The Delaware Chancery Court ruled today that it would deny a motion to disqualify the Wachtell Lipton firm from representing Rohm and Haas in its pending suit against Dow Chemical despite the prior representation of Dow by Wachtell. Rohm and Haas Co. v. Dow Chemical Co., (Del. Ch., Feb. 12, 2009), read opinion here.
The expedited lawsuit, filed earlier this month and now scheduled for trial on March 9, is an effort by Rohm and Haas to force Dow to consummate a merger based on the terms of the merger agreement, and was highlighted on this blog here. Although Delaware adheres to the objective theory of contracts and is not inclined to treat sophisticated parties like children who want to be relieved of a bad decision, (see, e.g., here), the Chancery Court is a court of equity and is famously capable of considering the fairness aspect of even the most sophisticated and complex business dispute.
Bloomberg News has a helpful summary of the decision here. It was also reported today (before the court issued its decision) that for the first time in its over 100 year history, Dow has reduced its dividend. Another pre-decision overview of the issues in the case, prior to today’s decision, was published today on Deal.com here.
The court noted its concern for the timing of motions such as these and it also made clear that it is not enough to establish that a technical violation of the professional rules of conduct has been shown. See, e.g., a similar result in an unrelated case that denied a similar motion that was highlighted here.
Before the Chancery Court will grant a motion to disqualify counsel, the court must be convinced that the information obtained in the prior representation could be used against the client in the current case, and that there would be a material threat to the fair and efficient adminstration of justice. The court concluded in this case that:
… I am not persuaded that Wachtell’s access to this information will materially advance Rohm and Haas’s position or undermine the fair and efficient administration of justice