March 02, 2008
Influential Corporate and Securities Law Cases
Posted by Brett McDonnell

Steve Bainbridge and Larry Ribstein have differing suggestions on the most influential of all corporate law cases.  After Bainbridge first suggested Smith v. Van Gorkom, Ribstein replied by suggesting a federal securities case, Basic v. Levinson.  Bainbridge responded that even if one expands the set to include federal cases, Basic is less influential than Case v. Borak, since the latter makes possible private standing to sue to enforce the securities laws.  Hence, Levinson could not have occurred without Case.

This raises interesting questions of how one measures the influence of a case.  By the standard quantitative measures, Basic seems to win hands down.  Westlaw's citation service shows 9898 cases citing Basic, and just 3373 citing Case.  Looking to influence among academics, a search of Westlaw's JLR database yields 637 hits for "Basic /2 Levinson" compared to just 158 for "Case /2 Borak".  Basic also seems to get much more attention in Securities Law classes (it certainly does in mine).

And yet, Bainbridge's take on what makes a case influential certainly makes some sense.  He asks us to imagine the counterfactual of how the world would look if a case had been decided differently, and plausibly argues that more would have changed with a different decision in Case than in Basic.  Fair enough.  Of course, such counterfactuals are tricky.  If Case had been decided in the opposite way, for instance, would Congress have acted to create an explicit cause of action?  Perhaps.  The question is also complicated by the fact that Case dealt with causes of action under sect. 14 of the '34 Act, whereas the real action is under Rule 10b-5.  I doubt the latter point matters too much--had the Court denied a private cause under sect. 14, it would have been very hard to find a private cause under 10b-5.

FWIW, my own suggestion for other highly influential state law cases besides Van Gorkom, in the comments section, was Aronson v. Lewis.  Note how many significant Delaware cases that one might give in answer to this question come from the same time:  Van Gorkom (1985), Aronson (1984), Weinberger (1983), Zapata (1980), Unocal (1985), and Revlon (1986) are all way, way up there among state law cases.  Essentially, the contemporary contours of Delaware fiduciary duty were set in a 6 or so year period.  Obviously, the high M & A activity of the time, particularly hostile takeovers, played a big role in the development of the law.

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