On November 11, the
Columbia Law School co-hosted with Wachtell, Lipton, Rosen & Katz, a symposium
entitled: The Delaware Court of Chancery: Change and Continuity. In
addition to Justice Jack Jacobs of the Delaware Supreme Court, each of the 5
members of the Court of Chancery were in attendance at this congregation in New
York City that brought together corporate litigation practitioners, academics
and jurists of business courts around the country. The list of luminaries on
the various panels at the conference is available here.
The press release announcing the conference explains that:
"The
program will equally celebrate the investiture of incoming Chancellor Leo E.
Strine, Jr., who has also written numerous groundbreaking corporate law
decisions and has led the Court of Chancery since 2011. A particular focus will
be on "merger and acquisition" litigation and the new tendency for such
litigation to occur in multiple forums.... Speakers will discuss some of the most
pressing issues that arose for the Court during the Chandler era, and how those
issues are likely to play out under the current chancellor. Panelists will also
discuss Delaware's influence on business courts around the country as well as
other topics pertaining to the Court of Chancery.... The Chancery Court, founded
in 1792, is the venue of choice for Fortune 500 companies, more than 60 percent
of which are incorporated in Delaware. Last year, the Court disposed of more
than 3,700 cases."
We
will provide snippets of selected comments from panel members.
Bill
Savitt noted the meteoric increase in M&A litigation in the last decade so
that 85% of public deals were litigated in 2010. He also noted that in addition
to the lengthy formal opinions, there has been a proliferation of the use and
distribution of "transcript rulings". Among other parts of his presentation was
an explanation of his view that the Delaware courts benefit from the extensive
commentary about their decisions by academics and practitioners, including
extensive analysis on blogs. Bill's PowerPoint included the masthead of several
blogs that exemplify his point. We were thrilled to see the masthead of this
blog on his PowerPoint, especially when we were in the august company of highly
respected blogs such as The Conglomerate, which provides a photo of the
PowerPoint slide here.
Other blogs referenced on his PowerPoint slide were The Harvard Law School
Corporate Governance Blog, Truth on the Market,The Deal
Professor, and The M & A Law Prof. If he had room on the slide,
I'm certain he would have also referred to Professor Stephen Bainbridge, a
corporate law scholar who is often cited in the opinions of the Delaware
courts. The good professor provides citations here
to the most recent Delaware opinions that reference his scholarship.
Mark
Morton discussed the challenge of having so many transcript rulings and
opinions, as well as commentary on them, to keep updated on-to the extent those
recent developments need to be incorporated in one's practice.
Prof.
Steven Davidoff briefly discussed "strategic decisionmaking" and the Airgas
case. He said that Airgas is an "unimportant" case from an historical
perspective because, for example, the bylaw ruling had little impact on most
companies. The case may be important, however, from a decisionmaking
perspective and what it says about how Delaware decides issues. For example,
the case attempted to keep a level or open playing field for bidding.
Prof.
Mark Roe talked about shareholder access in Delaware compared to the federal
model, with Delaware and Washington being the two jurisdictions that have the
most impact on corporate law. He posits that U.S. corporate law is the result
of interaction between the two.
Prof.
Bernard Black discussed his research about Delaware losing cases that are being
filed in other jurisdictions-even those involving Delaware companies and
Delaware corporate law. He explains why Delaware should be concerned about
losing the important cases. Delaware must balance the need to attract the cases
that should be decided in Delaware in order to develop and control Delaware
corporate jurisprudence, compared to the need to avoid making the forum too
attractive to plaintiffs' lawyers such that it would disincentivize those who
would incorporate in Delaware. His research disclosed that 80% was the former
"market share" Delaware had for key corporate cases, but now it is closer to
30%. He did a study of the top 25 M&A cases since 1995 and found that the
number filed in Delaware, as a percentage of all cases, is going down. In
addition, Delaware in the past was the only forum where many key cases were
filed, but now the cases challenging deals are often filed in multiple fora. He
suggested that among the factors for the decline was the "anti-plaintiff's
attorney rhetoric" in recent decisions, and the more parsimonious approval of
attorney fee requests. The problem, he explained, is that by scaring away the
"less worthy" cases (that other states may not be averse to), the "good cases"
might also be chased away.
Editor's
Note: As a
beneficiary of Delaware's status as a mecca for corporate litigation, I'm in no
position to be critical, but I think Professor Black's statistical analysis of
the declining market share of corporate litigation in Delaware provides a
sobering reminder that Delaware's prominence is not a natural or God-given
right, such as self-defense, for example, and is subject to perennial
challenges from the federal government and other states. An article in The
New York Times on November 13, 2011, by Ross Douthat discusses an
"occupational hazard" of respected individuals but the following quote from his
article might also be applicable by analogy to the risk of hubris that
institutions are subject to when they have enjoyed widespread respect and
success for so many years that they subconsciously may regard their
righteousness as almost beyond question: "... good people, heroic people, are led
into temptation by their very goodness-by the illusion, common to those who
have done important deeds, that they have higher responsibilities than the
ordinary run of humankind. It's precisely in the service to these supposed
higher responsibilities that they often let more basic ones slip away." This is
a risk that equally applies to exalted members of the judiciary and
accomplished attorneys and others who are so accustomed to doing the right
thing that they are hesitant to question the propriety of their actions.
-
At the luncheon, the legendary Marty Lipton spoke to the crowd about the term
of Chancellor William Chandler on the Court of Chancery and the many changes
and significant decisions that were issued. Mr. Lipton also spoke fondly about
and introduced the luncheon speaker Chancellor Leo Strine, Jr., who as usual
did not disappoint the attendees with his wit and humor. The Chancellor also
praised the influence that former Chancellor Chandler had on the Court.
Chancellor Strine talked about the Court's current state of operation and what
the future holds for the Court.
Of
particular note for practitioners, the Chancellor mentioned that the Court in
conjunction with the Court of Chancery Rules Committee is working on guidelines
for practitioners as to how the Court will operate and what lawyers should be
doing in terms of protocol and procedures. Stay tuned for more on this subject
in the near future.
In
the afternoon session, a panel of all the current Vice Chancellors moderated by
former Vice Chancellor Stephen P. Lamb, discussed various topics of Delaware
corporate law. Vice Chancellor Noble discussed the past, present and future of Omnicare,
and in particular his recent decision in the case of In Re Openlane
Shareholders Litigation. [See prior post here].
Vice Chancellor Parsons discussed a number of cases and took on the topic of
"Where does Revlon" stand? In connection with that analysis, Vice
Chancellor Parsons also discussed his May 2011 decision in In Re Smurfit
Stone Container Corp. Shareholder Litigation.[See prior post here.]
Vice Chancellor Laster spoke on the topic of the standard of review, and in
particular the standard of review issue in the recent decision of In Re
Southern Peru Copper Corp. Shareholder Litigation . [See prior post here].
Finally,
the newest member of the Court, Vice Chancellor Glasscock, discussed "poison
pills" and in particular Chancellor Chandler's February 15, 2011 decision in Air
Products and Chemicals, Inc. v. Airgas Inc. Instead of just recounting what
the decision discussed, Vice Chancellor Glasscock discussed what he called the
"Chandlerian approach" to decision-making when the judge has to consider
precedents of the common law. As former Chancellor Chandler looked on from the
audience approvingly, Vice Chancellor Glasscock discussed how former Chancellor
Chandler's decisions in the Airgas case, and indeed in many other cases,
addressed in detail the Delaware Supreme Court's precedents and followed that
precedent even when Chancellor Chandler felt the decision should have gone in a
different direction. So for example, in Chancellor Chandler's decision on the
poison pill in Airgas, he followed the Supreme Court's precedent and yet
he was still able in his analysis to address the precedential case law and at
the same time discuss how that result was unsatisfactory to him. In short,
through that opinion he was able to leave his fingerprint (or more likely a
sharp elbow print) on the development of the common law on poison pills in
Delaware.
-
The News Journal of Wilmington, Delaware, covered the conference here,
and described the large portion of Delaware's state budget that is bolstered by
the corporate franchise taxes of the business entities formed in Delaware-a
number of entities that is larger than the population of the state. In addition
to the direct payment of franchise taxes, the economic benefit of Delaware's
corporate prominence includes the revenue from all the in-state and
out-of-state lawyers and their entourages that use the state courts for
litigation matters, which activity also provides patronage to local hotels,
restaurants, copier services and the like.
Read
more Delaware
business litigation case summaries and commentary on Delaware
Corporate and Commercial Litigation Blog, a blog hosted by Francis G.X.
Pileggi, of Eckert Seamans.
For
more information about LexisNexis products and solutions connect with us
through our corporate site.