Minor Myers may be new to the legal academy, but already he was written a paper that up-ends the conventional wisdom on special litigation committees (SLC).  Because of Myers’ mere 31 page working paper, authors of the major corporate law treatises and editors of the corporate law case books are going to have to rethink how they present SLC materials. 

The quality of his sample and the unambiguous nature of his findings ensure that Myers will get a lot more credit than a “But see” footnote.  As a result of this paper, Myers is going to be on the radar of a lot of appointments committees.  There is a lesson here for young and ambitious scholars:  be skeptical of well-worn legal maxims that are lacking in recent or rigorous empirical support—simple counting and percentage can reveal how we legal academics get cowed by observations, anecdotes, and flawed empirical studies that are repeated early and often.  I have a few quibbles with Myers’ analysis, which I will briefly address at the end of my remarks; but they do not detract for the overall significance of his empirical findings.

Here is the line in the abstract that make be confident that Myers’ was overreaching   “[My study] demonstrates that the prevailing view in corporate law—that special litigation committees uniformly decide to dismiss derivative litigation against manager colleagues—is not accurate.”  Okay, it is always great to have a straw man to topple.  But I thought to myself, there is a large and developed literature on SLCs; surely, most of the Brahmins in the field foreshadowed the ambiguity that Myers has stumbled upon. 

My intuition turned out to be wrong.  In the footnotes, Myers provides unambiguous quotes from leading corporate law commentators that the appointment of an SLC presages the dismissal of a derivative shareholder suit.  Note that I said “in the footnotes.”  To Myers’ credit, his analysis contains no hint of smug satisfaction or a public rebuke to senior colleagues.  (Trust me:  if he is going on the market this fall, Myers’ emotional intelligence will earn him a much warmer reception at several leading law schools.)

The misreadings of the field, as it turns out, are traceable to the confluence of two sampling limitations:  (1) most SLC are formed and deliberate without the aggrieved shareholders ever filing a complaint; and (2) there is a clear selection bias in cases that are filed and reported.  Unfortunately, these limitations (which Myers avoided) influenced the findings on one empirical study in the early 1980s.  In turn, those findings got cited over and over again by other commentators until they reached canonical proportions. 

Within Myers’ more representative sample (n =97), which spans the 1993 to 2006 time period, the initial SLC recommendations to the corporate board fall into three major categories:  dismiss (60%), settle (30%), and pursue (10%).  So in 40% of the cases, SLC are not reflexively siding with management because of so-called “structural bias”.  Further, among the cases with a “dismiss” recommendation, courts rejected motions to dismiss 31% of the time, thus prompting more settlements.  So the perception that SLCs permit an end-run around meaningful scrutiny of management may not be warranted. 

My quibbles with Myers are largely at the margins. First, half of the sample involves Delaware corporations or other entities, and Delaware has more rigorous case law that New York or states that follow the MBCA. See, e.g., Zapata v. Maldonado, 430 A.2d 779 (Del 1981) (setting forth two-step inquiry that permits judges to exercise independent judgment over SLC recommendations); In re Oracle, 824 A.2d 917 (Del. Ch. 2003) (ruling that composition of SLC was impermissible because of member’s common ties to Stanford University). Obviously, if parties are truly "bargaining in the shadow of the law," different rules may produce different outcomes. Myers should run a simple t-test to see if outcomes vary by Delaware versus non-Delaware entities. I predict they will.

Third, no author should be above rudimentary Bluebooking practices. Myers fails to fill in his cross-references (which is so simple to do as you go in Word or WordPerfect), use short-cites for repeated references, or provide full cites to relevant case law when they are introduced for the first time.  When Myers refers to a case for a legal proposition, the year and jurisdiction matter.  Yet, he forces me to flip through his paper to locate this relevant information because he is (apparently) leaving rudimentary BlueBooking to student editors.  But if you want the benefit of outside reviewers, respect their time—and basic BlueBooking does just that.  There, I said it.  Hopefully Myers will live and learn.

But overall, congratulations are in order.  Minor Myers has made a name for himself.  Next time I teach SLC, I will be discussing his important work.   

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