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August 10, 2018

It’s Getting Harder to File “Meritless” Merger Lawsuits, Advisor Says

A communications advisor with an investor relations firm said in D&O Diary that it may be “getting more difficult” for plaintiffs’ lawyers to file “questionable” merger lawsuits now that the effects of the Delaware Court of Chancery’s Trulia decision are taking hold.

Patrick Gallagher of Dix & Eaton said that courts in four other states—California, Florida, North Carolina, and New York—have taken similar action in recent months to Delaware’s In re Trulia, Inc. Stockholder Litigation decision. That opinion heightened the requirements for “disclosure settlements” in merger and acquisition lawsuits that “serv[e] only to generate fees for certain lawyers” and “yield no monetary compensation to the stockholders they represent.”

Gallagher said the recent action suggests “the word about Trulia seems to be getting around.” If other courts hold similar disclosure settlements to the same heightened standards, he said “plaintiffs’ attorneys might stop filing meritless cases.”

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