The Delaware Court of Chancery's decision in In re Trulia Stockholder Litigation, 129 A.3d 884 (Del. Ch. 2016), was hailed as a meaningful step toward curtailing lawsuits alleging that corporate boards were breaching their fiduciary duties in nearly every public company merger transaction. The vast majority of those actions resolved quickly, before a stockholder vote (or closing of a tender offer), for nothing more than additional disclosures to stockholders in already-lengthy proxy or solicitation/recommendation statements. In exchange, corporate defendants received releases of any and all claims relating to the merger, and plaintiff's counsel received a fee for the “corporate benefit” they provided. That all came to an end in Trulia, following mounting criticism from the corporate community of what many called a deal tax and increasing skepticism by the Delaware courts. [see note 1] Or did it?

Since Trulia, there has been a decline in Delaware in the number of run-of-the-mill challenges to nearly every public company merger transaction. That decline is likely attributable to Delaware's disfavor of disclosure-only settlements, as expressed in Trulia, coupled with at least two other important developments: (1) the Delaware Supreme Court's decision in Corwin v. KKR Financial Holdings, 125 A.3d 304 (Del. 2015), which held that a fully-informed and uncoerced vote in favor of a merger by a majority of a corporation's stockholders invokes the business judgment rule standard of review; and (2) an amendment to the Delaware General Corporation Law that permits Delaware corporations to adopt forum selection bylaws to drive lawsuits concerning their internal affairs to Delaware.

But while the volume of merger litigation in Delaware has been on the decline, there has been a noticeable surge in filings in other jurisdictions, particularly federal courts. According to Cornerstone Research's “Securities Class Action Filings: 2017 Midyear Assessment,” the number of federal filings of class actions involving merger transactions are at record high levels and increased to 95 in the first half of 2017—up from 57 in the second half of 2016 and 28 in the first half of 2016. These federal actions typically assert disclosure claims against the target company (and often its directors) under §14 of the Securities Exchange Act of 1934 (and related regulations promulgated by the Securities and Exchange Commission) with respect to alleged misstatements and omissions in either a proxy statement filed in connection with a stockholder vote or a solicitation/recommendation statement filed in connection with a tender offer. In substance, the disclosure claims alleged under federal law—which, notably, are not subject to forum selection bylaws (because federal courts have exclusive jurisdiction over claims under the Securities Exchange Act)—are virtually identical to the disclosure claims that previously were alleged under Delaware fiduciary duty law.