The Problem with the “Non-Class” Class: An Urgent Call for Improved Gatekeepers in Merger Objection Litigation

Authors

Josh Molder, Fordham University School of Law

Keywords

Class actions, class certification, litigation gatekeepers, merger objection litigation, corporate governance, Federal Rules of Civil Procedure, plaintiff’s lawyers, non-class, individual suit, Rule 23, shareholders, collusive settlements, due process, settlement, corporate defendants, shareholder litigation

Abstract

Until recently, class actions dominated merger objection litigation. However, plaintiff’s lawyers have constructed a “non-class” class where an individual suit can benefit from the leverage of a certified class without ever meeting the stringent class certification requirements of Federal Rules of Civil Procedure 23. This new development has initiated a shift in merger objection litigation where plaintiffs are increasingly filing individual suits instead of class actions. However, this shift has left shareholders vulnerable to collusive settlements because plaintiff’s attorneys have significant control over these suits and a strong incentive to settle quickly for a substantial fee. Additionally, corporate defendants are incentivized to settle these individual suits to avoid the high costs of litigation and secure a broad release of all claims from the underlying transaction.

This Note explores the implications of this shift from class actions to individual suits in merger objection litigation and concludes that the need for a change by litigation gatekeepers is clear. However, as this Note will explain, the “non-class” class is also particularly capable of evading common litigation gatekeepers in shareholder litigation. Therefore, this Note proposes a series of actions by multiple gatekeepers that, if taken, would begin to address the problem of the “non-class” class.

Recommended Citation

Josh Molder, Note, The Problem with the “Non-Class” Class: An Urgent Call for Improved Gatekeepers in Merger Objection Litigation, 29 Fordham J. Corp. & Fin. L. 383 (2023).