Steve Bainbridge, responding to my earlier post, says no.
Maybe, to paraphrase a great American, that depends on what the meaning of "dead" is. The rule -- that a duty of care is always a prerequisite to the business judgment rule -- is plainly gone, at least in 102(b)(7) cases.
What about limiting the rule to the sort of major transaction involved in Van Gorkom, as Steve suggests? Still dead. Chancellor Chandler implies that, at least in a 102(b)(7) case, Disney-type abdication would have been enough for liability in this situation.
So, perhaps, good faith -- conscious disregard without conflict of interest -- is still alive for that narrow category of cases.
But Van Gorkom did not involve conscious disregard. It did not involve a "supine" board's failure to pay attention to one of the highest-profile employment contracts in the history of business. It involved nailing an experienced, sophisticated board for selling the company for 40% more than the current market price. Would that happen again, at least in a 102(b)(7) situation? No way. No earthly way, unless, as I do not believe will happen, the Supreme Court reverses in Disney.
So does Van Gorkom have any kind of a pulse? Maybe, in the following limited sense: No case ever dies in Delaware. Often cases are preserved as alternative tools the court can draw from as the facts and times require. At worst, cases go into suspended animation, to be dug up for freakish facts when none of the cases in current "inventory" are useful.
That's where I think Van Gorkom is going. Not six feet under, but into a sort of cryogenic state. We might see it walking around in a kind a Frankenstein, Living Dead-ish gait at some point. An imitation of life. But still dead.
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1. Posted by Steve Bainbridge on August 11, 2005 @ 15:14 | Permalink
But Van Gorkom is not a 102(b)(7) case.
2. Posted by Larry Ribstein on August 11, 2005 @ 15:29 | Permalink
Van Gorkom isn't a 102(b)(7) case, but virtually all cases now will be, as Justice Veasey and others have pointed out. If Van Gorkom is only relevant to the non-102(b)(7) realm, then it belongs in the Dead Dead rather than the Living Dead category.
3. Posted by Eh Nonymous on August 11, 2005 @ 15:39 | Permalink
I just want to point out that Imitation of Life is a really cool song.
And that Van Gorkom would "make a really good name for a rock band."
And that if the standard of care is no longer a fiduciary standard, then the common law of trusts no longer really applies to corporate management and direction. I mean, what kind of trustee could be "supine", disregard the consequences of a contract whether it involved winding up the trust or not, or otherwise fail to act "utterly selflessly and in the best interests of the beneficiary, without any conflict and in good faith"?
I like Delaware, it's a very cute little state, but this whole BJR thing is pretty wacky.
4. Posted by Larry Ribstein on August 11, 2005 @ 16:37 | Permalink
Two quick comments.
1. Imitation of Life might be a cool song. I wouldn't know. Before that it was a way uncool Douglas Sirk movie. That's what I was referring to.
2. A clarification on 102(b)(7), in further response to Steve Bainbridge. One would have thought that Van Gorkom died when 102(b)(7) was adopted. But there was still a question whether it could be reborn as bad faith. That's the undead Van Gorkom that Disney finally killed.
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