First and foremost, WaveDivision Holdings, LLC v. Millennium Digital Media Systems, L.L.C., 2010 WL 3706624 (Del.Ch.,2010), which I'm counting as a victory in my long struggle for judicial recognition of the validity of precommitment strategies on the part of boards of directors:
... despite the existence of some admittedly odd authority on the subject, it remains the case that Delaware entities are free to enter into binding contracts without a fiduciary out so long as there was no breach of fiduciary duty involved when entering into the contract in the first place.To generate wealth for investors, fiduciaries must be able to bind the entity to contracts.FN124
FN124. Cf. Omnicare, Inc. v. NCS Healthcare, Inc., 818 A.2d 914, 948 (Del.2003) (Steele, J., dissenting) (“We should not encourage proscriptive rules that invalidate or render unenforceable precommitment strategies negotiated between two parties to a contract who will presumably, in the absence of conflicted interest, bargain intensely over every meaningful provision of a contract after a careful cost benefit analysis.”); Stephen M. Bainbridge, Precommitment Strategies In Corporate Law: The Case of Dead Hand And No Hand Pills, 29 J. Corp. L. 569, 612-623 (arguing that boards of directors should be able to enter into self-disabling transactions and that when the law respects such precommitment behavior, value is generated for entities and their investors); Sean J. Griffith, The Costs And Benefits Of Precommitment: An Appraisal Of Omnicare v. NCS, 29 J. Corp. L. 569 (2004) (concluding that a board's ability to bind itself to transactions serves as an important bargaining chip that, when properly employed, increases shareholder value).
Boland v. Boland, 2010 WL 3547649 (Md.App.,2010):
In his article, “The Business Judgment Rule as Abstention Doctrine,” Stephen M. Bainbridge describes the difference in approach between the traditional business judgment rule and the enhanced independent business judgment rule followed in Delaware astwo conceptions ... compet[ing] in the case law. One views the business judgment rule as a standard of liability under which courts undertake some objective review of the merits of board decisions.... The other ... treats the rule not as a standard of review but as a doctrine of abstention, pursuant to which courts simply decline to review board decisions.Stephen M. Bainbridge, The Business Judgment Rule as Abstention Doctrine, 57 Vand. L.Rev.. 83 (2004).
Actually, I argued therein that the traditional business judgment rule and the Delaware version are both properly understood as abstention doctrines rather than as standards of review.
In re Dollar Thrifty Shareholder Litigation, 2010 WL 3503471 (Del.Ch.,2010):
The heightened scrutiny that applies in the Revlon (and Unocal ) contexts are, in large measure, rooted in a concern that the board might harbor personal motivations in the sale context that differ from what is best for the corporation and its stockholders. Most traditionally, there is the danger that top corporate managers will resist a sale that might cost them their managerial posts, or prefer a sale to one industry rival rather than another for reasons having more to do with personal ego than with what is best for stockholders. Avoiding a crude bifurcation of the world into two starkly divergent categories-business judgment rule review reflecting a policy of maximal deference to disinterested board decisionmaking and entire fairness review reflecting a policy of extreme skepticism toward self-dealing decisions-the Delaware Supreme Court's Unocal and Revlon decisions adopted a middle ground.FN175
FN175. E.g., Stephen M. Bainbridge, Unocal at 20: Director Primacy in Corporate Takeovers, 31 Del. J. Corp. L. 769, 795-96 (2006) (arguing that the Delaware Supreme Court recognized the difficulties associated with choosing either the entire fairness or business judgment rule standard to govern takeover disputes and so created a middle ground with Unocal and Revlon ); Ronald J. Gilson, Unocal Fifteen Years Later (And What We Can Do About It), 26 Del. J. Corp. L. 491, 496 (2001) (“In Unocal, the Delaware Supreme Court chose the middle ground that had been championed by no one. The court unveiled an intermediate standard of review, somewhere between the duty of care and the duty of loyalty.”).
S.E.C. v. Obus, 2010 WL 3703846 (S.D.N.Y.,2010):
The law of insider trading is not based on a federal statute expressly prohibiting the practice; but has instead developed through SEC and judicial interpretations of Section 10(b)'s prohibition of “deceptive” conduct and Rule 10b-5's antifraud provisions. See i.e. Ernst & Ernst v. Hochfelder, 425 U.S. at 199(holding that the scope of Rule 10b-5 cannot exceed the power Congress granted to the SEC under Section 10(b)). The SEC, in In re Cady, Roberts & Co, 40 S.E.C. 907 (1961), and the Supreme Court, in Chiarella v. United States, 445 U.S. 222, 227-30, 100 S.Ct. 1108, 63 L.Ed.2d 348 (1980), first recognized the “classical” theory of insider trading. The required element of a “duty to disclose” was premised on the “relationship of trust and confidence between the shareholders of a corporation and those insiders who have obtained confidential information by reason of their position with that corporation.” Chiarella, 445 U.S. at 228. It has been argued that there has been a “failure to meaningfully define the scope and content of the fiduciary duty” required to establish insider trading liability.FN8
FN8. See Bainbridge, Stephen M. “Incorporating State Law Fiduciary Duties into the Federal Insider Trading Prohibition,” 52 Wash & Lee L.Rev. 1189, 1198. (Discussing how, in order to determine if a fiduciary duty exists, federal courts must look to state substantive law). The Supreme Court has long grappled with how and when a fiduciary duty is established in securities cases. As stated by Justice Frankfurter: “[b]ut to say that a man is a fiduciary only begins analysis; it gives direction to further inquiry. To whom is he a fiduciary? What obligations does he owe as a fiduciary? In what respect has he failed to discharge these obligations? And what are the consequences of his deviation from duty? SEC v. Chenery Corp., 318 U.S. 80, 85-86 (U.S.1943).
