Delaware Litigation Lawyer & Attorney : Francis G. X. Pileggi : Corporate, Business, Commercial, Delaware Chancery Court

Due to time constraints, I will only summarily mention 2 recent Chancery Court cases. Full copies of the opinions can be downloaded at the court's website, the link for which is listed below this post.
In Weil v. Morgan Stanley DW, Inc., the Chancery Court rejected the claim that a transfer of customer accounts for profit, pursuant to contractual rights and disclosure, somehow breached a fiduciary duty. The Chancery Court reasoned that to recognize such a claim would be an improper use of the fiduciary tool to rework a voluntary contractual relationship, and would invent a "equitable duty" of boundless scope when there is no inequity justifying such a result, and when such innovation "would undermine the economic fairness and efficiency that result from the freedom to contract."
In Sergeant v. Schneller, the Chancery Court refused to find that an oral agreement for the sale of land existed, and even so, the court ruled that no partial performance was evidenced such that it would avoid the Statute of Frauds. The full opinions are available at this link.

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The Delaware Journal of Corporate Law and the Widener University School of Law will host The 19th Annual Francis G. Pileggi Distinguished Lecture in Law entitled "Unocal at 20: Director Primacy in Takeovers" . It will be held at the Hotel duPont in Wilmington, Delaware, on Friday, September 16, 2005 at 8:00 a.m. Nationally recognized corporate scholar, Professor Stephen Bainbridge will be the speaker. Seating is limited and RSVPs must be received by September 9, 2005 at the following number: (302) 477-2145. Admission is free.

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Regardless of your focus, everyone should be concerned about the devastation caused by Katrina. I understand that some newspapers in areas damaged by the storm were only able to publish online. One local website is www.nola.com , with updates on the situation in New Orleans. Another blog has sprung up with the sole purpose of providing details on damage in a suburb of New Orleans. It's called the "Slidell Hurricane Damage Blog". Prof. Bainbridge's blog has a post that refers to the more quotidian practical problems for lawyers and others whose files and offices no longer exist. Events like these make one realize how lucky we are to have been spared the suffering of those along the Gulf Coast.

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Regardless of what you think of SCOTUS nominee, John G. Roberts, if he is confirmed, he will at the very least have an eventual "trickle down" influence on corporate law. To that extent, a comment in a recent issue of BNA's Corporate Counsel Weekly (subscription required), is useful: They report that he was "one of the nation's top corporate lawyers" and suggest that if confirmed, he could help sharpen the high court's focus on business law issues.

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As I have said in the past, when the number of cases published by the court converges with my busy schedule in a way that creates a time crunch, I will make much shorter references than usual to the new cases and the issues they address. This is such an occasion. The reader can then access the full opinions to obtain more details of the decision.

Romero v. Career Education Corporation. This Chancery Court decision emphasizes how difficult it is to have a Section 220 case dismissed on a Rule 12(b)(6) standard in light of all the factual inferences that must be made in favor of the claimant to the extent that a determination of a "proper purpose" under Section 220 is sought to be defeated at the initial pleadings stages. [post continued below].

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Prof. Larry Ribstein has a post that refers to the current situation at KPMG, apparently dodging the bullet of indictment, and Prof. Gordon Smith also discusses the ramifications here.

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Thomas More, patron saint of lawyers and scholars, is the subject of a post by Prof. Bainbridge, who refers to an article that provides many sources for current and historical references to the first lay Chancellor to the King of England.

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Prof. Bainbridge has a recent blog post here about the Chancery Court's decision in the Toys R Us Shareholder Litigation, and an analysis of Revlon board duties in connection with the sale of that company. He cites to several of his works in support of the conclusion of the court that the Revlon duties were satisfied by the board. The full decision is downloadable here. In denying Revlon claims that a separate auction for the whole company was required when the board initially entertained bids for only part of the company, the court reasoned that:

... capitalists are not typically timid, and any buyer who seriously wanted to buy the whole Company could have sent a bear hug letter at any time, if it wanted to be genteel about expressing an interest. In all reasonable likelihood, the board's sales process for Global Toys provided the most credible and likely buyers of the whole Company with information that would have gotten their acquisitorial salivary glands going.

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In Montgomery Cellular Holding Co., Inc. v. Dobler, et al., download file, a Delaware Supreme Court decision, the Chancery Court's ruling in an appraisal action was upheld. The trial court ruled that the company's valuation expert at trial was rejected due to that expert's flawed theoretical model and his failure to refer to relevant data. However, the Supreme Court reversed to the extent that it remanded with instruction that the trial court grant an award of attorneys' fees and costs to the petitioner due to the bad faith conduct of the company in litigation including false testimony, failure to produce discovery (including destruction of computers). Also, it appeared that an expert witness at trial seemed to force his analysis to fit a predetermined conclusion. This is the second recent case where the Delaware Supreme Court has awarded attorneys' fees for conduct during litigation that falls below the standard required by Delaware courts. It is also referred to as the bad faith exception to the American Rule regarding each party bearing its own attorneys' fees. The other recent Delaware Supreme Court case was Kaung v. Cole.

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A short reminder is helpful to new readers of this blog to emphasize the limited scope of this blog, which is to briefly summarize recent cases of import by the Delaware Chancery Court and the Delaware Supreme Court on issues of corporate and commercial Delaware law, as those court decisions are made available on the court websites.

Though I was out of town on business and pleasure for the last two weeks or so, I was able to reference the scholarly summaries about the recent Disney opinion just before I left, so it would be duplicative and somewhat untimely for me to reiterate any summaries again, but I will highlight one or two parts of the opinion that I thought were personally noteworthy.

I refer readers, as I did the day the decision was published, to the scholarly website at www.theconglomerate.com for the thorough analysis by many corporate law professors on the recent Chancery Court decision of In Re: The Walt Disney Company Derivative Litigation. In addition to the discussions of the Delaware Business Judgment Rule, as well as the duties of loyalty and care found at pages 104 to 117 of the opinion, I found footnote 181 noteworthy as a reference to Judge Posner's incites into "group dynamics" as well as the dangers of perfect hindsight. Footnote 1 to the Disney opinion was also a useful reference to Law Review articles by Professor Bainbridge and others, on executive compensation. I refer you to the Conglomerate blog above for more detailed scholarly analysis.

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I have returned to the office after a hiatus of about 10 days. I hope to resume posting in the next day or so.

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The Conglomerate blog announces that the Disney opinion is out and the directors seem to have prevailed; as will be explained in the coming days in an online symposium on that blog.

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As indicated earlier, the Conglomerate blog will have an online symposium about the Disney/Ovitz case what it is published by Chancellor Chandler. Prof. Gordon Smith has heard that it may be made public today.

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My blogging may be light in August. I plan to attend the Annual American Bar Association Meeting in Chicago during early August and then I plan to be out of the country during most of the middle of the month. There is a high probability that until I return to the office, I will not have much of an opportunity to research and write posts on this blog, though I plan to keep up to date on the caselaw and make-up for it when I return to the office.

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Any lawyer, regardless of specialty or religion, should enjoy excerpts quoted at length below from A Man For All Seasons, about the life of St. Thomas More. The source of the quotes is www.imbd.com; and thanks to Vic Fleischer at the Conglomerate blog for the tip.
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Memorable Quotes from
A Man for All Seasons (1966)
King Henry VIII: Thomas. I chose the right man for chancellor!
Sir Thomas More: I should in fairness add that my taste in music is reputedly deplorable.
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The Duke of Norfolk: Oh confound all this. I'm not a scholar, I don't know whether the marriage was lawful or not but dammit, Thomas, look at these names! Why can't you do as I did and come with us, for fellowship!
Sir Thomas More: And when we die, and you are sent to heaven for doing your conscience, and I am sent to hell for not doing mine, will you come with me, for fellowship?

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