Patterns of merger litigation have changed significantly in response to developments in Delaware law, four scholars find in a recent paper. Lawyers for stockholder plaintiffs have filed fewer fiduciary duty cases in Delaware since Chancellor Andre Bouchard essentially barred disclosure-only settlements last year in in a case arising from the sale of Trulia to Zillow (Z), instead opting to file such matters in the courts or other states or bring securities law cases in federal court.
There has also been an increase in appraisal proceedings, Matthew Cain of the U.S. Securities and Exchange Commission, Jill Fisch, a professor at the University of Pennsylvania School of Law, Steven Davidoff Solomon, a professor at the University of California at Berkeley School of Law, and Randall Thomas, a professor at Vanderbilt University's School of Law, write in their paper, "The Shifting Tide of Merger Litigation."
The authors surveyed merger litigation on deals of $100 million or more from 2003 through November 2016, an exercise they have done a number of times over the years. They found that merger-related shareholder litigation in Delaware fell by 50% from 2015 to 2016, while the percentage of federal filings as a total of all M&A-related cases almost doubled, to 37% last year from 21% in 2015. Attorneys' fees have fallen, and the number of cases dismissed has increased, they found.
The authors also discovered a notable increase in appraisal litigation. In 2015, there were 51 appraisal petitions challenging 33 deals; last year, 77 petitions on 48 deals. (Appraisal is a legal action in which a stockholder who believes he is receiving an unfair price for his stock asks a court to determine the value of his shares.)
The quartet also found a decline in so-called amendment settlements, those in which a defendant company agrees to amend a merger agreement as part of the settlement of stockholder litigation challenging the deal. The authors wrote that their lawyer sources "uniformly attributed the decrease to better drafting by transaction lawyers and a lack of extreme terms existent in prior years which justified such a settlement, an explanation that we have no way to test with our current data."
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