Kevin LaCroix of the D&O Diary writes that the “abusive litigation racket” spotlighted by a recent Illinois decision on a merger objection lawsuit might be coming to an end.
The plaintiffs’ lawyer-driven trend of suing over disclosures in a proposed merger, only to dismiss the suit when the defendant makes extra disclosures and pays the lawyers additional fees, has been blamed in large part for the growing amount of securities litigation in recent years. LaCroix referred to the practice as a “shameful racket, all the more regrettable because the plaintiffs’ lawyers are using the threat of judicial process to extract a ‘go away’ payment.”
An Illinois Judge seemed to agree. Judge Thomas Durkin struck down one such settlement this week, also calling it a “racket.” LaCroix says the decision may persuade other judges to look at these settlements.