It is no secret that when a public company announces a merger, lawsuits follow. There is nothing inherently wrong with this phenomenon. If the merger price is woefully unjustifiable or if shareholders are not given adequate disclosure to cast an informed vote, a lawsuit is very much the proper way to redress these matters. However, the ubiquity and multiplicity of merger lawsuits, colloquially known as a “merger tax,” has caused many to view such lawsuits with a certain degree of skepticism. City Trading Fund v. Nye, No. 651668/2014 46 Misc.3d 1206(A), at *13 (Sup. Ct. N.Y. Cnty. Jan. 7, 2015).

In two recent decisions, Gordon v. Verizon Commn’s, No. 653084/13, 2014 WL 7250212 (Sup. Ct. N.Y. Cnty. Dec. 14, 2014) and City Trading Fund v. Nye, No. 651668/14, 46 Misc.3d 1206(A) (Sup. Ct. N.Y. Cnty. Jan. 7, 2015), the New York Supreme Court (New York’s trial court) has continued a promising trend of scrutinizing settlements that benefit plaintiffs’ lawyers and plaintiffs, but not the shareholders they purport to represent. Long term, this enhanced scrutiny will benefit companies, their directors, and shareholders. If it continues, companies and their directors—who satisfy their fiduciary duties—should experience fewer lawsuits from plaintiffs’ lawyers and their clients who, at times, seem motivated more by their own financial interests than out of a concern for the shareholder class they supposedly represent.