“These days, virtually every M&A transaction attracts litigation, usually involving multiple lawsuits,” writes Kevin LaCroix at the D & O Diary. “These cases have proven attractive to plaintiffs’ lawyers because the pressure to close the deal affords claimants leverage to extract a quick settlement, often involving an agreement to publish additional disclosures and to pay the plaintiffs’ attorneys’ fees.”
Companies feel additional pressure to settle M&A suits because post-merger litigation can be even more difficult to resolve. LaCroix then dives into a series of reforms proposed by Doug Clark of Wilson Sonsini that could “make this racket less rewarding for the plaintiffs’ lawyers.”
At the 13th annual Legal Reform Summit in October, ILR released a paper on the trial lawyers’ “merger tax” that parallels with the concerns of LaCroix and Clark. “Lawsuit growth exceeds the expansion of M&A activity…the only plausible explanation for this lawsuit epidemic is abuse of the litigation system by trial lawyers.”
Read The Trial Lawyers’ New Merger Tax here.