Tuesday, October 22, 2013
Last month, I posted a little blurb on Vice Chancellor Laster's denial of a motion to consolidate based in part entirely on the fact that plaintiffs had captioned the consolidated case "shareholder litigation" and not "stockholder" litigation. The Vice Chancellor's comments were succinct, "Under whose law do you think you are litigating?"
Me? I find that kind of thing entertaining and on the whole not troublesome. Afterall, I remember my brief experience as an associate. In my first drafting project, I used shareholder and stockholder interchangeably. Using the same word all the time seemed so ... boring. Of course, there was a sea of red ink on the document when it came back. OK, lesson learned - consistency in drafting. The next version of the document went up and came back in another sea of red ink! Stockholder, not shareholder.... grumbles among the associate ranks, but okay. In a later assignment, I decided to show how much I learned, so I was consistent and only used 'stockholder'. The joke was on me, though. More red ink ... it's shareholder for California corporations!
What? You've never had an experience like this? I find that odd. Of course you have. Who instructs their associates to draft in any which way they please? No one, that's who.
In any event, the whole tomato/tomahto thing generated a little bit of a kerfluffle in ways that my regular posts of insider trading or LBOs just don't.
My take? This is an internal affair of the State of Delaware. If the courts of Delaware have decided that plaintiffs should caption their litigation "stockholder litigation" and not "shareholder litigation", so be it. Who am I to complain? No substantive rights are affected either way, so let Delaware have its way.
It's not like last month's denial was the first time Vice Chancellor Laster has been tilting at this particular windmill. Last year, he observed in a settlement hearing in Adams Shareholder Litigation:
"Today's hearing is so that I can consider the proposed class action settlement in In re Adams Golf Shareholder Litigation, C.A. No. 7354. I note, for the benefit of everyone who captions these cases, that with the 2010 amendments to the Delaware General Corporation Law, there are no longer any stray references in the DGCL that use the term 'shareholder.' The DGCL uniformly uses the term 'stockholder.' 'Shareholder' is a model act concept, although it did slip in in Section 203 for a few years. And certainly our decisions are not always scrupulous in observing the distinction. Nevertheless, I will humor myself, if no one else, by thinking of this privately as In re Adams Golf Stockholder Litigation."
A check of the Delaware code turns up only one reference to shareholder -- a stray parenthetical reference in the new Section 251(g) (hey, someone get on that!). Otherwise, the word shareholder is nowhere to be found.
What to make of all this? It's not as if stockholders of Delaware corporations lose or are otherwise denied substantive rights if they call themselves shareholders. The two words are, afterall, synonyms in normal parlance. However, if attention to detail is the stock and trade of a transactional lawyer's craft -- and it is, it is -- then it's surprising to me that there might be even the slightest pushback in a demand that we pay attention to detail.
So...tomato, tomahto I guess...but if you are in front of a Delaware court, you better make sure it's stockholder all the same.