The Delaware Supreme Court finally issued its long-awaited opinion in Lyondell Chemical Company v. Ryan today. Remember, this is the case in which the directors of Lyondell Chemical Company were accused to breaching their fiduciary duties in connection with a sale of the company. The directors were admittedly independent and disinterested, but the plaintiff shareholders accused the directors of breaching their fiduciary duty of good faith by knowingly shirking their duties under Revlon. Vice-Chancellor Noble refused to grant the directors summary judgment because he wanted to know more facts about whether "the directors may have consciously disregarded their known fiduciary obligations in a sale scenario." (Ryan v. Lyondell Chemical Co., 2008 WL 2923427 (Del. Ch. 2008)).

In reference to that earlier decision, I expressed my frustration with the current state of Delaware law:

The problem with the decision is that [the defendants] can't get a lawsuit like this dismissed. But I don't see how you can pin that on Vice-Chancellor Noble. He is just taking direction from the Delaware Supreme Court.

Others, like Jeff Lipshaw, thought VC Noble was simply bootstrapping a duty of care claim into a non-exculpable duty of good faith claim. (Glom guest blogger Andrew Lund has written a paper about this possibility and how Delaware could more easily avoid it.) In its opinion today, the Delaware Supreme Court agreed with Jeff's assessment of the facts of this case: "At most, this record creates a triable issue of fact on the question of whether the directors exercised due care." (For Jeff's reaction to the opinion, see here.)

Importantly, this conclusion depends on a strikingly narrow understanding of "bad faith" in Delaware fiduciary law. In my first post on this case last August, I observed, "Disney and Stone now have defined 'bad faith' in a manner that does not require illegality or fraud (the traditional meanings of 'bad faith'), or disloyalty -- at least in the traditional sense of self-dealing. 'Bad faith' now has a more expansive meaning, that might include actions by directors who are admittedly independent and disinterested." While all of this remains true, it appears that the Delaware courts still have an extremely narrow view of bad faith. Steve Bainbridge described it this way earlier today: "Ryan ... goes a long way towards constricting the scope of bad faith claims to egregious and highly unusual sets of facts."

To understand how narrow "bad faith" has become, consider VC Noble's initial decision to deny summary judgment. That decision was motivated by a desire to gather more facts before determining that the directors here had not acted in bad faith. VC Noble was under the impression that directors could do something to fulfill their Revlon duties, but still knowingly fall short of doing enough. This is not an unreasonable view, though it would require a fair amount of precision to determine the difference between a care claim and a good faith claim. Chancellor Chandler made a similar point in a recent opinion in In re Citigroup Inc. Shareholder Derivative Litigation, 964 A.2d 106 (Del.Ch. 2009):

The Delaware Supreme Court wants to draw a brighter line in its opinion issued today:

And again:

The influence of Caremark is apparent here, and we know from experience that Caremark liability is almost unheard of in Delaware. Of course, Vice-Chancellor Strine recently found support for Caremark claims with respect to the former senior vice chairman of general insurance and former vice chairman of investments and financial services of AIG. See In re American Intern. Group, Inc., 2009 WL 366613 (Del.Ch.2009). In denying a motion to dismiss on this issue, VC Strine observed:

This sort of behavior, if proved at trial, would easily support a finding of "bad faith" under the traditional standards. In other words, the Caremark version of bad faith would be unnecessary. And if the Delaware courts are serious about the standards articulated in Lyondell, I suspect plaintiffs will need facts like these to prevail on a claim of bad faith. So while boosters of the fiduciary duty of good faith had reason to rejoice after VC Noble's initial opinion, they will not be pleased with this latest directive from the Delaware Supreme Court.

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Last week I, along with millions of other people, spent part of my Spring Break in California at Disneyland. While there I could not help but think about, and in fact reconsider my impressions of, the Disney decisions. Today when I refer to Disney I view it as a case with important corporate governance implications. Moreover, because I teach the Disney cases as well as the implications of the “vote no” campaign at Disney, I tend to view Disney in terms of its crisis points. As a result, I was frustrated by the final Disney decision, which appeared to enable that company’s officers and directors to get away with observing lax governance standards. However, I too often forget that Disney is a company that produces products that have a tremendous influence on people's lives and our culture. For many people, Disney represents the “magic kingdom.” And perhaps the fact that the kingdom remained in tact in the midst of Disney’s corporate governance troubles validates the business judgment rule’s application to what many viewed as less than ideal governance practices.

Indeed, by all markers, Disneyland appeared to be thriving--at least on the day I visited the park. There were many many children (and some adults) dressed in various Disney costumes, willing to stand in lines up to two hours long to get a glimpse of Mickey Mouse or ride on a simulated Star Wars ship. And visitors paid handsomely for their experience. In fact, I have been told that some days the park gets so full that it must close. Being in Disneyland underscores the fact that Disney sells a remarkable product that holds a special place for many in the US and abroad.

On the one hand, maybe this means that we should care more about the conduct of its board and officers because we want such an iconic company to be a symbol of best practices. On the other hand, so long as the Disney brand remains undisturbed, perhaps we should give the company room to make mistakes. Of course, that is what the business judgment rule is all about. And walking through the park, I could not find fault with such a rule. Because at the end of the day, it appeared that the conduct about which corporate governance experts spilled so much ink, did not impact the experience of park goers. In fact I feel certain that very few people in the park that day gave a passing thought to Michael Ovitz and a case called In re Walt Disney. And as long as that is the case, perhaps the business judgment rule has served its purpose.

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The AALS has posted podcasts from the Annual Meeting. You can browse the sessions from this page. If you would like to listen to the Section on Business Associations program on Disney, click here. By the way, I was the first speaker in that session.

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In 1993 Justice Horsey of the Delaware Supreme Court penned this unfortunate sentence in the second major Technicolor opinion: "To rebut the [business judgment] rule, a shareholder plaintiff assumes the burden of providing evidence that directors, in reaching their challenged decision, breached any one of the triads of their fiduciary duty -- good faith, loyalty or due care."

Triads?

In Gaylord, Vice-Chancellor Strine tweaked the Delaware Supreme Court for its use of the plural "triads" and for identifying "good faith" as a separate fiduciary duty: "Indeed, the very Supreme Court opinion that refers to a board's 'triads [sic] of fiduciary duty [sic] -- good faith, loyalty [and] due care,' equates good faith with loyalty."

In subsequent opinions, the Delaware courts and commentators charitably reduced the number of triads to one, but confusion remained about the role of "good faith" in fiduciary litigation. We had a lot to say here about the Disney litigation, and if you were following that conversation, you might remember a lingering issue from the Supreme Court's most recent opinion: does the duty of good faith provide an independent basis for director liability?

My initial take on the Disney opinion was unequivocal:

The Court clearly embraces the duty of good faith as a distinct duty, separate from care and loyalty. For example, "grossly negligent conduct, without more, does not and cannot constitute a breach of the fiduciary duty to act in good faith."

In a subsequent post, I addressed Footnote 112 of Disney, which reads as follows:

[W]e do not reach or otherwise address the issue of whether the fiduciary duty to act in good faith is a duty that, like the duties of care and loyalty, can serve as an independent basis for imposing liability upon corporate officers and directors. That issue is not before us on this appeal.

I argued that "footnote 112 was an afterthought designed to secure a vote for the opinion in pursuit of unanimity." I speculated privately to several colleagues that Justice Holland had demanded the footnote, though what he intended to do with it I wasn't sure.

Now I know. The triad is dead.

Yesterday, the Delaware Supreme Court issued a unanimous, en banc opinion that seems to drive a stake in the heart of "the fiduciary duty of good faith." The following comes from Stone v. Ritter:

It is important, in this context, to clarify a doctrinal issue that is critical to understanding fiduciary liability under Caremark as we construe that case. The phraseology used in Caremark and that we employ here—describing the lack of good faith as a "necessary condition to liability"—is deliberate. The purpose of that formulation is to communicate that a failure to act in good faith is not conduct that results, ipso facto, in the direct imposition of fiduciary liability. The failure to act in good faith may result in liability because the requirement to act in good faith "is a subsidiary element[,]" i.e., a condition, "of the fundamental duty of loyalty." It follows that because a showing of bad faith conduct, in the sense described in Disney and Caremark, is essential to establish director oversight liability, the fiduciary duty violated by that conduct is the duty of loyalty.

This view of a failure to act in good faith results in two additional doctrinal consequences. First, although good faith may be described colloquially as part of a "triad" of fiduciary duties that includes the duties of care and loyalty, the obligation to act in good faith does not establish an independent fiduciary duty that stands on the same footing as the duties of care and loyalty. Only the latter two duties, where violated, may directly result in liability, whereas a failure to act in good faith may do so, but indirectly. The second doctrinal consequence is that the fiduciary duty of loyalty is not limited to cases involving a financial or other cognizable fiduciary conflict of interest. It also encompasses cases where the fiduciary fails to act in good faith. As the Court of Chancery aptly put it in Guttman, "[a] director cannot act loyally towards the corporation unless she acts in the good faith belief that her actions are in the corporation's best interest."

I will have a lot to say about this at some future date, probably in a law review article, but the first question that springs to mind is this: Has the Delaware Supreme Court been acting in good faith in its development of the duty of good faith?

Over the past decade, the Court has had numerous opportunities to "clarify" this issue, and the Court has consistently muddied the waters. As noted above in my Gaylord citation above, the Court of Chancery responded to Justice Horsey's unfortunate sentence by treating the mysterious duty of good faith as a species of loyalty violation, but the Supreme Court repeatedly emphasized the distinctiveness of "the duty of good faith." I never liked the idea that good faith was part of the duty of loyalty, but if that's where the Supreme Court wanted it, did we really need over a decade to figure that out?

We are told that the duty of good faith is connected to Caremark, which the Supreme Court has cited in three other cases, though never with the complete endorsement of the Caremark standard that appears in Stone. This makes sense to me, given the notion of "good faith" articulated in the Disney cases.

Then we are told that Caremark is really a duty of loyalty case. Not duty of loyalty in the traditional sense -- you know, those cases "involving a financial or other cognizable fiduciary conflict of interest" -- but something different. More like a good faithy version of loyalty. Ok, I think I basically get good faith after Disney, but why dilute a useful and longstanding conception of loyalty with these other fact situations? Was the post-Disney triad broken and in need of repair?

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Like the Chancery Court, the Supreme Court in Disney distinguished between conduct that violated the duty of care--for which directors were not liable--and conduct that fell below corporate best practices.  And both courts agreed that Disney directors engaged in actions that failed to meet the courts' formulations of corporate best practices.  I intuitively understand the distinction between conduct that satisfies due care and conduct consistent with corporate best practices--after all, when imposing liability we cannot expect directors' and officers' conduct to be the "best" or perfect.  Given this distinction, I wonder what the point is in pinpointing these best practices.  Both courts suggest that all directors and officers should use the best practices identified in the opinions as a guide for their own behavior.  But why should anyone expect that directors and officers will follow that guide when there are apparently no sanctions for their failure to do so?  Indeed, if due care is judged according to a "we don't expect perfection/nobody's perfect" standard, then not only does breaching the standard seem virtually impossible, but also it seems that engaging in behavior that satisfies "best practices" is an option that most corporate actors are free to ignore.  Thus, I find myself asking, what is the point in pinpointing aspirational standards that have no connection to the conduct in which we realistically expect directors and officers to engage?  Or to put it differently, how do best practices standards help us determine conduct that violates the duty of care?  In this regard, I find the distinction frustrating and unhelpful, except to the extent that it suggests that all corporate conduct will satisfy the duty of care because that duty does not require directors and officers to be on their "best" behavior. 

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Larry asks some provocative questions below, and I think this post addresses the first question and the last question.  Um, where is Van Gorkom?  I searched the opinion -- no "Van Gorkom."  There's not even a "Gorkom."

So, the Supreme Court of Delaware issues an opinion in an appeal that has everyone asking "Is Van Gorkom Dead?" and does not even cite Van Gorkom?  And, in the opinion, the court notes, inter alia, that directors do not need to see documentation of transactions they are approving if someone describes those documents to them.  That characterization of the facts of the Disney case sound very similar to the facts of Van Gorkom, although those facts, twenty-one years ago, resulted in a different judicial decision.  That sounds a lot like the court is rejecting Van Gorkom without saying so.  Also telling is the fact that the court never cites Van Gorkom for anything, which is odd for a breach of duty case.  So, why doesn't the court explicity overturn Van Gorkom?  Why create a blip in the common law that must be explained?  I suspected that the court would distinguish the Disney case from Van Gorkom based on the fact that the Ovitz contract was a mere employment matter and that even though the aggregate dollar amount seemed high, the amount was still small compared to the size of the company's budget.  Van Gorkom involved the sale of the company, a fundamental change that requires more attention than an employment contract.  But the court did not distinguish the facts, but instead analogized them and implied that a different result under the same facts would be erroneous.

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Now that the Delaware Supreme Court has finally opined on Disney, maybe the old gang that has gathered in this space before would like to get back together to discuss the case. I've already posted at my home site. 

Let me suggest a few topics if anybody wants to join in, most of which are touched on in my post:

1. The future of due care and Van Gorkom. What does this case say about the nature of gross negligence?

2.  What are the case's implications for bad faith and the application of 102(b)(7)? What kinds of facts might constitute bad faith?  Given the court's view of bad faith, is there any longer a meaningful role for gross negligence? 

3. What, if anything, does the case say about how it might address the undecided questions, such as the application of the bjr to officers.

4.  What does the case imply about Roe's thesis concerning federal law's impact on Delaware?

5. What can be said now about the relation between Delaware and the federal law of corporate governance?  Has federal law taken over the Caremark business just as it has disclosure?

6.  What, if any, role do theories of "good governance" and best practices have on directors' liabilities after Disney?

7.  What are the decision's implications for the executive compensation debate?

8.  What's likely to be the single biggest effect of this decision?

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Interestingly, the Supreme Court’s decision also did not reach the merits of the appellants' claim regarding the legitimacy of the director-by-director approach vs. analyzing the board as a collective body. Certainly a lot of attention was given to this approach, particularly after Emerging Communication, which suggested that directors with specialized knowledge may receive some heightened scrutiny. Although the Chancery Court’s decision appeared to back away from this more stringent approach, that court still assessed each Disney director individually in a manner that suggested that in order to be protected from liability, there needed to be a record reflecting that each director had sufficiently informed himself or herself. At the very least this director-by-director approach suggested that all board minutes needed to provide more robust accounts of individual director’s questions and comments. On appeal, the appellants’ claimed that such an approach was improper, and instead argued that the Chancery Court should have assessed the liability of the board as a whole. The Supreme Court declined to rule on the merits of this issue, but rejected the claim in part because appellants had not proven how the Chancery Court’s analysis was prejudicial and yielded an outcome different from a collective analysis. On the one hand the appellants’ argument appears to be taking a step back from the heightened scrutiny apparently required by the individualized approach adopted by the Chancery Court. Hence one could read the Supreme Court’s decision as essentially saying that because the appellants claim did not pass muster under a more stringent standard of review, it certainly would fail under the more lax “collective board” analysis. On the other hand, the Court’s opinion can be viewed as suggesting that there may be no real distinction in the two modes of analysis. If this view is correct, perhaps directors need not be concerned about creating individualized records of their actions.

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Lots of bloggers writing about Disney ...

Larry Ribstein makes a bunch of excellent points. I will highlight two. First, he notes that fiduciary duty claims other than self-dealing will be very tough to win:

[T]he only way a board is going to be held liable for breach of fiduciary duty when it it isn't self-dealing is to (1) really not have any idea what it is doing; and (2) not have a 102(b)(7) clause in the charter; or (3) have such a clause but proceed in conscious disregard of the board's responsibility, which would be truly puzzling in the absence of self-dealing. In other words, the board will be liable for non-self-dealing conduct on a cold day in August in Miami under a blue moon.

Second, Larry provocatively asserts:

The opinion resoundingly denounces the federal approach to corporate governance in SOX. The opinion says that the court is going to trust the board's judgment as long as the board shows any sign of actually exercising this judgment.

Hmm. I am not so sure that the Delaware Supreme Court was using this case to "denounce" the feds, but I think we can safely conclude that Delaware has fairly modest aspirations for fiduciary law. And, in my view, that is a good thing.

Steve Bainbridge doesn't like Justice Jacobs' formulation of the business judgment rule. Steve is right that the business judgment rule functions as more than a procedural "presumption," and that framing the rule using that term makes it appear as "nothing more than a restatement of the basic principle that the defendant is entitled to summary judgment whenever plaintiff fails to state a prima facie case."

But I think Steve leaves the track with this statement:

[I]n the opinion (e.g., at 66) we find reference to the idea that "gross negligence (including a failure to inform one’s self of available material facts)," violates the duty of care. The word "including" would seem to imply "but not limited to," which suggests some scope for substantive review of board decisions.

Gross negligence might be evidenced by a failure to inform oneself -- indeed, the obligation to inform oneself is the core requirement of the duty of care -- but there may be other aspects of "care" that do not go to the substantive merits of the decision. For example, in Cede v. Technicolor, Inc., 634 A.2d 345, 368 (Del. 1994), the Court stated that "a director's duty of care requires a director to take an active and direct role in the context of the sale of a company from beginning to end." In the following sentence, the Court mentions the duty to gather information as a separate requirement of the duty of care. In my view, Steve is reading the wrong thing into Justice Jacobs' use of the word "including." Besides, Justice Jacobs clearly segregated the substantive review into the section on "waste."

Steve has a separate post on the duty of good faith in which he takes on the already infamous footnote 112. Steve suggests that resolution of the issue may not matter much: "It's hard to imagine a case in which the defendants would be found to have acted in bad faith as defined by Justice Jacobs without also having violated either their care or loyalty duties somewhere along the line." I think that I agree with this, but I wonder whether "intentional violations of law" will become a viable category of good-faith litigation.

Speaking of "intentional violations of law," Steve asks in another post whether "intentional violation of law = bad faith." Steve writes in  response to my post: "I have not seen anything in the opinion squarely so stating and, upon reflection, I think Gordon ought to be wrong - at least insofar as he may be suggesting that intentional law violations per se constitute bad faith."

Responding to the first part of his statement is easy. On page 72, Justice Jacobs describes "knowing violation[s] of law" under Section 102(b)(7) of the DGCL as an example of "subjective bad faith." Justice Jacobs also quotes approvingly from Chancellor Chandler's opinion, which states, "A failure to act in good faith may be shown ... where the fiduciary acts with the intent to violate applicable positive law." So I don't think that there is much doubt about where the Delaware courts stand on this.

As to whether this ought to be the result, Steve argues that "fiduciary obligation and the duty to act lawfully make a bad fit." It's an interesting argument, but it flies in the face of a long history of treating illegality as a form of bad faith. When I was researching The Shareholder Primacy Norm, I found this doctrine used quite commonly among 19th Century courts. It's not likely to be changed now.

As you might imagine, Elizabeth Nowicki is disappointed in the opinion, which makes her flu feel all the more oppressive. Elizabeth criticizes the Court for rejecting the appellants' claim that "directors violate their duty of good faith if they are making material decisions without adequate information and without adequate deliberation." She wonders, "am I to believe that the good court is saying that such decisions *are* acts in good faith?" Whether she believes it or not, the answer is yes.

Elizabeth's indignation has some intuitive appeal. Indeed, the Court recognizes that existence of some overlap between the duty of care and the duty of good faith, but argues that the duties should remain (?) distinct: "The conduct that is the subject of due care may overlap with the conduct that comes within the rubric of good faith in a psychological sense, but from a legal standpoint those duties are and must remain quite distinct." The reason is obvious:

To adopt a definition of bad faith that would cause a violation of the duty of care automatically to become an act or omission “not in good faith,” would eviscerate the protections accorded to directors by the General Assembly’s adoption of Section 102(b)(7).

At one time, I thought the Court might use Disney to reinvigorate Smith v. Van Gorkom, but this statement (and others like it) should put that fear to rest. Litigants will not be allowed to use the duty of good faith to outflank exculpation when the underlying behavior is nothing more than a failure to gather adequate information or a failure to act with adequate deliberation.

This new opinion has lots of little nuggets, and I will attempt to say a few more things later today. As always, your comments are most welcome.

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Darian and RR focus our attention on footnote 112:

[W]e do not reach or otherwise address the issue of whether the fiduciary duty to act in good faith is a duty that, like the duties of care and loyalty, can serve as an independent basis for imposing liability upon corporate officers and directors. That issue is not before us on this appeal.

I agree with RR that this is odd, and that we could have used an answer. This footnote is in deep tension with the text of the opinion. As I noted below, the Court took pains to distinguish the duty of good faith from the other traditional duties. Also, in January, I explained at length why the plaintiffs misunderstood the role of bad faith in rebutting the business judgment rule. In the opinion today, the Court made the same essential points, though more briefly. The bottom line: bad faith can be used for "rebutting the business judgment rule presumptions" and for "evaluating the availability of charter-authorized exculpation from monetary damage liability after liability has been established." (p. 40) But we don't know if it can be an independent basis for liability?

In addition, the Court describes actions that must be "proscribed" using the duty of good faith: "To protect the interests of the corporation and its shareholders, fiduciary conduct ... which does not involve disloyalty (as traditionally defined) but is qualitatively more culpable than gross negligence, should be proscribed." Does the duty serve as a "proscription" if it cannot be summoned as an independent basis for liability?

Finally, the Court notes that "highly significant consequences" flow from distinguishing the duty of care and the duty of good faith. The two consequences it discusses are exculpation under Section 102(b)(7) and indemnification under Section 145. Strange that the Court does not mention in this part of the opinion the possibility that the duty of care might be the basis of liability (at least, theoretically) while the duty of good faith might not.

All of this suggests to me that footnote 112 was an afterthought designed to secure a vote for the opinion in pursuit of unanimity. But as for why one or more of the justices perceived this to be necessary is not at all clear to me.

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As Gordon and our readers have pointed out, the Delaware Supreme Court declined to address issues that it decided did not need to be addressed at this point.  One interesting side issue that was raised on appeal by the appellants was whether the business judgment rule applied to officers or only directors.  The appellants argued that the BJR did not apply to decisions made by mere officers.  At the time, I blogged about this here and so did Steve Bainbridge.  It seemed like a good time for the court to clear that question mark up once and far all.

Or not.  In footnote #38, the court puts that question on ice:

These claims are asserted against the Disney defendants in their capacity as directors. The appellants also advance, as an alternative claim, an argument that Disney defendants Eisner, Litvack and Russell, are liable in their separate capacity as officers who, unlike directors, are not protected by the business judgment rule or the exculpatory provision of the Disney charter. That alternative argument is procedurally barred, because it was not fairly presented to the Court of Chancery. SUP. CT. R. 8. Indeed, the Chancellor noted in his Post-trial Opinion that the application of the business judgment to Eisner and Litvack was not contested, and that the “parties essentially treat both officers and directors as comparable fiduciaries, that is, subject to the same fiduciary duties and standards of substantive review.” Post-trial Op. at *50, n. 588. To the extent the argument is advanced against Russell, it also is not grounded in fact, because Russell was not an officer of Disney.

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In my view, the most interesting part of the new Disney opinion is the Court's discussion of the duty of good faith (pp. 60-73). Here are some thoughts on that portion of the opinion:

• The Court rejected the plaintiffs' contention that Chancellor Chandler changed the definition of "bad faith" between his 2003 opinion ("consciously and intentionally disregarded their responsibilities") and his 2005 opinion ("intentional dereliction of duty, a conscious disregard for one's responsibilities"). The Court stated, "We perceive no substantive difference" between the two, and that seems right to me.
• The Court clearly embraces the duty of good faith as a distinct duty, separate from care and loyalty. For example, "grossly negligent conduct, without more, does not and cannot constitute a breach of the fiduciary duty to act in good faith." (p. 67)
• The big question, therefore, is whether plaintiffs can find cases where the directors' conduct would constitute a breach of the duty of good faith, but not a breach of the duty of care or the duty of loyalty. The Court observes, "Cases have arisen where corporate directors have no conflicting self-interest in a decision, yet engage in misconduct that is more culpable than simple inattention or failure to be informed of all facts material to the decision." But it offers no citations. In my view, plaintiffs should be looking for one of three fact scenarios: intentional infliction of harm on the corporation, intentional violations of law, and intentional derelictions of duty.
• The Court noticed the language in Section 102(b)(7) that Elizabeth Nowicki has been touting as a new basis for liability: "acts ... not in good faith." The Court looked at that statute and found two categories of "subjective bad faith" (which it also describes as "actual intent to do harm): "intentional misconduct" and "knowing violation of law." These are the first two fact scenarios listed in the prior paragraph. The Court says that "acts ... not in good faith" are encompassed by Chancellor Chandler's definition of bad faith, i.e., intentional derelictions of duty. In short, "acts ... not in good faith" are acts of "bad faith."  

Will the duty of good faith be important in future litigation? I assume that it will be argued frequently, at least in the near future, because bad faith is not capable of exculpation under Section 102(b)(7). Nevertheless, I suspect that the number of fact scenarios in which the duty of good faith will have traction is small, with "intentional violations of law" being the largest potential category. See Enron, et al.

All in all, I think that Justice Jacobs did an excellent job with the opinion. I am surprised that the decision was unanimous, and now I am wondering: what took them so long?

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The Delaware Supreme Court unanimously affirmed the Court of Chancery's decision in the Disney case. I have uploaded Justice Jacobs' 91-page opinion here. Analysis to come ...

Thanks to Rob Saunders, Julie Hill, and Steve Haas for alerting me and sending the opinion.

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Earlier this week, I wrote, "I heard from a little birdie that the release of the Delaware Supreme Court's opinion in Disney was imminent...." We are now past the 90-day mark from the oral argument, and the opinion is still forthcoming. Should we read anything into this?

Larry Ribstein has suggested that the delay could be a sign that it's about to reverse. He could be right about reversal, but that's reading a lot into a relatively short delay. Nevertheless, I suspect that the delay may be important if it suggests that there is disagreement among the justices. As noted by former guest-blogger David Skeel, The Unanimity Norm in Delaware Corporate Law, 83 Va. L. Rev. 127 (1997), the Delaware Supreme Court has a strong unanimity norm:

Delaware's justices write separately in only three percent of the court's reported cases. The percentage is even lower when considering the court's whole docket. The minuscule number of separate opinions is particularly noteworthy given that the supreme court, unlike many state high courts, is the national arbiter of an important and often controversial area of law.

If I am right that Disney is dividing the justices, it reinforces what I have been saying for a long time: Disney is a tough case. Horrible facts for the Disney directors bumping up against legal rules that rightly show directors great deference in non-conflict transactions.

Does a split court suggest affirmance or reversal? It's not much to go on, but I keep remembering Omnicare, a recent split decision in which Justice Holland wrote a majority opinion, with then-Chief Justice Veasey and current-Chief Justice Steele dissenting.

I hope that a split court doesn't bring us another Omnicare.

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Last week, I heard from a little birdie that the release of the Delaware Supreme Court's opinion in Disney was imminent, and Chief Justice Steele told me awhile back that the opinion would be posted on the Court's website. Since Friday, that website has been inaccessible -- "Bad Gateway." Meanwhile, we wait ...

UPDATE: The Delaware Supreme Court's website is back online, but still no Disney opinion.

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