Most, but not all, merger objection litigation is settled, say observers. These cases tend to be settled “because people want peace,” said Steve Shappell, Denver-based managing director of Aon Risk Solutions' financial services group.
However, there are cases where “our clients look at this, and say, "We're not going to pay blood money,'” said David W. Steuber, a partner with law firm Jones Day in Los Angeles. Meanwhile, “more and more courts are beginning to recognize that many of these are quite legitimate and well-done deals, and they're perhaps less inclined to permit (the lawsuits) to proceed.”
However, in Delaware, where many of these cases have been filed, judges have said in speeches that “there is a problem” with the way merger objection lawsuits are working, but “they haven't taken steps at least in their decisions to really rein it in,” said Geoffrey Etherington, a partner with law firm Edwards Wildman Palmer L.L.P. in New York. But there have been some situations where judges have refused settlements for attorneys fees, stating they are too high, he said.
Barring any legislative approach, which is not expected, there is no apparent end in sight to these cases, though, experts say.
In response to the issue, insurers are seeking separate retentions for merger objection cases.
Trevor Howard, New York-based senior vice president of U.S. management liability for Liberty International Underwriters, said these are “quickly becoming the norm,” particularly for small to medium-sized companies. He noted that in many cases, larger companies' retentions are high enough so that these split retentions are not necessary.