November 16, 2011
The Delaware Chancery's Unusual Relationship with Academia
Posted by Matt Bodie

Earlier this year, Chief Justice Roberts again displayed his antipathy towards the legal academy when he said, "What the academy is doing, as far as I can tell, is largely of no use or interest to people who actually practice law."  Gordon responded with a nice post, which included the quote: "legal scholars often are not writing for practicing lawyers."  However, I think one of the very special things about the Delaware Chancery, and the once and future chancellors, is their openness to corporate law scholarship.  Not only do Chancellor Chandler and Chancellor Strine have SSRN pages, but their opinions reflect a willingness to engage with the academic literature that goes beyond any other court in the nation. It's not even close.

The Airgas opinion provides a recent example.  Central to Chancellor Chandler's opinion is his discussion of the "substantive coercion" standard first set forth in Ronald Gilson & Reinier Kraakman, Delaware's Intermediate Standard for Defensive Tactics: Is There Substance to Proportionality Review?, 44 Bus. Law. 247, 258 (1989).  Chancellor Chandler quotes at length from the article, and discusses how the standard (first used by Chancellor Allen in City Capital Assocs. Ltd. P'ship v. Interco Inc., 551 A.2d 787 (Del.Ch.1988)) had developed both in the case law and the academic literature.  The opinion noted:

At least one of the professors, it seems, is unhappy with how the Supreme Court has apparently misunderstood the concept of substantive coercion as he had envisioned it, noting that “only the phrase and not the substance captured the attention of the Delaware Supreme Court” such that the “mere incantation” of substantive coercion now seems sufficient to establish a threat justifying a board's defensive strategy.

Air Products & Chemicals, Inc. v. Airgas, Inc., 16 A.3d 48, 100 (Del, Ch. 2011) (citing Ronald J. Gilson, Unocal Fifteen Years Later (And What We Can Do About It), 26 Del. J. Corp. L. 491, 497 n. 23 (2001)).  This is a remarkable passage: a lower court is using a law review article to (indirectly?) criticize a higher court.  One can only imagine Chief Justice Roberts' reaction to such a move.  But it demonstrates the respect the Chancery has for the analysis that corporate law scholars bring to a problem.

David Marcus from the Deal Magazine has a terrific interview with Chancellor Chandler upon his stepping down from the Chancery.  I found this exchange to be reflective of the chancellor's views on legal scholarship:

[Q:] It was clear in reading the [Airgas] opinion that you had thought very deeply about that question, but except for your decision in Unitrin, you hadn't had the chance to write about it until Airgas.

I got the views of all of my colleagues on the court on both the pill question, which was Airgas II, and on the bylaw question, which was Airgas I. They were very helpful to me in writing it and getting it out in a timely way. If the question is, "Would I have written this as long or in the same way?" probably not, because back when I wrote Unitrin in the mid-1990s, there hadn't been as much ink spilled by academics. You saw a lot of academic references in the opinion, and that probably resulted in a slightly different approach to how to write it, because I was writing it for the parties but also acknowledging the views of various academics on this question from professor [Lucian] Bebchuk to others.

There are a lot of examples of the dialogue, synergy, and even good-natured humor between the two groups -- Larry Ribstein's riff on Chancellor Strine's Three Times a Lady reference comes to mind.  (And I'd add "Fee Tines a Mady.")  I don't expect this to change with Chancellor Strine.  But Chancellor Chandler carried on and fostered the relationship during his term as chancellor, and we can only hope to keep returning the favor.

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