Speaking of casebooks, here's a pitch to my casebook author friends: include Del. County Emples. Ret. Fund v. Sanchez.  What's not to love about this opinion?  First, it's a Delaware Supreme Court opinion.  Second, it's short and sweet--clocking in at a mere 13 pages (I'm looking at you, Steve Bainbridge).  Third, it takes on a topic of interest to law professors and law students alike: friendship.  Fourth, it makes human one of the most challenging topics for the new student of corporate law: the derivative suit.

I know from experience that the derivative suit is a challenge in the classroom. Amounting to a lawsuit about whether there should be a lawsuit, it's a foreign concept to the uninitiated.  Aronson v Lewis provides guidance on how to balance the fact that per DGCL 141 the board is in charge of corporate decisions (including the decision about when to sue) against the point that in the derivative context the plaintiffs usually allege that some subset of the board itself, or the whole board, should be liable.  So the derivative suit is about how to sift the meritorious suits from the nuisance ones.

Aronson's first prong says such suits get to go forward if the majority of the board is interested or not independent.  Interested is easy--financial interest.  Independence is far more tricky--and therefore far more fun.  I spent my first article as a law professor puzzling over what independence means, and how Delaware's version of it is situational, rather than the SOX/SRO status-based definition.

Strine's jurisprudence, in particular, while he was on the Chancery Court did a terrific job of limning the nuances of independence.  Here's Fetishization of Independence on Delaware cases discussing independence in the context of familial relationships. Strine is all over it:

So it's nice to see Chief Justice Strine doing what he does best--writing a clear, accessible opinion acknowledging that independence is complicated and contextual. In my opinion Oracle, Beam v. Stewart, and Sanchez now make up the triumverate of cases on this issue.  Here's Strine in Sanchez:

Here, the plaintiffs did not plead the kind of thin social-circle friendship, for want of a better way to put it, which was at issue in Beam. In that case, we held that allegations that directors “moved in the same social circles, attended the same weddings, developed business relationships before joining the board, and described each other as friends, ‟ . . . are insufficient, without more, to rebut the presumption of independence.”

In saying that, we did not suggest that deeper human friendships could not exist that would have the effect of compromising a director’s independence. When, as here, a plaintiff has pled that a director has been close friends with an interested party for a half century, the plaintiff has pled facts quite different from those at issue in Beam.  Close friendships of that duration are likely considered precious by many  people, and are rare. People drift apart for many reasons, and when a close relationship endures for that long, a pleading stage inference arises that it is important to the parties.

True, Chief Justice Strine acknowledges in the next paragraph the economic dependence that the director in question also allegedly had to the defendant.  But it is his eloquent defense of friendship that resonates for me. Just last week I paraphrased the Beam court as holding that "friendship alone is not enough."  But I asked students if they would feel unbiased if they were a director and the defendant and fellow boardmember was their college roommate. Their answer was an emphatic no.  I hazard that Chief Justice Strine might agree.

Update: In my excitement I neglected to link to Ann Lipton's excellent post about Sanchez.  Give it a look, and the lively discussion from law profs in the comments.

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