The Changing Dynamics of Merger Litigation — Early Impacts on Filings, Settlements, Trials, and Insurance

If your company announces a merger, multiple merger objection lawsuits will likely soon follow. Such lawsuits have often led to “disclosure-only” settlements, in which the target company agrees to make additional disclosures along with payment to the plaintiff’s lawyers in exchange for a broad release of claims related to the merger. However, in a January 2016 decision, the Delaware Chancery Court rejected disclosure-only settlements as a means to resolve such cases. While the immediate impact of the ruling may be to reduce the number of lawsuits filed in Delaware in connection with proposed mergers, the long-term impact could be higher costs for companies, their directors and officers, and their D&O insurers.

This article was co-authored by Jennifer A. Dowd, senior vice president, Marsh FINPRO, and Barry Kaplan, partner, Wilson Sonsini Goodrich & Rosati.

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