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Editor: Brian JM Quinn
Boston College Law School

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Friday, November 8, 2013

More on Challenge to Edgen Forum Provision

So a couple of days ago, I noted another challenge to an exclusive forum provision (this one in a corporate charter) in connection with the acquisition of Edgen Group by Sumitomo.  So, Edgen had its day in Chancery Court where it argued that the Vice Chancellor should issued an injunction against the plaintiff stockholder to prohibit him from purusing a law suit outside of Delaware.  In considering the whether to issue the order, Vice Chancellor Laster made it clear that Delaware believes exclusive forum provisions are binding on stockholders.  There are no issues for the court with respect to the legality of these provisions.  But...no injunction for Edgen.  Why? Well, on the balance of the equities analysis, the court felt that it wasn't the court's place to tell a court in Louisiana what to do.  Edgen can raise the forum provision in front of the Louisiana court and the court - if fairly applying Delaware law - should toss the case out.  Ahem...we shall see...

Now, what I thought was really interesting about Vice Chancellor Laster's hearing in Edgen was his statements about the nature of plaintiff shareholders.  To get the context, Edgen and their counsel appeared  before Laster for the hearing.  Genoud, the plaintiff, however did not appear.  Genoud's counsel was in fact there, but without authorization to speak on behalf of his client in the Delaware action.  There was a lot of 'we love to appear, but our client hasn't authorized us to appear in Delaware' etc.  To that, Laster had this to say (Transcript Hearing):

Now, Mr. Genoud has not responded to the complaint. Extraordinary efforts have been made by Mr. Slights and his colleagues to track down Mr. Genoud, including the hiring of two process servers and the hiring of a private investigator. His residential address cannot be found. 

The Louisiana counsel who represent Mr. Genoud for purposes of that action have declined to accept service. And the Robbins Geller firm, a firm that I generally have great respect for, has engaged in unsatisfying and, dare I say, pathetic representational contortions in which they have maintained that although they represent Mr. Genoud for purposes of challenging the merger and bringing the lawsuit in Louisiana, they do not represent Mr. Genoud for the clearly-related subject matter of this proceeding.

Now, anyone remotely familiar with this type of stockholder litigation understands that Robbins Geller is not taking its direction from a nominal client on these issues but rather is calling the shots itself. And the idea that Robbins Geller and Louisiana counsel have not been able to reach their client, even though they sued in Louisiana and sought expedited proceedings and have a status conference tomorrow, is either, one, not credible, or two, confirmatory that Robbins Geller is not taking direction from its client about how to handle this litigation.

Frankly, it's quite disappointing behavior from a firm that otherwise has done a great deal to build up reputational capital and credibility with the Delaware courts. It would not have been, I think, any impairment at all to enter an appearance and reserve the ability to fight the jurisdictional issue. It is much more credibility-straining to claim that you can't contact your client, and that although you have been engaged to handle a broad and expedited attack on a merger and to sue in a jurisdiction internationally removed from your client's residence, you have nevertheless not been retained to handle a related proceeding in another court that, although I haven't done the math, is probably equidistant, if not closer, to the plaintiff's residence.

The Louisiana court held a hearing in this case yesterday.  I'm assuming the plaintiff (or his counsel) turned up for that hearing.  No word yet on the outcome of that hearing. 

-bjmq

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