Blog posts today and tomorrow will be from the Tulane Corporate Law Institute in New Orleans. This event gathers practitioners and academics from around the country who want to keep updated on the latest developments in the law impacting corporate litigation and corporate transactions. Among the few hundred attendees, lawyers and judges from Delaware represent a disproportionately large percentage of participants. Members of the Delaware Supreme Court and Delaware Court of Chancery dominate several panels including the following:
"Delaware Developments"; "Public Company M & A: 2010"; "M & A of Financially Distressed Companies"; and "Enhanced Ethics and Professionalism".
The plan is to provide posts with selected highlights from the panel presentations that refer to Delaware corporate law developments.
The highpoint of this afternoon’s schedule is a presentation called "Delaware Developments". The handout materials include almost 100 pages of case summaries on topics such as "220 Demands"; Disclosure; "Claims Against Dissolved Corporations"; and "Rights of Preferred Shareholders".
How, one might ask, can a 90-minute presentation and 100-pages of case summaries be converted into a manageable blog post? Let’s find out. All of the cases discussed by the panel are Delaware decisions issued within the last year or so that have been highlighted in the past on these pages and can be found via the "search box" in the right margin. Bullet points will be used as the format that lends itself most readily to this situation.
- San Antonio Fire and Police Pension Fund v. Amylin Pharm. In connection with a "continuing director provision" that would trigger a put of debt instruments if violated, the Court of Chancery allowed directors to "approve" (as provided in the continuing director provision), an insurgent board if they determined in good faith that the election of the insurgents would not be materially adverse to the corporation.
- Selectica, Inc. v. Versata, Inc. The Chancery Court upheld the use of a pill by a board and deferred to the board’s business judgment based on a Unocal standard, for the following reasons: it was not preclusive (i.e., the proxy contest was not impossible); the protection of the NOLs was a valid corporate objective; to exchange rights for newly issued shares and to issue a new rights dividend (i.e., reloading), was proportionate and entitled to deference under the business judgment rule. Also, importantly, one panel member said it was the first Delaware decision to distinguish between "independent directors" and "outside directors". Even though not regarded on these facts as "outside directors", the Court found that two directors were still independent.
- In re Revlon, Inc. S’hlders Litig. (Del. Ch. Mar.16, 2010). This is not the same as the 1985 Delaware Supreme Court decision relating to the duties of directors in connection with the sale of a company. This recent decision discusses the standards that the Court will impose on attorneys in class actions. The Court removed lead counsel and Delaware counsel. Extensive discussion and analysis was provided by the Court for the factual, legal and policy reasons behind the ruling, and the Court addressed these concepts in the context of representative litigation in general. One panel member suggested that an inevitable consequence of this opinion is that cases of this type will be prosecuted with more vigor, and more discovery is likely before Memoranda of Understanding are entered into involving litigation that challenges corporate mergers or similar transactions. It was also suggested that the practice of "high volume" complaints filed by some plaintiffs’ firms will be more carefully handled. Another member of the panel (who is a New York lawyer that often practices in Chancery Court), indicated that if there is a risk that plaintiff’s lawyers will now be inclined to avoid Delaware, one solution for companies who want their shareholder suits to be filed in Delaware, is to include a "Delaware exclusive forum" provision in their charters–much like a forum selection clause in a merger agreement. To the extent that plaintiffs’ lawyers already choose other fora, one risk is that the results in those fora is not as predictable as decisions from Delaware.
The new "expedited, voluntary" arbitration rules now applicable in the Court of Chancery were discussed by the panel (as previously explained on this blog). Among the prerequisites and features of these new rules are that:
- The parties must consent to the procedure
- A member of the Court will be the arbitrator (and will be able to issue injunctive relief)
- The dispute must involve a Delaware entity and an amount in dispute of at least $1million
- The parties can agree that the decision will be binding, otherwise appeals are directly to the Delaware Supreme Court
- Hearings are expected to be held within 90 days of filing the complaint (i.e., very fast).
- The procedure will be confidential (as will the decision) unless and until an appeal is made to the Delaware Supreme Court