This is the second live installment from the above 2009 corporate law seminar in New Orleans. Among the other bloggers posting live, see, e.g., here.

As a follow-up to my last post, the panel presentation of this afternoon is entitled:

Public Company M & A in 2009: What to Expect?  The moderators are Victor Lewkow and James Morphy, Jr. The panel members include a Vice Chancellor of the Delaware Chancery Court.

MAC clauses were discussed. The member of the Chancery Court on the panel provided his perspective on MAC clauses by suggesting that recently there seem to be less "outs" in contracts, and Delaware strongly supports contract rights.  There is a tension between a MAC clause and a "break-up fee" if the deal is not consummated. The "downside" of the position that strongly honors contracts,  is that it puts pressure on financing parties when there is no "financing out". A problem develops if the agreement does not allow specific performance and one does not have a deal, then one is only left with the unpalatable option of "chasing" the termination fee.

Ted Mirvis of  Wachtell Lipton discussed remedies in the context of merger agreements. Among the many issues he addressed, include the discussion of the different treatment of third party beneficary rights addressed in the Delaware decision in Amirsaleh compared with the New York decision in Con Ed

The Omnicare case was discussed and juxtaposed with the need for "deal certainty".  The point was made that the analysis may be different when viewed from an "equitable as opposed to law" lens. In that context, a transcript of a decision by the Delaware Chancery Court in the case of

Optima International of Miami, Inc. v. WCI Steel, Inc., (Lamb, V.C., transcript, June 27, 2008),

was cited for the position that Omnicare  is not violated when there is shareholder consent and the controlling shareholder owns less than 50% (and such consent is not prohibited by charter). However, the SEC recently made an interpretation that such consent cannot  be used if there is any non-cash consideration requiring an S-4.

I’m blogging live from the 21st Annual Tulane Corporate Law Institute, a two-day seminar on corporate law that brings together scholars, practitioners and judges who want to  explain, and to learn about the latest developments in corporate law. There is always a large contingent of Delaware lawyers and judges. I will only be posting about selective and subjective tidbits that I think would be of the most interest to those who read these pages looking for the latest updates in Delaware corporate law. Several others are also blogging this seminar today, e.g., here and here.

One of the morning panels was titled: “Shareholder Activism, Board Governance and the Role of State Law in the Age of Uncertainty.” Moderators of the panel were David Katz of Wachtell Lipton and Faiza Saeed of Cravath, Swaine and Moore.

Among the panel members are Delaware Supreme Court Chief Justice Myron Steele.
The topics addressed by the panel included:

“The Role of Delaware v. ‘Federal’ Corporate Law”.

The Chief Justice suggested that the future role of state law  in corporate governance ultimately will be determined by the Federal government. [Note that this is not an official transcript and this post is the result of my notes that may not be a complete summary of the presentation by any panel member.]
His Honor said that Delaware’s approach is to find a balance between accountability and authority, and to allow shareholders and directors to talk about what improvements can be made on an incremental basis. My take on a few other soundbites from His Honor follow:
• His is concerned that the changes at the federal level will be the result of a frenzied race to make some change without the application of thoughtfulness. His preference is to allow the states to continue to lead the change.
• He mentioned a reference to a seminar last week at Notre Dame Law School where a panelist mentioned a federal statute that could be used to impose criminal liability for breach of fiduciary duty. One of the concerns is the lack of consistency in an approach that allows the many federal courts to define fiduciary duty according to 1,300 different federal district judges’ views in applying, potentially, the different definitions from one or more of the 50 states on fiduciary law.
• He said that a board is entitled under Delaware law to consider other constituencies, such as the community impact in a merger context, as long as they document their reasons, even though Delaware does not have a statute like some other states have, that expressly allows a board to consider the community.
• In reply to a question, His Honor  expressed his personal hope that before acting too hastily, Congress would consider whether the systemic failure experienced in the financial markets and other sectors of the economic downturn, is due to corporate governance problems or whether it is more a problem of faulty federal regulation–or simply inappropriate, excessive risk-taking.


According to the World Health Organization this afternoon, and a televised announcement from the President of the United States this evening, a novel coronavirus (Covid-19) has now been declared to be a worldwide pandemic. Two other examples of how serious this situation is: The President announced a travel ban from most of Europe to the U.S. for the next 30 days, and the NBA just cancelled the rest of their season.

The Delaware Courts have responded by issuing Standing Orders addressing precautionary measures that direct litigants, their counsel, and others who participate in court proceedings about how to address requests for rescheduling, attendance at court hearings, etc., for those who have, or may have, the coronavirus.

In addition, a notice was distributed today that the public investiture ceremony for the newest Vice Chancellor for the Court of Chancery, The Honorable Paul Fioravanti, scheduled for next week, has been postponed due to this public health risk–although His Honor has been sworn in already and is “on the job”. Prior to his recent ascension to the bench, he was a well-respected corporate litigator for many years. Now he is a well-respected jurist. We wish him all the best, and many years of health and prosperity.

The Delaware Supreme Court issued a Standing Order this week regarding how to address the impact of the coronavirus on Court proceedings.

The Court of Chancery also issued a Standing Order on the topic, and the Delaware Superior Court likewise has published a Standing Order with precautionary measures and instructions for how to address obligations to the Court if you have the coronavirus, or have been exposed to it. [Editor’s Note: Both of the foregoing Orders were superseded by Orders effective on March 16 that were also highlighted on these pages.]

As an aside, last Thursday and Friday many members of the Delaware Bar who practice corporate litigation (including yours truly), as well as members of the Delaware Supreme Court and Delaware Court of Chancery, attended the 32nd Annual Tulane Law School Corporate Law Institute in New Orleans, as they have done since the seminar was started by a former Delaware Supreme Court justice. Occasional reports from the seminar over the last 15 years have appeared on these pages. Even though the seminar attracts lawyers from all over the U.S. and other countries, a large percentage of the 600-plus attendees are from Delaware. I only mention this as part of this short post because I hope that those of us who attended this public gathering as well as the several dinners and cocktails parties related to the seminar, did not spread any germs (myself included.) I didn’t notice anyone who had obvious symptoms.

We have referred to Delaware legislative developments regarding benefit corporations previously on these pages, but a recent article in Forbes provides helpful background information about the history and genesis of the Delaware statutory provisions regarding this rather new aspect of Delaware corporate law. The article features a prominent Delaware lawyer who is a major player in promoting benefit corporations. In essence, the relatively new statute allows a corporation to be formed in order to have as its legitimate and explicit purpose more than only the maximization of profit for stockholders. The article linked above should be of interest to anyone who wants to know more about this developing topic.

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.

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.

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.

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.

Gordon Smith at The Congomerate blog writes that the offer that Kerkorian just made for Chrysler does not trigger Revlon duties under Delaware law for at least  2 reasons: One, Chrysler is part of a German company and so Delaware law likely will not apply. Two, it is only a division of a larger company and therefore, as it only involves the spinoff of a subsidiary, Revlon is not triggered. The good professor ends his post with a citation to the following  Delaware Chancery Court decision: Cf.  In re Toys "R” Us, Inc. Shareholder Litigation, 877 A.2d 975 (Del.Ch. 2005).

SUPPLEMENT: Elizabeth Nowicki of the Truth on the Market blog provides insightful commentary about when the Revlon duty (to maximize shareholder value when the company is for sale),  applies in the context of a sale to a strategic buyer, but when the same company is sold to a private equity firm, the entire fairness standard is applied (to the extent it involves the board being on both sides of the transaction when they negotiate to keep their jobs after the purchase by a private equity firm, as opposed to a strategic competitor in which they likely will lose their jobs.) She supplements her commentary with remarks on the topic by Vice Chancellor Leo Strine, Jr. of the Delaware Chancery Court  who was on a panel at the recent Tulane Corporate Law seminar. 

STILL MORE: A long list of colorful quotes from His Honor at the  Tulane seminar are captured here by the WSJ’s Deal Journal blog.