Is it better to be first, or to be right?
For lawyers wanting to reap big fees in securities cases, speed matters.
Bristol-Myers Squibb announced in September 2010 that it agreed to buy ZymoGenetics at an 84% premium. Almost immediately, a lawyer filed a lawsuit, citing “possible breaches of fiduciary duty” by ZymoGenetics.
But there was a problem – his purported client hadn’t agreed to let the lawyer represent him.
Corporate mergers are a booming industry for some lawyers. A study found that mergers over $100 million in 2013 drew an average of nearly seven lawsuits. Lawyers race to the courthouse when they hear about a corporate merger, needing to be at the front of the line when fees are handed out, Dan Fisher writes in Forbes:
This is the routine in many M&A lawsuits, which have become so prevalent that the pro-business Institute for Legal Reform calls them a “merger tax.” Companies eager to close a deal know they can typically make the litigation go away by paying the lawyers who filed suits less than $1 million in fees.
So, what happened to the lawyer? He narrowly avoided a year-long suspension, and instead received a “private reprimand” from the state disciplinary board.