The past few years have seen a dramatic spike in M&A litigation, despite an equally dramatic decrease in deal volume after the post-Lehman economic collapse. These days, essentially every corporate merger involving a publicly traded company invites a lawsuit from shareholders claiming that the target corporation’s board of directors breached its fiduciary duty by agreeing to sell the company for an unfair price through a tainted process. As it has become increasingly difficult to enjoin the arm’s length acquisition of a Delaware corporation based on unfair price claims, the real focus of most M&A litigation has become the claim that the board violated the Delaware common law duty to disclose by issuing a materially misleading proxy statement in connection with the proposed transaction.
No matter how accurate the information disclosed in the target company’s proxy statement, it seems as if there will always be a shareholder (backed by the usual-suspect law firms) that demands more information. But Delaware courts have become increasingly frustrated with the type of “tell-me-more” disclosure allegations that generally seek nothing more than additional details about the negotiations leading up to the merger and the underlying data considered by the target corporation’s banker in formulating its fairness opinion. As such, Delaware courts are reluctant to award plaintiffs’ attorneys significant fees for disclosure-only settlements.
