I’m quoted in a Reuters story about merger lawsuits and their quick settlements:
Settlements often come fast, and plaintiffs’ lawyers share in the spoils — $500,000 in a typical lawsuit, Advisen said.
“The real problem, I think, is in cases where lawyers win a few extra sentences of disclosure and walk away with $1 million of fees,” said Ted Frank, who founded the Center for Class Action Fairness and often challenges proposed settlements.
Lawyers and researchers say the proliferation of lawsuits reflects increased competition among firms.
“There are some bottom feeders on the plaintiffs’ side,” said Adam Savett, a director at the Claims Compensation Bureau LLC, which monitors class-action claims for investors. “Their modus operandi is throw up a lot of stuff on the wall and try to get a quick settlement, and move on.”
REARRANGING DECK CHAIRS
Typically, an individual or institutional investor sues a target company or its directors, seeking class-action status and alleging a breach of fiduciary duty to shareholders.
“Defense lawyers benefit from this game,” Travis Laster, a vice chancellor in Delaware Chancery Court, said at a December hearing. “They get to bill hours without any meaningful reputational risk from a loss. They then get to get a cheap settlement for their client. Disclosures are cheap.”
Frank, of the Center for Class Action Fairness, said it was up to judges to decide if these settlements have much benefit.
“Judges should consider whether these provisions actually create value for shareholders,” he said, “or amount to a rearranging of the deck chairs to create the illusion of value to justify attorneys’ fees.”