Disney has been appealed. If there's no settlement, I expect affirmance. As others (e.g, Larry H) have observed, the fact that Chandler held a trial, the embarassment of the trial itself, and Chandler's strong normative language are likely to have an effect on corporate practices. Unless there's some change in the environment, I doubt the Supreme Court will think a reversal necessary to send a message.
One thing that might provoke the Supreme Court to stronger action is, as Mark Roe would say, some federal rumblings. But the fallout from Sarbox has not been good, and I doubt Cox is going to be pushing major SEC initiatives into internal corporate governance.
If it does act, the Supreme Court may try to clarify good faith. But what can it do? The key to the case is the holding, not the rule. If the defendants are not liable, they have been exonerated in the face of some pretty strong facts for abdication of the board's supervisory role, whatever the court says the rule is.
That's why this case is so important (as I've said, the case of the decade). It presented both high profile and the exact right facts to test whether there was anything left of a non-loyalty fiduciary duty. Van Gorkom is finally dead, a stake through its heart.
The case is also important because of its timing. Together with the Cox ascendancy and the chastening effect of the Sarbox fallout, this opinion marks the official end of the Enron era.
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1. Posted by Shag from Brookline on August 11, 2005 @ 6:20 | Permalink
I have not read that much about the details in Disney. To what extent did Delaware corporate law apply (assuming Disney is incorporated in that state)? How might the result have been different if Disney had been incorporated in another state with less liberal corporate laws? Is federalism part of the problem with large public corporations that carry on business worldwide? We have a UCC adopted in just about every state now and a lot of other uniform laws adopted by many states that impact business. Is it time for a uniform corporate law? Just asking.
2. Posted by Gordon Smith on August 11, 2005 @ 8:36 | Permalink
Larry, I agree. The Supreme Court will affirm. I could imagine a Delaware Supreme Court that would reverse, but not this one.
3. Posted by In the Trenches on August 11, 2005 @ 9:30 | Permalink
As interesting and noteworthy as the Eisner decision is, the demise of non-loyalty fiduciary duty claims is greatly exaggerated. In a decision that could prove far more important than the various Disney rulings, the Third Circuit just reversed a decision dismissing a fiduciary duty claim of exceptionally broad proportions. See In re Tower Air, No. 04-3633 (Aug. 3, 2005). For those of us who actually litigate these cases, the Tower Air decision may be much more relevant.
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