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Coalitions among Plaintiffs’ Attorneys in Securities Class Actions

This paper examines contests among plaintiffs’ firms to become lead counsel in securities fraud class actions. We study lead plaintiff appointments in all federal securities class actions involving a disclosure claim from 2005 to 2016. We find that law firms’ decisions to combine correspond primarily with the existence of relationships—either with clients or between firms—rather than case characteristics. In the case of initial motions, the presence of a relationship between attorney firms and certain institutional investor movants for lead plaintiff corresponds with motions that propose multiple lead counsel. We also find that although the typical class action has several lead plaintiff motions, many of these motions will either withdraw or combine before the judge chooses the lead plaintiff and lead counsel. When motions combine, the number of selected lead counsel typically increases. The existence of prior relationships between law firms corresponds with the decision to withdraw or combine. Finally, we find that the correspondence of prior relationships between law firms on decisions to withdraw or combine does not increase with our proxies for the importance of synergies between law firms.