John Noble is at it again. In 2008, the Delaware vice chancellor issued one of the more puzzling decisions to come from the Court of Chancery when he found that the directors of Lyondell Chemical Co. violated their fiduciary duties in approving a $13 billion cash sale to Basell AF SCA that came at a 45% premium, a price so rich that it was one of the reasons Basell filed for Chapter 11 in January 2009. Lawyers worried about how to interpret the decision but ended up ignoring it after broad hints from other Delaware judges that they thought the opinion was wrongly decided.
Noble issued another head-scratcher last month on a claim that a buyer aided and abetted target directors' violations of fiduciary duty. His decision came in a suit brought by shareholders of Answers Corp. who challenged the company's $127 million sale to Summit Partners. The deal closed in April 2011.
The shareholders argued that the sale was tainted because two Answers board members were partners of Redpoint Ventures, which owned 30% of the company and wanted to monetize its stake via a sale. The shareholders also claimed that CEO Robert Rosenschein was conflicted because he would be fired unless the company were sold. Noble agreed and also found that the rest of the Answers board members were complicit because they allowed the trio to sign the deal with Summit quickly, before an effective presigning market check could be done. The judge also refused to dismiss claims that Summit aided and abetted the breaches of duty because it saw nonpublic information that Answers' performance was improving and thereafter "pushed the board to do a quick market check in order to finish the sales process before the market price for Answers' stock rose above the offer price." In other words, Summit tried to cut the best deal it could.
Delaware law has long allowed shareholders to act in ways that maximize the value of their stock. And in February Delaware Chancellor Leo E. Strine Jr. held in shareholder litigation challenging the sale of El Paso Corp. that buyer Kinder Morgan Inc. was unlikely to be found an aider and abettor of alleged violations of fiduciary duty by El Paso CEO Doug Foshee. "It bargained hard, as it was entitled to do," Strine wrote of Kinder Morgan.
Apparently, that's not true in Noble's court. Noble's 12-year term as a vice chancellor ends in November, and the word in Wilmington, Del., is that he won't seek to extend his judicial tenure.