April 19, 2010
A "New" Revlon Duty for Plaintiffs' Counsel: A Duty of Candor to the Court
In a 46-page opinion, Vice Chancellor Laster substituted new lead counsel in a representative action against Revlon related to the merger process that made MacAndrews & Forbes Revlon's controlling stockholder. The case criticizes the process used by many of the "regulars" in Delaware stockholder actions and provides an overview of what the Vice Chancellor views as typical of certain representative actions following a merger.
My favorite part of the opinion is right on the first page:
Having reviewed the record in the case to date, I conclude that the original plaintiffs' counsel failed to litigate the case adequately. Indeed, their advocacy has been non-existent. The memorandum of understanding to which they agreed raises serious questions about whether they focused foremost on the interests of the class, or instead settled on terms that would be easy gives for the defendants while still arguably sufficient to support a release and a fee. Factual representations in the memorandum of understanding appear inaccurate. When the defendants later wanted to amend a non-waivable majority-of-the-minority condition to effect a de facto waiver, original plaintiffs' counsel readily signed off. Then, when forced to defend their conduct and leadership role, original plaintiffs' counsel approached the concept of candor to the tribunal as if attempting to sell me a used car.
It is rarely easy to admit when we make a mistake (or a series of mistakes), but it is usually the right thing to do even though it can be costly. Just ask golfer Brian Davis, who this weekend called the penalty on himself that ensured a second-place finish. Even if it means losing in the short term, when we come clean and own our mistakes, we at least keep our own self-respect and have the chance to earn the respect of others. And that's even more important as a lawyer, than it is as a golfer. At least, it should be.
April 19, 2010 | Permalink