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— Safe Harbor —
Parsons didn't hide the pragmatic grounds for his ruling. Though the
case raised "important" -- others might say "fundamental" -- Delaware
law issues, Parsons held, he found it "to be sui generis. What is
paramount is that the court not contribute to a situation that might
cause harm to a number of affected constituencies, including U.S.
taxpayers and citizens, by creating the risk of greater uncertainty."
Not only did Parsons want to avoid alienating Washington by standing in
the way of Bear's sale, which wasn't set to close until May; he didn't
want to issue an ill-considered ruling that other members of the bench
would have to spend years shoehorning into the state's M&A
jurisprudence.
Neither concern particularly troubled Cahn. He issued his 44-page ruling seven months after the sale closed, and as a New York judge, his opinions on Delaware law don't bind that state's judges. In 2007, Cahn had a more contentious encounter with a Delaware judge. That spring, he and Vice Chancellor Leo E. Strine Jr. sparred over who should hear a suit in which Topps Co. shareholders challenged the baseball trading card company's proposed leveraged buyout. Strine wanted the case and made quite clear he wouldn't defer to courts of another state where important issues of Delaware law were at stake. His ruling in the case was one of three significant decisions on LBO sales processes that he issued in the first half of 2007. As University of Pennsylvania Law School professor Edward Rock and New York University School of Law professor Marcel Kahan noted in a paper on the Bear case, Parsons' approach risks diminishing Delaware's status as the leading jurisdiction for U.S. corporate law. But the yawns that greeted Cahn's ruling showed its irrelevance despite his citation of the classic Delaware takeover cases. Parsons' punt may not have been a glamorous play, but it reflected a justifiable confidence that his court will remain the field of choice for corporate law. Parsons was more aggressive in Off v. Centerline Holding Co., a 36-page ruling issued Nov. 26 in which he rejected a proposed settlement of shareholder litigation. Plaintiff Peggy Off sued Centerline to challenge the real estate finance and investment company's proposed rights offering on the theory that the deal served only to benefit two Centerline insiders. She and other shareholders sued on Jan. 15, 2008, and settled seven days later when Centerline agreed to extend the rights offering to all shareholders. But another group of those holders sued in New York state court to challenge the deal. They didn't want to be bound by Off's proposed settlement and therefore asked Parsons to reject it. He agreed with the upstarts, finding that the extension of the rights offering to all shareholders was of only "marginal" benefit to them and that they gained "minimal" benefit from the plaintiffs' proposed changes to the offering prospectus. But Parsons added in a footnote that he didn't "question the good faith" of the parties or their counsel in seeking approval of the settlement nor did he pass judgment on the $800,000 fee that the plaintiffs' lawyers were to receive. The judge's equanimity contrasts with the harsher treatment to which fellow Delaware Vice Chancellors Strine and Stephen Lamb have subjected plaintiffs' lawyers in rejecting settlements over the last few years. The decisions led some in the plaintiffs' bar to favor jurisdictions other than Delaware, a move the state's lawyers saw as worrisome. Parsons' more muted approach in the Centerline case, like the Bear Stearns situation, shows Delaware has rivals as a venue for the resolution of significant corporate cases. David Marcus is a senior writer at Corporate Control Alert. |
Herman Cahn can't keep his mitts off of Delaware corporate law. The New York State Supreme Court judge on Dec. 4 dismissed a suit in which Bear Stearns Cos. shareholders claimed that its directors violated their fiduciary duties in 
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