The Market for Preclusion in Merger Litigation

77 Pages Posted: 4 Oct 2012

See all articles by Sean J. Griffith

Sean J. Griffith

Fordham University School of Law; European Corporate Governance Institute (ECGI)

Alexandra D. Lahav

University of Connecticut - School of Law

Date Written: October 1, 2012


The recent finding that corporate litigation involving Delaware companies very often takes place outside of Delaware has disturbed the long-settled understanding of how merger litigation works. With many, even most, cases being filed and ultimately resolved outside of Delaware, commentators warn that the trend is a threat to shareholders, to Delaware, and to the integrity of corporate law generally. Although the out-of-Delaware trend suggests that litigants are seeking to use the procedural rules of other jurisdictions to their advantage, we argue that the result need not threaten the interests of any of the stakeholders in deal litigation.

We reframe the process of resolving merger litigation as a market for preclusion, in which plaintiffs seek to sell and defendants seek to buy an important element of transactional certainty. Moreover, this market has the potential to efficiently process and price shareholder complaints while also providing benefits to Delaware and to corporate law more generally. We are not blind to reality, however, and also address how a well-functioning market for preclusion can be distorted by the opportunistic conduct of plaintiffs’ and defense attorneys alike.

Greater judicial oversight is necessary to preserve the benefits of this market while preventing the distortions brought on through opportunistic conduct. In order to make this a reality, however, judges in different courts must have a means of communicating and coordinating across state lines. We therefore offer a theory of horizontal comity in which judges build trust and cooperation through communication across jurisdictional boundaries. We use this theory to suggest a set of concrete policy proposals designed to provide for a more efficient market for preclusion.

Keywords: merger litigation, M&A, corporations, civil procedure, federalism, comity, reverse auction, objector, multi-jurisdictional litigation, Delaware

JEL Classification: K22, K41,

Suggested Citation

Griffith, Sean J. and Lahav, Alexandra D., The Market for Preclusion in Merger Litigation (October 1, 2012). Vanderbilt Law Review, Forthcoming; Fordham Law Legal Studies Research Paper No. 2155809. Available at SSRN:

Sean J. Griffith (Contact Author)

Fordham University School of Law ( email )

150 West 62nd Street
New York, NY 10023
United States

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

Alexandra D. Lahav

University of Connecticut - School of Law ( email )

65 Elizabeth Street
Hartford, CT 06105
United States

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