Fixing Multi-Forum Shareholder Litigation

This Article presents new empirical evidence demonstrating that serious intra-corporate disputes at public companies now attract lawsuits in multiple fora. No existing mechanism can reliably coordinate shareholder litigation in different court systems, and the resulting disorder generates uniformly negative consequences for shareholders. The multi-forum character of shareholder litigation can undermine its deterrent effect by aggravating the disjunction between settlement values and merit. At the same time, the multi-forum pattern can diminish the quality of U.S. corporate law over time by depriving incorporation states of important cases.This Article proposes to fix multi-forum shareholder litigation by creating a clear and simple mechanism for coordinating similar cases in different court systems. This proposal would require federal courts to stay proceedings in shareholder litigation before them when a similar case is pending in the state of incorporation. It would also allow suits filed in states other than the state of incorporation to be removed to federal court, where they would be subject to the same stay of proceedings. Such a system would neutralize the ability of any plaintiff to file a case that could compete for settlement with a case in the incorporation state. The result is an ordered solution to the problem of multi-forum shareholder litigation that prioritizes the state of incorporation when suits are filed in competing fora but otherwise does nothing to restrict the venue options of shareholders