The Deal Quotes Douglas Rappaport on Litigation Strategies for Shareholder Activists
Douglas Rappaport, a partner in the litigation practice at Akin Gump, has been quoted by The Deal in “Activist Spotlight: Litigation Strategy Moves Behind the Scenes.” The article reports that shareholder activists and corporations are filing fewer lawsuits targeting each other, though the behind-the-scenes action, such as writing letters and challenges, remains robust.
Rappaport said companies have likely cut back on their challenges related to Schedule 13D disclosures or other disclosure concerns because of a realization in many cases that, at best, a challenge will result in the activist needing to correct their securities filings, which “can provide some leverage but is not a great tool to knock an activist out of the box.” He pointed to one factor behind the recent decline in litigation, which he said was due to corporations that are more willing to engage in recent years: “It used to be companies wouldn’t communicate, seal up the gate and the only way for communications was through litigation. But issuers and activists are becoming more communicative, less litigious.”
Challenges seeking so-called “books and records” from targeted corporations can be successful, Rappaport said, but the activists may not be able to take public the information they get. In many cases, he said, activists are working without enough information about their targeted information, so a lawsuit could help to get it.
“Depending on the judge you can get a great deal of [confidential] information, the issue for proxy contest is that it could be subject to a non-disclosure agreement and you can’t put it in proxy materials,” Rappaport added. “It is an arrow in the quiver, especially when you feel you aren’t getting the whole story.”