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Crusted Veal Tenderloin with Celery Root and Potato Bake

One of the things that made this meal easy was the ability to reuse some leftovers from last night's Stuffed and Crusted Rack of Venison. This dinner serves 4.

The Sauce

• 1 cup Two Night Sauce leftover from last night (skim off any fat that formed overnight on the top of the sauce)
  
• 2 tablespoons black cherry preserves
  
• ½ cup dried cherries
  
• 1 tablespoon unsalted butter

In a small sauce pan, bring the sauce to a boil over hight heat. As soon as the sauce begins to boil, reduce the heat to maintain a low simmer. Add cherry preserves and dried cherries. Allow to reduce by about one third. Just before serving, remove from heat and swirl in the butter. Spoon over sliced veal.

The Veal

Preheat oven to 400°.

Divide the leftover two night crumb mix in half. Set one half aside to use with the celery root and potato bake. To the other half, add 1 tablespoon dried Herbes de Provence.

Season a 2-½ pound veal tenderloin with salt, pepper, and paprika. Heat a nonstick skillet over high heat. Sear veal on all sides,

Transfer veal to a cutting board. Slather with Dijon mustard. Roll tenderloin in crumb mixture, pressing the crumbs into the surface. Place on a roasting rack set in a roasting pan. Roast for 20 minutes. Check with an instant read thermometer. I like mine at 130°, which is moving from rare to medium rare. YMMV, however, so adjust time as necessary.

Transfer veal to a cutting board, tent with foil, and allow to rest for 10 minutes. Slice thinly. Plate and top with cherry sauce.

Celery Root and Potato Bake

• 1 medium celery root, peeled and cut into ¼-inch dice
  
• ½ tablespoon olive oil
  
• ½ medium onion, diced
  
• 2 cloves garlic, minced
  
• 1 teaspoon salt
  
• ½ teaspoon ground black pepper
  
• ½ teaspoon paprika
  
• 1 cup mashed potatoes (left over from last night)
  
• ¼ cup Boursin garlic and herb cheese
  
• ¼ cup grated parmesan cheese
  
• 1 dried pear, diced
  
• 1 egg, beaten
  
• 2 teaspoons dried Italian herbs

In a medium saucepan, bring 3 cups water to a boil. Add a couple big pinches of salt and return to the boil. Add celery root and blanch for 5 minutes. Strain.

Heat a nonstick skillet over medium heat. Add olive oil, celery root, onion, salt, pepper, and paprika. Sweat until onions soften (about 7 minutes). Transfer to a large mixing bowl. Allow to cool. Add remaining ingredients and mix well. If the mixture is a bit soupy (mine was), add a bit more mashed potatoes and parmesan cheese. Divide among 4 ramekins. Top with reserved two night crumb mixture. Melt 2 tablespoons unsalted butter and drizzle ½ tablespoon over each ramekin. Put ramekins on a cookie sheet and bake for 15 minutes.

Stuffed and Crusted Rack of Venison

The trick to this dinner was to produce a sauce and a crust that could be reused tomorrow night for a crusted tenderloin of veal. Two good eaters will enjoy this meal. It's a variation of my recipe for Rack of Venison Stuffed with Sausage and Apples.

Preheat oven to 400 degrees.

The Two Night Sauce

• ½ tablespoon olive oil
  
• ½ onion roughly chopped
  
• 1 carrot, peeled and roughly chopped
  
• 2 cloves garlic, peeled and smashed
  
• ½ teaspoon salt
  
• 1-½ cup tawny port
  
• 1-½ cup red wine
  
• 1 cup veal or chicken stock
  
• 1 package D’Artagnan duck and veal demi-glace
  
• 1 bay leaf
  
• 12 whole black peppercorns
  
• ¼ cup dried currants
  
• ¼ cup dried cherries

Plus:

• ¼ cup dried currants
  
• 1 tablespoon unsalted butter

Heat a large sauce pan or dutch oven over medium-high heat. Add olive oil and reduce heat to medium. Add onion, carrots, and garlic. Season with salt. Saute the veggies until they brown slightly (do not let them burn). Add port, wine, stock, and demi-glace. Raise heat to high until liquid comes to a boil, reduce heat to maintain a steady high simmer. Skim off any scum that forms. Add bay leaf, peppercorns, currants, and cherries. Reduce by about half. Strain the liquid through a chinois into a 2 or 4 cup measuring cup. You should have between 1-½ and 2 cups of liquid. Divide in half, reserving half the sauce for tomorrow night's veal dinner.

Transfer half the sauce to a small sauce pan. Bring to a low simmer and allow to reduce by about 20%. Add second batch of dried currants. Turn heat to lowest setting and keep warm. Just before serving add butter and swirl until melted.

The Two Night Crust

• ½ cup roasted and shelled pistachios
  
• ½ cup toasted pine nuts
  
• ½ cup panko bread crumbs
  
• 1 teaspoon salt
  
• ½ teaspoon freshly ground black pepper
  
• ½ dried Italian herbs

Combine all ingredients in your Cuisinart mini-prep food processor and process to coarse crumbs. Divide in half, reserving half for tomorrow night's veal.

The Stuffing

• ½ teaspoon olive oil
  
• ¼ medium onion, diced
  
• ½ teaspoon Paul Prudhomme poultry seasoning
  
• 1 Italian sausage removed from the casing and broken into small pieces
  
• 4 dried pear halves, diced
  
• ¼ cup dried currants
  
• ¼ cup toasted pine nuts
  
• 1 teaspoon dried Italian herbs

Heat a nonstick skillet over medium heat. Add olive oil. Add onions and seasoning. Reduce heat and sweat onions until they soften and start to become translucent, about 8 minutes. Add sausage, breaking the sausage pieces up as they cook. Saute until the sausage browns, about 5 minutes. Using a slotted spoon, remove onions and sausage to a bowl. Allow to cool briefly. Add remaining ingredients and mix with your hands.

The Rack of Venison

• 1 4-bone rack of venison, bones frenched, meat trimmed of any silverskin
  
• 1 teaspoon Paul Prudhomme poultry seasoning
  
• 2 tablespoons Dijon mustard

Using a long thin knife held horizontally, make a cut through the center of the venison lengthwise. Spin the knife to expand the cut. Insert the handle of a long wooden spoon and spin to create a cavity that's about 2 inches wide. Fill with stuffing. You'll probably have some stuffing left over. If so, saute it until warm as a treat for the chef.

Season the exterior of the rack of venison. Heat a nonstick skillet over high heat. Sear rack on all sides until well browned. Remove to a cutting board, slather with mustard, and dredge in the crust crumbs.

Put venison on a roasting rack set in a medium roasting rack. Put in oven and roast about 25 minutes or until an instant read meat thermometer registers 135 degrees for medium rare.

Allow the rack to rest for 10 minutes and then carve between bones into 4 pieces.

To serve, put a bit of sauce on lower half of plate. Rest 2 chops on top of sauce on each plate. Nap a bit more sauce on top of chops. Serve with mashed potatoes and baby peas. Pour a California Rhone Ranger red wine.

Stoneridge and the Judicial Role

In a thoughtful post, Jay Brown takes the Supreme Court Stoneridge majority to task for engaging in, as he puts it, "Legislation by the Court." Apropos of my disagreement with Larry Ribstein from the other day, I would distinguish cases like Gustafson, in which the SCOTUS (arguably) relied on policy to trim the scope of the express private right of action granted by Securities Act section 12(a)(2), from cases like Stoneridge in which the Court relied on policy to trim the scope of the implied private right of action under Rule 10b-5.

As I discuss in my article Securities Act Section 12 (2) After the Gustafson Debacle, "one ought to object to decisions, such as Gustafson, which narrow the scope of an express cause of action in ways that arguably are counter to Congressional intent. As both dissents argued, that seems to me to be a task more appropriately left to Congress."

But in Stoneridge, we are dealing with what I believe is properly understood as a species of federal common law. As Justice Rehnquist famously quipped, Rule 10b-5 is ?a judicial oak which has grown from little more than a legislative acorn.? We are dealing here with interstitial lawmaking in which the courts are using common-law adjudicatory methods to flesh out the bare statutory bones. The analytical methodologies applied by the Supreme Court to federal common-law issues thus provide an appropriate mechanism for giving content to Rule 10b-5. As Judge Winter explained in Chestman, the text of Section 10(b) can be seen as "a general authorization to the SEC and to the courts to fashion rules founded largely on those tribunals' judgments as to why insider trading is or is not fraudulent, deceptive, or manipulative." The same holds true for the rest of Rule 10b-5 jursiprudence, in my opinion.

And not just my opinion. As Adam Pritchard has written, Justice Lewis Powell "considered the judge-made remedy under Rule 10b-5 to be a species of federal common law, and thus appropriate for judges to consider policy in defining its limits. Second, Powell understood, based on experience counseling corporate clients, the consequences that the phenomenon of class action lawsuits had for corporations and their officers and directors. Finally, Powell was profoundly suspicious of judicially created private causes of action not specifically authorized by Congress. From Powell's perspective, the expansion of securities fraud lawsuits based on implied rights of action was creating a litigation crisis. That perception of crisis would influence the outcome in a number of cases that came to the Supreme Court." Indeed, as Pritchard further observes, Powell thought policy considerations "particularly relevant in 'a private cause of action . . . wholly of judicial creation.'"

I would therefore argue that the proper question is not whether Stoneridge is an example of judicial legislation, but rather whether the SCOTUS improperly deployed the tools of common law adjudication so as to reach an erroneous result.

The Supreme Court's Institutional Incompetence to Decide Securities Fraud Cases

The Supreme Court's Stoneridge decision prompts this sharp critique from Elizabeth Nowicki:

... this opinion re-affirms that the Supreme Court is often totally confused when it tries to discuss securities fraud. First Dura, now Stoneridge. With due respect to the Justices who signed on to the majority opinion in this case, the law isn?t particularly challenging in this area? either a plaintiff establishes the five/six elements necessary to prove securities fraud or she does not. Were I writing the Stoneridge opinion, and I wanted, for policy reasons, to affirm dismissal of the suit, I would have done it on the ?in connection with? element. One could argue with a straight face that S-A's and Motorola's "lies" (to wit, the fraudulent wash contracts) were not lies told "in connection with the purchase or sale of securities." Reliance, not so much.

The Supreme Court's institutional incompetence to decide securities fraud cases will come as no surprise to readers of this blog, as Jay Brown kindly noted:

... we have to hand it to Steve Bainbridge at UCLA who got this case exactly right. He noted that the Supreme Court was largely incapable of analyzing securities issues on its own. He predicted that, as a result, the Court would decide the case by largely duplicating the brief of the government. With almost all of the participants fighting over whether deceptive conduct could violate Rule 10b-5, the solicitor general's brief took the position that the case turned on the element of reliance. Guess what? Justice Kennedy's opinion turned on the issue of reliance.

The genesis of my take on the SCOTUS' abilities in this area goes back to an article I co-authored with my friend Mitu Gulati, How Do Judges Maximize? (The Same Way Everybody Else Does - Boundedly): Rules of Thumb in Securities Fraud Opinions. The abstract follows:

Judicial opinions in securities fraud class actions frequently do not conform to standard theories of adjudication. Instead of the complex modes of legal reasoning predicted by standard models, decisions in this area commonly rely on rules of thumb-decisionmaking heuristics or shortcuts. To the extent prior literature has focused on the use of decisionmaking heuristics in adjudication, commentators have emphasized procedural shortcuts, such as the doctrine whereby courts refuse to address issues that have not been squarely argued. In contrast, the heuristics we identify are substantive law doctrinal rules of thumb enabling a judge to avoid analysis of a case's full complexities. This distinction is significant. Procedural shortcuts do not affect the evolution of substantive legal doctrines, except as to produce no doctrine. Substantive heuristics, however, not only become doctrine but can come to dominate the on-going evolution of substantive law. We suggest that the desire to avoid complexity is an important factor in explaining the emergence of a number of the newer doctrines in the securities area.

Underlying all of these doctrines are assumptions about either, (a) investor responses to information or (b) managerial responses to incentives. The standard approaches used by commentators in the area would be to explain either why the assumptions are accurate or why they are not and how they should be corrected. What we suggest, however, is that the real puzzle thus is that federal judges are claiming-at least implicitly-both a level of expertise about the workings of markets and organizations that, in some areas, not even the most sophisticated researchers in financial economics and organizational theory have reached. Federal judges, however, are far from being experts in these areas. As a group, they have little expertise on the topics of markets and organizational behavior. Further, they are consistently faced with overwhelming caseloads where only a small fraction of cases are securities cases. As a result, there is little opportunity to develop expertise in the area. Finally, judges are known to delegate much of the work of drafting their decisions to their law clerks, who are typically recent law school graduates.

Generalizing from the securities regulation context, we contend that standard theories of adjudication are flawed because they fail to adequately account for institutional constraints. Drawing on the tools of new institutional economics (bounded rationality, transaction costs, and agency costs), we tell a story about recent doctrinal developments in the lower federal courts in the area of securities class actions. The story highlights the link between doctrinal developments and the characteristics of the institutions that produce them. That story is then extended to the contexts of the Supreme Court and the Delaware state courts. Our claim is that the institutional perspective provides insights into the evolution of doctrine that today's dominant models fail to provide.

Incredibly Easy Stuffed Leg of Lamb

This was the easiest dinner I've made in ages. I picked up the following from my local Gelson's:

• 1 4-pound butterflied boneless leg of lamb with most fat trimmed
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• 1 jar Kalamata olive tapenade
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• 1 jar minced garlic
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• Italian seasoning
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• salt
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• pepper
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• olive oil

I rolled the leg out on my work surface, trimming fat and tendons, and making small cuts where necessary to further flatten the meat. I covered the meat with plastic wrap and whacked with the flat side of a meat tenderizer to further flatten it. Then I liberally seasoned the meat with salt and pepper, rubbed the seasonings into the meat briefly, and then (again, liberally) smeared the meat with tapenade and garlic. I sprinkled the stuffing with dried Italian herbs. I didn't measure any of the stuffing ingredients; instead, I just eyeballed it to cover the whole slab of meat. I then rolled the meat up lengthwise into a log, tying it with kitchen twine. I poured olive oil over the meat, seasoned the outside with salt and pepper, and rubbed it in.

Meanwhile, the oven had been preheated to 450 degrees. The lamb went onto a roasting rack set in a roasting pan and then into the oven. I turned the oven down to 350 and roasted the lamb for 80 minutes for medium-rare. After removing the lamb from the oven, I transferred it to a cutting board, tented it with foil, and allowed it to rest 30 minutes before carving.

While the lamb was resting, I popped one package of Alessi mushroom risotto, 2-½ cups cold water, and 1 tablespoon butter into my Cusinart rice cooker. 20 minutes later, I sliced the lamb and served it with the risotto. Because I had had the foresight to use a cutting board with a juice trough on the permieter, I could pour jus over all right before serving.

The lamb was incredibly moist and interestingly flavored from the stuffing. I really recommend trying this one.

Essay versus Multiple Choice Exams in Law School

Lisa Fairfax poses the following issue:

As I stare at my 100+ Business Associations exams, I ask myself why I have yet to give a multiple choice exam. Since I have been in academia, my exams have been a combination of short and long essay questions. At a meeting over the weekend when I asked a couple of law professors what type of exams they gave, I was surprised to learn that almost everyone gave or had given a multiple choice exam in some form. That is, some people gave half or some portion of their exam as multiple choice, while others gave an entire multiple choice exam. Of course everyone agrees that creating multiple choice exams takes significantly more time than creating an essay exam, and hence the ease of grading that such exams provide requires input of time on the front-end. However, the brief survey over the weekend, did have me wondering if more people have begun to gravitate toward multiple choice exams in lieu of the essay.

I first used a multiple choice exam when I was teaching at Illinois. The Associate Dean had assigned me two sections of Business Associations in the same semester, with a total enrollment of 230 students. Unable to face that many bluebooks, I worked up a set of objective questions and haven't looked back since.

In terms of student preferences, my evaluations over the years have been unhelpful. About half the students who express an opinion say they prefer objective exams, about half prefer essay. So that doesn't get us very far.

How about pedagogical validity? It's been well said that:

There has been a long-standing debate on academic testing--which is better, essay testing or multiple choice testing? Anyone in education as long as we knows that when-ever a question is phrased that way, the answer is "neither," followed by a long string of qualifiers.

In the first place, I think it's easier to justify the use of objective exams in the second and third year than in the first year of law school. This is so because:

The first and most important qualifier in determining which question type is preferable is the instructional objective being tested. To coin a phrase, you can't weigh a duck with a yardstick." The measure you choose must match the purpose of the measurement, if not physically, at least conceptually. So if your purpose is to measure the student's grasp of basic facts, the type of test items you choose should require just that and nothing more. If, on the other hand, you want to measure a student's ability to communicate facts concisely, you need to choose a totally different task for the test.

In the first year, we need to test the student's ability to "think like a lawyer." By the second and third year, however, if they haven't learned how to think like a lawyer by now, they probably never will. At this point, we are teaching - and testing - knowledge more than basic reasoning and communication skills. It's the same argument I give for not using the Socratic method in upper division classes, by the way.

There's another set of reasons I like objective questions as a testing tool:

... essay items allow the student to throw in everything he knows about a subject; and while these items may be more sensitive to breadth of learning, they are more vulnerable to padding or skirting the question. ... [Accordingly,] students may try to "pad" their way through an essay item without knowing the subject.

Frankly, I get very tired of trying to slog through bloated essay answers that never seem to get to the point.

Finally, I think objective questions have certain technical advantages:

Since multiple choice items require less time to answer than do essay items, more items can be included in an exam; therefore, more areas can be tested. The wider the sample range, the more valid and reliable a single test can be.

It's much easier to cover a wide range of topics, especially since I find that only certain topics in a course justify - or can support - a 60 minute essay, which means you cover the same topics every year.

A second consideration is test reliability. Multiple choice tests, in general, are more reliable than essay tests. The greater reliability is primarily a function of the required grading procedures. Essay items are subject to variability due to errors or influences on grading as well as achievement level differences among the test takers, while the variability of multiple choice items comes mostly from differences among test takers. It is possible to train essay graders to be more consistent and reliable, but such training occurs infrequently.

When I give essay exams, I always feel that grading those exams - like sausage making and law making - is something you don't want to know how it's done. Trying to explain to a student why they came up one point shy of an A on an essay exam is always a lot tougher than with an objective exam.

Finally, multiple choice items lend themselves to statistical analysis for evaluation and improvement purposes. Measurement and evaluation centers can assess the effectiveness of test items or provide instructors with information for completing their own. Although comparative analyses can be done on essay items, the procedures must be done by hand and are far less reliable.

Every year, determine the ten least effective questions in that year's set and throw them out, never to be used again. As a result, over time, one develops a testing instrument in which one can have a high degree of confidence.

A final advantage of objective questions is that it levels the playing field for the growing number of international students in my class, who must be graded on the same scale, but whose communication skills obviously are likely to be less effective than those of my USA students.

Of course, I freely admit that all this might be just rationalizing. But, then again, sometimes self-interest and doing the right thing are one and the same.

Arnold's Budget and the UC System

From the university's press release:

[T]he governor's budget, when combined with prior cuts, would leave the university with $530 million less in net state funding than it had in the 2000-01 fiscal year -- a decline in state support of more than 16 percent during a period when enrollments have grown by more than 15 percent. Already, every area of university spending has been cut, student fees have increased significantly, employee positions have been eliminated, and faculty and staff have been denied cost-of-living salary increases....

Salaries: There would be no state funding, once again, for cost-of-living increases for faculty and staff. Because competitive compensation is key to the recruitment and retention of faculty and staff, UC is very concerned about this continuing trend.

Three years in a row. Grump.

The Formalities of Board Meetings are Requisite

The Delaware Business Litigation Report flags Fogel v. U.S. Energy Systems, Inc., C.A. No. 3271-CC (December 13, 2007), which they summarize as follows:

Directors often think that if they get together that is a real board of directors' meeting. Not so. As this decision holds, a board meeting is a formal event that must be preceded by the appropriate notice, be conducted by voting on the issues and otherwise be properly called and conducted. Gatherings of even all the directors that do not meet these tests are void.

Moreover, the consequence of holding a meeting void is that actions taken cannot be ratified later. Thus, even when all but one of the company's directors wanted to fire the CEO, their attempt to do so at a haste gathering of all the directors was ineffective.

The ruling makes sense. As I explain in the chapter on boards of directors in my Corporation Law and Economics treatise:

The legal rules governing the board of directors ... put considerable emphasis on the need for collective rather than individual action. As the Restatement (Second) of Agency puts it, for example, a director ?has no power of his own to act on the corporation?s behalf, but only as one of a body of directors acting as a board.? Why this emphasis on collective action? Put another way, why not vest the ultimate power of fiat in an individual autocrat rather than a collegial group?

The commentary to the MBCA?s provisions on board meetings provides one answer:

A well-established principle of corporate common law accepted by implication in the Model Act is that directors may act only at a meeting unless otherwise expressly authorized by statute. The underlying theory is that the consultation and exchange of views is an integral part of the functioning of the board.

... Many of these housekeeping rules doubtless seem formalistic or even a little silly, but the requirement that the board act only after meeting as a collective body actually has a sound economic basis. Work by experimental psychologists has found that group decisionmaking, under certain circumstances, can be superior to decisionmaking by individuals. Where evaluation of complex problems requiring the exercise of critical judgment is concerned, the evidence is clear that the performance of a group will be superior to that of the group?s average member. This result has been confirmed by experiments requiring performance of a wide variety of tasks.

For more on the rationale for formalities, see my article Why a Board? Group Decisionmaking in Corporate Governance, which explains:

The board of directors is a collegial body that, for the most part, makes decisions by consensus. Accordingly, an individual director acting alone generally has neither rights nor powers. Instead, unless otherwise authorized by statute, only collective decisions taken at a meeting of the board at which a quorum is present are binding on the corporation. This common law principle is reflected, albeit by negative implication, in DGCL Section 141(b)?s statement that ?[t]he vote of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors . . . .? The MBCA?s drafters contend that the same requirement is implied by their statute?s provisions on board meetings. All of this doubtless seems formalistic and silly at first blush, but because interacting groups produce better decisions, the requirement that the board act only after meeting as a collective body actually has a sound basis.

Consider also the statutory requirement that directors may participate in board meetings by conference call or speakerphone only if all participants can hear one another. The requirement that members be able to ?hear? one another seems quaint in an era of electronic mail, instant messaging, and internet chat capabilities. Yet, when Delaware recently amended its corporation statute to permit much greater use of electronic forms of communication, it retained the requirement that board meetings be conducted in such a way that all members may hear one another. As it turns out, this appears to have been the right choice. Research on decision making has found that groups linked by computer make fewer remarks and take longer to reach decisions than do groups meeting face to face. Kiesler and Sproul, for example, not only found that meetings conducted through computers result in greater delays, but also that the decisions made in such meetings were more likely to exhibit the risky shift phenomenon. They also found that time-constrained groups exchanged much less information when meeting electronically than when meeting face-to-face.

As with other aspects of the rules governing board meetings, accordingly, there seems to be a legitimate basis for otherwise formalistic rules. Electronic communication takes place mostly through text-based mediums. For many people reading and typing are slower and require greater effort than verbal communication. Text-based communication also deprives participants of social cues, such as body language and tone of voice, that may be important signals. Social norms constraining behavior apparently function less well in text-based communication, as illustrated by the flame wars that plague Usenet newsgroups. Even such housekeeping rules as notice requirements prove to be consistent with the research on group decision making. Unless the articles of incorporation require otherwise, no notice of regularly scheduled board meetings is required. Special meetings require at least two days notice. As a matter of statutory law, the requisite notice need not announce the purpose of the meeting. Because the directors? duty of care requires them to make an informed decision, however, it is advisable whenever possible to provide directors of advance notice of the reason for calling a meeting and any relevant documentation. As with other requirements relating to board meetings, the notice rules are intended to ensure that the board functions as a collegial body, all of whose members participate and get the benefit of the participation by all other members. [A footnote here explains that: The statutory quorum and voting rules likewise reinforce the notion of the board as a collegial body, ?forcefully bringing the position of the dissenting member to the attention of the balance of the board of directors.? MBCA ? 8.24 cmt.]

That notice requirements effectively carry out that function is suggested by research on group performance. Michaelsen et al. conducted a study in which individuals were pre-tested and then re-tested as members of a group. Under those conditions, groups outperformed individuals. Michaelsen et al. analogize this testing order to organizational decision-making processes in which ?group members prepare a position paper and circulate it to other group members prior to problem-solving discussions.? A board meeting conducted after meaningful notice likewise replicates this testing order.

Revlon Duties in Negotiated Acquisitions

On a corporate law professor list serv to which I subscribe, the following question was posted:

Are Revlon duties triggered if a corporation receives a(n unsolicited) time-sensitive offer for an acquisition (say 3 days) at an obviously large premium (say twice the valuation of the corporation) and the board is convinced that there can possibly be no better deal down the line?

If indeed Revlon duties are triggered, can one say they are satisfied anyway by procedurally structuring the deal to be an arms-length transaction e.g. getting proper fairness opinion that convinces the board it is in the best interests of the shareholders to sell? Differently put, does the board have to actually seek other potential acquirers (or at least spend some reasonable time seeking) for it to discharge its Revlon duties?

I replied as follows:

First, its important to note that the so-called "Revlon duties" are really just the general Unocal rules applied to a special fact situation. To be sure, the courts have waffled on this issue, although the latter interpretation seems to have ultimately prevailed. In 1987, for example, the Delaware supreme court drew a rather sharp distinction between the Unocal standard and what it then called "the Revlon obligation to conduct a sale of the corporation."  Ivanhoe Partners v. Newmont Mining Corp., 535 A.2d 1334, 1338 (Del.1987). Two years later, however, the court indicated that Revlon is "merely one of an unbroken line of cases that seek to prevent the conflicts of interest that arise in the field of mergers and acquisitions by demanding that directors act with scrupulous concern for fairness to shareholders." Barkan v. Amsted Indus., Inc., 567 A.2d 1279, 1286 (Del. 1989). While subsequent cases and commentators still occasionally use phrases like Revlon duties or even Revlon-land, the court has continued to indicate that Revlon is properly understood as a mere variant of Unocal rather than as a separate doctrine. See my Unocal at 20.

Second, the Delaware Supreme Court appears to have settled on three triggers for invoking the Revlon variant of Unocal:

The directors of a corporation have the obligation of acting reasonably to seek the transaction offering the best value reasonably available to the stockholders, in at least the following three scenarios: (1) when a corporation initiates an active bidding process seeking to sell itself or to effect a business reorganization involving a clear break-up of the company; (2) where, in response to a bidders offer, a target abandons its long-term strategy and seeks an alternative transaction involving the break-up of the company; or (3) when approval of a transaction results in a sale or change of control. In the latter situation, there is no sale or change in control when [c]ontrol of both [companies] remain[s] in a large, fluid, changeable and changing market. Arnold v. Socy for Sav. Bancorp, Inc., 650 A.2d 1270, 1289-90 (Del. 1994) (citations and footnotes omitted).

The scenario posed doesnt invoke any of the conditions for implicating Revlon. Hence, the relevant standard of review would be the requirement of process due care established by Van Gorkom. (See my Mergers and Acquisitions at 166-172.)

The more difficult issue, I think, would be whether the board in tihs scenario can do anything to lock up the deal for the favored bidder. Although Van Gorkom neither invalidated exclusivity provisions nor mandated inclusion of a fiduciary out, recent Delaware case law has trended in that direction. See my Mergers and Acquisitions at 179-92.

I find the Delaware courts hostility to no shops and other forms of exclusive merger agreements very puzzling.  Precommitment strategies are commonplace. Think of Odysseus lashing himself to the mast so that he can hear the Sirens song without running his ship aground. Hostility to precommitment strategies certainly does not follow a fortiori from the mere fact that directors are fiduciaries. Why should informed directors acting in good faith not be allowed to lash themselves to the mast of a particular deal? Case law in other jurisdictions allows them to do precisely that.  See, e.g., Jewel Cos., Inc. v. Pay Less Drug Stores Northwest, Inc., 741 F.2d 1555 (9th Cir. 1984), which specifically validated no shop clauses by permitting the targets board to lawfully bind itself in a merger agreement to forbear from negotiating or accepting competing offers until the shareholders have had an opportunity to consider the initial proposal. Id. at 1564.

No Delaware court has yet offered a persuasive reason for their hostility to no shop clauses and the like. Instead, the invalidity of such strategies has been asserted by mere fiat. See my Dead Hand and No Hand Pills: Precommitment Strategies in Corporate Law.

In sum, I think the answer is that provided the board has gathered all material information reasonably available to it, the board may take this deal without shopping the company. However, the boards ability to use lockups, no shops, best efforts clauses, and the like will be sharply constrained. As I explain in my Mergers and Acquisitions at 187-88:

Van Gorkom, however, does not require target boards to shop the company among competing bidders in order to satisfy their duty of due care. [FN: Van Gorkom, however, was decided before the duty to auction control emerged in Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173 (Del. 1986). Subsequent Delaware decisions suggest that the Revlon auctioneering duty may apply where the merger would result in a change of control, such as where a publicly held corporation goes private by means of a merger. Omnicare, Inc. v. NCS Healthcare, Inc., 818 A.2d 914, 928 (Del. 2003).] Rather, the court seems to be saying that target boards must have some credible basis for determining that a proposed merger is in the best interest of their shareholders. An unfettered market test is merely one means of satisfying the board's duties. A determination of the firm's "intrinsic value," preferably in the form of a fairness opinion by an independent financial expert, is another. A combination of both techniques is probably the safest approach, but the duty of due care should be satisfied even if only the latter device is utilized. [FN: Cf. In re TW Services, Inc. Shareholders Litigation, [Current] Fed. Sec. L. Rep. (CCH) 94,334 at 92,179 n.8 (Del. Ch. 1989) ("alternatives to an auction for collecting the information that directors need to make an informed choice may be appropriate"); In re Amsted Indus. Inc. Litigation, No. 8224, slip op. (Del. Ch. Aug. 24, 1988) (alternatives to auction procedures acceptable).]

Update: I cover this and related Revlon issues in my new eBook for Kindle: Directors as Auctioneers: A Concise Guide to Revlon-Land