In what has been a familiar trend in courts around the country, shareholders of public companies have increasingly brought putative class actions challenging publicly announced mergers and acquisitions. These class actions, in which the named plaintiffs purport to represent the interests of all shareholders of the acquired company, typically allege that the agreed upon deal price is too low, that the process used to reach the deal was unfair, and that the disclosures in the proxy or tender offer materials are inadequate.
These lawsuits are typically filed within days of the announced merger. According to a recent study, in 2012 alone, 93 percent of all deals valued over $100 million were subject to merger challenge lawsuits, with an average of 4.8 lawsuits filed per deal. Often, these suits are resolved quickly in “disclosure settlements” in which some additional disclosures about the transaction are made and plaintiffs counsel petition the court for a six-figure fee. As discussed below, a recent decision by the Superior Court, while nonprecedential, makes Pennsylvania a much less hospitable venue for such settlements, which strongly suggests that plaintiffs firms will choose to file elsewhere.
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