For many years, litigation inevitably followed close on the heels of a public company merger announcement. These lawsuits often led to a quick settlement in which the defendant made additional disclosures relating to the merger, the plaintiff released the defendant from all merger-related claims, and the plaintiff’s lawyers received a six-digit attorney fee award.
But recently there has been a backlash against this process. Public companies have begun adopting corporate bylaws designed to manage risks associated with a merger lawsuit. In addition, the Delaware Court of Chancery has started refusing to approve disclosure-only settlements in a number of merger litigation cases. These developments have significantly affected the merger litigation landscape.