Delaware Corporate Litigation and the Fragmentation of the Plaintiffs’ Bar

75 Pages Posted: 30 Apr 2012 Last revised: 14 Jul 2012

Brian R. Cheffins

University of Cambridge - Faculty of Law; European Corporate Governance Institute (ECGI)

John Armour

University of Oxford - Faculty of Law; University of Oxford - Said Business School; European Corporate Governance Institute (ECGI)

Bernard S. Black

Northwestern University - Pritzker School of Law; Northwestern University - Kellogg School of Management; European Corporate Governance Institute (ECGI)

Date Written: July 1, 2012

Abstract

Since 2000 a growing proportion of lawsuits against directors of public companies incorporated in Delaware have been filed outside Delaware. There has also been a large increase in the likelihood of litigation challenging for M&A transactions involving Delaware targets, and the likelihood that suits involving the same transaction will be filed both in Delaware and elsewhere. In this Article we explore one potential cause for these trends -- intensified competition between plaintiffs’ law firms. We trace the development of the plaintiffs’ bar from the 1970s to the present and identify three changes that plausibly contributed to the out-of-Delaware trend and a higher litigation rate: 1) stronger competition among plaintiffs’ lawyers specializing in securities litigation also affected the corporate law side of the plaintiffs’ bar, 2) changes in how the Delaware courts selected lead counsel encouraged non-Delaware filing by firms who were unlikely to win lead counsel status in Delaware, 3) potential obstacles associated with launching a suit in a jurisdiction other than Delaware become less of a concern to the plaintiffs’ bar.

This Article draws upon data and insights developed more fully in a related policy oriented paper: “Delaware’s Balancing Act”, Indiana Law Review (2012), at http://ssrn.com/abstract=1677400, and a related empirical paper (“Is Delaware Losing its Cases”, Journal of Empirical Legal Studies (2012), at http://ssrn.com/abstract=1578404.

Keywords: shareholder lawsuits, deal litigation, class actions, derivative actions, corporate litigation, Delaware, plaintiffs’ bar

JEL Classification: K22, K41

Suggested Citation

Cheffins, Brian R. and Armour, John and Black, Bernard S., Delaware Corporate Litigation and the Fragmentation of the Plaintiffs’ Bar (July 1, 2012). As published in 2012 Columbia Business Law Review, pp. 427-501; Northwestern Law & Econ Research Paper No. 12-04; ECGI - Law Working Paper; Oxford Legal Studies Research Paper No. 21/2012. Available at SSRN: https://ssrn.com/abstract=2030398

Brian R. Cheffins

University of Cambridge - Faculty of Law ( email )

10 West Road
Cambridge, CB3 9DZ
United Kingdom
+44 1223 330084 (Phone)
+44 1223 330055 (Fax)

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

John Armour

University of Oxford - Faculty of Law ( email )

Oriel College
Oxford, OX1 4EW
United Kingdom
+44 1865 286544 (Phone)

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Bernard S. Black (Contact Author)

Northwestern University - Pritzker School of Law ( email )

375 E. Chicago Ave
Chicago, IL 60611
United States
312-503-2784 (Phone)

Northwestern University - Kellogg School of Management

2001 Sheridan Road
Evanston, IL 60208
United States
847-491-5049 (Phone)

European Corporate Governance Institute (ECGI)

Brussels
Belgium

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