The D & O Diary : Directors and Officers Liability and Insurance : The D & O Diary : Kevin LaCroix : Securities Laws, Corporate Fraud, D & O Litigation

One of the more vexing litigation problems to emerge recently has been the proliferation of multi-jurisdiction litigation, where corporate defendants are forced to litigate essentially the same claim in multiple courts at the same time. This problem is a particular issue in the context of M&A litigation, although not contained to those kinds of lawsuits. In the midst of what has become essentially a jurisdictional competition, Delaware’s courts have tried to establish themselves as the preferred and presumptive court for corporate litigation.

As discussed here, in June 2012, in a high-profile and controversial example of the efforts of Delaware courts to control litigation involving Delaware corporations, Vice Chancellor Travis Laster refused to give effect to the judgment of a California federal court dismissing a derivative suit parallel to the case pending in Delaware.

However, in a harsh rebuke to Laster, on April 4, 2013, the Delaware Supreme Court entered an opinion reversing the Chancery Court ruling and recognizing the California federal court’s prior dismissal. The Supreme Court’s opinion represents a recognition that principles of federalism and comity require Delaware’s courts to respect the preclusive effects of the California court’s judgment.

Background

In September 2010, Allergan pled guilty to a criminal misdemeanor for misbranding its Botox product and paid a total of $600 million in civil and criminal fines. Various plaintiffs’ firms filed multiple derivative suits both in federal court in California and in Delaware Chancery Court. The California cases went forward more quickly, while in Delaware, at least one of the plaintiffs sought to pursue a books and records action against the company, in order to obtain further information pertinent to the company’s board’s actions. The Delaware plaintiff used the information and documentation to amend its complaint. The California plaintiffs ultimately also obtained the same information and documentation and supplemented their complaint as well.

The defendants moved to dismiss the California action on the ground that the plaintiffs had not made a demand on the Allergan board to pursue the claims, nor had they established demand futility. The California court granted the defendants’ motion to dismiss. The defendants then sought to have the Delaware action dismissed, arguing that the collateral estoppel effect of the California dismissal was preclusive of the demand futility issue.

In an extensive June 11, 2012 opinion (here), Vice Chancellor Laster firmly rejected the suggestion that the California court’s prior ruling compelled him to dismiss the Delaware action. He relied on two grounds in rejecting the argument that the California judgment is preclusive; first, he found that the California judgment was preclusive only as to the individual California shareholder plaintiffs, and second, he found that the California plaintiff did not adequately represent Allergan. The defendants pursued an interlocutory appeal to the Delaware Supreme Court.

The April 3, 2013 Opinion

In an April 4, 2013 opinion written by Justice Carolyn Berger for the full Court, the Delaware Supreme Court reversed the Chancery Court’s ruling, holding that the Vice Chancellor had erred with respect to both aspects of his ruling. The Supreme Court concluded that the California judgment was preclusive of the Delaware case and also rejected Vice Chancellor Laster’s conclusion that the California plaintiffs were inadequate representatives.

In rejecting the Chancery Court’s conclusion that the California judgment was not preclusive, the Supreme Court noted that the U.S. Constitution’s full faith and credit clause requires courts to give full force and effect to the judgments of other jurisdiction’s courts, including the judgments of federal courts. Vice Chancellor Laster’s refusal to give effect to the California judgment was based on a “mistaken premise” that the question of the effect of the California judgment was controlled by “demand futility” law controlled by Delaware legal principles.

The Supreme Court stated that “once a court of competent jurisdiction has issued a final judgment … a successive case is governed by principles of collateral estoppel, under the full faith and credit doctrine, and not by demand futility law,” adding that “in the Court of Chancery, the motion to dismiss based on collateral estoppel was about federalism, comity, and finality. It should have been addressed exclusively on that basis.’  Delaware’s “undisputed interest” in governing the internal affairs of its corporations “must yield to the stronger national interests that all state and federal courts have in respecting each other’s judgments.”

The Supreme Court also rejected the Chancery Court’s conclusion that the California plaintiffs were inadequate plaintiffs. The Supreme Court noted that Vice Chancellor Laster had “sua sponte announced and applied an irrebutable presumption that derivative plaintiffs who file their complaints without seeking books and records very shortly after the announcement of a ‘corporate trauma’ are inadequate representatives.” The Supreme Court said that “we reject the ‘fast filer’ irrebutable presumption of inadequacy.” The Court noted that “undoubtedly there will be cases where a fast filing stockholder also is an inadequate representative” but that “there is no record support for the trial court’s premise that stockholders who filed quickly, without bringing a Section 220 books and records action, are a priori acting on behalf of their law firms instead of the corporation.” The Court added that although it “understands the trial court’s concerns about fast filers,” the remedies “for the problems they create should be directed at the lawyers, not the stockholder plaintiffs or their complaints.”

Discussion

As I discussed at the time, Vice Chancellor Laster’s opinion in this case was a broadside against certain segments of the plaintiffs’ bar, who, in his view, rush to file actions in other jurisdictions’ courts, to the detriment of litigants that proceeded more deliberately by first pursuing a books and records action in Delaware court and then in due course filing an action in Delaware based on the results of the books and records search.

While Laster’s effort to create a Delaware-centric solution to the chaos of multi-jurisdiction litigation is understandable, it put the defendants in the unacceptable position not only have having to face a multi-front war,  but also having to fight the war in piecemeal fashion, rather than trying to move toward a single, comprehensive solution.

The Supreme Court’s opinion does not directly take on the problems arising from multi-jurisdiction litigation, but merely recognizes that basic principles of “federalism, comity and finality” required that the judgment of California court be given full force and effect. However, the Supreme Court did reject the Chancery Court’s suggestion that the plaintiffs in the California case were inadequate representatives simply because they failed to first pursue a books and records action before launching their suit. As Alison Frankel noted in an April 5, 2013 post on her On the Case blog (here), the Supreme Court Opinion “puts an end to Chancery’s recent insistence that shareholder lawyers seek corporate books and records before filing derivative complaints.”

In effect, Laster’s Chancery Court opinion seemingly embodied a belief that both that Delaware’s courts should be in charge, and that if the Delaware courts were in charge, an orderly process would replace the unseemly spectacle of multi-jurisdiction litigation. There is no doubt that the curse of multi-jurisdiction litigation imposes enormous, duplicative costs on the litigation targets. But Vice Chancellor’s Delaware-centric manifesto threatened to exacerbate the problem rather than solve it, presenting as it did the prospect for multiple conflicting rulings in different jurisdictions on identical issues.  The Supreme Court’s opinion suggests a recognition that the curse of multiple-jurisdiction litigation won’t be resolved by Delaware’s courts grabbing authority or disdaining other courts. 

In its April 4, 2013 client alert (here), the Wachtell Lipton law firm noted that the Delaware Supreme Court’s ruling “makes clear that Delaware is sensitive to the unfairness that multiple parallel lawsuits can work on corporations and their directors and is prepared to enforce scrupulously rules of interstate comity that limit this mischief.”

The Delaware Supreme Court's decision is a welcome outcome for corporate litigants. As the Wilson Sonsini law firm noted in its April 2013 client alert about the decision, the ruling "may calm the concerns of those facing multi-forum shareholder litigation that a resolution on the merits in one forum will be given preclusive effect in Delaware (and presumably other jurisdictions)."

Just the same, though defendants undoubtedly will welcome the Delaware Supreme Court’s ruling, it will not eliminate the problem of multiple-jurisdiction litigation. The unseemly scramble of competing claimants to pursue claims against companies experiencing adverse developments or involved in corporate transactions will continue. The solution to the problem of multi-jurisdiction litigation has been and remains particularly elusive.

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In their paper “A Great Game: The Dynamics of State Competition and Litigation” (here), Ohio State Law Professor Steven Davidoff and Notre Dame Finance Professor Matthew Cain analyzed the M&A related litigation during the period 2005 to 2010. I discussed this article in a prior post, here. In a newly released February 2, 2012 paper entitled “Takeover Litigation in 2011” (here), Professors Davidoff and Cain supplement their prior research with the preliminary statistics for takeover litigation in 2011.

The authors review all 2011 transactions involving U.S. exchange traded companies with a deal size over $100 million, an offer price of at least $5 per share, with a publicly available merger agreement and a closing date by January 12, 2012. There were 103 transactions that met these criteria, which represents a slight decline from the 124 transactions in 2010. However, the 2011 figures do not include pending transactions from 2011, so these figures could change as more of the deals are completed.

But while the absolute number of transactions declined slightly in 2011, the number of transactions that attracted lawsuits increased, at least as a percentage matter. The authors found that while 84.6% of mergers attracted litigation in 2010, the percentage rose to 94.2% in 2011. The authors noted  in their original paper that in 2005 only 38.7% of deals attracted litigation, so the litigation is now brought “at a rate almost 2.5 times that of 2005. The authors expect that as the pending 2011 deals are completed “we expect that the ultimate 2011 litigation rate will match or exceed the 94.2% figure.”

In addition, the mean number of complaints per deal remained basically constant in 2011, to with a 2011 per deal mean of 4.8, from 4.7 in 2010. These mean figures represent a doubling of the 2005 mean number of lawsuits of 2.2. The percentage of deals that attracted multistate litigation declined slightly to 47.4% in 2011, from 47.6% in 2010.

Disclosure only settlements increase to 84% of all 2011 settlements, compared to approximately 80 percent in 2010.

The authors note that “so far for 2011 average attorneys’ fee awards are down substantially.” The mean plaintiffs’ attorneys fees awarded in all settlements declined in 2011 to $784,000, from $1.255 million in 2010. The mean attorneys’ fee award was smaller in disclosure only settlements, with the 2011 mean disclosure only attorneys fee award of $530,000, down from$710,000 in 2010. The mean fee award for settlements that involved other consideration declined to $1.952 million in 2011, down from $3.284. However the decline in median fee awards for both disclosure settlements and other settlements was much slighter than the decline in the mean. The median 2011 disclosure only settlement fee award was $450,000, compared to $546,000 in 2010, and the median fee award in 2011 for settlements involving other consideration was $1.1 million, compared to $1.25 million in 2010.

Delaware drew a much larger share of M&A-related litigation in 2011. The state attracted 64.3% of all lawsuits involving target companies incorporated in Delaware or with their headquarters in Delaware, compared to 44.1% in 2010. The 2011 rate was “the highest rate in the seven years we have tracked these figures.”

Delaware also seems to be dismissing fewer cases, “thus allowing more cases to be settled.” 85.7% of Delaware cases settled in 2011, compared to 79% of 2010 cases. The authors note that this finding is consistent with the analysis in their earlier paper, noting that “when Delaware loses cases to other jurisdictions it historically has dismissed fewer cases and allowed more to settle, consistent with conduct designed to reattract litigation.”

Consistent with the overall 2011 attorneys’ fee award trends, Delaware awarded lower average fee awards in 2011. The mean 2011 Delaware fee award was $1.051 million, compared to $2.052 in 2010. Delaware did continue to award higher attorneys’ fees than other jurisdictions, as Delaware’s 2011 average of $1.051 million was substantially above the overall 2011 average of $784,000.  

The authors emphasize however that all of the 2011 statistics are preliminary “should be read with caution” particularly given the delay in the availability of some information (particularly with respect to attorneys’ fees). The authors expect to update their information as the year progresses.

Special thanks to Professor Davidoff for providing me with a copy of his latest paper.

A D&O Primer: Readers interesting in a good, basic overview of the D&O insurance policy will want to take a look at the recently published paper “D&O Insurance: A Primer” by Lawrence Trautman and our good friend  Kara Altenbaumer-Price. Their paper can be found here

2011 Securities Litigation Overview: The Haynes & Boone law firm has a February 3, 2012 memo entitled “Securities Litigation Year in Review 2011” (here) which has a detailed overview of 2011 securities litigation developments. The memo has several very interesting sections including a section on extraterritorial litigation; a section on litigation involving auditors; and a section on litigation involving rating agencies.  

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I am still out in the field and on assignment in Palo Alto at the Stanford Law School Directors’ College. The keynote speaker on the first full day of the event was Myron Steele, the Chief Justice of the Delaware Supreme Court. Later in the morning, SEC Enforcement Director Robert Khuzami presented what the conference organizers called a “short shot.” Both speakers’ presentations were thoughtful and interesting.

Chief Justice Steele’s presentation addressed his concern about “the significant intrusion of the federal government into corporate governance.” The problem with the changes that both SOX and Dodd-Frank are bringing about is that the new federal statutory standards were enacted without proper appreciation of the possible “unintended consequences” and without a proper “cost/benefit analysis.”

Steele suggests that the Congress adopted the changes even though they were “missing an analytic basis” for the change. Steele described this approach as “faith-based corporate governance,” because the changes were imposed on “faith that changing the corporate governance will result in better corporate governance.” Rather than basing the changes on empirical proof that a certain practice would produce better governance, the changes were “dictated by the politics of the hour.”

Steele’s position is that “the federal government shouldn’t have a role in corporate governance of state-chartered system.” A state-based approach is preferable, according to Steele, because it allows different companies to choose and it allows experimentation, because what works for some may not work for others.

As examples of the alternatives available at the state level, Steele contrasted the approach of two other states, North Dakota and Nevada, with that of Delaware. The critical distinction, Steele asserted is the legal system that is available in Delaware, which provides “predictability, clarity and consistency.” The Delaware legal system provides reassurance to directors that if they act in the best interests of the corporation, then they won’t have to worry about “some bizarre result.”

Steele said that if he had to describe the Delaware judiciary in two words, they would be “prudence” and “reasonableness” – that is, that the courts would be “prudent” in their review and  the courts would apply a “reasonableness” test in their application of the laws. He said that the test of every judicial doctrine in Delaware comes down to that single word – reasonableness.

In answer to a question from the audience, Steele referred to the conduct of the Airgas board taken during the course of the recent attempt of Air Products for a hostile takeover of the company. After Airgas had first rejected Air Products buy out offer, Air Products had managed to bring about the election of a short slate of new directors to the Airgas Board. The reconstituted Airgas board then took up the question whether the date for the next director election should be accelerated, which theoretically could have allowed Air Products to control a majority of the Airgas board and then to have the Airgas poison pill provision set aside. However, the newly constituted board, included the short slate of Air Products designees, declined the election date change and also continued to reject the Air Products offer.

Steele said that the Airgas board’s performance “renewed his faith and confidence in the boards of publicly traded companies” because the newly elected board members did not come onto the Airgas board as “shills” for the would-be acquirer. Rather, when they took their seat on the Airgas board, they took their duties to Airgas seriously.

Khuzami on the SEC Whistleblower Rules: Robert Khuzami’s presentation essentially amounted to a defense of the approach the SEC took in the recently released Dodd-Frank whistleblower rules. Khuzami began by noting that under Dodd-Frank, the payment of the whistleblower bounties is not discretionary, as the statutory provision “requires” the SEC to pay a reward when a whistleblower’s information results in a fine or penalty meeting the statutory requirements.

Khuzami noted that the Commission received a large volume of comments about the SEC’s proposed rules and that many commentators were concerned that the rules will create incentives such that whistleblowers will report “out” rather than “up,” which could create prevent companies from remediating problems themselves. Although the Commission staff met frequently and discussed these concerns at length, in the end the decision was made not to include a requirement that whistleblowers would have to report their information internally first in order to qualify for the bounty, because such an absolute requirement would be inconsistent with Dodd-Frank itself, as the statute has no requirement that whistleblowers report internally first. The Commission was concerned that requiring internal reporting first might “chill” whistleblowers from coming forward, particularly where the person to whom the whistleblower might have to report the information is involved in the misconduct.

However, the Commission recognizes great value in internal compliance, and therefore adopted an approach that, rather than requiring internal reporting, provides incentives for internally reporting. First the final rules give a whistleblower a “120-day grace period,” within which the whistleblower might first report to the company and have the measurement date for determining whether or not the whistleblower was first to report to the SEC related back to the date of the internal report. Also, if the whistleblower reports to the company and the company accumulates information and then self-reports to the SEC, the whistleblower will get the benefit of the entire package of information reported in order to determine whether or not the other bounty requirements had been met.

Khuzami emphasized that the Commission did not want to undermine internal compliance efforts and processes, so there are certain types of whistleblowers who are disqualified from the bounty, including attorneys and internal compliance offices, as well as those who obtained those who obtained their information in violation of the law.

Khuzami said that the Commission and its staff are going to remain attentive and if what they see requires further changes. As for the Commission’s ability to handle the whistleblower reports, he expressed confidence that the Commission could handle the reports, although he added that he does not expect a “huge flood” of reports.

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In an interesting and provocative June 7, 2011 post on the DealBook blog (here), University of Connecticut Law Professor Steven Davidoff voiced his frustration that public company directors are not held liable more often for problems at their companies. Directors, he says, “have about the same chance of being held liable for the poor management of a public firm as they have of being struck by lightning.”

Davidoff goes on to note that the Delaware courts set “an extraordinarily high standard for finding directors liable for a company’s mismanagement” adding that “a Delaware court is not going to find them liable no matter how stupid their decisions are,” but will only find them liable “if they intentionally acted wrongfully or were so oblivious that it was essentially the same thing.” The bottom line for Davidoff is that while the “upside” for board member is “huge,” their downside is “very limited.” 

I have some thoughts and comments about Davidoff’s column. My purpose is not to dispute his thesis or even necessarily to disagree with him, but rather to try to sharpen the focus of the discussion. My fundamental concern is that I think that there are already many more lawsuits against boards than there are companies engaged in corporate misconduct.

My fear, given the civil litigation resources our society already has deployed, is that more dramatic sanctions against corporate board members could result only in unintended collateral damage rather than greater traction in the fight against corporate misconduct. To me, a demand that all directors must face greater financial consequences in civil litigation is akin to a proposal that we must use more powerful rat poison in the kitchen – it is just as likely that we will wind up killing off the family pets and Grandma as it is that we will eliminate any greater number of rats. To be specific, if we are going to employ more potent means of controlling corporate misconduct, let us take great care to understand what our goals are and make certain the means are well calculated to achieve the intended goal.

Let me just say at the outset that I have nothing but respect for Professor Davidoff. His posts on the Dealbook blog are among the best out there. By raising the questions as I do below, I am merely hoping to consider his assumptions, not to disrespect his work in any way. I also should probably declare my biases at the outset, as well. I have spent most of my career worrying about the interests of corporate directors and officers. There is no doubt that I come at these issues from the perspective of the corporate officials, and with their interests in mind. However, I believe that even if it may the product of a bias, this perspective still affords an important take on these issues.

Davidoff seems very sure that directors are not being held liable often enough. However, it is not clear why he thinks directors should be held liable more often. Upon reflection, I can think of three possible reasons why it might be argued that directors ought to face civil liability more frequently: recompense; retribution; and deterrence. I examine each of these three reasons below and consider whether or not they substantiate the need for directors to face civil liability more frequently.

Recompense: Davidoff addresses the issue of recompense, at least inferentially. After identifying the two Delaware court cases in which directors have been held liable, and reviewing the amounts paid in those two cases, he aggregates the amounts paid and comments, with obvious derision, these payments amount to “no more than $8.35 million in personal payments by directors over the 26 years.”

While the cited figure may indeed represent the total amount that directors have themselves paid during that period in Delaware cases, it is hardly an accurate picture of the total amount of recompense paid to investors or to companies during that period. There have of course been many other cases settled during that period in which the settlement amounts were funded by D&O insurance or other sources.

Davidoff briefly acknowledges the role that D&O insurance plays, by stating that “even if there is a liability or a settlement, it is almost always covered by insurance of directors and officers.” But if the goal is recompense, what difference should it make whether that the funds were provided by insurance? The directors may not have paid these other settlements out of their own assets, but the settlements have provided extensive additional recompense to companies or to investors. Moreover, as I have noted on this blog (most recently here), the frequency of very large cash payments in Delaware cases and other derivative suits has become increasingly common in recent years.

In addition, though Davidoff briefly refers in his column to cases involving potential liability under the federal securities laws, he omits to mention that there have been billions of dollars of recoveries in these cases in recent years. Yes, as Davidoff notes, settlements in those cases rarely include amounts paid personally by directors, but if the goal is recompense (rather than retribution), the source of funds should be irrelevant.  

The omission of any reference to these many other settlements suggests that the real objection may not be that the cases do not produce enough recompense, but that these case resolutions do not produce enough pain for directors, because the funds did not come out of the directors’ pockets. But if the absence of pain is the problem, then the issue seems to be retribution, not recompense.

Retribution: Perhaps I am reading too much into Davidoff’s words, but I do not think I am being unfair in suggesting that behind Davidoff’s words is a belief that directors should face a greater threat of punishment, and specifically that their personal assets ought to be on the line.

In considering whether or not directors should face a greater threat of punishment, I think it is critical to note that in his column Davidoff only refers to civil litigation (specifically, Delaware state court litigation and federal securities litigation). His column does not address, discuss or mention criminal or enforcement actions.

There unquestionably are occasions when retribution against corporate officials may be appropriate. But the proper vehicles for retributive justice are criminal actions and enforcement proceedings, which are the appropriate means for enforcing societal values and imposing punishments.

There is and should be an entirely different discussion whether or not the criminal and enforcement authorities have sufficiently exercised their prosecutorial responsibilities in connection with corporate misconduct. But Davidoff’s column was restricted just to civil litigation. Civil litigation may well serve the goals of recompense (as discussed above) and deterrence (as discussed below), but I would contend that it is not the purpose of civil litigation to serve the goal of retribution, which is the goal of criminal and enforcement procedures.

Deterrence: Which brings us to the question of deterrence. I understand the argument that if directors faced a greater likelihood of being personally liable financially, there would be greater deterrence of corporate misconduct. But before examining this question, I want to make a few points about deterrence as it currently operates.

The problem with most analyses of the deterrent effect of corporate and securities litigation is that it usually assumes that the only effective deterrence is through financial consequences, and it overlooks other possibilities. My own experience is that the threat of civil litigation (as well as the possibility of criminal and enforcement proceedings) provides a powerful deterrent effect, separate and apart from the threat of financial liability.

My experience is that most corporate directors have a deep and abiding aversion to becoming associated with any type of corporate scandal. The prospect of seeing their name in the media paired with the word “fraud” or even “mismanagement” is a truly detestable possibility and one they are deeply committed to trying to avoid. These individuals value their reputations. They are keenly interested in avoiding the types of situations that would draw them into scandal and tarnish their personal or professional standing.

The individual directors are also highly motivated to avoid the burden, disruption and expense of civil litigation. And with regard to expense, I think it is critically important to note that Davidoff’s analysis of how often directors have been required to pay settlements or judgments themselves omits to consider how often directors are compelled to fund their defenses out of their own pockets.

Defending these kinds of suits can be hideously expensive, and if indemnification is unavailable and insurance is inadequate, directors can (and sometimes do) find themselves forced to draw on their own assets to mount their defense. Directors are well aware of these possibilities and they are highly motivated to avoid them.

In short, I believe that even conceding all of the points in Davidoff’s column about the infrequency of personal civil liability for directors, the threat of civil litigation still provides a powerful deterrent to corporate boards.

There are of course boards or individual directors to whom these deterrents are not sufficient. However, there is nothing that says that imposing greater financial liability in civil litigation would deter these undeterrable boards and individuals. Very significant personal liability was imposed on the boards of Enron, WorldCom and Tyco, but I would argue that perhaps other than with respect to the specific individuals involved these individuals’ settlement contributions otherwise had absolutely no measurable deterrent effect.

I can anticipate the argument that three cases alone is not enough, that personal liability must be imposed more generally in more civil cases in order to generate enough deterrent effect. But if personal liability in three cases was not enough, how many will be enough? How do we know? Doesn’t this all seem rather speculative?

My fear is that in the highly charged current environment, the generalized notion that individuals ought to be compelled to pay more out of their personal assets could wind up imposing costs and burdens in ways that far exceed the intended purposes – indeed, without any substantiation that it would even potentially produce the intended benefit. And likely imposing enormous costs on many of the wrong people.

Let me put it another way. The suggestion that individuals ought to be held personally liable is a far more comfortable notion if you are sure that the liability will never be imposed on you personally. It is an easy assertion to make against a group from which you have not only dissociated yourself, but that you have comprehensively demonized. However, you would take a far different perspective if the question involved your own personal assets. Particularly in our litigious society where sensational and even outrageous allegations can be made with impunity and where the high costs of litigation often can compel settlements simply as a way to avoid financial ruin. In these circumstances, the insistence on personal director liability looks to many directors like nothing more than a legally sanctioned predicate for future hostage crises.

I know that in taking this position, I may well be flying in the face of conventional wisdom. My purpose here is to provoke discussion and to make sure that before we move on to what actions we should take, we make sure that we identify our goals and ensure that the actions are well matched to the intended goals. Stronger rat poison undoubtedly will produce many effects, but there is nothing that it ensures that it will result in fewer rats.

My own view is that there are already far too many civil lawsuits against corporate boards, most of them involving circumstances where nothing improper has occurred. The law has evolved in response to the excess of litigation, and that is the reason for the barriers to liability that Davidoff bemoans. A welcome and interesting discussion would be one that addresses the question of how we can develop a more concentrated system of civil litigation, in which meritorious cases are resolved and fewer of the other kind are filed.

More About Delaware: This must have been the week to raise doubts about Delaware’s courts. In her June 9, 2011 “Summary Judgment” column on the Am Law Litigation Daily (here), which included her remarks on the nomination of Delaware Vice Chancellor Leo Strine to take the position of Chancellor of the Court, she commented, among other things, that Delaware is “soft on Corporate America” adding that corporate directors “have little to fear in terms of being held accountable when they do a lousy job and harm a lot of people in the process.” She concluded by calling on Strine to reconsider the words of the courts critics, adding that the Court “can and should send a much stronger message.”

In Case You Missed It: I hope readers had a chance to read the interesting guest post I published late last Friday afternoon (here), in which Bernstein Liebhardt attorney Brian Lehman presents his prediction of the outcome the Janus Capital case now pending before the U.S. Supreme Court. Lehman’s interesting prognosis is worth a look, particularly given that the Court is likely to release its decision in the Janus Capital case any day now.

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