July 14, 2024

DealBook: At Top of Delaware Chancery Court, Adherence to Tradition

Tim Shaffer for The New York TimesChancellor Leo E. Strine Jr.

WILMINGTON, Del. — The Court of Chancery in Delaware has been the battleground of some of the biggest legal fights in corporate America.

Yet even as shareholders become more aggressive in using the courts, the new chief judge of the Delaware court says that the court’s role remains the same.

“People don’t understand the limited role of corporate law: Are people running the corporation upholding the rights that the people who invested in them have?” “ said Leo E. Strine Jr., who was confirmed late last month as chancellor in Delaware.

“The court’s role is traditional,” he said in an interview. “The core concept of the Delaware court is, what are the fiduciary duties that directors owe to shareholders? Markets are dynamic, the core concept is constant.”

Tradition is very much at the heart of the Delaware court. It is a descendant of feudal courts of equity in England, and Chancellor Strine is its 21st chancellor since 1792.

And the court’s reputation for quick and knowledgeable decisions is one of the main reasons that 900,000 businesses are incorporated in Delaware, including half of all publicly traded companies and 63 percent of the Fortune 500. Franchise taxes contribute 21 percent of the state’s revenue.

As chief judge, the chancellor assigns and hears cases while overseeing the running of the court. Chancellor Strine first joined the court as a vice chancellor in 1998.

Previously he had served as a legal counsel to former Gov. Thomas R. Carper of Delaware. A graduate of the University of Delaware and the University of Pennsylvania Law School, he had also worked at the law firm Skadden, Arps, Slate, Meagher Flom.

Chancellor Strine and his wife, Carrie, an occupational therapist, have two sons, 12 and 9, whose soccer teams he coaches. As someone who says he grew up watching Julia Child, he is the family cook.

The judge has written hundreds of opinions, which are noted for extensive analysis and detail that even he concedes are too long. His 28 publications include footnotes so voluminous they compete for space with the text. He teaches law at Harvard, the University of California, Los Angeles, the University of Pennsylvania and Vanderbilt and has lectured on law in places as distant as London and Brazil.

Since 2002 he has been writing scholarly papers about globalization, arguing that if capital can flow freely across borders, it will settle where its ability to grow is least restricted. For that reason, he says, laws like the Sarbanes-Oxley Act, however well intended, can have unintended consequences.

It is not all high-minded analysis. The judge is also known for peppering his courtroom commentary with humorous asides and references to pop culture personalities, like Joel McHale of E! channel’s “The Soup “ and Snooki of “Jersey Shore,” to break up the tension.

Yet he describes himself as relentlessly insecure in deciding cases, and believes it comes from fear and wanting to do the right thing. When he is writing, music calms him down, and his selections are geared to his mood. Photos of James Taylor line his office walls, as do photos of Franklin D. Roosevelt, Lyndon B. Johnson and the fourth Supreme Court chief justice, John Marshall. And his bookshelves have enough CDs to stock a small music store.

Facing a blank computer screen before he begins to write can sometimes be paralyzing, he said.

“Then you wake up and realize, ‘I am a judge and I’ve done this before,’ ” he said. “The fear and anxiety keep you on your toes.”

He added, “I’ve been invited to be on business shows — and declined. I’ve never been comfortable about being on television. I don’t know how the world is going to be. If I did know I could probably resign from the bench and make a lot of money.”

As vice chancellor, he oversaw a closely watched case involving the acquisition of Massey Energy, the coal mining company accused of negligence in the deaths of 29 miners.

The judge spoke with personal anguish about the tragedy, but he ruled to allow a shareholder vote on a sale to Alpha Natural Resources, despite the heated objection of a group of shareholders. His ruling was based on what he said was the only relevant legal standard — the financial interest of all shareholders to vote for or against the merger.

“Our law is very clear; you can’t violate law,” Chancellor Strine said. “A corporate law case is not a case about all laws, but about a law. We are not environment protection law, labor law or antitrust law — you stay in your lane.”

Stuart Grant, an outspoken and well-known lawyer for institutional investors, was on the losing end of the Massey case. But of Chancellor Strine, he said: “He will be a phenomenal chancellor. You won’t find anyone with better qualifications. He’s got the intellect, the work ethic, the experience, everything you could want. He’s the whole package. He will be tremendous.”

“He blew it on Massey,” Mr. Grant continued, “but even Ted Williams struck out once in a while.”

Article source: http://feeds.nytimes.com/click.phdo?i=38904ef146c3194f60ff4eb8545ffe09

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