July 20, 2018

M&A Litigation: Suits Continue Shift to Federal Court

The latest edition of Cornerstone Research’s M&A Shareholder Litigation Study says that the move away from Delaware and toward federal courts as the preferred venue for M&A objection litigation continued in 2017. Here are some highlights:

– In 2017, the number of M&A deals litigated in federal court increased 20%, while state court filings declined. The 3rd Circuit was the most active federal court last year.

– The number of M&A deals litigated in Delaware declined 81% from 37 in 2016 to seven in 2017.

– A total of 112 M&A deals valued over $100 million had associated lawsuits in 2017 compared to 137 in 2016 (an 18% decline).

–¬†Lawsuits were filed more slowly in 2016 and 2017 compared to pre-Trulia trends. In 2017, the first lawsuit was filed an average of 48 days after the deal announcement, compared to 40 days in 2016 and 21 days in 2015.

The study also notes that litigation rates have dropped markedly since Delaware’s Trulia decision made it more difficult to obtain judicial approval of broad, disclosure-only settlements. In 2013, 94% of M&A deals valued over $100 million were litigated. In contrast, shareholders filed lawsuits in 71% and 73% of¬†comparably sized deals announced in 2016 and 2017, respectively.

John Jenkins