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.)
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.