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

Most corporate lawyers recognize the name Shannon Pratt as the author of several seminal and widely cited treatises on the valuation of businesses. He is in the process of publishing a new edition of The Lawyer's Business Valuation Handbook, which should be available by the summer.  I am flattered to have been requested to write the foreword to the upcoming edition. I am sure that many of my readers have relied on the book and have cited it in their briefs (as I know it has been cited in many court decisions including those of the Delaware Chancery Court).

If you want to share any views of the book that would be appropriate for me to refer to in the foreword, please let me know. Thank you.

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Professor Stephen Bainbridge has just published yet another book on corporate law. His most recent publication is entitled: The New Corporate Governance in Theory and Practice

The summary on Amazon.com here  (where it can be pre-ordered for delivery in about 6 weeks), describes the book as follows:

Forty years ago, managerialism dominated corporate governance. In both theory and practice, a team of senior managers ran the corporation with little or no interference from other stakeholders. Shareholders were essentially powerless and typically quiescent. Boards of directors were little more than rubber stamps. Today, the corporate governance landscape looks vastly different. The fall-out from the post-Enron scandal and implementation of the Sarbanes-Oxley Act have resulted in shareholder activism becoming more widespread, while many observers call for even greater empowerment. The notion that the board of directors is a mere pawn of top management is increasingly invalid, and as a result, modern boards of directors typically are smaller than their antecedents, meet more often, are more independent from management, own more stock, and have better access to information.

The New Corporate Governance in Theory and Practice offers an interdisciplinary analysis of the emerging board-centered system of corporate governance. It draws on doctrinal legal analysis, behavioral economic insights into how individuals and groups make decisions, the work of new institutional economics on organizational structure, and management studies of corporate governance. Using those tools, Stephen Bainbridge traces the process by which this new corporate governance system emerged, and explores whether such changes are desirable or effective.

We know from citations to his publications in their opinions that members of both the Delaware Supreme Court and the Delaware Chancery Court read the corporate law writings of Professor Bainbridge, and he has appeared at seminars on the same panel as members of the Delaware bench. Anyone interested in the latest developments in corporate law should read this most recent magnum opus by one of the nation's leading authorities on corporate governance.

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Prof. Bill Sjostrom on Truth on the Market Blog posts about an article on SSRN that provides an empirical study which concludes that among those LLCs  formed outside the state of their principal place of business, more LLCs choose Delaware to form their LLC in, with suggested reasons why. Good stuff for those interested in why certain jurisdictions are chosen over others for the formation of entities.

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Prof. Bainbridge analyzes here the applicable standard under Delaware corporate law that would apply to the defensive measures taken by Yahoo to spurn the advances of Microsoft. He explains why the case of Blasius v. Atlas Corp. would not apply. Blasius imposes a heightened standard of review when the shareholder franchise is interfered with by the board. Yahoo amended its bylaws in reply to Microsoft's bid so that the date by which nominations for board members had to be submitted was delayed until 10 days after the announcement of the annual meeting (which has not been announced yet.)  Professor B. explains that the Delaware Supreme Court's decision in Stroud v. Grace supports the argument that the standard announced in Delaware Supreme Court opinion in Unocal, and not  the Blasius standard, should apply in the "Microhoo" situation where the primary purpose in any changes that impacted the shareholder franchise was related to a defense to a takeover attempt.

Prof. Ribstein has also provided several insightful posts on the situation, e.g., here.

Although not nearly as scholarly as the good professors, I was quoted here by the San Francisco Chronicle in an article in today's edition that addressed the same issues about the standards that would apply to Yahoo's actions (or inactions).

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The Delaware Chancery Court issued a clarification yesterday to lawyers in order to clarify that passwords for eFilings of pleadings and other submissions with the Court are only to be used by Delaware lawyers and shall not be "lent to" (my words) or shared with non-Delaware lawyers, nor shall non-Delaware lawyers be added to the "electronic service list" through which those who eFile documents with the court are sent notice of eFilings by other lawyers in the case.

Here is  the text of the short admonition that was emailed to Delaware lawyers yesterday. This, of course, is of great practical importance to any lawyer who serves as local counsel for the large number of out-of-state lawyers from around the country who practice in Chancery Court.

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An all-day seminar yesterday at Widener University Law School featured leading members of the judiciary as well as practitioners and academics who proposed changes to Delaware corporate  law on (or about)  the 40th anniversary of the last major overhaul of the Delaware General Corporation Law in 1967 (although minor updates have been made each year since then.)  Unlike most other jurisdictions, Delaware recognizes practitioners and academics from other states as  being well-versed enough about Delaware law that their opinions are respected in terms of their suggestions for changes in our law. Indeed, the last major revision in 1967 of the DGCL was done under the scholarly direction of University of Virginia Law Professor Ernest Folk.

Here is a post I did recently on the current issue of the Delaware Lawyer magazine which contains articles with many suggested changes by several of the panel members at yesterday's seminar.

Here is a list of the topics covered at yesterday's seminar along with the panel members' names and an overview of the purpose of the seminar.

I am attempting to provide a link to the materials because the volume of topics addressed is too much to cover in a blog post, but among the suggestions I though most notable were those made by Ted Mirvis of the Wachtell Lipton firm in New York, who proposed 2 changes to the DGCL as follows (and I am only paraphrasing):

1. All claims related to the DGCL or regarding fiduciary duties, shall be brought in the Delaware Chancery Court; and

2. Rulings regarding the exercise by directors of their fiduciary duties in change of control cases should be contextual only and should not be the subject of a per se rule.

Professor Faith Stevelman Kahn of New York Law School suggested that for policy reasons, a mandatory forum selection clause would not be advisable--even if permissible by applicable law to do so.  Professor Elizabeth Nowicki of Tulane University Law School argued that Section 102(b)(7) should be "gutted" (my word) in order to give directors a negative incentive (or in her words, "fear of punishment") that would scare them into better observance of their duties.

During a luncheon speech, Vice Chancellor Leo Strine, Jr. provided insights during a 40-minute presentation that I cannot do justice to in the short space appropriate to this forum, but one nugget I wrote down in my notes (and this is only a paraphrase that runs the risk of being taken out of context), is his suggestion that even though Congress has the authority to increase their regulation of corporate governance, they should not engage in "selective intervention" into the corporate governance arena while still leaving the hard work to the states of enforcing fiduciary duties on a case-by-case basis.

Many other luminaries offered suggestions about how to change the DGCL to keep up with the global competition in the 21st Century, and I hope to add more details about the symposium later.

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The Harvard Law School Corporate Governance Blog has graciously added my name to their masthead as a "Guest Contributor", in light of the several prior posts I have written on their blog, as well as one that will appear shortly based on my summary  I posted here of a recent Delaware opinion applying Caremark principles to an officer (as opposed to a director) of a company.

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Here is an article from Law.com about the interview last night on 60 Minutes, of U.S. Supreme Court Justice Antonin Scalia, the first full-scale broadcast interview he has ever given since he became a SCOTUS justice 22 years ago. In my view he is the best writer on the High Court . He just wrote a book about how to persuade judges (that I just ordered).

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 On May 5th, Widener University School of Law in collaboration with Corporation Service Company (CSC) will be hosting a one day, interactive symposium which looks at The Delaware General Corporation Law (DGCL) in the 21st Century. The symposium aims to provide a forum to generate the best current thinking on how the DGCL needs to be modified to respond to or anticipate changes in markets and technology as the century unfolds. This event will take place on the Wilmington, Delaware campus of Widener Law and will be broadcast live via video webcast.

The symposium will include four panel discussions (The DGCL and Takeovers; Stockholder Litigation Under the DGCL; Stockholders in Corporate Governance; and What We Can Learn from Other Statutory Schemes) and a keynote address by Vice Chancellor Leo E. Strine, Jr.

(Note: keynote address will occur at lunch, which will not be video webcast) Each panel discussion will be followed by an open Q&A session where both in-person attendees and webcast participants will be able to share comments and pose questions. 

For those interested in more details, here is a link to registration and related information.

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The U.S. Chamber of Commerce released its annual survey of the legal systems of the 50 states according to corporate lawyers who were polled, and for the 7th year in a row, the Delaware court system retained its number 1 ranking among the states in most categories. Here is a link to the report.  The Delaware Business Litigation Report has a post here on the story. The results of last year's survey ranking Delaware as number 1 were posted here on this blog.

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Here is a link via the Harvard Corporate Governance Law Blog to a memo by the Wachtell Lipton firm that provides wide-ranging suggestions to directors based on Delaware fiduciary duty case law, along with practical commentary that in some respects is akin to business advice on best practices for boards of directors to follow.

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Regardless of one's religious persuasion or disinclination, I think that the visit starting today of His Holiness Pope Benedict XVI is an occasion for celebrating hope for all that is good and can be good about mankind, and for promoting peace and goodwill among all people. Here is a link for anyone who wants to follow the pope's visit to the U.S. this week. I understand that this is the first time in President Bush's 7 years as president that he has ever met an arriving dignitary at Andrews Air Force Base, as he did today to honor Pope Benedict XVI.

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Courtesy of the Legal Profession Blog here is a story about an attorney who was penalized for not obtaining a login and password that were necessary in order to comply with the mandatory e-Filing requirements of a court in Kansas. So, all of us who may have started practicing law when some were still using a quill pen, can no longer argue that only the "younger lawyers" need to concern themselves with the various technological advances that are now such a large part of the practice of law.

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Professor Timothy Glynn of Seton Hall University highlights here on the Race to the Bottom blog, a new article he has written that examines the internal affairs doctrine, and in particular the 2005 decision of the Delaware Supreme Court  called Vantage Point Venture Partners 1996 v. Examen, Inc., 871 A.2d 1108 (Del. 2005). (Here is a link to summaries on this blog of both the Chancery Court's decision in the foregoing case as well as a link to the Delaware Supreme Court's opinion affirming, as cited above.)

He discusses the broader implications of the doctrine in the context of the "tug of war" between and among Delaware and the federal government--and other states--for preeminence in the governance of corporate law issues. This is a topic that has been the subject of many posts on this blog, including links to the writings of several other professors who have written on the topic.  See, e.g., here.

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A veritable treasure trove arrived in today's mail inside the current issue of the Delaware Lawyer magazine. The issue is devoted to a re-examination of the Delaware General Corporation Law (DGCL) by assorted luminaries from Delaware as well as those from New York and elsewhere who spend more time in Delaware Chancery Court fighting about the nuances and meaning of the DGCL than many Delaware lawyers do.

Here is the Table of Contents that lists the articles. Several argue for proposed changes to the DGCL  and other articles assert that the status quo is just fine. They are short articles that are easy, quick reading, but nevertheless this publication is "must reading" for anyone interested in:  where the DGCL has been, where it is now, and where it is heading.

Although it was not easy to pick one, if I had to choose my favorite among the articles, it would be the one by legal legend R. Franklin Balotti, and co-authored by Donald A. Bussard and Thomas A. Uebler. The concluding paragraph indicates the important and far-reaching theme of this short piece, as follows:

"Unless a court must determine the validity of a self-dealing transaction before it considers a director's equitable conduct and potential liability, [DGCL Section] 144 should not be considered when determining director liability. Until the General Assembly instructs otherwise, Section 144 should be limited to the purpose expressed by Professor Folk 40 years ago--validation of self-dealing transactions."

The current issue was edited by Vice Chancellor Leo Strine, Jr. of the Delaware Chancery Court. Among the articles is a transcript of a recent conversation among those who worked with Professor Folk on the 1967 revisions of the DGCL, and who provide insights into the reasons behind the revisions. The articles in the current issue of the magazine, in one sense, serve a purpose similar to what occurred in Delaware during the "Summer of Love", to the extent that  many of the leading lights of the corporate bar have explained how they think the DGCL should be updated and revised to keep up with the current developments--in a major way, as opposed to the updates that are made each and every year to the DGCL in a manner that is not considered akin to a complete overhaul.

Here is a recent, related post that describes background materials in connection with the 1967 revision of the DGCL that is made available by Prof. Larry Hamermesh at the Widener University Law School.

Here is a link to the Delaware Bar Foundation's website. The Foundation publishes the Delaware Lawyer and at least in the past has eventually made the articles available online on their site, but they have not allowed me to post the articles here. I have been told--but have not verified myself--that  the articles will eventually be available via Westlaw and Lexis.

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Prof. Larry Ribstein has literally "written the book" on LLCs and other "alternative forms of entities" and has also written many articles on the topic, in his role as one the nation's leading authorities on LLCs and other non-corporate forms of entities. He comments on his Ideoblog  here  about proposed revisions to the uniform laws relating to LLCs. The introduction to his post provides that:

I have already written on the incredibly misguided Revised Uniform Limited Liability Company Act. In my analysis of the law, I note that the Act "threaten[s] to impose substantial risks and costs on limited liability companies. . .that there is little reason for states to adopt the Act, and that practitioners should be wary about advising clients to form under it."

...

As misguided and as harmful as the "uniform" law is, many state legislatures do need some sort of model because they lack the resources to draft state-of-the-art statutes. They can use the more sophisticated statutes, including those of Delaware, Colorado, Georgia, and Virginia. But they may need guidance picking particular provisions from these statutes.

Anyone serious about keeping up to date on the latest developments in the law of LLCs, needs to read the whole post above and the links provided therein to other original sources and writings on the topic.

 

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As a follow-up to my posts from yesterday, this is my last post from the two-day seminar at the Tulane Corporate Law Institute. One of the benefits for the 250 attendees at this New Orleans venue, is the further clarification and direction for corporate practitioners provided by members of the Delaware Chancery Court and Delaware Supreme Court who are on the panels at this seminar along with other leading lawyers from around the country who labor in the vineyards of Delaware corporate governance. Remember that these comments by members of the judiciary are "off the record" and do not represent the official position of the courts on which they sit, but nevertheless for those who need to understand the formal opinions of these courts, such commentary is akin to manna from heaven.

One other "added value" of the seminar is the intangible positive impact from the interaction "on a personal level, without discussing cases" of the members of the judiciary who attend, with the lawyers from around the country who often appear before the Delaware courts. Some of the "Delaware-bashing" commentators who criticize judges who participate in scholarly colloquia or write and participate in the development of the law outside of their judicial opinions, miss at least one point. There is a demonstrable increase in professionalism and efficiency when lawyers and judges gather outside the courtroom on a personal level and get to know each other on a collegial basis. This interaction, on a human level, makes it easier and more enjoyable to work with people, even if they are lawyers on opposite sides of a case.

Former Chancellor William Allen, who is now a professor at New York University Law School and also on the faculty of their Stern School of Business, was on a panel this morning and gave his perspective of Delaware corporate law about 20 years ago, prior to 1985. At that time, former Chancellor Allen explained, things were much simpler and there were two basic principles that governed the analysis of director conduct, for example, in the context of mergers and acquisitions. The two basic governing principles were: (i) the fiduciary duty concept that any self dealing by directors or controlling shareholders would be subject to a much higher level of scrutiny and a shifting of the burden of proof; and (ii) the Business Judgment Rule that provides that the court will not second-guess a board's decision if the circumstances justify the presumption that their decision was made on an informed basis, in good faith and in the best interests of the company. Then, if 1985, came the decisions in Van Gorkom, Unocal and Revlon, which heralded a much more nuanced and multi-layered range of standards to review directors' actions.

Chief Justice Myron Steele of the Delaware Supreme Court was also on a panel this morning and his  "off the record" remarks were also illuminating. He reminded those gathered that for purposes of corporate governance (as compared with LLCs, for example), there are three bedrock principles that are fundamental: (i) the Delaware General Corporation Law which provides at Section 141(e) that the directors manage the corporation; (ii) the shareholder franchise is sacrosanct (my word) and will be vigorously protected; and (iii) all cases are factually-based, and the facts cannot be separated from the decision of the courts. He also remarked that practitioners found it helpful when the members of the judiciary present at seminars and shed light on less clear areas of the law--for the benefit of lawyers--and other judges-- who need to know what that law is so that they can advise their clients on what the law is and what standards judges will use to decide issues presented to them. Another panel discussed MAC clauses, and one of the members of the Chancery Court suggested that in the current environment it was likely that there would be more "deal certainty" which of course will impact the price of the particular deal.

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As a follow-up to the prior post earlier today from the Tulane corporate law seminar, Vice Chancellor Leo Strine, Jr., from Delaware's Chancery Court, is on the panel this afternoon along with other leading practitioners, discussing recent Delaware cases that address the duty of the board under Delaware law in the context of the sale process for a company.

Here are a few comments from His Honor to help one in applying recent Chancery Court cases on the topic. For example, he said that one key is for the board to demonstrate that the sale process is fair to the highest bidder because, in part, the analysis regarding whether one's fiduciary duty has been fulfilled is "inherently contextual" and necessarily factually based, as opposed to lending itself to per se, bright line rules, which are the purposes of statutes, as opposed to the role of a court of equity. See, e.g., a law review article by Professor Rock, in which he describes the role of Delaware courts in formulating corporate law as, in part, writing heavily fact-based decisions as "morality tales" or parables if you will, as opposed to bright line rules: Saints and Sinners: How Does Delaware Corporate Law Work?, 44 UCLA L. Rev. 1009.

His Honor also commented that the minutes of board meetings should have attached the reports of financial advisors that are making presentations to the board to clarify what the board considered in these matters. ( That is only a paraphrase and since I am in sitting in the back of a very large seminar hall, do not take this as a transcript of the statements in the seminar). Here  is what The Wall Street Journal's Deal Journal  blog had to say today about some of His Honor's comments at the seminar this afternoon.

Famed Delaware corporate litigator Gil Sparks reviewed several recent decisions of the Delaware Chancery Court from the last year (all of which have been highlighted on this blog--see search function in margin), such as: Ryan v Gifford (Feb. 6, 2007); Tyson Foods (Feb. 2007); Desimone v. Barrows (not finding a problem with the stock options involved); Weiss v. Swanson; Conrad v. Blank; Jana Master Fund v. CNET; Mercier v. Inter-Tel; Gantler v. Stephens (board decision ok'd per business judgment rule, not to pursue third-party offer and instead board pursued plan to reclassify shares and privatize); Territory of Virgin Islands v. Goldman Sachs (claims time-barred that disputed proceeds from dissolution of company); Ryan v. Gifford (Nov. 07 and Jan. 08)(example of how attorney/client privilege was waived due to overly broad distribution of report by attorneys for Special Litigation Committee.)

I notice that many others are covering this corporate law event at Tulane today on the Internet. See, e.g., WSJ's Deal Journal;  The New York Times' DealBook and Delaware Business Litigation Report.

SEC Commissioner Paul Atkins gave a luncheon presentation to the assemblage of lawyers and judges. He talked about recent proposals suggested by the Treasury for reviewing the regulatory framework of financial markets, and he cautioned against knee-jerk reactions to quotidian issues as opposed to taking a long-term approach after careful study. He noted the CIFIUS review system in place to protect the national security interests of the country from foreign investment. He also addressed the materiality aspects of disclosure obligations and that the standard is the view of the "reasonable investor" as opposed to just any investor. He said that when the SEC examines the materiality standard, it should focus on the basics from the viewpoint of the reasonable investor. In reviewing Commissioner Atkins' background it was interesting to note that before becoming a lawyer, he obtained a Ph.D. in the "hard sciences" and was an astrophysicist before delving into the metaphysical aspects of the law.

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Members of the Delaware Chancery Court and the Delaware Supreme Court  as well as leading corporate law practitioners from Delaware and around the country are here in New Orleans at the Tulane University Law School's 20th Annual Corporate Law Institute . I will be blogging live during the seminar today and tomorrow. The panel this morning is discussing the duty under Delaware law to disclose material information in connection with a merger vote, both independent of, and in light of, any possibly applicable SEC duties of disclosure.

The recent Delaware Chancery Court decision in the BEA, from the bench, was discussed by Vice Chancellor Lamb.  He noted that the issue presented at the preliminary injunction hearing was whether it was enough to present the street estimates and the base line estimates. The issue presented was whether the high and low sensitivity analysis needed to be disclosed. This data was not disclosed and was not considered reliable by the management, and  VC Lamb held that that data was not material based on the record before him in a preliminary injunction motion setting. This decision from the bench in March 2008 was in the context of a strained credit market which puts heightened pressures on consummating a deal.

Brian Breheny, Deputy Director of the SEC's Division of Corporation Finance, addressed the overlap between SEC rules and the state law duty in Delaware that can force an annual meeting even if the company does not have its updated financial information prepared as required by SEC rules.  See, e.g., Vesta decision by Vice Chancellor Lamb on this issue and the Delaware Supreme Court's decision in the Skeen case.

The SEC's  Breheny commented on this situation by recognizing the tension between the SEC rule and the Delaware state law on holding an annual shareholders' meeting, even if the necessary financial data is not available, and he said that the company should call his office in that situation and ask for a special "exemption" which the SEC has given in the past in these situations.

The enforceability of Standstill Agreements was discussed. Although they are generally enforceable, the Topps  decision by Vice Chancellor Strine was reviewed as an example of such an agreement  which was not upheld in light of Revlon duties. James Morphy of Sullivan and Cromwell, a member of one of the panels, said that his view of the case is that the antitrust condition of the Standstill Agreement was only used as an excuse not to entertain a higher bid, and that was one reason the agreement was not upheld.

More updates to come as the seminar continues.

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Here is a report by Prof. Gordon Smith on his Conglomerate blog about the privatization of Delaware's Chancery Court--but remember that today is April Fools Day. I forgot that when I commented on the post today on Professor Bainbridge's blog where he announced that he was just appointed by President Bush as the newest SEC commissioner. Remember: today is April Fools Day.

 

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Willam Allen is the former Chancellor of the Delaware Court of Chancery, and is now the Director, NYU Center for Law & Business, Professor of Law and Clinical Professor of Business at New York University Law School.  Professor Bainbridge highlights here, and provides a link to a new law review article the former Chancellor penned on modern corporate governance and Delaware corporate law. The good professor introduces the article in this way:

In a paper entitled Modern Corporate Governance and the Erosion of the Business Judgment Rule in Delaware Corporate Law, former Delaware Chancellor William Allen tackles two subjects near to my heart: (1) the role of the board of directors and (2) the centrality of the business judgment rule to corporate law.

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A few months ago I was selected by Lexis/Nexis to have this blog included among their "top commercial blogs" for a new commercial law "homepage/portal" they created. Here is the link (see the drop-down menu at the bottom of the page at the foregoing link.) I added it to my blogroll a few months ago, but I decided to add this post about it when I realized what exalted company I found myself in when I looked at the other 12 or so blogs listed. (e.g.,The Harvard Law School Corporate Governance Blog  which recently added me to their short blogroll.)

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A recent report by an independent examiner for a trustee of subprime lender, New Century,  in bankruptcy, has described in a 581-page report, various bases for causes of action against officers and directors for breach of fiduciary duty, as well as claims against their accounting firm KPMG in connection with, for example, publicly reporting profits of over $60 million for a given period,  when in reality they should have reported a loss-- but the managment paid themselves very large bonuses based on the reported profits that were allegedly due to accounting errors.  One claim may be to attempt some recoupment of those bonuses. This is a classic instance of corporate governance issues arising in bankruptcy. Hat tip to Kevin LaCroix for his characteristically complete treatment of this matter, with much more detail and links to the report, here.

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Kevin O'Keefe, the nation's leading expert on blogs for lawyers--and others--provides here his updated review of blogging amid the AmLaw 200 (the country's 200 largest firms). Changes since his last survey in August 2007 show that just over 25% of the group's firms (including my firm) generate a total of 110  blogs.   I noticed from the survey that 30 of those blogs are not "firm-sponsored". This is an increase from the 56/74 ratio of only 6 months ago.  That is a very important statistic for me, since my firm is pressuring me to make this  Delaware Corporate and Commercial  Litigation Blog that you are now reading into a "firm-sponsored blog" and we are in negotiations about what that will mean in terms of the "public face" of this blog though I will remain the sole author and I will retain editorial control over the substantive content--which will continue to focus on summaries of key business litigation opinions primarily from Delaware's Chancery Court and Supreme Court, as it has for the three years that my blog has been online. Stay tuned.

UPDATE: For those interested in blogging, here  is a recent post by Kevin O'Keefe in which he describes the group he has created on LinkedIn  for those who blog and those who want to learn more about blogging.

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An article I wrote on the above topic for my regular ethics column here  is in the March/April issue of  The Bencher, a publication of the American Inns of Court.

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Occupying an intriguing intersection among corporate law, constitutional law and religion, is the article by Julie Marie Baworowsky of Notre Dame Law School that appears at Notre Dame Law Review, Vol. 83, No. 4, 2008. Here is the abstract:
Should corporate religious expression receive protection under the Fourteenth Amendment's Due Process Clause and under the First Amendment's Speech Clause?
The article is available on SSRN here.

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Professor Stephen Bainbridge highlights here, courtesy of Prof. Larry Hamermesh and the Law Library at the Widener University Law School,  an online link to extensive background materials that led to the 1967 revisions to the Delaware General Corporation Law (DGCL). This is a treasure trove for anyone doing an analysis of statutory history of a particular provision of the DGCL.

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What a great place for a seminar. Bill Bratton on the Conglomerate blog posts here about a corporate governance seminar on the Italian island of Sardinia, held in Cagliari, and hosted by the University of Cagliari, Vanderbilt University and the University of Amsterdam. The panel featured several leading U.S. corporate law professors.

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In honor of Good Friday there will be no blog postings today.

Also, a note to readers: I will be out of the office for the next week, so blogging will be lighter than usual over the next week or so.

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This month, your truly is listed here among the Top 100 Most Popular Blogs according to Justia.com's BlawgSearch. That plus $1.50 may get you a small soda somewhere, but it still feels good. However, I agree with the leading blog guru and iconic expert for bloggers, Kevin O'Keefe of LexBlog, that rankings of blogs are not very meaningful on an individual level, because the value of blogs is directly related to the niche that they serve. If one is looking for a blog that focuses on the law of food poisoning and it does a good job of covering that topic, does it matter whether that blog is ranked highly in any particular survey?

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Prof. Gordon Smith comments here on the "fire sale"(?) at $2 per share of Bear Stearns on Sunday night to JP Morgan, with apparent pressure from the U.S. Treasury Department and the Federal Reserve Bank [despite statements days earlier that the value of the stock was much, much higher], and the application to the situation of Delaware corporate law. For example, did the Bear Stearns board of directors meet their Revlon duties to get the highest price? Also, if they were insolvent, did the directors fulfill their duties to creditors (some observers said that the only other option was bankruptcy). The good professor cites to a Delaware Chancery Court case that applied the Business Judgment Rule  to an apparently similar situation where a board was forced to choose between bankruptcy or another unpalatable option. See Odyssey Partners, L.P. v. Fleming Companies, Inc., 735 A.2d 386 (Del. Ch. 1999).

Prof. Larry Ribstein also comments on the situation here, citing to his prior writings on the issues.

Kevin LaCroix comments here on the inevitable lawsuits that have already been filed v. Bear Stearns.

UPDATE: In light of the recent increase in the price of Bear Stearns' stock and JP Morgan's stock, Prof. Smith updates his analysis here, with reference to the Delaware decisions in  both Quickturn and Omnicare, wondering aloud how, if at all, the Fed's pressure and involvement  to get the deal done would impact the legal analysis by a Delaware court of the applicable fiduciary duties of the Bear Stearns' board.

UPDATE II: Here is another update from Prof. Gordon Smith, including a link to his interview by the WSJ Law Blog (the comments to which are in parts entertaining and educational.)

UPDATE III: Here is an update on NYT's Dealbook blog that indicates a possible drafting error in the agreement by JP Morgan's lawyers, regarding JP Morgan's duty to guarantee Bear Stearn's liabilities forever, and that might  be one reason JP Morgan quintupled its offer to $10 per share (which in part will allow them to correct this term in the agreement, as well as "save" the deal in light of pending shareholder suits and recent threats by some to force a bankruptcy.) Prof. Smith has more on the guarantee issue here.

UPDATE IV: Prof. Larry Ribstein discusses applicable Delaware case law to the updated facts here, and Prof. Bainbridge discusses same here, including reference to updates by Prof. Smith.

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Professor Stephen Bainbridge writes here in response to a criticism that some members of the Delaware Bench are too prolific in terms of the law review articles they author, as well as being too peripatetic in terms of the seminars in which they participate. He quotes from and cites to scholarly reasoning (in articles, of course) that supports the policy.

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 The current issue of the ABA magazine Business Law Today  features an article (starting on the back page) on the recent Delaware Chancery Court decision in Sample v. Morgan that I co-authored with Danielle Blount, an associate in our Wilmington office. The article is available here. My prior blog summary of the case and a link to the whole decision is available here. The decision has attracted a fair amount of attention for establishing what may be the high water mark for finding personal jurisdiction over a non-Delaware lawyer for his role in advising a Delaware corporation's management.

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Here is commentary by Professor Ribstein on the seminal case of  Ringling Bros.-Barnum & Bailey Combined Shows v. Ringling, in connection with an article on the case by Professor Ramseyer.

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Here is a video clip of a presentation by Prof. Stephen Bainbridge (linked from his blog), on a  recent panel moderated by Vice Chancellor Leo Strine, Jr. of the Delaware Chancery Court, in connection with Penn’s Institute of Law and Economics’ Chancery Court Program.  This issue involves whether the federal government, or the states, or any forum, should address the concerns in some circles about whether allegedly excessive executive compensation needs to be regulated and/or if shareholders should have more say in the matter. The bill on this topic that recently passed the House is specifically discussed.

 

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Here is a link from the DelawarePolitics blog,  to yesterday's press conference at Legislative Hall in Dover regarding proposed "open government" legislation in Delaware, that featured comments from the Communications and Policy Director for Pennsylvania's Senate Majority Leader (my big brother), who discussed the recent passage of an historic open records bill that was passed last month in Delaware's sister state. Here is a post on that legislation that I penned last month.

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The venerable Wilmington, Delaware, law firm of Potter Anderson & Corroon has established a new, free service via their website called "eDelaware" that allows one to download the Delaware General Corporation Law (DGCL) to a Blackberry, as well as other  DGCL-related materials, for easier access. This is a welcome innovation for our mobile society from Delaware's oldest law firm and one of the leading firms in Delaware.

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Corporate law titans, Professors Stephen Bainbridge and Larry Ribstein, discuss here and here, what court decision on corporate law each of them regards as the most important of the 20th Century. Prof. Brett McDonnell continues the discussion here.

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Courtesy of Kevin LaCroix on his D & O Diary blog, here is a link to the annual letter of Warren Buffett to his shareholders. As Kevin notes, it is a cult classic that provides an insight in "plain English" on the "state of the economy" and other current topics that are generally of interest to anyone interested in checking the pulse of the business world today.

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We have written periodically on these pages about the tension between the dominance in corporate law that Delaware enjoys and the risk that Federal law will continue to encroach on the field of corporate governance moreso than it has in the past. Here is an article in today's Wilmington News Journal  that discusses the topic from various angles. Professor Mark Roe of Harvard Law School, who was quoted in the article, gave a speech on the topic a few months ago that is highlighted here. Much has been written on this issue by many people. Here, for example, is a discussion by Prof. Larry Ribstein about the international aspects of the matter. Here is one of Prof. Stephen Bainbridge's posts on the topic.

UPDATE: The Wall Street Journal Law Blog picked up on the article here.

UPDATE II: Here is Prof. Ribstein's reply to The WSJ Law Blog post.

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Here is a post by Mark Herrmann and James Beck on their blog called Drug and Device Law about their views on lawyers at big firms who have their own blogs. This is a topic I have written on before and that I could fill volumes on, but for now I will defer to the widely-read and wildly popular Messrs. Herrmann and Beck. I think every firm approaches blogs a little differently, but as partners at 2 of the largest law firms in the world, their views deserve attention.

UPDATE: Here is the view on the issue by  the blog called Adam Smith, Esq.

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Here is an update of the Qualcomm  e-discovery matter that we have been following, courtesy of the Electronic Discovery Law Blog. What a bloody mess. Qualcomm just paid over $8 million in penalties imposed by the court for failing to provide e-mails during discovery. It gets worse. In what must be every lawyer's nightmare, the court imposed a whole list of protracted and Procrustean and draconian penalties on the hapless lawyers who were in any way involved in the emails not being produced. Qualcomm thought by not appealing the penalty and paying it promptly, the matter would be over, but as the link above indicates, the opposing party still wants more blood. Here is a prior summary of the matter with links to the opinion imposing the penalties. 
 This case should be enough of an incentive to learn the acronyms ESI (electronically stored information) and EDD (electronic data discovery).

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One corporate law professor argues that the landmark Delaware Chancery Court decision in 1996 of In Re Caremark, describing a director's duty of oversight, was "dead upon enunciation" and it is, in practice, a Potemkin Village that never actually results in liability in light of the common "opt in" provision of DGCL Section 102(b)(7) that protects directors against claims that they violated their duty of care. Here is the commentary by Prof. Harry Gerla on The Race to the Bottom blog in a post entitled: Caremark: The Failed Revolution. He asserts that no Delaware court decision has found liability based on Caremark. But see the recent Chancery Court decision in Araneta, available here, that was interpreted by the nationally-prominent corporate law professor Gordon Smith as finding liability based on Caremark principles. Here is Prof. Smith's post on the case.

Prof. Eric Chiappinelli also offers his analysis here and similary reads Araneta as finding liability based on a Caremark claim which he describes as the basis for the liability of the two beholden directors for not monitoring the third director (and majority shareholder)--describing their breach of good faith for intentionally not taking action to fulfill their duties  as a breach of the duty of loyalty.

Prof. Bainbridge discusses Araneta  here at the tail end of his analysis of the recent Delaware Supreme Court's decision in Stone v. Ritter, and how it interfaces with the Supreme Court's decision to make oversight claims a la Caremark, into a breach of the fiduciary duty of loyalty as opposed to the duty of care--which he thinks is part of the court's inclination to gut DGCL section 102(b)(7).

Here is a "corporate cartoon" depicting the holding in Araneta. (It is wonderful to have an artist who helps to explain decisions involving Delaware corporate litigation through cartoons.) Also, see generally, Sample v. Morgan, (Del. Ch., Jan. 2007), a Chancery Court decision excoriating some directors for being "unwitting and uninformed accomplices" in an entrenchment scheme by other directors, available here.

UPDATE: I am flattered that the reknowned corporate law expert, Professor Stephen Bainbridge, has linked here to this post on his blog. That makes for a great day in my world.

UPDATE II: Here is an assessment of the Delaware Chancery Court's opinion in Caremark by Prof. Brett McDonnell  that  is more supportive of the merits and policy of the decision than the first post linked at the beginning of this entry.

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Here is a post by Prof. Ribstein that links to an article by Prof. Lynn Stout that argues for fiduciary duties to be applied to shareholders (even if not majority shareholders).

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Please excuse this brief "off-topic" post that aims to celebrate good government, but more candidly it also is a chance to exult in the success of my big brother, Dominic, who was the author and prime sponsor of Senate Bill 1 that was just signed today by the Governor of  Pennsylvania (Delaware's next door neighbor). Sen. Dominic Pileggi, Majority Leader of the PA Senate, has worked for over a year to get the bill passed and has persevered through multiple revisions and battled numerous amendments in both chambers in order to reform the 50 year old state law concerning public access to public records. The new Open-Records Law radically transforms the law in Pennsylvania by "reversing the presumption" and placing the burden on the government to explain why a document should not be made available to the public, with certain enumerated exceptions. Here is an editorial about the new legislation in today's Philadelphia Inquirer. Congrats, big brother!

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Here is a post by Prof. Donald Clarke on the Conglomerate blog, about the inability to enforce, predictably, any of the corporate governance principles that are on the books in China. This must be a serious limitation on the ability of China to become a major world economic leader as well as a source of hesitancy for those thinking of becoming investors in Chinese companies. Compare this with a recent article referred to by Professor Bainbridge here about the connection between the quality of corporate governance and the economic  performance of a company.

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Delaware lawyers Seth Barrett Tillman and Stephen Bigler recently wrote a scholarly article that addresses the issue under Delaware law of stock issuances that may suffer from some infirmity such as lack of complete compliance with all necessary corporate formalities, and whether such a stock issuance is void or merely voidable. Here is the link. This is one of the few areas of Delaware corporate law that is not as fully developed in the case law as one might think. The authors suggest the best approaches for the corporate lawyer or corporate litigator who must deal with this situation. A prior article co-authored by Seth Tillman was previously posted on here.

I summarized here a recent Chancery Court decision that discussed the distinction between void and voidable stock.

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Here is a post by Prof. Donald C. Clarke, guest-blogging on the Conglomerate blog, about the gap between what the law of corporate governance in mainland China provides "on the books", and the observance of those laws, due to several reasons, including the absence of the judiciary that we have--say in Delaware--to enforce those statutes.