so-called “mootness fee.” At least one federal judge recently questioned this “racket,” but the question remained whether more courts would take steps to scrutinize this process and discourage what has become nothing more than the plaintiffs’ lawyers’ extraction of a “go away” payment.

In a positive sign suggesting that court may indeed become more involved in policing this process, a District of Delaware judge recently rejected merger objection lawsuit plaintiffs’ mootness fee petition on the ground that the plaintiffs failed to carry their burden of showing that the supplemental disclosures produced a substantial benefit for the acquired company’s shareholders.
Continue Reading Delaware Federal Court Rejects Merger Objection Plaintiffs’ Mootness Fee Request

In the following guest post, Stephen J. Choi, Jessica M. Erikson, and Adam C. Pritchard take a look at the plaintiffs’ attorney fee awards in “mega-settlements” in securities class action lawsuits. The authors ask the question whether the lawyers who lead these cases and negotiate the settlements are appropriately rewarded for their efforts. Choi is the Murray and Kathleen Bring Professor of Law at New York University School of Law. Erickson is Professor of Law & Associate Dean for Faculty Development at University of Richmond School of Law. Pritchard is the Frances and George Skestos Professor of Law at University of Michigan Law School. My thanks to the authors for allowing me to publish their article as a guest post on this site. 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. Here is the authors’ article.
Continue Reading Guest Post: Working Hard or Making Work? Plaintiffs’ Attorneys Fees in Securities Fraud Class Actions