Delaware and More Change in the Civil Litigation Industry; “Intergalactic Releases” and
Some naive lawyers (e.g. me) long ago thought civil litigation was about truth, justice and the American way. Not so; the University of Chicago law and economics focus plainly is correct; civil litigation is about money. Therefore, it’s not a surprise that Delaware Chancery judges now issue opinions with warnings about their thoughts on future lawsuits. Alison Frankel covers the latest set of Chancery Court warnings and opinions in a September 18, 2015 blog post. As is detailed in her post, the Chancery Court comments and warnings are so blunt they almost feel like public company guidance on future earnings. Ms. Frankel wraps up with the paragraphs below; note the overt focus of all commenters on economic drivers for corporate litigation. Civil litigation is indeed all about money and predictability, in many ways.
“If Delaware won’t approve settlements with these “intergalactic” releases, might corporations prefer litigating in a forum where they can still buy cheap deal insurance? Corporationsfought hard to tame multijurisdictional M&A shareholder litigation through forum selection clauses in charters and bylaws. Most of those provisions, at least for Delaware corporations that have adopted them, require shareholders to litigate in Delaware. It’s up to defendants to enforce the provisions, though, so if corporations decide they can’t get what they want from Chancery Court, they could presumably choose not to move to dismiss shareholder M&A suits in other jurisdictions where they can obtain broad releases in exchange for just disclosures and fees for plaintiffs’ lawyers.
I ran that hypothesis past a couple of very wise corporate defense lawyers. They were of the mind that Chancery Court judges are aware of that possibility – and are going to give defendants a reason to continue funneling cases to Delaware. Chancery Court can do that by becoming more aggressive about dismissing unfounded M&A class actions early and being stingier about expediting dubious cases.
Delaware judges have been saying since the M&A litigation boom began that they will reward plaintiffs’ lawyers who bring strong cases, as we saw most recently in Laster’s $148.2 million judgment against Dole’s CEO and former general counsel. But if they want defendants to keep exercising forum selection clauses, they have to be willing to discourage shareholder firms from pursuing dubious cases. In the long run, plaintiffs’ lawyers won’t sink money into litigation that doesn’t pay.”