Abstract
The prevalence of settlements in class and derivative litigation challenging mergers and acquisitions in which the only payment is to plaintiffs’ attorneys suggests potential systemic dysfunction arising from the increased frequency of parallel litigation in multiple state courts. After examining possible explanations for that dysfunction, and the historical development of doctrines limiting parallel state court litigation — the doctrine of forum non conveniens and the “first-filed” doctrine — this article suggests that those doctrines should be revised to better address shareholder class and derivative litigation. Revisions to the doctrine of forum non conveniens should continue the historical trend, deemphasizing fortuitous and increasingly irrelevant geographic considerations, and should place greater emphasis on voluntary choice of law and the development of precedential guidance by the courts of the state responsible for supplying the chosen law. The “first-filed” rule should be replaced in shareholder representative litigation by meaningful consideration of affected parties’ interests and judicial efficiency.
Highlights
Overview we describe in modest detail the doctrines that determine the appropriate forum and the applicable law in American civil litigation, with an emphasis on corporate disputes
We focus on personal jurisdiction, choice of law, and the internal affairs doctrine
The large percentage of such cases that are resolved by settlement in which the only monetary compensation flows to plaintiffs’ counsel, and neither the corporation nor the class of stockholders receives any such consideration, invites closer examination of the situation to determine whether such parallel litigation is promoting undue agency costs
Summary
This paper can be downloaded without charge from: The Harvard John M. Olin Discussion Paper Series: http://www.law.harvard.edu/programs/olin_center/ The Social Science Research Network Electronic Paper Collection: http://ssrn.com/abstract=2200499 This paper is a discussion paper of the Harvard Law School Program on Corporate Governance. Putting Stockholders First, Not the First-Filed Complaint January 10, 2013 Draft
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