Empirical scholars of corporate law are uncovering a rapidly changing and depressing pattern in M&A litigation. This new research dates from a series of articles in 2012 by professors John Armour, Bernard Black and Brian Cheffins, which announced that Delaware was "losing" its cases, as plaintiff’s attorneys migrated to other jurisdictions where they could expect lower dismissal rates and/or higher fee awards.1 This year, a newer study by professors Matthew Cain and Steven Davidoff covers 1,117 merger transactions between 2005 and 2011 and reports more surprising and complex findings.2 But the key question has not been faced by these empiricists: What policy response is appropriate?
Most of the recent studies have hypothesized an assumed competition among jurisdictions for M&A litigation.3 This assumes what is to be proved, because (with the notable exception of Delaware) most jurisdictions do not have a clear incentive to seek more corporate litigation at a time when their courts already perceive themselves as overburdened. Further, this competitive model cannot easily explain the rapidity of recent change. To cite one statistic, in 2005, 39.5 percent of corporate merger transactions with a value over $100 million attracted litigation, but in 2010 and 2011, this rate rose to 87.3 percent and 92.1 percent, respectively.4 That a merger transaction will be attacked in court is now the new norm, not the exception.
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