This Lawyer Is Making It Less Profitable to Sue When Companies Merge

David Duggan opened his mail last August to find he was part of a legal settlement. He’d been a shareholder in Crestwood Midstream Partners LP, a natural gas pipeline company that had recently merged with one of its affiliates in a $3.5 billion deal. A group of attorneys Duggan had never heard of, representing Crestwood investors, had objected to the terms of the deal and settled a class-action suit brought in the Southern District of Texas against the company and its affiliate. Yet investors didn’t get a check. All that Duggan found in the mail was a dozen pages of legal disclosures.

Duggan was upset. A retired lawyer himself, he knew about “disclosure-only” settlements like this one. Someone would sue a company involved in a merger for failing to provide a piece of information that might be relevant to the merger deal and then settle when the company agreed to disclose it. The plaintiffs wouldn’t get any money—but the lawyers would have their fees paid by the company as part of the agreement. In the Crestwood case, attorneys were paid about $575,000.