Edited by Claire A. Hill and Steven Davidoff Solomon
Chapter 14: Settlements and fees in merger litigation
The rate of merger litigation has more than doubled over the past decade, yet the vast majority of these cases end in ‘disclosure only’ settlements, which exhibit all of the indicia of litigation agency costs. This chapter offers a review of settlement practices in the Delaware Court of Chancery, America’s leading corporate law court, focusing on the role of the judiciary in approving settlements and awarding fees, demonstrating that the occasional reduction of attorneys’ fees has not been sufficient to stem the flood of merger-related litigation. The chapter then argues that in order for the Court of Chancery to solve the problem of merger litigation, it must consider more drastic measures. Specifically, the Court should either: (i) reject low value settlements as a matter of course; (ii) establish a presumptive no-benefit rule for disclosure settlements; or (iii) require proportionality of the settlement and release. Fortunately, there is substantial evidence, reviewed in the chapter, that the Court is now considering changes along precisely these lines.
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