First, the adulation. Those who have been lucky enough to have met Chancellor Chandler know that he is a wonderful, gracious person. He is a judge’s judge, able to deal effectively with litigants, lawyers and the myriad of actors in the Delaware eco-system. Chancellor Chandler’s tenure has been defined by the warmth and collegiality which he exudes.
I agree with Jeff Lipshaw that the Cerberus case shows Chancellor Chandler’s excellent grasp of what corporate lawyers do. But in remembering and honoring the Chancellor’s tenure, I’d like to focus on three cases that, while not necessarily defining him, show his skill at guiding Delaware and its precious corporate law through the hardest of issues.
The first of these was the epic Disney litigation. Through years of proceedings and numerous opinions Chancellor Chandler held a discourse with the Delaware Supreme Court about the fundamental tenets and breaking points of Delaware corporate law doctrine. What does it mean to act in good faith? What, if anything, was left of Smith v. Van Gorkom in a post-102(b)(7) world? What role was Delaware going to take in defining corporate governance after Enron? (Answers in order: see the opinions, not much, and a deferential one; on this last point you need only read the Chancellor’s 2009 Citigroup opinion to see Disney’s ultimate outcome).
The answers to these questions may have been disenheartening to those who advocated for a more active Delaware judiciary, but they appeared to be just right porridge to those who felt that court-administered corporate governance was bound to go wrong. Without wading into the debate, I think it is enough to say that by the end Chancellor Chandler and the Justices of the Delaware Supreme Court had come to a remarkable agreement on both the content and direction of their jurisprudence. This was a remarkable feat for a common law court.
But it was not all harmony and agreement during Chancellor Chandler’s tenure. Here, I turn to the two opinions which bookended Chancellor Chandler’s career: Unitrin, Inc. v. American General Corp. and Air Products and Chemicals, Inc. v. Airgas, Inc. et al. These two opinions are must reads for anyone trying to understand the tensions which grip Delaware’s current takeover jurisprudence. Together, they sketch an alternative takeover regime than the one the Delaware Supreme Court has crafted. In Unitrin Vice Chancellor Chandler’s lower court opinion found that a repurchase program designed to fend off a hostile takeover violated Unocal proportionality review. Chancellor Chandler, then a Vice Chancellor, framed the question nicely in that opinion by raising the question of whether “placing the decision to sell the company in the hands of stockholders who are also directors a disproportionate response to a low price offer to buy all the shares of the company for cash.” Chancellor Chandler was reversed by the Supreme Court which raised the bar on Unocal proportionality view, later leading Professors D. Gordon Smith and Robert B. Thompson to subsequently assert that Unocal proportionality review was “dead”.
Fifteen years later and faced with related issues in the Airgas case, Chancellor Chandler took a different tack. Chancellor Chandler refused to order Airgas’ ruled that Delaware law and the Unocal doctrine did not encompass the doctrine of “substantive coercion” but that were it up to him, he would decide differently.
In putting forth his vision in both opinions, Chandler advocated a more searching but not overreaching standard of review for takeovers. He did so out of a belief that director conflicts should be subject to substantive scrutiny. Perhaps shareholders should also decide at some point. Chancellor Chandler showed that he could not only fashion strong doctrine in tandem with the Delaware Supreme Court but register his dissent and preserve the autonomy and intelligence of the Chancery Court.
Ultimately, Chancellor Chandler guided the Delaware courts through Dodd-Frank, Sarbanes-Oxley and other perils. He has done the best job of all by leaving a strong court in the hands of his equally qualified successor Chancellor Strine.
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