Zealous Advocates or Self-interested Actors? Assessing the Value of Plaintiffs? Law Firms in Merger Litigation

Using a hand-collected sample of 1,739 class actions that challenge the fairness of M&A transactions from the period 2003 through 2012, we examine the effectiveness of plaintiffs? law firms. We divide plaintiff law firms into top-10 and non-top-10 firms using various reputation measures. We further segregate top law firms into top 5 law firms based on their popularity with informed plaintiffs and ability to obtain large attorneys? fees awards. We find that the presence of a top plaintiffs? law firm is significantly and positively associated with a higher probability of lawsuit success. These results hold even after controlling for selection bias - the likelihood that top law firms get to pick better cases that have higher chances of success. We find that top plaintiffs? law firms are significantly more active than other plaintiffs? law firms: they file more documents in the cases they litigate and they are more likely to bring injunction motions to enjoin a transaction. Defendants are also less likely to file a motion to dismiss cases filed by top plaintiffs? law firms. Overall, we find evidence that law firm litigation activity aids top law firms in their success, which, in turn, feeds into their popularity. Our results inform the debate over shareholder litigation generally as well as the appropriate method for appointing lead counsel in shareholder class action litigation.