Enforceability of Mandatory Arbitration Clauses for Shareholder-Corporation Disputes

Authors

Garry D. Hartlieb, University of Michigan Law School

Abstract

Investor litigation is an increasingly vexatious field of law. Nearly every time a significant change of control or corporate ownership occurs, plaintiffs’ attorneys file standardized complaints to set in motion class action suits. Ultimately, the settlements shareholders receive fail to achieve the practical effects that parties on both sides desire. Shareholders may receive pennies on the dollar of what they allege was lost by corporate wrongdoing, and, in some cases, shareholders may not receive monetary recovery as the settlement requires only that the corporation to make changes to its governing documents. These suits distract directors and management from the core operational aspects of their business. Corporations will pay enormous fees to attorneys and experts to defend against the suits. Often times, as a result of director and officer liability insurance, neither corporations nor directors pay damages out of pocket, making it unlikely that the suits serve a deterrent function, one of the principal policy goals behind allowing for such suits.

Recommended Citation

Garry D. Hartlieb, Enforceability of Mandatory Arbitration Clauses for Shareholder-Corporation Disputes, 4 Mich. Bus. & Entrepreneurial L. Rev. 131 (2014).
Available at: https://repository.law.umich.edu/mbelr/vol4/iss1/5