April 28, 2006
Where is Disney?
Posted by Gordon Smith

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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Comments (4)

1. Posted by Elizabeth on April 29, 2006 @ 7:43 | Permalink

I posted a comment (littered with typos, I am sad to see) on Larry Ribstein's blog on this point. I am optimistically donning my blinders and taking the Delaware Supreme Court's delay to mean that the Justices are reversing or vacating on either gross negligence or, even better, good faith.

Specifically, I expect an opinion reversing the g.n. finding or vacating the g.f. finding, with instructions to assess good faith on remand in the AFFIRMATIVE (as opposed to looking for an absence of bad faith). Matter of fact, since I am playing pretend with a set of facts I am sure I'll never see, let me note that I expect a line in the opinion to say something like "Good faith in the director qua fiduciary context is an ACTIVE duty. A fiduciary has POSITIVE DUTIES, affirmative duties, active duties, for the love of all things good and holy. A director qua fiduciary is required, by his fiduciary status, to act in the best interests of his principals. Just refraining from harming the beneficiaries is not enough. A fiduciary often has to actually act, to actually *do* something." (In my dream world, that missive would end with "geesh," just to emphasize the Justices' frustration with the way "good faith" appears to be evolving in the "monitoring board" world.)

<> I can dream, can't I?


2. Posted by Gordon Smith on April 29, 2006 @ 9:10 | Permalink

One person's dreams, another's nightmares.


3. Posted by Elizabeth on May 3, 2006 @ 13:04 | Permalink

Don't hold back, Gordon. Tell me how you *really* feel.

Actually, on the serious side, if you ever run out of topics about which to blog, perhaps you could do a quick post on why you are against any sort of expansion of director liability (via a more stringent 'good faith' obligation). I realize that your blog is not a radio station request line, such that I cannot "request" a post topic, but I would be curious to hear more about your views on the general topic of expanding director liability if ever you were willing to share them.
Note that part of the reason I am asking is that (a) I don't buy that there was a "D&O insurance crisis" after Van Gorkom (the legislative history for 102(b)(7) is very weak on this point, and my research assistant pulled the insurance pricing numbers, which indicate that there was no "crisis") and (b) I am unsympathetic to the argument that "nobody will want to serve if director liability is expanded via a more broad reading of good faith." It seems that the anesthesiologists did a decent job in dealing with expanded liability years ago (by creating essentially a self-regulating body).
Feel free to ignore my query to you - I hope you do not view it as too pushy - but I thought I'd put it out there in case you wake up one day and realize you have totally run out of blogging topics.


4. Posted by Gordon Smith on May 3, 2006 @ 15:20 | Permalink

Maybe I can do that post after the Disney opinion is released.

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