Docket Dividends: Growth in Shareholder Litigation Leads to Refinements in Chancery Procedure

Abstract

The Delaware Court of Chancery is considered by many to be the United States’ premier business court. As a result, the Court of Chancery’s docket tends to reflect the latest developments in the law of business organizations and, especially, the merger & acquisition (or M&A), marketplace.

One important recent trend is the growth in shareholder representative litigation, (i.e., class actions and derivative suits). Currently, over 90% of M&A deals over $100 million are challenged by shareholders. The authors describe how this growth has resulted in new case law refining Chancery procedures relating to the handling of shareholder representative litigation. This Article addresses emerging issues in the civil procedure of shareholder representative litigation along two parallel tracks. First, it summarizes the effect that the growth in shareholder representative actions has had on four areas of Delaware procedural law: (1) awards of attorneys’ fees to plaintiffs’ counsel; (2) certification and removal of lead plaintiffs; (3) motions to stay or dismiss because of concurrent litigation in another jurisdiction; and (4) the interaction of pleading rules, forum shopping, and statutory books and records actions under DGCL Section 220. Second, the Article attempts to demonstrate how Delaware’s volume of corporate and alternative business entity cases and the responsiveness of its courts, its legislature, and the legal marketplace generally accelerate the development of refined doctrine, measured balance, and valuable predictability in substantive and procedural aspects of corporate law alike.