A recent Corporate Counsel story, “In M&A Litigation, Attorneys’ Fees Under Attack?,” reports that three court decisions last month have taken aim at plaintiffs’ attorney fees.  The rulings, two in Delaware and on in Texas, “suggest a trend toward greater judicial scrutiny of ‘disclosure-only’ merger litigation settlements and, in particular, attorneys’ fee awards in such settlements,” according to the latest Morrision & Foerster newsletter (pdf), written by Joel C. Haims and James J. Beha.  The three cases are In Re Transatlantic Holdings Inc. Shareholders Litigation, In Re PAETEC Holdings Corp. Shareholders Litigation, and Kazman v. Frontier Oil Corp.  Haims and Beha write:

“Delaware is, of course, the most popular state of incorporation and its Chancery Court is the most popular forum for merger litigation.  The decisions in In re Transatlantic and In re PAETEC Holdings show the plaintiffs’ bar that the Chancery Court will not rubber stamp fee awards in merger litigation.  Plaintiffs’ attorneys often attempt to escape such scrutiny by bringing suit in other jurisdictions, most often the state where the defendant corporation’s headquarters are located. 

But it appears that Kazman effectively precludes merger litigation in Texas, the country’s second-most populous state and home to the second-most Fortune 500 companies.  As a result, taken together, these cases should cause the plaintiffs’ bar to evaluate more carefully the basis of merger suits and the relief to shareholders that such suits are meant to secure.”