"That's pretty audacious," says Strine. "I'm not necessarily saying
it's wrong, but there's not a lot of lineage for any of this." But
Moore was taking part in a debate on hostile takeovers that extended
well beyond case law; his statement that the board was not "a passive
instrumentality" responded to an article by Frank Easterbrook and
Daniel Fischel, two influential Chicago School academics who have
argued that the boards of target companies should do nothing to stop
hostile bids, Strine notes. "This is a court that is reading what
people are talking about."
Strine concludes with the 1985 case arising from Ronald Perelman's
hostile bid for Revlon Inc., whose French CEO, Michel Bergerac, Strine
says, had "a strong personal antipathy" for his antagonist, "some
Jewish guy from Philadelphia." Bergerac did everything he could to stop
the bid, but the Delaware Supreme Court found that once Revlon had
decided to sell itself for cash, it had to get the best deal it could.
"Do they feel like typical appellate opinions?" Strine asks the
students about the three decisions. "There are tons of adjectives and
adverbs everywhere. These are stories."
The performance at Harvard captures Strine's energy, breadth of
knowledge and unflinchingly pragmatic view of the law. But this is a
busman's holiday for Strine, Delaware's most talked-about jurist since
the takeover era on which he has lectured. He flies to Boston every
week during the fall to teach with Robert Clark, Harvard Law's former
dean and a leading corporate law scholar. The effort, combined with
some teaching at the University of Pennsylvania, a regular round of
conferences and lectures, and, of course, his caseload in Wilmington,
says a lot about Strine's intellectual zeal, worldview -- and ambitions.
Ten years ago, Strine became a vice chancellor of Delaware's Court
of Chancery at age 34. He had clerked for two federal judges, spent two
years as an associate at Skadden, Arps, Slate, Meagher & Flom LLP
in Wilmington, Del., then served as chief counsel for then-Gov. Thomas
Carper, a Democrat who is now a U.S. senator. Many in Wilmington's
corporate bar did not know Strine, and some worried that a man they saw
as a political appointee would not be up to the task of serving on the
country's leading business law court.
Instead, Strine has become the court's leading voice. He writes long
opinions in a distinctive voice in which he treats not just the issue
before him but related subjects in his state's law. The references to
popular music and culture that he works into his writings suggest a
breadth of interests, as does the presence of an old paperback copy of
Joe McGinniss' "The Selling of the President," an account of Richard
Nixon's 1968 presidential campaign, near a corporate finance textbook
on a bookshelf in Strine's office. The judge has also written 19 law
review articles in his time on the bench.
And yet, as Strine wrote in a law review article last year,
"Corporation law is not my primary public passion. Rather, what
primarily animates my commitment to public service is the continued
worthiness of the liberal vision of a just society." He believes
strongly in the free market -- he wouldn't be sitting on Chancery if he
didn't -- but he's also an unabashed New Deal Democrat who has
photographs of Franklin Roosevelt and Lyndon Johnson hanging in his
office.
Strine declines to discuss the recent market upheaval, but a recent
law review article suggests what his response might be. He notes that
Adolf Berle Jr. and Gardiner Means in their 1932 classic "The Modern
Corporation and Private Property" focused as much "on the broad range
of dangers that unconstrained corporate power posed to the citizenry as
on the victimization of stockholders by faithless managers." The men
"feared that large corporations had outgrown the capacity of existing
governmental structures to constrain them." Berle was a major force in
the crafting of the New Deal.
Strine has astutely managed his career, from volunteering as a
teenager for Carper's first congressional campaign to becoming a
significant force in American corporate governance as a judge, but it
is a career not without its tensions between jurisprudence and
politics, business law and a wider world of ideas. His skill along with
his relative youth and his political connections has led to talk that
he might move to a bigger stage if Barack Obama and his running mate,
Delaware Sen. Joe Biden, capture the White House in November. Few of
the lawyers who follow Chancery believe he will spend the rest of his
career there, but there's no consensus on what his next move might be.
Strine himself offers few clues.
Strine was born in Baltimore in 1964, the son of teenage parents.
"My people were working people," Strine says. "My parents were row
house kids." In 1973 the Strines moved to Hockessin, outside of
Wilmington, when Leo's father got a job as a buyer at Lit Brothers, a
Philadelphia department store. His parents' emphasis on education and
political engagement influenced Leo and his younger brother, Michael,
who earned a doctorate in political science from Johns Hopkins
University and worked in Delaware's Department of Finance before
becoming chief financial officer of New Castle County in 2005 and
returning to Hopkins this year as its executive director of financial
planning.
As a boy, Strine says, "I loved to read, and before I was 13, I had
read virtually everything that George Orwell wrote, including the
journalism." But he was also a soccer enthusiast with talent enough to
be recruited to play for the University of Delaware team.
Strine abandoned soccer for politics as his primary extracurricular
activity in college. In 1982, as a freshman at the University of
Delaware, Strine volunteered for Carper's campaign for Congress. "I
blew up balloons and handed them out at football games," he says. "In
1984, I did a lot of work for Sen. Biden's re-election campaign as well
as for Carper at the grunt level of getting out the vote and dropping
literature. I can still do a political polling phone call pretty much
from memory."
Biden already had an established staff, having served in the U.S.
Senate since 1972, four years before Carper launched his political
career by winning an election for Delaware state treasurer. "In the
1980s, if you were young and Democratic, Carper was the magnet," says
James Soles, a politics professor at the University of Delaware active
in the state's Democratic Party who taught both Strine boys. Leo Strine
worked in Carper's Washington office one summer, and in 1986, while a
law student at Penn, he ran Carper's campaign volunteer corps while attending law school. The only corporate law course he took was basic
corporations, he says.
After graduating from Penn in 1988, Strine clerked for John F. Gerry
of the U.S. District Court of New Jersey and Walter K. Stapleton, whom
Nixon appointed to the U.S. District Court of Delaware in 1970 and
Reagan elevated to the U.S. Court of Appeals for the 3rd Circuit in
1985. Clerking for Stapleton remains a significant credential in
Delaware; William T. Allen, the chancellor, or chief judge, of Chancery
from 1985 to 1997, was also a Stapleton clerk.
Stapleton had great influence on Strine. The two men still lunch
once every six weeks or so, Stapleton says, and they talk about "his
kids, my kids, Barack Obama, John McCain, that sort of thing." And,
Strine adds, Stapleton's "worrying about my not burning myself out." As
a judge, Stapleton was meticulous. "Walter would write draft after
draft and sweat over them," Strine says. "He was a painstakingly
careful opinion writer. That was a difficult year because it was like
going into a cloister. Here you were in these judicial chambers with
just the judge and a couple of other colleagues working on drafts."
Stapleton's opinions were "shorn of ornament, simple, elegant, useful
and sound," his former clerks Strine, Allen and Leonard P. Stark, a
U.S. magistrate in Delaware, wrote in a 2003 article. "Although the
opinions speak in a voice, that voice is not a highly personal one."
On the surface, Strine is very different. He writes with verve and
wit. He will acknowledge his doubts about the coherence of the law and
even his uncertainty about how he should decide. "I am confessedly torn
about the outcome," he admitted in a 2001 opinion in which he ordered Tyson Foods Inc., a chicken processor, to complete its $4.7 billion purchase of IBP Inc., a beef processor.
But the flourishes adorn a precise legal mind. "I have to imagine
that what Strine learned from Stapleton was carefulness and judicial
responsibility, and those are not the things you think of when you
think of Leo," says David Skeel, himself a former Stapleton clerk and
now a corporate law professor at Penn. "You think of his being
flamboyant and not keeping things close to the vest. But it's also true
that Leo is very careful and he doesn't make dumb mistakes."
Working for Gerry and Stapleton was a profound experience for
Strine, he says: "I went into the clerkships not knowing that I ever
might want to be a judge and coming out of them thinking that that is a
form of public service where I could make a contribution."
He was able to start making that contribution eight years later
thanks to Carper. After his clerkships, Strine spent two years at
Skadden Arps in Wilmington. "He came to us," says Rodman Ward Jr., then
a partner at the firm, now retired (Strine coaches his grandson's
soccer team). "My partner Steve Rothschild talked to Tom Carper, and
Tom recommended he talk to Strine."
Working primarily with Ward, Strine focused on two cases. One
involved a family fighting over a corporation. In the other, Skadden
represented Delaware in a case where the federal courts ended up
approving the end of mandatory busing in New Castle County. "He worked
on the case, but more than that, he had the politics of the case in
mind," says Ward. "I knew he was interested in civic stuff. He never
indicated any interest in making money and doing the things that
Skadden partners mostly try to do. I never thought he would stay with
Skadden, because he'd come from Tom's recommendation."
As Ward realized, Strine's primary passion remained politics. He
helped advise Carper on his successful 1992 campaign for governor and
became his chief counsel -- "a dream job," Strine told The New York
Times in 2001. As a judge, he added, "I sometimes feel left out." He
still enthuses about his time in Dover, the state's capital, when he
was not only Carper's lawyer but a key driver of policy. "I had a boss
who was fighting the good fight on every front. How many people get to
say that they were one of the leading drafters of a statewide welfare
reform act that was critical in the shaping of the national debate,
that they wrote a state charter school law, state ethics reform? It was
an intellectual feast. You're doing very diverse things. I read a lot
of the academic literature on these topics."
Strine admired his boss' style as well as his politics. "Carper took
chances," he says. When he ran against William V. Roth Jr. for the
incumbent's seat in the U.S. Senate in 2000, "Carper gave up the
teachers' recommendations by pushing for teacher accountability. You
had a guy who was on the right side of things, who wanted to push the
system in the right ways." The lack of an endorsement didn't hurt
Carper, who won the election and is now in his second term as a U.S.
senator.
Delaware restricts its governors to two terms, and as Carper neared
the end of his tenure, Strine was left with a decision. "Leo knew that
it was time for him to make a transition," says Michael Houghton, a
partner at Morris, Nichols, Arsht & Tunnell LLP in
Wilmington and a close friend of Strine's going back to his political
days. "I had advised him that it was time to go, not because he wasn't
doing an exceptional job, but because there's a season for everything.
I guess I was a little surprised that he applied for the Chancery Court
position."
Stapleton was not: "If I had had to say at the time what I'd hoped he would do, it would be 'Be a judge.' "
Strine was an unorthodox choice for Chancery, since he hadn't spent
years practicing corporate law as Allen and other judges had and was,
at 34, quite young to sit on the court. Strine was nonplused. "Someone
who wanted to be on this court tried to convince me that I should go on
Superior Court," he says. "The suggestion was that it was a little
premature for me to come to Chancery. I said to that person, 'I did my
two clerkships, I did work on a fair number of criminal cases. I was
involved with death penalty stuff. But what I really do is read and
write for a living.' It seemed to me much more of a jump to preside
over a capital murder trial than to be in a position where the judge
makes a decision and writes the reasons for his decision."
Carper nominated Strine knowing that the confirmation battle in the
state's senate would be tough. "It was a contentious nomination,"
Carper says. "Leo was the guy who in many cases went to the
Legislature, trying to sell our program." Not only was Strine a
precocious, aggressive representative of a Democratic governor widely
expected to challenge a Republican incumbent for a U.S. Senate seat; he
wasn't shy about making state senators the target of his occasionally
biting wit. Says Ward: "He's a very funny person. Sometimes he's a
little incautious about that, which I like. There were some members of
the General Assembly who thought he was twitting them, and maybe he
was."
Strine scraped through, winning confirmation by a few votes just
days before his wife, Carrie, an occupational therapist at a children's
hospital, gave birth to their first child, James. (Two years later,
they had a second son, Benjamin.) Wilmington's corporate bar, which
tends to stay above the political fray in Dover, had its doubts about
the choice. But even as Strine worked for Carper, he kept an eye on
Chancery. "I remember running into him in New Orleans at the Tulane
Corporate Law Institute before he came on the bench," says William
Lafferty, a partner at Morris Nichols who's known Strine since high
school. "He was trying to learn more about Delaware law."
Strine may have had to deepen his understanding of corporate law,
but he knew how he wanted to treat the subject in his opinions. "He had
a pretty good idea of the kind of judge he wanted to be when he went on
the bench," Stapleton says.
Strine's model was Allen, who had just completed his 12-year
judicial term in 1997. "I came to the job as a great admirer of
Chancellor Allen's decisions," Strine says. "They were a treat to read,
because there's a living mind and you can follow that mind, and you
know exactly when you get off the train. You could follow a Bill Allen
decision; there was no shirking, none of the techniques like the use of
the royal 'we' that some authors of decisions use to distance
themselves from what they're doing. There's an ownership of the
reasoning and an attempt to rest that reasoning within a legal
tradition and recognize the importance of the incentive effects of what
you're ruling on. No one's going to agree with everything you write,
but I wanted to have people understand what I was doing and have it be
useful to people."
And Strine enjoyed Allen's style: "There's a certain enthusiasm
about a Bill Allen opinion. He's entrusted with writing these opinions,
but he's enjoying it. The intellectual struggle has its rewards, and
you can see that in the prose."
Allen's opinions were also a critical part of the jurisprudence that
Strine had to apply on the Court of Chancery. As the leader of that
court, Allen repeatedly grappled with how it should evaluate measures
that target companies took in response to hostile bids or the threat
thereof -- in legal terms, the "standard of review," an issue central to
the three cases Strine taught at Harvard. Strine offered his
interpretation of the case law on the subject in two long opinions
issued a little over a year after he became a judge: In re Gaylord
Container Corp. Shareholders Litigation and Chesapeake Corp. v. Shore.
Both raised classic questions of takeover law. In Gaylord, Strine had
to evaluate defensive measures that the company's board had installed
in the absence of a takeover bid; in Chesapeake, he was faced with
defenses put in place during a bid.
"This case unavoidably brings to the fore certain tensions in our
corporate law," he wrote in Chesapeake. Although, Strine acknowledged,
"I must apply the law as it exists," he didn't hesitate to question its
wisdom. The judge concluded a long footnote in Gaylord with a mocking
metaphor about the various standards of review that Delaware courts had
ginned up in response to the '80s takeover boom: "Right now, Delaware's
doctrinal approach is premised on the assumption that the world can be
viewed clearly by simultaneously wearing three pairs of eyeglasses with
different prescriptions (Unocal, business judgment, and entire
fairness). It is not apparent that this approach works any better in
the law than it does in the field of optics."
Both the substance and the tone grabbed lawyers' attention. Some
were disturbed by the rulings' apparent boldness; others admired their
candor. But the decisions demonstrated a command of their subject that
put to rest any worries about Strine's ability to grasp the nuances of
corporate law. "Gaylord and Chesapeake made clear that this guy gets it
in a practical sense," says J. Travis Laster, a partner at Abrams & Laster LLP in Wilmington. "A year and a half to get the practical side -- it was pretty impressive. There's no doubt he's a fast read."
"A Chesapeake v. Shore pours out of you like a clear mountain
stream," Strine says. "I had been thinking a lot as I decided the cases
that came up about these various standards of review and seeing some of
the frictions and the overlap." Chesapeake raised precisely those
questions, he continues. "The core parts of the standard of review
flowed from my brain to my fingertips. When I went running, I would
think about it, I would outline it in my head. You don't have cases
like that every year, or every third year."
Strine continued to ponder the issue and in 2001 and 2002 teamed to
write three law review articles on it with Allen and Jack Jacobs, a
Delaware Chancery vice chancellor since 1985 who was elevated to the
state's Supreme Court in 2003. But hostile takeovers waned, and the
Delaware courts heard fewer cases involving them.
While hostile takeovers have become a topic of largely academic
interest, Strine has become a leader in a number of other aspects of
Delaware corporate law. His 2001 opinion in IBP v. Tyson remains the
major Delaware case on so-called material adverse effects clauses that
allow buyers to walk from merger agreements in certain circumstances.
He has written important opinions on how courts should treat a
controlling stockholder's acquisition of a corporation, and his three
rulings involving leveraged buyouts last year helped freshen Delaware's
1980s takeover jurisprudence for a new boom era in dealmaking.
The M&A bar has largely embraced Strine even as some of its
members complain about the length and style of his opinions. Fears that
his decisions in Gaylord and Chesapeake portended a radical change in
the law proved unfounded. His most aggressive decision, the 2001 case
in which he forced Tyson to complete its $4.7 billion purchase of IBP,
in hindsight seems correct; after all, IBP CEO Richard Bond now holds
the same spot at Tyson. And since Strine joined the Delaware courts, it
hasn't had to face the fundamental challenges that the rise of the
hostile bid posed for Moore, Allen and their contemporaries, which has
removed a significant source of contention within the bench.
No one in the Wilmington bar seems to doubt that Strine could stay
on the Court of Chancery as long as he wants; and a few suggest that
Strine might succeed William B. Chandler III as chancellor if Chandler
retires at the end of his term next year. If McCain wins in November,
Strine may well remain on Chancery.
But Strine's ambition extends well beyond Wilmington. The classes he
teaches at Harvard and Penn help him pay for his sons' private school
tuitions, he says, but they also expose him to new ideas in corporate
law and related fields. Harvard's Clark says the judge makes a point of
scheduling his classes on Tuesdays "because that's when we have the
corporate law lunch group, and he wants to hear what the professors are
up to."
Nor does Strine neglect the lawyers who advise the companies who
paid $700 million in franchise and corporate fees to Delaware last
year, 22% of the state's budget. He's a regular at conferences and
loves mugging for the crowd. In 2004, Tulane held its Corporate Law
Institute after Strine ruled against Conrad Black in a closely watched
case. On one panel, Robert Spatt, a partner at Simpson Thacher & Bartlett LLP in New York, summarized the Hollinger decision as "Bad guy does bad things, gets big spanking."
Strine couldn't resist the opening: "I'm not into spanking, Rob. Not that there's anything wrong with that."
Such settings offer Strine more than a chance to play the court
jester. By interacting with lawyers, bankers, shareholder activists and
other constituencies, he says, "what you're doing is getting
knowledgeable about the world. When you get an expedited case, you only
have the time to do case-specific learning."
And like Delaware's other judges, Strine is an advocate for the
state's franchise in corporate law. "The Delaware courts are a large
part of what Delaware has to offer business," Spatt says.
"Accessibility and a certain willingness to be open and engaging by
members of the courts is part of what helps them make Delaware
attractive."
Those traits were particularly important in selling Delaware after
Congress passed the Sarbanes-Oxley Act in 2002. Corporation law has
always belonged to the realm of state rather than federal jurisdiction
in the U.S., but since Washington first considered federalizing the
area in the 1970s, Delaware's corporate bar has tried to parry the
possibility of such regulation by tweaking its corporate statute and
emphasizing the virtues of the state's flexible corporate law over the
more doctrinaire approach that federal oversight might bring. Strine
and Chancellor Chandler did their part to make Delaware's case by
writing "The New Federalism of the American Corporate Governance
System: Preliminary Reflections of Two Residents of One Small State"
just months after SOX became law.
Strine continues to keep a close eye on the fight for power among
the players in American corporate governance. This year, he wrote a
paper in which he suggested that Delaware should mute calls for giving
shareholders a say on executive compensation by allowing them access to
the company's proxy. Strine is skeptical of the shareholder activists
who clamor for such access.
But, he wrote in his paper, "one can view an obstinate objection to
[shareholder access] as, in the long term, increasing the risk that
federal action will be taken to mandate that all public companies adopt
certain election practices favored by institutional investors."
The work shows a mastery of the arcane debate over shareholder
access within the Securities and Exchange Commission and a keen
understanding of the politics surrounding it, but in recent years
Strine has often taken a broader view of the corporation's societal
role in papers.
In an article published this fall, he acknowledged the "important
but very discrete role" of corporate law in regulating the behavior of
managers and directors. "American corporate law has no answer to the
challenges facing Americans as a result of globalization," he wrote.
Strine concludes by citing Franklin Roosevelt's 1944 State of the
Union address, in which the president said, "True individual freedom
cannot exist without economic security and independence," and
considering its relevance for regulating a "globalized world economy."
Such words raise the question of whether Strine wants to be more
directly involved in that effort than any judge can be.
They can also unsettle academics who often hear Strine deliver early
drafts of his work. "When he's talking legal doctrine, he knows what
the game is about," says Edward Rock, a corporate law professor at
Penn. "When he steps out of that, he is a Democratic populist, and he
rails about management overcompensation and downsizing and outsourcing,
all of which is out of keeping with Leo Strine corporate law judge.
When you're at a conference, you never know which Leo you're going to
get."
Strine bristles at the comment. First, he says, he's not a populist:
"To the extent that I'm a Democrat, I would say that I'm a Franklin
Roosevelt, Adolph Berle Democrat about the economy," he says. "I
believe that one of the great triumphs of the West was Western Europe's
and Japan's and our coming up with a form of capitalism that worked for
everyone. When I'm not deciding a particular case, I do have concerns
about environmental standards, about the future employment of
Americans, if the solution is to export jobs to places with no labor
concerns."
And, he continues, he has a freedom in his academic work that he
does not have on the bench. "My role as a judge is to decide cases
within the framework of a constitution and common law," he says.
"When you take on that role, your job is to do that. If you're
asking me a question about what the law is or requires, that's a
different question than an ought question. It's a long way to finding
someone liable for giving someone a $10 million contract and being in a
conversation about CEO pay. But I'm an American, and I don't think it's
particularly shocking for someone to be cognizant of the growing
disparity between what certain elements of our economy receive."
Next month, Strine will mark the 10th anniversary of his appointment
to the Court of Chancery, where personal liability rather than income
disparity is the issue. He could stay, of course. But if Obama wins in
November, Strine's connections in the Delaware Democratic Party might
open a spot in the federal judiciary or at a regulatory agency.
Stapleton cites his friend's affinity for being a judge: "I think he
enjoys solving real problems. That's what we do. The only reason we're
given permission to mess in other people's affairs the way we are is
because they're real people who've gotten themselves in serious
problems, or they wouldn't be before us, and he is very mindful of the
human aspect of the litigation that's before him."
Houghton agrees: "I think he wants to continue in the judiciary. He
and I don't do a regular forensic review of what his plans are, and I
think he very much enjoys the Court of Chancery, but I would be very
much surprised if he did not pursue a federal position at the highest
levels. He's got the credentials and the relationships."
But Strine surprised Houghton 10 years ago by seeking a spot on the
Chancery, and the judge's occasional admiring references to Berle and
his fascination with public policy suggest a variety of career paths.
"I knew when I came on here I was making a commitment to serve
Delaware in a particular way that was very important," Strine says. "I
still have enthusiasm for it. But as one of my law school professors
advised, keep your options open until you're dead. I am committed to
public service, and my wife is also. Some of the options are outside of
my control. I'm lucky to have a great job, and I'm not in a particular
hurry to do something else, but if there's an option for serving my
state or my country doing something else, I'm open to that if and when
it comes."
At Harvard, Strine concludes his grand tour through Delaware's
takeover law, vintage of 1985, by asking the class what overarching
view of the corporation the cases take. Do they suggest that the
corporation is primarily shareholder property that the board should aim
to maximize or that it is a social entity whose purpose is to generate
the greatest possible value for society over the long haul?
Clark opts for the property model, if in a humane form. Strine takes
a slightly different tack. He writes a series of numbers on the
chalkboard in front of the class. At some point, he says, there's a
share price at which Revlon duties kick in, and that colors the entire
course of negotiations between a hostile bidder and a target. Strine is
making a point about the broad ramifications of a single decision and,
by extension, of the judge who makes that decision.
As the class ends at 7 p.m., a few students come up to continue the debate with Strine for another 15 minutes.
Another day, another debate, another decision in the marvelous adventures of Leo Strine.
