Putting Stockholders First, Not the First-Filed Complaint
105 Pages Posted: 17 Jan 2013 Last revised: 15 Jan 2014
Date Written: January 10, 2013
The prevalence of settlements in class and derivative litigation challenging mergers and acquisitions in which the only payment is to plaintiffs’ attorneys suggests potential systemic dysfunction arising from the increased frequency of parallel litigation in multiple state courts. After examining possible explanations for that dysfunction, and the historical development of doctrines limiting parallel state court litigation — the doctrine of forum non conveniens and the “first-filed” doctrine — this article suggests that those doctrines should be revised to better address shareholder class and derivative litigation. Revisions to the doctrine of forum non conveniens should continue the historical trend, deemphasizing fortuitous and increasingly irrelevant geographic considerations, and should place greater emphasis on voluntary choice of law and the development of precedential guidance by the courts of the state responsible for supplying the chosen law. The “first-filed” rule should be replaced in shareholder representative litigation by meaningful consideration of affected parties’ interests and judicial efficiency.
Keywords: class actions, derivative suits, forum non conveniens, first-filed rule, multi-forum litigation, internal affairs doctrine, choice of law, choice of forum, state of incorporation
JEL Classification: G3, G38, K2, K22
Suggested Citation: Suggested Citation