Court Rejects “Merger Tax” Litigation Settlements That Benefit Primarily Plaintiffs’ Attorneys and Plaintiffs Who Do Not Represent Shareholder Interests

Court Rejects “Merger Tax” Litigation Settlements That Benefit Primarily Plaintiffs’ Attorneys and Plaintiffs Who Do Not Represent Shareholder Interests

Feb 10, 2015

Client Alert

Brownstein Client Alert, Feb. 10, 2015

In two recent decisions, Gordon v. Verizon Commn’s, No. 653084/13, 2014 WL 7250212 (Sup. Ct. N.Y. Cnty. Dec. 14, 2014) and City Trading Fund v. Nye, No. 651668/14, 46 Misc.3d 1206(A) (Sup. Ct. N.Y. Cnty. Jan. 7, 2015), the New York Supreme Court (New York’s trial court) has continued a promising trend of scrutinizing settlements that benefit plaintiffs’ lawyers and plaintiffs, but not the shareholders they purport to represent. Long term, this enhanced scrutiny will benefit companies, their directors, and shareholders. If it continues, companies and their directors—who satisfy their fiduciary duties—should experience fewer lawsuits from plaintiffs’ lawyers and their clients who, at times, seem motivated more by their own financial interests than out of a concern for the shareholder class they supposedly represent.

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