Out like a lamb

Leo E. Strine Jr. usually dominates the Tulane Corporate Law Institute, just as he can overshadow his fellow judges on Delaware's Court of Chancery. Strine loves a crowd, and he's happy to be the life of the party -- particularly one the M&A bar dominates. But this year, the most entertaining jurist in New Orleans was Strine's colleague, Stephen Lamb. Like most of the Delaware judges, Lamb has played Tulane before, but he's never been as relaxed and witty as he was on April 3, when he appeared on a panel that considered recent Delaware law developments. Just a few days earlier, Delaware Gov. Jack Markell had announced that Lamb would retire from the bench when his 12-year term ends on July 28, a decision that seemed to liberate an often stern judicial presence.

Lamb led off by walking through the Delaware Supreme Court's recent decision in Lyondell Chemical Corp. v. Ryan, in which Justice Carolyn Berger reversed a ruling by Vice Chancellor John Noble.

In a rare peek behind the Chancery Court curtain, Lamb seemed to share many lawyers' low opinion of the lower-court decision, in which Noble would not dismiss shareholder claims that Lyondell directors had breached their duty of loyalty by approving a sale to Basell AF SCA.

Lamb walked the audience through the Supreme Court's decision and quoted Berger's holding that "[t]he trial court approached the record from the wrong perspective." Lamb also noted that Berger cited approvingly In re Lear Corp., a decision that Strine issued Sept. 2, just a month after Noble issued his ruling in Lyondell. "As he sometimes does," Lamb said of Strine, "there are extensive footnotes in the opinion, which I read as directed at Lyondell."

In Lear, Strine cited four cases -- Lyondell not among them -- that have "dealt with arguably the hardest question in corporation law: what is the standard of liability to apply to independent directors with no motive to injure the corporation when they are accused of indolence in monitoring the corporation's compliance with its legal responsibilities." The answer, according to Strine: "a strong showing of misconduct." Chancellor William B. Chandler III concluded similarly in a case issued the same day as Strine's, leading one to wonder whether he, Strine and perhaps Lamb had discussed the issue.

The panel also benefited from the presence of Marc Wolinsky, who filled in at the last minute for Thomas Cole when the Sidley Austin LLP partner had to leave unexpectedly for a client board meeting -- that of Pulte Homes Inc., which announced a $3.1 billion agreement to buy Centex Corp. on April 8. The meeting meant Cole failed to appear on a Tulane panel for the first time since the inaugural conference in 1988, but Wolinsky was an able replacement. The Wachtell, Lipton, Rosen & Katz partner appeared before Lamb while representing Hexion Specialty Chemicals Inc. in its effort to walk from an agreement to Huntsman Corp., a case in which Lamb ruled for Hexion.

Wolinsky also represented J.P. Morgan Chase & Co. last year in defending against litigation brought by Bear Stearns Cos. shareholders challenging the deal. The lawyer said his client had sought to stay the plaintiffs' Delaware case in favor of one they had brought in New York to avoid having to contend with Omnicare Inc. v. NCS Healthcare Inc. In that controversial 2003 ruling, the Delaware Supreme Court overruled Lamb and held that a target board must retain a fiduciary out when signing a merger agreement.

"We were confident the Court of Chancery would come to the right result," Wolinsky said, "but frankly we didn't need the hassle."

Lamb's response drew even more laughs than Wolinsky's comment: "Unless some of you out there have more perseverance and guts than they did," he said, "we're never going to get rid of Omnicare."

David Marcus is a senior writer at Corporate Control Alert.