The stockholder’s appraisal remedy has never been the most glamorous facet of shareholder litigation. But Professor Minor Myers’s new take on the topic is not only upending assumptions, but also winning acclaim. This weekend, he and his co-author Charles Korsmo, a former visiting associate professor at BLS, will present at the 2013 Harvard/Stanford/Yale Junior Faculty Forum at Yale University. Their paper, titled “The Law and Economics of Merger Litigation: Do the Merits Matter in Shareholder Appraisal?”, offers surprising new insight into shareholder litigation.
Held each spring, the Forum is designed to encourage the work of junior scholars by “providing experience in the pursuit of scholarship and the nature of the scholarly exchange,” according to organizers. Ten to twelve scholars – each with one to seven years’ experience in teaching – are selected to present works in progress. Prominent senior scholars and junior academics alike provide feedback on the papers, which this year will focus largely on private and dispute resolution law. In past years, BLS Professors Miriam Baer, Edward Janger, and Dana Brakman Reiser have also been selected to attend this prestigious event.
Professor Myers’s paper offers the first comprehensive empirical study of shareholder appraisal, a remedy for dissatisfied shareholders that has attracted comparatively little attention in corporate law scholarship. Most challenges to mergers are brought as class actions based on some alleged breach of fiduciary duties. The attorneys who file such suits typically have ample discretion over the management and settlement of the case. The risk others have identified in such scenarios is that settlements may benefit the attorneys at the expense of shareholders.
Appraisal offers a unique window into shareholder litigation because it differs from standard fiduciary class actions in important ways. In appraisal, there are no class actions. The only shareholders who can press appraisal claims are those who have affirmatively opted-in to the litigation. Also, there is no provision for allowing the attorneys’ fees to be paid by the defendant. “The only way that the plaintiff’s attorney gets paid in appraisal is if the plaintiff decides to pay,” Myers said. The result is a set of incentives that should attract litigation only when a shareholder actually believes the claim is worth the cost of bringing it. “Our thought was that appraisal litigation ought to appear more meritorious than standard fiduciary duty class actions in mergers,” he said.
Myers and Korsmo found evidence that tends to support their hypothesis. For the same set of merger transactions, appraisal actions targeted deals with lower prices. By contrast, the only thing that accounted for which transactions attracted fiduciary class actions was the size of the transaction, not the premium. “Maybe some aspects of appraisal can serve as a template for potential reforms, which we might cover in a future paper,” Myers noted.
Professor Myers teaches courses on mergers and acquisitions, corporate finance, and property at BLS. His scholarship focuses on corporate governance, shareholder litigation, executive compensation, and corporate director behavior. His recent publications have appeared in the University of Illinois Law Review, Delaware Journal of Corporate Law, Indiana Law Journal, and others. He has also presented his research at the American Law & Economics Association Conference, Conference on Empirical Legal Studies, the NYU/Penn Law & Finance Conference, and others worldwide. He is affiliated with the Dennis J. Block Center for the Study of International Business Law and the Center for the Study of Business Law & Regulation. In addition, he is a member of the Corporation Law Committee of the New York City Bar Association.