The causal relationship between block premium and the likelihood of shareholder litigation has two possibilities. First, Barclay and Holderness (1989) argue that one of the costs of block ownership is the expected likelihood of litigation. According to this argument, greater ex ante litigation risk will reduce the size of block premium. Second, agency theory suggests that excessive private benefits, the size of which is measured by the block premium, can lead to litigation by disgruntled shareholders. According to this agency-theory hypothesis, greater block premium will indicate a greater likelihood of litigation. Using a sample of 593 block trades in the United States, we find evidence that greater litigation risk at the time of the block trade lowers the block premium, thus supporting the notion that the expected litigation risk is one of the costs of block ownership.