Putting Stockholders First, Not the First-Filed Complaint

105 Pages Posted: 17 Jan 2013 Last revised: 15 Jan 2014

See all articles by Leo Strine

Leo Strine

University of Pennsylvania Law School; Wachtell, Lipton, Rosen & Katz; Columbia Law School

Lawrence A. Hamermesh

Widener University Delaware Law School

Matthew Jennejohn

Columbia Law School; Brigham Young University - J. Reuben Clark Law School

Date Written: January 10, 2013

Abstract

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

Strine, Leo and Hamermesh, Lawrence A. and Jennejohn, Matthew, Putting Stockholders First, Not the First-Filed Complaint (January 10, 2013). Business Lawyer, Vol. 69, 2013, Harvard John M. Olin Center for Law, Economics, and Business Discussion Paper No. 740, Widener Law School Legal Studies Research Paper No. 13-25, Available at SSRN: https://ssrn.com/abstract=2200499 or http://dx.doi.org/10.2139/ssrn.2200499

Leo Strine

University of Pennsylvania Law School ( email )

3501 Sansom Street
Philadelphia, PA 19104
United States

Wachtell, Lipton, Rosen & Katz ( email )

51 W 52nd St
New York, NY 10019
United States
212-403-1178 (Phone)

Columbia Law School ( email )

435 West 116th St
NEW YORK, NY 10027

Lawrence A. Hamermesh (Contact Author)

Widener University Delaware Law School ( email )

4601 Concord Pike
Wilmington, DE 19803-0406
United States
302-477-2132 (Phone)
302-477-2257 (Fax)

Matthew Jennejohn

Columbia Law School ( email )

435 West 116th Street
New York, NY 10025
United States

Brigham Young University - J. Reuben Clark Law School ( email )

436 JRCB
Brigham Young University
Provo, UT 84602
United States
9175093028 (Phone)

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