Next steps

Over the years, we have gotten lots of inquiries about objecting to bad shareholder derivative settlements. We’d largely passed, because we had high hopes for our pending case in the Seventh Circuit, and wanted to have that precedent in hand before we asked courts to recognize the issue of Rule 23.1 adequate representation. Now that we do, we are very interested in expanding our work objecting to bad shareholder derivative settlements. However, we face two barriers to entry that make objecting difficult.

First, the law has developed in a bad way so as to give very substandard notice to individual shareholders who hold their certificates through brokers. The settling parties typically wait until the last minute to notify brokers, asking them to comply with unrealistic deadlines, and the individual shareholders who work with Schwab or Merrill Lynch or the like don’t get notice until a few days before the objection deadline, and sometimes after the objection deadline. That’s often not enough time to investigate and handle the logistics of representation, especially if one needs to hire local counsel and request pro hac vice status. One of our long-term goals is to move the precedent in this area, but, until that happens, we need institutional-investor clients—hedge funds, pension funds—who get notice well in advance of objection deadlines and would like to work with us to end the problem of rent-seeking shareholder-derivative strike suits that hurt shareholders.

The second problem is that local-counsel requirement we just mentioned. I’m licensed in California, Illinois, D.C., and a couple of other federal courts that offer reciprocity, but many of these shareholder suits are in state courts or federal courts with burdensome local counsel requirements. (I also suspect we’ll be seeing many fewer shareholder suits in Illinois federal courts as plaintiffs forum-shop.) Large law firms are frequently unwilling to represent us for conflicts reasons; many other firms don’t want to alienate the powerful shareholder-plaintiffs’ bar. We could very much use attorneys licensed in Delaware and D. Delaware to assist us. We’d obviously prefer pro bono help, but budget to pay reasonable fees for local counsel where necessary.