In "The Decisions of Corporate Special Litigation Committees: An Empirical Investigation," Minor Myers makes an important claim. Contrary to the received wisdom of everyone who has ever written on the topic, Myers finds that special litigation committees (SLCs) do not almost uniformly recommend to dismiss shareholder derivative litigation against their companies. If only the paper had the data to back up this claim, it would be an instant part of the scholarly canon in corporate law. Because everything hinges on its empirical finding, this review will focus only on the assumptions that the paper uses to come to this finding. Upon inspection, the paper's important empirical finding is really nothing more than a particular characterization of the data, and the data instead have more in common with the received wisdom than the paper's novel claim.

The way the paper gets to its startling conclusion is to count settlements as a nondismissal of the shareholder derivative litigation. If we adopt Myers's counting and consider settlements as an SLC decision not to dismiss, then a surprising 42% of the time SLCs do not ask to dismiss a shareholder derivative suit (p. 31, tbl. 1). As Myers himself acknowledges, however, we know nothing about the terms of these settlements:"To be sure, there is the possibility that a committee may do just enough to pass the straight-face test, maybe striking a settlement, and a wimpy one, with only the most egregious defenders. However, the securities filings do not distinguish between a phony settlement (or pursuit) and a good-faith settlement." (p. 32) Moreover, Myers counts a case as a dismissal only if the SLC moved to dismiss all claims against all defendants (p. 32). A settlement with one scapegoated and perhaps disgraced ex-officer while the SLC recommends dismissal of multiple counts against current officers and directors is still a settlement by Myers's reckoning. Finally, Myers counts a case as an SLC recommendation to settle the case without knowing who initiated the settlement. If one fiscal quarter's securities filing discloses an SLC and then the next quarter's filing says the case was settled, the case goes under the "settled by SLC" category (pp. 26-27) when, in fact, it may have been a rubber-stamped SLC action of a plaintiff and corporate defendant settlement.

The paper's defense of these counting conventions seems to be that it is the best we can do given the information available in the SEC filings. In deciding to count any settlement as an SLC settlement, for example, Myers argues that the SLC need not have acquiesced in the settlement and thereby must have implicitly or explicitly approved it (p. 27). Therefore, it gets counted as an SLC action. This may be the best we can do looking only at the general descriptions contained in public securities filings upon which the paper relies, but an investigation of the underlying court documents surely would provide more detail into whether the paper's use of the settlement data made the appropriate assumptions. Without considering the corresponding benefits, it is not a fair criticism of empirical work that a costlier data collection process would have yielded more information. This paper, however, makes a big claim by making assumptions about the information that costlier data collection would yield. In this instance, more data collection would seem necessary.

At nearly every turn, the paper counts cases in a way that biases its results toward a finding that would cut against the conventional wisdom. A more conservative and more appropriate approach toward the data would exclude the settled cases, about which we know very little. Of the 69 cases where the paper has information about whether the SLC recommended dismissal or to pursue the derivative litigation, 57 of these cases (82.6%) were recommendations to dismiss (p. 31, tbl. 1). Even this figure would be surprising when viewed against the conventional wisdom that SLCs almost uniformly vote to dismiss and would be much more defensible, if not as quite a sensational, claim than the paper currently makes.

Even then, one must remember the paper's convention of counting as a dismissal only a case where the SLC recommended dismissing all claims against all defendants (p. 32). Looking at the paper's own data from a different perspective thus suggests a very different view of the data. In about five cases out of every six, the SLC recommends to dismiss all claims against all defendants. In the sixth case, the SLC's recommendation is a mixed bag, recommending dismissal of some claims or some defendants. In not one of the paper's 69 cases where it has information on the SLC's recommendation did the SLC fully support the underlying derivative suit. Thus, the paper's data are actually quite supportive of the conventional wisdom of near uniform SLC recommendations to dismiss derivative litigation. Indeed, I suspect if one looked carefully at the underlying stakes involved in the one of every six SLC decisions to partially pursue derivative litigation, one would find that most of these SLC decisions are more "partial" than true "pursuit" of existing directors and officers.

Myers is to be commended for writing an empirically minded paper with a transparent presentation of his data and his assumptions. By not relying on reported cases, he has gone beyond the past attempts to study SLC decision making. Myers rightly points out and has the data to show (p. 39 tbl. 6) that a reliance on reported cases likely will result in a bias toward reinforcing the conventional wisdom. After all, a case where the SLC moves to dismiss is the most likely to be appealed and hence end up in the case reports. By going beyond the conventional and easy data collection methods and then by being appropriately transparent about the assumptions he makes in using the data, Myers has opened up the paper for admittedly tough criticism such as that written above. Nonetheless, the conventional wisdom that SLCs most always move to dismiss shareholder derivative litigation remains intact.

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