Concerns over agency costs dominate corporate law. The central challenge is ensuring that directors act in the corporation's best interests, rather than their own best interests. Shareholder litigation is a key tool in controlling these agency costs. If directors cross the line, the law provides an array of litigation options that shareholders can use to hold directors accountable. Shareholders can file securities class actions if directors lie to them. They can file shareholder derivative suits if directors engage in egregious misconduct. And they can file lawsuits under both state and federal law if directors try to sell the company at too low of a price or without adequate disclosures.

Shareholder litigation, however, has agency costs of its own. Most shareholder plaintiffs lack sufficient incentives to closely monitor these lawsuits. As a result, plaintiffs' attorneys can make litigation decisions that benefit themselves at the expense of their shareholder clients. This concern arises in nearly all types of shareholder litigation-from shareholder derivative suits to securities class actions and merger cases. Regardless of the underlying law, shareholder litigation faces a common need for a gatekeeper.

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