Of Pilgrims and Puritans and the Role of Delaware Courts: In re Revlon (Frequent Filers)

One of the other unfortunate characterizations in the opinion is the reference to firms that represent shareholders as "repeat players" or "frequent filers."  As the opinion notes: 

• During the three weeks following the announcement of the Original Merger, four representative actions were filed by familiar repeat players who regularly bring representative actions on behalf of stockholders with small ownership stakes.1

And his source of information about these repeat players?  Experience. 

• 1 I characterize certain law firms as frequent filers based on my personal experience, which happily accords with an empirical analysis of the plaintiffs’ firms who file most frequently in the Court of Chancery. See Robert B. Thompson & Randall S. Thomas, The New Look of Shareholder Litigation: Acquisition-Oriented Class Actions, 57 Vand. L. Rev. 133, 186-87 (2004) (identifying firms and number of representative actions filed during a two-year period).

The phrase is not intended to complement law firms that have developed expertise in complicated corporate litigation.  It is without a doubt a pejorative characterization.  Here is how he uses the phrase throughout the opinion: 

• Real litigation activity then ceased. With repeat players in place, events were set to
  unfold on cue.
• Empirical evidence again supports this experiential insight. Professors Thompson and
  Thomas found that lawsuits brought by their list of frequent filers “settle more quickly on
  average than suits filed by other attorneys.”
• Old Counsel obtained minor tweaks to the transaction.  Frequent filers like the firms in this case have perfected this technique as a basis for settling cases challenging third-party deals, where a transaction is typically announced after a merger agreement has been executed.
• Perhaps greater judicial oversight of frequent filers will accelerate their efforts to populate their portfolios by filing in other jurisdictions.
• Regardless, while in the short run policing frequent filers may cost some members of the bar
  financially, in the long run it enhances the legitimacy of our State and its law not to facilitate a system of transactional insurance through quasi-litigation.

We let the quotes and the attitude speak for itself.  Primary materials are, as usual, posted on the DU Corporate Governance website.

Comments

[Steve]

I always enjoy reading this blog for its viewpoints, but I can't believe you are criticizing this opinion--in which the court was concerned about the adequacy of the representation given to common holders by lawyers who are repeat players on the plaintiffs-side. Can Delaware do nothing right on this blog? The plaintiffs' bar can be an unsavory industry. Some of its high-profile members have landed in jail for kickbacks. And it indeed is an industry. It's a volume business where the lawyers file as many suits as possible hoping some stick. Some of their claims have merit, many don't. But these lawyers frequently are not zealous advocates for the class. And, in fact, I've witnessed many "good claims" that weren't litigated with any high degree of competence. The practices of the repeat players become known to the court and the bar. In fact, for that reason, this opinion was very surprising since the court removed as lead counsel several very prominent Wilmington lawyers. It indicates the conduct was bordering on outrageous.

It appears that, based on what the Vice Chancellor witnessed in practice, he has some concerns about plaintiffs' lawyers undermining the integrity of the representation process---good claims going unchallenged. There are serious agency costs in the class action/contingency fee business that have to be policed. It's nice that Delaware, which has an interest in attracting lawsuits, can from time to time police misconduct.