In 1988, I was fortunate enough to meet a recent U of A graduate named A Cohn. His office was next door to me. He soon became a friend and client. Before the age of 30 he had become a millionaire many times over. I once asked him his secret for such great success. His answer… “I actually read the documents”. That’s it? He reads? Wow. They do not teach you that in B-school. Well, across Arizona and the US many public companies have adopted bylaws over the past few years requiring shareholders suing them to do so in a single court. This is a concerted effort to limit and control the Plaintiff’s bar and it’s working.
A resent treatise found that— 96% of mergers over $1 billion in 2014 ended up in shareholder litigation. Just 40% of deals faced suits in more than one jurisdiction, down from 62% in 2013, according to Cornerstone Research and the Wall Street Journal. The number of individual complaints filed per merger fell to about 5%, its lowest level since 2008.
These hardball suits, which always accuse boards of selling too cheaply, too quickly or failing to protect shareholders’ best interests, are very toxic and costly. Critics including corporate lawyers and executives, say they constitute a “deal burden” and often fail to uncover any wrongdoing. The Plaintiff’s bar say they keep boards on their toes and, in many many cases, can recover money for the investors who lost out.
Multi-jurisdictional litigation has been a particular gripe of corporate advisers. Responding to lawsuits in multiple courts around the country raises defense costs and encourages bad settlements that do little for shareholders while enriching plaintiffs’ lawyers, they say. So, you are going to see more of these bylaw provisions dictating jurisdictional mandates for aggrieved shareholders. Like A Cohn said back in 1988, “read the documents”. It’s that simple.
We have experience in these types of M & A lawsuits. For almost 30 years, we have worked in Scottsdale and Paradise Valley Arizona on behalf of and up against limited liability companies, public companies and not-for profit companies. Take away? Always read the bylaws and corporate governess documents before you invest. Call Bill Miller at 602.319.6899 to discuss any corporate law issue, business, real estate or commercial legal questions you may have. The law office is office is located at 8170 North 86th Place, Suite 208 Scottsdale, AZ 85258

Comments are closed.