Alison Frankel reported on the implications of HLLI’s appellate victory yesterday in Akorn, which allows HLLI director Ted Frank to intervene against strike suit plaintiffs.
Law professor Jill Fisch of the University of Pennsylvania Carey Law School, who has co-written landmark studies on disclosure-only settlements and accompanying mootness fees, told me she’s optimistic that the 7th Circuit opinion, written by the influential Easterbrook, will in fact prompt federal trial judges to be more wary of M&A disclosure-only suits.
“Judge Easterbrook getting this out there, explaining why these lawsuits are a problem, is incredibly powerful,” Fisch said. Companies contemplating pre-suit demand letters from shareholder firms, she said, can now point to Easterbrook’s opinion to argue that if plaintiffs’ lawyers make good on their threats to sue, they face the risk of sanctions.
The opinion also offers ammunition, Fisch added, to shareholders who might want to intervene to block mootness fee payouts because the 7th Circuit laid out why the fees impact all investors, not just the shareholders who sued over disclosures.
I should note that courts have from time to time denied mootness fee requests by shareholder firms when companies have refused to pay up. The issue for defendants, though, is that it’s almost always cheaper for companies to pay a mootness fee to plaintiffs’ lawyers than to pay their own lawyers to contend that shareholder firms do not deserve a payout.
Frank told me on Tuesday that Hamilton Lincoln had moved away from the issue of unwarranted mootness fees in the four years since he argued the Akorn case but that he will re-evaluate that shift after the 7th Circuit’s opinion.
“This changes the playing field,” he said. “Hopefully, the ruling is a deterrent.”
Like Fisch, Frank said that at the very least, the 7th Circuit decision should give new leverage to companies that don’t want to accede to demands from shareholder firms, driving down the cost of mootness fee settlements.