Ribstein thinks it could happen. Given the intense factual detail and richness of Chancellor Chandler's decision after trial, I don't see how the Delaware Supreme Court could reverse without creating new law. And I don't see anyway for the Supreme Court to create new law in this case without creating bad law. Chief Justice Steele recently explained that:
“Delaware will not test the judgment of members of the board of directors so long as no credible issue is raised about the objectivity of the directors’ decision making or their candor in stating the basis for their decision making.” He went on to say that a genuine question about a director’s independence or personal interest in the outcome would have to be raised before a Delaware court would be interested in scrutinizing more carefully a decision by the board of directors. “Otherwise, we’ll trust the directors’ judgment. This approach will not change in Delaware.”
The Disney directors did a pretty bad job by most accounts, but I don't see any basis in Chandler's decision for the requisite finding of "a genuine question about a director’s independence or personal interest in the outcome." Hence, as I argued in my article The Business Judgment Rule as Abstention Doctrine, the Supreme Court should abstain from reviewing the merits of the Disney board's decision.
In response to an email query from Larry, I should emphasize that I don't think Steele's statement (of which I heartily approve) is inconsistent with the requirement of an informed decision the Delaware Supreme Court imposed in Smith v. Van Gorkom. I continue to believe that Van Gorkom rests not on failure to comply with some judicially imposed decisionmaking model but on the absence of a sufficient record of any deliberative process a major transaction having final period consequences. Put differently, if the decisionmaking process is adequate, the court will continue to defer to the decision that emerges from that process. The basic thrust of the opinion then is that the board must provide some credible, contemporary evidence that it knew what it was doing. If such evidence exists, the court will not impose liability—even if the decision proves to have been the wrong one. Accountability thus appropriately trumped authority on the facts of Van Gorkom. But not on Disney's facts.
