Zealous Advocates or Self-Interested Actors? Assessing the Value of Plaintiffs' Law Firms in Merger Litigation

48 Pages Posted: 19 Jul 2014

See all articles by C. N. V. Krishnan

C. N. V. Krishnan

Case Western Reserve University - Department of Banking & Finance

Steven Davidoff Solomon

University of California, Berkeley - School of Law; European Corporate Governance Institute (ECGI)

Randall S. Thomas

Vanderbilt University - Owen Graduate School of Management; Vanderbilt University - Law School

Date Written: July 17, 2014

Abstract

Using a hand-collected sample of 714 class actions that challenge the fairness of M&A transactions from the period 2003 through 2012, we examine the effectiveness of plaintiffs’ law firms. We divide plaintiff law firms into top-10 and non-top-10 firms using various reputation measures. We further segregate top law firms into top 5 law firms based on their popularity with informed plaintiffs and ability to obtain large attorneys’ fees awards. We find that the presence of a top plaintiffs’ law firm is significantly and positively associated with a higher probability of lawsuit success. These results hold even after controlling for selection bias - the likelihood that top law firms get to pick better cases that have higher chances of success. We find that top plaintiffs’ law firms are significantly more active than other plaintiffs’ law firms: they file more documents in the cases they litigate and they are more likely to bring injunction motions to enjoin a transaction. Defendants are also less likely to file a motion to dismiss cases filed by top plaintiffs’ law firms. Overall, we find evidence that law firm litigation activity aids top law firms in their success, which, in turn, feeds into their popularity. Our results inform the debate over shareholder litigation generally as well as the appropriate method for appointing lead counsel in shareholder class action litigation.

Suggested Citation

Krishnan, C. N. V. and Davidoff Solomon, Steven and Thomas, Randall S. and Thomas, Randall S., Zealous Advocates or Self-Interested Actors? Assessing the Value of Plaintiffs' Law Firms in Merger Litigation (July 17, 2014). Available at SSRN: https://ssrn.com/abstract=2467738

C. N. V. Krishnan

Case Western Reserve University - Department of Banking & Finance ( email )

11119 Bellflower Rd
PBL 363
Cleveland, OH 44106-7235
United States
216-368-2116 (Phone)

HOME PAGE: http://weatherhead.case.edu/faculty/c-n-v-krishnan

Steven Davidoff Solomon

University of California, Berkeley - School of Law ( email )

215 Law Building
Berkeley, CA 94720-7200
United States

European Corporate Governance Institute (ECGI) ( email )

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

Randall S. Thomas (Contact Author)

Vanderbilt University - Owen Graduate School of Management

401 21st Avenue South
Nashville, TN 37203
United States

Vanderbilt University - Law School ( email )

131 21st Avenue South
Nashville, TN 37203-1181
United States

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