Sunday, January 25, 2009
Corporate Misconduct and the Perfect Storm of Shareholder Litigation, by Jessica Erickson, University of Richmond School of Law, was recently posted on SSRN. Here is the abstract:
When it comes to combating corporate misconduct, is more litigation necessarily better? The conventional wisdom is that we should deploy every weapon in the law's arsenal to combat corporate misconduct. This wisdom, however, reflects legal scholarship that is confined to analyzing securities class actions and derivative suits in isolation, with little inquiry into the interplay between them. By failing to take a broader view of shareholder litigation, legal scholars have missed an opportunity to provide courts with the conceptual tools necessary to meet the complex challenges of complex corporate litigation. In courtrooms and boardrooms across the country, a debate is raging over whether courts should permit shareholders to file parallel securities class actions and derivative suits arising out of the same allegations of corporate wrongdoing-a debate that has gone almost entirely unnoticed in the legal academy. The time has come for legal theory to catch up with legal practice. We must re-conceptualize the tools we use to combat corporate misconduct, recognizing that securities class actions and derivative suits can work together to achieve the diverse goals of shareholder litigation. We should then bring these new conceptual insights to bear on the current legal debate over how courts should handle parallel securities class actions and derivative suits. Now is the perfect time to calm the perfect storm of shareholder litigation.