How do Legal Standards Matter? An Empirical Study of Special Litigation Committees
48 Pages Posted: 16 Oct 2017 Last revised: 7 Mar 2019
Date Written: February 15, 2019
We examine how legal standards effect the decisions of special litigation committees (SLCs). We compile a hand-collected sample of SLC associated lawsuits spanning a 26-year period from Jan 1, 1990 through Dec 31, 2015. We produce the first extensive descriptive statistics on the utilization, role and effect of SLCs. We find evidence that law matters for SLC outcomes: case dismissals are the lowest amongst all jurisdictions in Delaware suits, but in states with the lowest legal standards for SLC judicial review, SLC’s cases are more likely to be dismissed. Defense lawyers appear to exploit these differences to obtain dismissals at a higher rate, potentially impacting shareholder value. Our results have implications for the standard of review for SLC cases and the role of judges in reviewing SLC decisions.
Keywords: SLC, Special Litigation Committee, Lawsuits, Case Dismissal, Case Settlements, High Value Settlements, Delaware courts, Legal Standards, SLC Reports, SLC Report recommending dismissal
JEL Classification: K41, G39
Suggested Citation: Suggested Citation