CEI Fights Merger Tax and Abusive Strike Suit in Fifth Circuit
This morning, the Competitive Enterprise Institute (CEI) argued before the U.S. Court of Appeals for the Fifth Circuit in its challenge to the strike suit settlement in Aron v. Crestwood. CEI’s Center for Class Action Fairness (CCAF) is appealing the settlement approval of this shareholder suit where the plaintiffs’ attorneys received $575,000, while the shareholders recovered only immaterial supplemental disclosures.
Ted Frank, director of CEI’s Center for Class Action Fairness said the following about CCAF’s objection in Aron v. Crestwood:
“Strike suits against mergers are, in the words of the U.S. Court of Appeals for the Seventh Circuit, a ‘racket’ that costs shareholders millions of dollars a year, all to the pockets of rent-seeking lawyers. CEI has been at the forefront of challenging this litigation abuse, and we hope this case creates additional precedent deterring this type of legalized extortion. It can be a game of whack-a-mole as lawyers try to find jurisdictions that haven’t yet spoken out against the practice, but as more and more courts strike down these lawsuits, more and more shareholders will be able to avoid the ‘merger tax.’”
This abusive strike suit is similar to Hays v. Walgreen, where CCAF won its challenge before the Seventh Circuit Court of Appeals in August 2016. The Walgreen ruling was a helpful step in protecting shareholders from getting the raw end of the deal in disclosure-only settlements and CCAF hopes the Fifth Circuit recognizes the same principles apply in Aron v. Crestwood.
>> See the Crestwood filings here.
Source: https://cei.org/content/cei-fights-merger-tax-and-abusive-strike-suit-fifth-circuit
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