Business Law Prof Blog

Delaware Innovates, Agains

Delaware will test its new law that gives its courts jurisdiction to respond to inquiries from the SEC on what Delaware corporate law provides.  The SEC, in Rule 18-A8, allows firms to deny ballot space to shareholder resolutions that are contrary to state law. Now the SEC can ask the Delaware court for specific opinions on such resolutions.  Very clever and another reason why company prefer to incorporate in Delaware.

Grasso Wins

The ex-Chief Executive of the NYSE, Richard Grasso, won his long lawsuit filed by the state of New York over his compensation.  The win was technical, the state had no standing, but a win nonetheless.  Obscured in this fight is Grasso's real legacy.  You have to admire his climb up the ladder in the organization, he was far from an ivy leaguer, and his grit and pugnacity.  But these attributes were also detriments.  His "take no prisoners" style of public relations and his heavy handed protection of floor brokers and specialists meant that the NYSE was, during a time when it should have been innovating to stay competitive, an obstinate bully.  He single-handily protected the exchange's market share with heavy lobbying, not with innovation.  The exchange is still feeling the effects of this delay and has struggled to get its new trading platform on line to stay competitive in a now international race for market share.  He was the wrong guy for the times and managed to get paid handsomely nonetheless.

Exxon Valdez Damages Reduced

On Wednesday, the Supreme Court ruled to cut the punitive damages for the 1989 Exxon Valdez disaster to $507.5 million.
A jury decided in 1994 that Exxon should pay $5 billion in punitive damages and in 2006, a federal appeals court cut that verdict to $2.5B.
The $507.5 million amounts to punishment on top of the $3.4 billion in cleanup costs, compensatory payments and fines Exxon already has paid.  The 5-3 ruling was written by Justice David Souter, who stated that punitive damages may not exceed what the company already paid to compensate victims for economic losses.
On the question of whether Exxon Mobil was liable for punitive damages at all, the court split 4-4, which left standing the appeals court opinion that the company was liable. Justice Alito, an owner of Exxon shares, took no part in the case.  While the 5-3 ruling limited damages is getting all the press, the 4-4 split on punitive damages, with a conservative judge not participating, may be the more important ruling.

InBev Goes Hostile

On Thursday, Anheuser-Busch rejected the unsolicited $46 billion purchase offer from InBev.  A copy of the letter to InBev CEO, Carlos Brito, stated, "we see that now could be opportunistic timing for you to make this acquisition, given the weak U.S. dollar and sluggish U.S. stock market," Busch said in the letter. "From the standpoint of the Anheuser-Busch shareholder, however, a transaction with InBev at this time would mean forgoing the greater value obtainable from Anheuser-Busch's strategic growth plan."
   InBev filed a lawsuit in Delaware court, Anheuser-Busch's state of incorporation, seeking to officially declare that shareholders can replace the 13 members of the A-B board.
   Douglas Cogen, an M&A attorney with Fenwick & West in San Francisco, commented that "before this was filed, you could have guessed about whether (InBev) would have another round and upped their bid.  To sort of come right out and say we're looking to replace the board ... it's about as aggressive as you can get."

At issue is whether a consent solication can remove the board with or without cause. Again, the court will tell us.