I recently summarized the Chancery Court's opinion in the case of In Re SS&C Technologies, Inc., here, with a detailed discussion of why the court refused to approve a settlement, but another blog today added additional commentary that should be of interest to most readers of my blog. Here is the link to that blog's commentary: The Harvard Law School Corporate Governance Blog - Court Rejects Settlement of Claims Challenging Private-Equity Deal
I have summarized many cases on this blog regarding Section 220 of the Delaware General Corporation Law (DGCL) which provides the right of a shareholder to demand books and records if the prerequisites in the statute are satisfied. (e.g., just type 220 in the search box in the right margin.) The current issue of the Delaware Law Review just arrived in the mail and the lead article provides an analysis of recent 220 cases. See S. Mark Hurd and Lisa Whittaker, Books and Records Demands and Litigation: Recent Trends and Their Implications for Corporate Governance, 9 Del. Law Rev. 1(2006) (published by the Delaware State Bar Association, www.dsba.org.)
In EDIX Media Group, Inc. v. Mahani, (Del. Ch., Dec. 12, 2006), read opinion here , the Chancery Court analyzes a long list of claims arising from the breach of a covenant-not-to-compete and related issues, in a 47-page opinion. Even The Wall Street Journal Law Blog today picked up on the first page of the opinion in which the Chancellor uses the argot of hobbyists in the after-market modification of cars. Specifically, in footnote 1 of the opinion, the court refers to a song by the rapper "50 Cent" for the definition of "whip" as a car. See Law Blog - WSJ.com : Chancellor William Chandler Is Off Da Hook!. (In the same post, the WSJ Blog refers to the Chancery Court as the most important corporate law tribunal in the nation.)
In EDIX, the plaintiff made allegations based on virtually every theory that could arise when an employee severs its relationship with the employer. Here the employers was the party who terminated the relationship, and the complaint included statutory claims of trade secret misappropriation and deceptive trade practices; common law duties of employees; breach of contract; defamation; and tortious interference with business relationships. The court distinguished between data that was confidential as compared to "trade secrets" (i.e., confidential data is not always a trade secret.) E-mail addresses of clients here were considered by the court to be confidential, but in the context of the facts of this case, the email addresses used by the ex-worker were not considered trade secrets, even though they were revealed to others after his employment ended.
An issue of first impression in Delaware decided by the court, was the enforceability of a covenant not to compete (or a restrictive covenant) against an independent contractor. Whether the ex-worker was an employee or an independent contractor was contested. The court discussed the factors in distinguishing between an employee and an independent contractor as well as the general principles applied to determine the enforceability of a restrictive covenant. Based on the facts of this case, the court "edited" the agreement to limit only direct competition as opposed to business activities that were "substantially similar". It was emphasized by the court that the overly broad restrictive covenant was not enforceable as written because it would not only deprive a person of his livelihood--but also his hobbies and any opportunity to work in his chosen industry in the area in which he lives.
Notably, the court "redlined" the agreement and only partially enforced it--as opposed to taking an "all or nothing" approach.
The damages awarded included injunctive relief but despite the treble and exemplary damages available by statute, the monetary award was quite nominal, however the court did award the reasonable costs the employer spent on third parties to investigate the emails the ex-worker sent to former clients from sites that the ex-worker thought (wrongly) were being sent anonymously.
In Georgetown Crossing, LLC v. Ruhl, (Del. Ch., Dec. 5, 2006), read opinion here, the Chancery Court addressed a claim by the proposed purchaser for specific performance of a land contract for a former farm that was to be developed into a housing subdivision. The relief was denied in large measure due to the purchaser's (perhaps inadvertent) notice of defect in title to the property the day before the scheduled closing. That notice had the result, based on the terms of the parties' agreement, of terminating the agreement due to the inability of the seller to cure the defect prior to the scheduled closing date.
In a 31-page opinion, the court reasoned that if the purchaser's attorney had merely insisted upon compliance with a subdivision obligation, instead of "good, marketable title", the purchaser would have been able to waive title defects. As it turned out, however, by insisting the day before closing that the seller cure title defects, the purchaser put the seller in breach, thereby invoking the termination provisions and barring the purchaser from pursuing specific performance as a remedy.
The U.S. Conference of Chief Justices has prepared a summary overview of basic concepts about electronic discovery that is a useful primer. Here is a link to it.
The Wired GC is the name of a blog by an anonymous general counsel, but in a recent post, he promises to unmask his identity next month (and also to talk about the choices a GC has when firm's raise rates). See his post here
For the sheer fun of it, I am linking to a quote from me in the current issue of Delaware Today magazine. Here it is. If the foregoing link does not work, try www.delawaretoday.com
In State of Delaware v. Philip Morris USA, Inc., ( Del. Ch., Dec. 12, 2006), read opinion here , the Delaware Chancery Court addressed the arbitrability of a claim related to the major tobacco company settlement with the states. The court conducted an extensive analysis and determined the the claim involved was indeed subject to the arbitration clause at issue.
The Wall Street Journal Law Blog reports on a study by the Harvard Law School that found 1,400 directors of public companies in the last decade to have been involved in the manipulation of stock options. Here is the link to the post (which links to the study): Law Blog - WSJ.com "Lucky Directors" and a Corporate Governance Malaise
To all my readers, I extend a heartfelt wish for a happy and healthy holiday to you and your families.
Here is the blog equivalent of a holiday card, courtesy of Charles Fincher of www.LawComix.com:.gif)
In ATR-KIM ENG FINANCIAL CORPORATION v. ARANETA, (Del. Ch., December 21, 2006), 2006 WL 3783520, read opinion here, the Delaware Chancery Court found directors liable for acting as mere "tools" of the majority shareholder, (see footnote 129), instead of also fulfilling their duty to protect the interests of the minority shareholders.
The directors apparently stood idly by while the majority shareholder "looted" the company. There is much more to commend this opinion than I have time to explore at this time, but I refer you to the post about the case on The Harvard Law School Corporate Governance Blog at the following link: The Harvard Law School Corporate Governance Blog -- Directors Ignore Majority-Shareholder Malfeasance at their Peril
UPDATE: Here is an analysis by Prof. Gordon Smith, and Prof. Chiappinelli has more commentary here.
UPDATE II: See generally, the later decision in Sample v. Morgan (Del. Ch., Jan. 2007), here, that excoriated directors for being "unwitting and uninformed accomplices" to an entrenchment plan by other directors.
Prof. Larry Ribstein of Ideoblog fame, has a post on the Harvard Law School's Corporate Governance Blog on the topic of backdating stock options and "lucky CEOs". Here is the link: The Harvard Law School Corporate Governance Blog- Lucky CEOs and Directors: How Serious is the problem?
Courtesy of Adam Savett of the blog called Lies, Damn Lies and Forward Looking Statements, we have a link to a decision from the bench by Chancellor Chandler of Delaware's Chancery Court, denying a motion to dismiss a challenge to the sale of 90% of the exchange's equity to a group that includes its board of governors. The suit was brought as a class action by the exchange's shareholders. Here is a link to the full post: Lies, Damn Lies, & Forward Looking Statements: Philadelphia Stock Exchange Sale Challenged
The Wall Street Journal Law Blog reports that the Valassis litigation in Chancery Court has settled. Here is the link: Law Blog - WSJ.com : Sexy M&A Litigation in Delaware Settles
Prof. Larry Ribstein has a thoughtful post commenting on an article in The Wall Street Journal that rails against blogs. He uses the useful analogy of the makers of horse and buggies complaining when cars were first introduced. Here is the link: Ideoblog: Rago's rag on blogs
In Majkowski v. American Imaging Management Services, LLC, 2006 WL 3627111 (Del. Ch. Dec. 6, 2006), read opinion here , the Delaware Chancery Court rejected a claim for advancement based on a clause that merely promised to "indemnify and hold harmless". In a thorough manner that time will not allow me to explore here, the court also addressed, in great detail, substantive arbitrability issues (after noting the argument that some arbitrability issues were waived by not being raised in the briefs.)
The court explained at length that a clause merely providing to "indemnify and hold harmless" does not entitle one to advancement. The opinion makes clear that indemnification and advancement are separate and distinct rights. Though the court was sympathetic to the plaintiff's plight, basic contract interpretation principles would not allow the blurring of the distinction between the two concepts. Many other cases on this blog have summarized the importance that the Delaware courts give to advancement rights (note: readers can insert word in search function in the margin), but that was not enough to justify a result not supported by the facts or the law. Among other things, this case is an example of the limitations that even a court of equity has to fix some things that are "just not fair".
In Re SS&C Technologies, Inc., 2006 WL 3499748 (Del. Ch., Nov. 29, 2006), read opinion here. The Chancery Court refused to approve
a settlement in this derivative case, despite agreement of the parties to the settlement terms. This result reminds me of the phrase, (often attributed to themes in some operas) that "it is not over until the fat lady sings". (Cartoon courtesy of Charles Fincher at www.LawComix.com).
The court provided the following instructive lesson for counsel’s observance:
“For some years, this court has sought to impress on parties to representative litigation the imperative to present settlements for approval before the terms of the settlement are performed. Where litigation challenges a pending transaction and the settlement involves a change in its terms reached before the transaction is completed, court approval of the settlement should, where possible, occur before the transaction closes. At a minimum, where circumstances warrant closing the transaction first, leave of court should be obtained for a delay in presenting the settlement, and the settlement should be presented promptly thereafter.”
The court disapproved the settlement in this case for two independent reasons. First, the court found that the parties were dilatory in presenting it for approval and therefore as a result of the performance of the settlement terms prior to court approval, the publication of supplemental disclosures followed by the conclusion of the transaction made the approval by the court in the review of the settlement terms devoid of meaning or purpose. Second, the court was not able to conclude from the presented record that the potential claims belonging to the class were adequately or diligently investigated or pursued. Basic questions concerning the fairness of the process pursued in arranging the management buyout, according to the court, were left unexplored and unanswered: “Thus preventing the court from reaching any conclusion that the very modest settlement terms secured fairly, reasonably, or adequately support the dismissal of this action.”
The court noted that the plaintiffs did not move for expedited treatment and never sought preliminary injunctive relief. Shortly after the complaints were filed, based on several phone calls and an apparent consultation with an expert, the parties began settlement discussions leading to the execution of a Memorandum of Understanding and the dissemination of a supplement to the proxy materials containing additional disclosures.
The parties neither advised the court of these developments nor asked leave of the court to present their settlement after completion of a transaction.
The court relied on the decision of Chancellor Duffy in Chickering v. Giles, 270 A.2d 373 (Del. Ch. 1970), as the basis for prior instructions to counsel of the need to present settlements quickly and to advise the court when some exigent circumstance makes it difficult to give the necessary notice and seek formal approval before the performance of some part of the agreement.
The court was bothered by the fact in this case that the proxy supplement that formed the basis of the settlement was both mailed and the transaction closed, without any notice to the court. At the time of the settlement hearing almost one year later, the only remaining part of the settlement that had not been performed was the payment of plaintiffs’ counsel fees. (The court had approved lead counsel approximately one month after the complaint was filed which was approximately one year prior to the settlement hearing.)
The court was also unhappy with what it viewed as the representative counsel’s inability to correctly identify basic terms of the disputed transaction. The court raised several issues about the transaction that were not answered and also observed that one officer who had the opportunity to take over $72 million in cash from the transaction and roll a portion of that equity into a large equity position in the surviving entity “has a different set of motivations than one who does not.”
The court further observed that “where the terms of the proposed settlement are entirely non-economic, as here, with a supplemental disclosure supplying all of the consideration for the proposed settlement,” the court can have no confidence that the interest of the class were adequately represented if counsel is not able to identify basic terms of the transaction or a basic set of legal issues raised thereby. Although the court acknowledged that it may be possible that strong, economic settlement terms would permit the court to overlook a weakness in the presentation of counsel, the court found that this was not the case here.
Thus, counsel in the case are now left in the unenviable position of “returning to the drawing board” to try to recreate a revised settlement based on terms that the court would approve, or alternatively, to bring the case to trial and somehow deal with the awkward situation of pursuing a case that they thought was settled. This case will likely go down in history as an example of the importance of coordinating with the court those settlements that require court approval, or in more colloquial terms, it is an example of the motto that “the opera is not over until the fat lady sings."
Gordon Smith of the Conglomerate blog posts about a new book by Kent Greenfield called: The Failure of Corporate Law: Fundamental Flaws and Progressive Possibilities. Gordon says this book would be of interest to those interested in "corporate social responsibility". Here is a link to his fuller discussion of the book:Conglomerate Blog: Business, Law, Economics & Society
.jpg)
Courtesy of Steve Jakubowski's Bankruptcy Litigation Blog is a thorough and scholarly analysis, with copious links to original sources, of a recent U.S. Senate hearing, referred to as a slugfest. The hearing featured testimony from various viewpoints of the bench and bar, regarding the aftermath of the "recent" bankruptcy law overhaul. Of course, the photo on the left is a great graphic regardless of whether the hearing actually rose to the level of a slugfest.
Courtesy of The Wall Street Journal Law Blog, comes the announcement that the Department of Justice will no longer take punitive measures, as a general rule, when a corporate defendant facing criminal investigation advances fees to its officers pursuant to pre-existing advancement rights. The former DOJ position was outlined in what was notoriously known as the Thompson Memo. The new position is outlined in what is referred to as the McNulty Memo. My blog has addressed the DOJ's prior position which in my view was plainly wrong and clearly at odds with the basic right of advancement under Delaware law. See, e.g., here and here. I quote from the WSJ Blog for a quick summary of the new DOJ position (what took the DOJ so long to see the light?):
"The new memorandum also instructs prosecutors that they cannot consider a corporation's advancement of attorneys' fees to employees when making a charging decision. An exception is created for those extraordinary instances where the advancement of fees, combined with other significant facts, shows that it was intended to impede the government's investigation. " Here is the link to the WSJ Blog post on the matter: Law Blog Thompson Memo Out, McNulty Memo In .
UPDATE: Prof. Larry Ribstein quotes further from the memo but cautions that the new memo may not be as clear as it should be if it still "more subtly" pressures corporations to either waive privilege and/or restrict the advancement rights previously given to officers. Here is the fuller quote from the memo:
"Prosecutors generally should not take into account whether a corporation is advancing attorneys' fees to employees or agents under investigation and indictment. Many state indemnification statutes grant corporations the power to advance the legal fees of officers under investigation prior to a formal determination of guilt. As a consequence, many corporations enter into contractual obligations to advance attorneys' fees through provisions contained in their corporate charters, bylaws or employment agreements. Therefore, a corporation's compliance with governing state law and its contractual obligations cannot be considered a failure to cooperate...." See this link to Prof. Ribstein's post on the matter. Here is the DOJ's Press Release.
In Sammons v. Doctors For Emergency Services, P.A., (Del. Supr., Dec. 6, 2006), read opinion here, the Delaware Supreme Court addressed important matters of pre-trial practice and trial procedure that will serve as a useful standard for trial lawyers. Several issues were addressed (not all of which I will cover in this short blurb), but especially helpful for its practical utility is the high court's analysis of pre-trial disclosures required as a prerequisite for an expert witness to be called at trial.
In sum, the Supreme Court upheld the trial court's restriction of an expert's trial testimony to the scope of the expert report that was previously produced by the expert in discovery and pursuant to the Rule 16 scheduling order. The court reasoned that to allow expert testimony more expansive than the report produced would defeat the purpose of pre-trial deadlines and would be unfair to the other lawyers who were relying on the scope of that report to prepare for trial. In this case there was no effort to amend the Rule 16 scheduling order, nor was there any apparent attempt to supplement the prior replies to discovery so as to notify the other counsel of the newly expanded scope of testimony. The expanded scope of the expert's opinions were disclosed for the first time at a deposition, several months after the deadline for producing expert reports. One defense counsel did not attend the deposition because he was relying on the limited scope of the expert report that apparently was not expected to impact his client. The court found such reliance on the report to be reasonable and held that an opponent should not be required to wait for the deposition of the expert to be made aware of the substance and scope of that expert's opinions that are to be presented at trial.
In essence, this opinion strongly supports the enforcement of pre-trial deadlines in scheduling orders and it emphasizes the importance of the expert report produced before trial. Although this decision was based on the Superior Court rules, it can be used by analogy, at least, in Chancery Court. (The state court rules in Delaware are based on the federal rules, but Rule 16 of the Federal Rules of Civil Procedure is different in some respects.)
The Delaware Supreme Court reasoned:
The purpose of the Rule 16 scheduling order and discovery deadlines are to improve the efficiency of trials. The expert identification deadline assists the parties in conducting useful discovery of expert’s opinions. Pursuant to Rule 26, the expert disclosure statements should identify the expert’s opinions and the basis for those opinions so that the opposing party can properly prepare for depositions and trial. Here, Sammons did not properly and timely disclose Dr. Bridges’s opinion regarding causation and failure to diagnose sepsis before the expert disclosure date mandated by the trial judge’s scheduling order. Contrary to Sammons’s assertion, she did not cure the discovery deficiency simply by disclosing Dr. Bridges’s opinion regarding a failure to diagnose sepsis and causation during a deposition scheduled by another party for discovery purposes.
Further, Sammons’s counsel neither moved to amend the Rule 16 scheduling order upon a “showing of good cause,” supplemented their original expert disclosure to expand Dr. Bridges’s opinion nor contacted DFES counsel to notify him of Dr. Bridges’s expanded opinion before the scheduled deposition. Without notice of the proposed expanded expert opinion to be proffered, DFES was entitled to rely on Sammons’s disclosure. DFES could fairly assume it to be an accurate statement of the expert’s anticipated opinion at his deposition as well as later at trial. DFES relied on Sammons’s expert disclosure statement, and did not attend the deposition.
Therefore, the trial judge did not abuse his discretion when he granted Family Practice and Dr. Sobel’s motion to restrict Dr. Bridges’s trial testimony.
See also Duncan v. Newtown & Sons, Co., 2006 WL 2329378 (Del. Super. 2006).
In Esopus Creek Value LP v. Hauf, 2006 WL 3499526 (Del. Ch., Nov. 29, 2006), read opinion here , the Chancery Court extended its reasoning in Newcastle Partners, L.P. v. Vesta Insurance Group, Inc., 887 A.2d 975 (Del. Ch. 2005), read summary here (including links to commentary and analysis on the topic by Professor Ribstein and others), and once again "Delaware law comes out on top" to the extent that there were conflicting duties and/or rights under Delaware law compared with SEC rules and regulations.
Time constraints will only allow a brief highlight at this time of the issue addressed:
Whether a corporation's delinquency in its federal reporting obligations should deprive necessarily that corporation's common stockholders of the power to authorize a sale of substantially all of the corporation's assets. The Chancery Court said that the answer, as one should have known from the Newcastle Partners case, supra, is "no". The failure of the company to file its annual report, according to its view of its SEC obligations, prevented it from calling a shareholders' meeting to approve the sale. Thus, it planned to file bankruptcy and seek bankruptcy court approval without the approval of its shareholders. The Chancery Court imposed a stipulated injunction preventing such an attempt.
Of course, there is much more discussion warranted about this case and more details and reasoning to recount, but this is all I have time to report now. See the link above to read the whole case. Perhaps my schedule will allow more commentary later.
Prof. Bainbridge provides scholarly commentary here on the recent Chancery Court decision in the PNB Holding, case, 2006 WL 2403999, summarized on my blog here, regarding the "cleansing device" of ratification of an interested transaction by a "majority of the minority" of informed, non-coerced, non-conflicted shareholders (based on authorized and issued shares eligible to vote, as opposed to merely those who are voting)--which could allow for the protection of the BJR, instead of the entire fairness standard of review, in a situation to which Kahn v. Lynch line of cases does not apply (i.e., not a controlling shareholder analysis).
Prof. B. extends the reasoning from the PNB Court's analysis to a discussion concerning approval by disinterested directors, specifically based on the wording of DGCL Section 144(a), (and compared to the wording of DGCL 141(b)(1)), as a cleansing device. Here is the link to more thorough treatment of the topic in Prof. B.'s post, including quotes from one of his books: Professor Bainbridge's Business Associations Blog: Strine's Take on the Majority of the Minority: A Comment on In re PNB Holding Co.
UCLA Law Professor Rick Sander has a new law review article that discusses what the article refers to as the "racial paradox in corporate law firms". The hiring preference given to some minorities is analyzed in a statistical and scholarly manner in the context of the low retention rate, in terms of how many of those same associates become partners. Here is the link via Prof. Bainbridge's blog: Professor Bainbridge's Business Associations Blog: The Racial Paradox of the Corporate Law Firm. Coincidentally, I am now reading the widely-respected Thomas Sowell's classic book: The Quest for Cosmic Justice, (The Free Press 1999), which approaches the general topic on a more theoretical level.
In Happ v. Corning, Inc., the U.S. Court of the Appeals for the First Circuit, read opinion here, recently applied Delaware law and interpreted DGCL Section 145, (Section 145 of the Delaware General Corporation Law found in Title 8 of the Delaware Code), to support the summary judgment finding that a director of a company was required to pay back the almost $1 million in legal fees that his company advanced in connection with a civil suit by the SEC. That suit resulted in a verdict that he engaged in insider trading (in the amount of about $40,000.) The director argued that the "undertaking" to pay back the advanced fees demanded by the company as a condition of advancement was signed "under duress" and that it went beyond the undertaking requirement of Section 145. The U.S. Court of Appeals for the First Circuit, applying Delaware law, disagreed with the argument. The court reasoned that even if the exact language of 145 was used, it is doubtful that the judgment of insider trading could be consistent with either the "good faith" and/or the "best interests of the company" provisions of 145. Compare generally, DGCL Section 102(b)(7) which allows a provision in a certificate of incorporation that prohibits recovery of monetary damages from directors for a shareholder claim that is exclusively based on a violation of the duty of care. It is in the nature of an affirmative defense and it is the burden of the directors to demonstrate that they are entitled to such a charter provision. It does not, however, prevent injunctive relief from being awarded. See, Malpiede, 780 A.2d at 1095; see generally, In re Walt Disney Company Derivative Litigation, 907 A.2d. 693 (Del. Ch. 2005).
This Happ case involves the less than common situation where there is a court opinion finding that a company's advancement must be paid back. Most of the case law in Delaware recently on this topic is a clarification of the company's obligation to make the advancement, where applicable. This is a good example of why a party needs advancement, as most people cannot wait until the case is over to finance almost $1 million in legal fees, and then wait for post-trial indemnification (if warranted). It is not clear whether the officer in this case has the wherewithal to make the repayment, however, which highlights the company's conundrum. The Court of Appeals reasoned that the director should have filed a declaratory judgment action if he thought the undertaking was made under duress and/or was beyond that required by Section 145. ( I will not give in to the temptation to describe the unsuccessful plaintiff in this case as hapless.)
In Allied Capital Corp. v. GC-Sun Holdings, L.P., 2006 WL 3437507 (Del. Ch. Nov. 22, 2006), read opinion here, the Chancery Court rejects the argument that entities with common equity ownership can never conspire illegally with one another. The case included many claims surrounding an alleged scheme to make a debt uncollectible and to subordinate it to equity.
The court distinguished this issue from the separate question of whether corporate managers can be held civilly liable for conspiring among themselves and with their own corporation. See, e.g., Amaysing Tech. Corp. v. Cyberair Communications, Inc., 2005 WL 578972 at *7 (Del. Ch. 2005)(answering that question in the negative unless the corporate agents were acting for their own personal financial gain rather than for the benefit of the corporation. In that case, a very generous salary for little work did not satisfy the personal gain exception.) Notably, the Allied court respectfully disagreed with, and distinguished, a recent Chancery Court decision holding that a parent entity is incapable of conspiring with its wholly-owned subsidiary. See, Transamerica Airlines, Inc. v. Akande, 2006 WL 587846 at *6 (Del. Ch. 2006).
In what the Allied court referred to as a "jurisprudentially-intergalactic campaign" to sue anyone possibly liable on a promissory note, the court also addressed claims for breach of contract, breach of implied covenants of good faith and fair dealing, tortious interference with contract, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, fraudulent conveyance, civil conspiracy and unjust enrichment.
In Allied, the Chancery Court also made clear in a more elegant manner than I can briefly describe here, how disinclined it is to find "implied terms" that are not clearly stated in an agreement but that one party now wants the court to include. See, supra at *10 and n. 30 (courts "should be most chary" about implying a term that the parties could have easily drafted to expressly provide for it). There is much more hornbook law in the opinion about contract interpretation, including how a motion to dismiss is a procedurally proper posture for the court to decide questions of law about contract interpretation. Id. at *8.
Prof. Stephen Bainbridge's article in connection with the 20th Anniversary of the Delaware Supreme Court's decision in Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946 (Del. 1985), is now available on SSRN. Here is the link to the post about it on the good professor's blog: Professor Bainbridge's Business Associations Blog: Speaking of Unocal at 20. An abstract of the article was blogged about by me here in connection with its presentation last year as the Annual F.G. Pileggi Distinguished Lecture in Law. My foregoing link also connects to a post by Prof. Larry Ribstein (who also previously gave the Lecture) with his comments as well as an article that he also wrote on the topic.
Courtesy of the Electronic Discovery Law Blog (appropriately enough) is a summary of the new e-discovery amendments to the Federal Rules of Civil Procedure that went into effect yesterday. Finally, we will be able to point to a controlling rule, at least in Federal court, so opposing counsel will not be heard to say that they have produced paper documents, so they do not want to produce anything else. Of course, the digerati know that "hard copies" of documents are only a small fraction of discoverable material. Here is the link to the summary of the new rules: E-Discovery Amendments to the Federal Rules of Civil Procedure Go Into Effect Today : Electronic Discovery Law
As most lawyers now know, and as I have been writing about here for some time, effective yesterday, December 1, 2006, the Federal Rules of Civil Procedure specifically address electronic discovery.
On December 19, 2006, I will be on a panel giving a seminar on the new e-discovery rules as well as on electronic discovery basics, including how the new federal rules will impact state court practice. The seminar will be held at the Delaware State Bar Association, 301 N. Market St., Wilmington, Delaware. Other panel members are: Superior Court Judge Joseph R. Slights, III; Kevin Brady of Connolly Bove; Sharon Oras Morgan, (a partner of mine at Fox Rothschild) and Judith Kinney of Kroll Ontrack, Inc.
For those interested, click on the following link for more details:
www.dsba.org/CLE/PDFs/EDiscoveryBasics2006.pdf
I am blogging today while attending the meeting in Washington, D.C., of the Business and Corporate Litigation Committee of the ABA's Business Law Section. I am attending a panel discussion called: Institutional Investors: The Sleeping Giants or Shrugging Altases of the Corporate Democracy Debate? The panel includes Delaware Supreme Court Chief Justice Myron Steele; Prof. Larry Hamermesh; Hedge Fund Manager William Ackman of Pershing Square Capital Management, L.P.; Moderator Rolin Bissell of Young Conaway, Wilmington; Amy Goodman of Gibson Dunn, D.C.; Trevor Norwitz of Wachtell Lipton, NY; John Wilcox of TIAA-CREF and Ann Yerger of the Council of Institutional Directors.
Prof. Hamermesh noted that most commentators agree that the common goal of corporate governance is maximizing shareholder wealth. John Wilcox observed that the $380 billion in assets that TIAA-CREF manages is concerned with long-term as opposed to short-term profit.
Chief Justice Steele provided comments about the recent Stone v. Ritter (2006 LEXIS 597 (Del. November 6, 2006)), decision of the Delaware Supreme Court. His Honor referred to that decision as making clear that good faith is not a stand-alone duty, but is a part of the duty of loyalty. Moreover, that decision--as mentioned on this blog here when the case was released--also addressed Caremark (In Re Caremark Int'l Inc. Deriv. Litig., 698 A.2d 959, 971 (Del. Ch. 1996)), issues and the board's duty to have a compliance system in place and to monitor that system to check that it is working. Of course, however, the decision reaffirmed that the court will not second guess directors when their actions earn them the protection of the Business Judgment Rule.
The materials handed out at the seminar include a memo dated today, Dec. 1, 2006 from Martin Lipton, in which he advises board members that "the fundamental governance issue confronting corporations in 2007 will be the extent to which shareholders should have the ability to intervene in board actions and influence directors". The panel also discussed the surge in the support of "majority voting" requirements, as compared to plurality, and the memo of Marty Lipton basically says that majority voting requirments are here to stay.
One panel member, William Ackman, suggested some improvments in this area: For example, the record date is often days prior to the meeting date, which means that some shareholders who sell after the record date but before the meeting and thus despite having no stake in the outcome, are still voting at the shareholders' meeting. Prof. Hamermesh noted that is usually up to the board to determine the record date, and that the statute gives them some flexibility, though in light of modern technology making the "gap" between the record date and meeting date less necessary, it might be a good focus of consideration for the next round of DGCL revisions or updates.
Enter keywords:
