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These days just about every public company merger transaction draws at least one merger objection lawsuit. These lawsuits formerly were filed in Delaware state court alleging violations of Delaware law, but since the 2016 Delaware Chancery Court decision in the Trulia case, in which the court expressed its distaste for this type of litigation, the lawsuits have been filed in federal court based on alleged violations of Section 14 of the Securities Exchange Act of 1934. These cases, through frequently filed, are rarely litigated. They typically are resolved by the defendants’ voluntary insertion of supplemental proxy disclosures and agreement to pay the plaintiff a “mootness” fee.

However, in a recent case a corporate defendant refused to update the proxy and succeeded in getting the case dismissed. As discussed in a recent law firm memo about the dismissal ruling, the “usual playbook” for these kinds of cases – making supplemental disclosures and paying a mootness fee – may not be the best approach, and the ruling itself may provide ammunition for companies that want to try an “alternative to the status quo.”
Continue Reading Is There an Alternative to the Status Quo on Merger Objection Lawsuits?

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

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

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?

new yorkAfter the Delaware courts in a series of decisions culminating in the January 2016 ruling in the Trulia case showed their hostility to disclosure-only settlements of merger objection lawsuits, commentators asked whether this development might mean the end of the merger objection lawsuit curse. Since that Delaware court’s decision in the Trulia case, plaintiffs’ lawyers increasingly are filing merger objection lawsuits outside Delaware, primarily in federal court. This shift in turn raises the question of the extent to which the courts in other jurisdictions will follow the principles the Delaware court set out in the Trulia case. The jurisdictional shift also raises larger cases about the future direction of merger objection litigation. A recent decision from a New York intermediate appellate court provides important perspective on many of these questions.

A February 2, 2017 opinion from the New York Appellate Divisions, First Department, applying New York law, reversed a lower court’s rejection of the disclosure-only settlement of a suit that had been filed in connection with Verizon’s proposed acquisition of Vodafone subsidiaries holding ownership interests in Verizon Wireless. The decision expressly considered the Delaware courts’ concerns in Trulia and other cases about disclosure-only settlements, but nevertheless not only reversed the lower court’s rejection of the settlement, but remanded the case for the lower court to consider a fee award for the plaintiffs’ counsel. The New York court’s decision in the Verizon case presents a number of interesting and important suggestions the future direction of merger objection lawsuits.  The New York appellate court’s opinion can be found here.
Continue Reading Latest Twist in the Merger Objection Lawsuit Saga: New York Appellate Court Approves Disclosure-Only Settlement

delmapWhen Delaware Chancellor Andre Bouchard rejected the proposed disclosure-only settlement in the litigation arising out of Zillow’s acquisition of Trulia, there was some belief that his decision represented the death knell for these kinds of settlements in merger objection lawsuits. There is indeed some evidence that the number of merger objection lawsuits filed has declined. However, as discussed in an April 29, 2016 Washington Legal Foundation article by attorneys Anthony Rickey and Keola R. Whittaker (here), “Delaware’s sister courts continue to approved disclosure only settlements and award six-figure attorneys’ fees.” As discussed below, the net effect of Delaware’s hostility to disclosure only settlements may not necessarily be that fewer of these kinds of cases get filed, it may be that weaker cases are “driven to other jurisdictions.”
Continue Reading Will Disclosure-Only Settlements in Merger Objection Suits Live On Outside Delaware?