The Best Corporate Law Judge of His Generation

Twenty some years before Bill Allen was appointed Chancellor of Delaware, Bayless Manning, a fine corporate law scholar, announced the death of corporate law “as a field of intellectual effort.”  Manning described its focus as “our great empty corporation statutes – towering skyscrapers of rusted girders, internally welded together and containing nothing but wind.”[1]  When Bill became Chancellor in 1985, that wind had become a hurricane and the skyscraper was indeed empty.  The standard duality of corporate law – business judgment or entire fairness – simply could not hold up to the storm that hostile takeovers produced.  Management efforts to block a hostile bid were neither an exercise of business judgment nor an occasion of self-dealing.  That same year, the Delaware Supreme Court gave Bill Unocal to deal with it and left the ball in Bill’s court, literally and figuratively: what was proportionality review, and how should the legal and business communities understand what the rules were governing the largest transactions in business history?

The good news was that the governor had made the right choice.  Bill was not only really smart, but he was also a really good judge in an unusual institution that was confronting a very difficult task.  The Chancery Court is a hybrid, both a trial court that resolves disputes and also often in effect a court of last resort whose opinions importantly shape the form of future transactions.  The result under the circumstances was an inevitable tension between the Chancery Court and the Supreme Court.  The acquisition market required the Chancery Court to rewrite the law at warp speed and the Supreme Court, when it jumped back into the game, in important respects disagreed.

Bill’s management of this tension reflected his judicial skill; put differently, he put judgment back in judging.  Bill recognized that Chancery could influence transactional conduct not only through what its opinions held, but also through dicta.  When he thought a transaction’s structure was deficient, he sometimes chose to let the transaction stand, but in dicta offered a lecture on how the transaction could better have been lawyered.  The result was to lever significantly the court’s ability to influence the shape of future transactions.

But there was more.  Working by example, Bill built a culture of scholarship at the Chancery Court that remains in place today.  The Chancellor and the Vice Chancellors wrote ambitious law review articles, typically at a pace that rivaled that of full-time academics.  More important, the Chancery Court scholarship did not duck the hard issues because they might someday come before the court. Among other things, the articles engaged (and sometimes jousted) with leading academics, made clear the best way forward in areas the cases still left open, and were a vehicle to continue the Chancery Court’s disagreements with the Supreme Court.  Just as Bill recognized the power of dicta in shaping future transactions, he also recognized the power of scholarship as a way to  provide  guidance to the business and legal communities when cases before the court did not provide the opportunity.

Bill also wrote with a scimitar, not a broadsword.  Positions were carefully reasoned, reflected a knowledgeable, nuanced, and sometimes skeptical view of the influence of economics that was invading corporate legal scholarship during his time as Chancellor, and a respectful assessment of positions that in the end he did not find persuasive.  Of course, only those with a well-deserved confidence in their talents could pull it off.

Bill was, in my view, the best corporate law judge of his generation. Given the remarkable conditions that prevailed during his  judicial service, when corporate law had to change quickly in response to a rapidly changing capital market – think just of hostile takeovers and leveraged buyouts – and the fact that two groups of very talented people each thought, simultaneously, that it was the best or the worst of times, measuring Bill’s contribution by reference to only a single generation is a significant understatement.  I am comfortable with that understatement because I believe Bill would have been uncomfortable with anything more grand, however accurate.

ENDNOTE

[1] Bayless Manning, The Shareholder’s Appraisal Remedy: An Essay for Frank Coker, 72 Yale L.J. 223 (1962).

Ronald J. Gilson is the Marc and Eva Stern Professor of Law and Business at Columbia Law School and the Meyers Professor of Law and Business emeritus at Stanford Law School.

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