Shareholder Litigation in Delaware: An Empirical Investigation

Authors

James D. Cox, Duke Law SchoolFollow
Randall S. Thomas
Lynn Bai

Document Type

Article

Publication Date

2025

Abstract

The empirical study of shareholder litigation in state courts is a seriously underexamined subject. To remedy this gap, we collected data on all 4,741 fiduciary duty complaints filed in the Delaware Court of Chancery over a sixteen-year period, from January 1, 2004, to December 31, 2019. After removing the duplicative cases consolidated into a lead complaint, the number of unique complaints was reduced to 2,958 in our dataset. In our coding, we examined over one hundred variables (with many variables being further subdivided into as many as eight subvariables) for each of these cases, including information about the parties, claims, motions, fees, outcomes of each motion filed, and final disposition of the case.

We begin this overview of our study by focusing closely on differences our data shows exist among the three forms that such suits take: class actions, derivative suits, and individual suits. We analyze how experiences with such suits vary depending on a range of variables, such as the form of the suit, the nature of the suit’s plaintiff, whether the suit involves a public company (and, if so, the public company’s relative size), whether the suit involves an acquisition, and the suit’s final disposition (e.g., dismissed, settled, adjudged). In this inquiry, nearly one-quarter of the suits in our dataset involve purely independent claims, which provide a ready reference to assess whether representative suits (i.e., class and derivative claims) reflect long-feared agency costs from their counsel. Commentators have long asserted class and derivative suits suffer such costs because the suit’s representative plaintiff is a mere figurehead and the plaintiff’s counsel is the one with true skin in the game.

This study also provides a time-series analysis that allows us to analyze evolving trends in the data. To do this, we first divide our database into acquisition-related cases (52% of the sample) and non-acquisition-related cases (48% of the sample). We next separate acquisition cases into three time periods that are distinctly impacted by economic and legal developments. For example, one of our time periods enables us to observe the full impact of a trilogy of important Delaware court decisions: Kahn v. M&F Worldwide Corp., Corwin v. KKR Financial Holdings LLC, and In re Trulia, Inc. Stockholder Litigation.

Finally, our data provides a rich backdrop against which the social value of shareholder litigation can be assessed. Not only do we present extensive data on the final dispositions of the cases filed during our sixteen-year study period, but we also combine that information with data bearing on attorney effort during the course of litigation, fees awarded, and the outcomes of the suit. In this context, we gather information on frequent-filing attorneys and law firms. One important finding of our study is that while a small handful of attorneys garner significant fee awards, this cohort of attorneys does not overlap the short list of attorneys and firms that constitute about half of all complaint filings, which we refer to as “frequent filers.”

Citation

James D. Cox et al., Shareholder Litigation in Delaware: An Empirical Investigation, 78 Vanderbilt Law Review 433-491 (2025)