Thursday, January 17, 2013
Chancellor Leo Strine and Prof. Larry Hamermesh have recently posted a new paper, Putting Stockholders First, that is their contribution to the question of multi-forum litigation. Unlike his predecessor, Strine takes a more active approach to managing this problem:
Abstract: The prevalence of settlements in class and derivative litigation challenging mergers and acquisitions in which the only payment is to plaintiffs’ attorneys suggests potential systemic dysfunction arising from the increased frequency of parallel litigation in multiple state courts. After examining possible explanations for that dysfunction, and the historical development of doctrines limiting parallel state court litigation — the doctrine of forum non conveniens and the “first-filed” doctrine — this article suggests that those doctrines should be revised to better address shareholder class and derivative litigation. Revisions to the doctrine of forum non conveniens should continue the historical trend, deemphasizing fortuitous and increasingly irrelevant geographic considerations, and should place greater emphasis on voluntary choice of law and the development of precedential guidance by the courts of the state responsible for supplying the chosen law. The “first-filed” rule should be replaced in shareholder representative litigation by meaningful consideration of affected parties’ interests and judicial efficiency.
Dennis Berman at the WSJ has a piece at WSJ.com that asks the right question about the now simmering Dell going private transaction. Who is Dell working for?
Management buyouts are always fraught, precisely for this reason. Prodded by court rulings, boards have taken steps to minimize the most flagrant problems. Should a deal be announced, be prepared for a barrage of reminders about "independent committees," "go shops" and the like.
But these steps are ultimately cosmetic. No one will say it this way, but it's the way deals happen: The conflict is the opportunity.
For example, without Mr. Dell's stake, it would be nearly impossible to assemble the $22 billion to $25 billion needed to buy the company. It's also unlikely that another buyout shop or industry player would make a competing bid without Mr. Dell's consent.
In these situations, a powerful executive like Mr. Dell can effectively act as his own poison pill, guarding against outcomes he doesn't like.
Make no mistake. Once this deal is announced there will be multiple suits. So of course, the lawyers are being attentive to the requirements. But if the J Crew transaction from last year is any guide the deal will pasts muster. However, these going private transactions always raise a question with me. If Dell (or whoever is the continuing management) have such good ideas about how to run the company, why don't they just go ahead and implement them now for the public shareholders? Why keep all the good ideas and strong management for when the business goes private? It's a question without a real answer.
Wednesday, January 16, 2013
Is it me or since Versata v Selectica have we been seeing an unusual rgowth in the use of NOL pills? I mean, there are an awful lot of firms out there all of a sudden looking to protect net operating losses from the liklihood of an inadvertant "ownership change". Or maybe, it's a shift of what is now the new "market" from a 10-15% trigger down to a 4.99% trigger. Oh, Krispy Kreme adopted a NOL pill yesterday. It's not seeking to prevent a hostile takeover, just an inadvertant change of ownership.
Monday, January 14, 2013
The editorial board of The Business Lawyer asked that I share this announcement. It's a great publication and probably the premier place for a corporate law scholar to publish:
The Editorial Board of The Business Lawyer is soliciting submission of articles and essays for Volumes 68 and 69. TBL is the flagship scholarly journal of the American Bar Association Section of Business Law. It reaches 41,000 readers on a quarterly basis. Authors must submit exclusively to the journal and submissions are peer-reviewed. We generally give authors a response in about two weeks. TBL provides a good forum to reframe scholarly articles published elsewhere for an audience of judges and practitioners. Past authors include Bernard Black, Henry Wu, Lucian Bebchuk, Joseph Grundfest, Guhan Subramanian, Vice Chancellor Leo Strine, former Chief Justice of the Delaware Supreme Court Norman Veasey, Larry Hamermesh, Starvros Gadinis, Roberta Karmel, Jonathan Lipson, and Barbara Black.
Articles should be submitted to Diane Babal, Production Manager, firstname.lastname@example.org. Questions about submissions can be addressed to Associate Editor-in-Chief, Professor Gregory Duhl, email@example.com.