Depositions of Shareholder Representative Plaintiffs in M&A Deal Litigation

Some believe that in the run-up to a preliminary injunction hearing in M&A deal litigation, a shareholder representative plaintiff needs to show only that he owns stock; hence, the deposition of that plaintiff frequently is thought to be of little utility. But for those who would give a shareholder representative plaintiff a free pass when it comes to expedited discovery, serious rethinking is warranted.

When a shareholder representative plaintiff tries to disrupt a merger, schedules a preliminary injunction hearing and commences expensive expedited discovery targeted at a corporation, its director defendants and its investment banker, seeking the plaintiff’s deposition before the preliminary injunction hearing should be de rigueur, not the exception. The Jan. 6 Chancery Court opinion inSteinhardt v. Howard-Anderson shows how potent discovery targeted at plaintiffs can be. But, as discussed below, the relevant discovery inSteinhardt arguably came too late in the process, i.e., after the preliminary injunction hearing.