Anti-Delawarite Jay Brown is offering up his annual list of the 5 most anti-shareholder Delaware decisions--i.e., the five Delaware decisions most likely to be correct. ;-))
For example, he cites:
Keyser v. Curtis, 2012 Del. Ch. Lexis 175 (Del. Ch. July 31, 2012), [which] was the latest salvo in eroding the Blasius standard. We discussed the case back in October. In effect, the court found that in a case implicating both the duty of loyalty and the standard from Blasius, it would apply the standard from the duty of loyalty. In other words, the court opted for the test that was easier for the board to meet. Moreover, the court did so largely by disparaging the Blasius standard, portending further erosion. Id. (opinion stating that the main role of Blasius "to the extent it has one" is as an iteration of the intermediate standard fromUnocal).
If the Chancery Court has its way, the need for "compelling justification" will go the way of the Dodo.
If Blasius really is on the way out, I would applaud loudly. I direct the reader's attention to Harry G. Hutchison, Director Primacy and Corporate Governance: Shareholder Voting Rights Captured By the Accountability/Authority Paradigm, 36 Loy. U. Chi. L.J. 1111 (2005), which deploys my director primacy model to very good effect in analyzing shareholder voting rights, and makes a compelling case for scuttling Blasius.
What you ask is Blasius? Well, Gordon Smith once explained that:
One of my favorite Delaware decisions is Blasius Industries, Inc. v. Atlas Corp., 564 A.2d 651 (Del. Ch. 1988), written by then-Chancellor Bill Allen.Blasius has a narrow assignment in Delaware jurisprudence, requiring a "compelling justification" for any corporate action "intended primarily to thwart effective exercise of the franchise." Not many corporate actions over the years have been subjected to that standard, but Allen's defense of the shareholder vote is a classic:
The shareholder franchise is the ideological underpinning upon which the legitimacy of directorial power rests. Generally, shareholders have only two protections against perceived inadequate business performance. ...
To which I must respectfully dissent.
As I wrote in The Board of Directors as Nexus of Contracts:
“The theory of our corporation law confers power upon directors as the agents of the shareholders; it does not create Platonic masters.” So opines former Delaware Chancellor William Allen, whom many regard as the leading corporate law jurist of our era. To paraphrase a television commercial of my youth, when Chancellor Allen speaks, people listen. Yet, as Horace cautioned, “even the worthy Homer sometimes nods.” The central thesis of this Article is that directors are not mere agents of the shareholders. To the contrary, the corporation’s board of directors in fact is a Platonic Guardian. All others with interests in the corporation are mere constituents.
Hence, in Director Primacy and Shareholder Disempowerment, I described Allen's holding in Blasius as "mere ipse dixit."
