At least five national law firms have filed notices seeking FirstMerit Corp. shareholders for potential lawsuits to block the proposed buyout to Huntington Bancshares.

But such lawsuits are commonplace and expected, said a University of Akron law professor.

“It’s the cost of doing a deal. You’re going to get sued,” said UA School of Law Professor Stefan Padfield, who primarily teaches business law. “When [companies] weigh the costs and benefits of fighting that lawsuit, [they] figure in the costs of settlement into deal costs.”

In 2014, shareholders filed suits challenging 93 percent of corporate mergers, up from 44 percent in 2007, according to Cornerstone Research. The average deal drew nearly five lawsuits claiming the transaction shortchanged investors. Recent studies, however, have shown the number of lawsuits on the decline — though still large in numbers.

There’s usually a rush for law firms to quickly begin soliciting potential plaintiffs after a merger is announced, said Padfield.

“It’s almost before anybody even looks at what is in the [merger] documents, [they] file the suit first and ask questions later,” he said.

It usually depends upon the jurisdiction, but often a judge will look for the firm representing the top dollar amount in the largest number of shareholders to determine a lead counsel or law firm for a potential class-action suit, he said.

Additionally, large institutional investors, which often have large numbers of shares in companies, usually will use their own law firms to file lawsuits blocking mergers, Padfield said.

Individual investors

For consumers, who often hold a small number of shares and aren’t familiar with lawsuits, they usually either don’t do anything — and would be included in any potential class-action suit unless they opt out — or they just pick a firm, he said.

“Unfortunately the reality is there’s a lot of unsophisticated investors. It’ll probably be the first one they see,” Padfield said.

The legal industry has hotly debated whether such lawsuits really benefit shareholders, he said.

“Some people look at it as a way for lawyers to make money. I see value of the ability to bring the suits,” said Padfield. There are incentives for managers and boards of directors to soften a deal and not look out for shareholders, he said.

“There’s a need for outside check of the boardroom, but there should be a better way of ‘Let’s just assume it’s going to happen,’?” he said.

As of Thursday, five law firms from New York, Texas, Pennsylvania and Delaware were soliciting FirstMerit shareholders and saying they were “investigating” the buyout.

Terms of the deal

Two Dallas firms in one announcement touted that one of their lawyers was a former U.S. Securities and Exchange Commission attorney. Their news release said the consideration for the value of the stock in the deal “is virtually no premium over the 52-week high and significantly lower than at least one analyst’s estimated value of $22.86.”

The deal calls for shareholders of FirstMerit to receive 1.72 shares of Huntington’s common stock, and $5 in cash, for each share of FirstMerit common stock.

The per share consideration is valued at $20.14 per share based on the closing price of Huntington common stock on Monday, the day the deal was announced.

Calls to both firms, the Briscoe Law Firm and Powers Taylor LLC, were not returned.

Padfield said he’s hard pressed to think of many lawsuits that have actually stopped a merger.

“I don’t remember the last time a merger got derailed by these fiduciary claims,” he said. “My gut reaction is it’s rare. Usually there’s the back and forth — both sides have an incentive not to go to court. The plaintiff’s firm would hope not to invest a lot of money, and management has an incentive not to spend a lot on litigation and going to trial. There’s perverse incentives to get it done on both sides.”

Betty Lin-Fisher can be reached at 330-996-3724 or