Abstract

This Article develops a construct of judges as gatekeepers and a set of principles to guide them in policing aggregate and derivative litigation. Part I provides an introduction to this type of litigation and the role of judges as agency cost monitors. Part II contrasts the “solutions” of this type of litigation with its costs, and explores an area not developed in the legal literature—the agency issues on the defendants' side of the cases. The development of the role of defense counsel and their collusion with plaintiffs' counsel illuminates the need for judges to perform their gatekeeping role. Part III explores the role of judges in aggregate litigation, including their fiduciary responsibilities as monitors of the agency costs inherent in these cases. The judicial role maps to the role of gatekeepers more generally. The focus of this Article is on gatekeeping for the “exit mechanism,” or settlement stage of these cases. To develop this gatekeeping role, this Article examines a set of cases in which judges engaged in some gatekeeping, as well as incentives for gatekeeping and for shirking. Part IV then presents a set of gatekeeping principles that judges can deploy to decrease agency costs and improve the effectiveness of the litigation overall. Part V concludes.

Keywords

Caremark International, Inc. Derivative Litigation, In re 698 A.2d 959 (Del. Ch. 1996), Fiduciary duties, Judicial power, Settlements (Law), United States