What Might Chancellor Strine's Nomination Mean for Business Law?
On Wednesday, Delaware Governor Jack Markell nominated Leo E. Strine, Jr., the current Chancellor of the Delaware Court of Chancery, to lead the Delaware Supreme Court. If confirmed, Chancellor Strine will succeed Myron T. Steele as Chief Justice of Delaware's highest court. Since more than half of U.S. publicly traded companies, and nearly two-thirds of the Fortune 500, are incorporated under Delaware law, Chancellor Strine's appointment could have far-reaching significance for the future of U.S. business law.
As a member of the Delaware Court of Chancery, Chancellor Strine has strongly supported the authority of directors to manage their corporations using their business judgment, as long as they act in good faith. He has upheld board-adopted bylaws specifying Delaware courts as the exclusive forum for suits involving the corporation's internal affairs. He has also held that, where a controlling stockholder seeks to acquire a subsidiary, the merger should be evaluated under the business judgment rule, rather than an "entire fairness" standard, when the merger is conditioned on approval of an independent special committee and an uncoerced, informed vote of a majority of the minority stockholders. But he has not hesitated to impose heavy penalties when he has found corporate wrongdoing, perhaps most notably in the Southern Peru Copper case, where he awarded $2 billion in damages (including interest) and $300 million in attorneys' fees to the plaintiff.
Chancellor Strine has voiced concern about "the substantial costs of discovery, the burdens to the judicial system, and the drag on economic efficiency that come with excessive litigation." Indeed, this concern has drawn him into clashes with the Delaware Supreme Court over the proper standard for pleading a claim under Delaware law, in which he has criticized the Delaware Supreme Court's "suggest[ion] that 'vague allegations' could 'conceivably' conjure up a state of affairs that, while not supported by pled facts, might support a cause of action." It will be interesting to see how this debate plays out if Chancellor Strine is confirmed to lead the court he has criticized.
Since the Delaware Supreme Court hears a wide range of criminal and civil appeals, Strine would have less day-to-day impact on Delaware business law than he has had as a member of the Court of Chancery, where business cases fill most of the docket. But as the Chief Justice of the Delaware Supreme Court, he would wield more authority to influence the course of business law on fundamental questions.
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