Rare Federal Court Decision Casts Doubt on Merger Disclosure Claims, but Will It Change Anything?

These days, most public company mergers continue to attract one or more boilerplate complaints, usually filed by the same roster of plaintiffs’ law firms, asserting that the target company’s proxy statement contains materially false or misleading statements.

These complaints usually also assert that the stockholder meeting to approve the merger should be enjoined unless and until the company “corrects” the false or misleading statements by making supplemental disclosures. While not too long ago cases like this tended to be filed in the Delaware Court of Chancery and other state courts asserting breaches of state-law fiduciary duties, including the duty of disclosure, after the vast majority of these cases today are filed in federal court under Section 14 of the Securities Exchange Act of 1934.

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This article was republished by Harvard Law School Forum on Corporate Governance.