Corporate Governance

Changing the Guard in the Delaware Chancery Court

By J. Robert Brown

Vice Chancellor Lamb has opted to step down from the Chancery Court.  Francis Pileggi at the Delaware Corporate and Commercial Litigation Blog has listed the seven folks who have apparently applied for the position.  They include:

Richard Forsten
Joel Friedlander
Judge Mary Johnston
Richard Kiger
Theodore "Ted" Kittila
Travis Laster
Bruce Silverstein

The number will apparently be narrowed to three and sent to the governor for the final appointment. 

We have been highly critical of the lack of diversity on the Delaware Chancery and Supreme Court, noting that there is only one woman and, more importantly, that the jurists tend to have the same experiential background, with most coming from corporate law firms. 

The pool will likely continue much of this practice.  It contains only one woman.  There are no people of color.  The only place where there is some diversity is in the legal background of the candidates.  Most, as usual, have a corporate law firm background.  Even Judge Johnston was a partner at Morris James, a pro-defense firm.  

For all of our criticism of the bench, it is certainly one stacked with powerful intellects.  Vice Chancellor Lamb will be big shoes to fill. 

Among the nominees likely to advance, Travis Laster will probably be one of them and may even be the current frontrunner.  He is from Abrams & Laster LLP, a firm with a more balanced reputation in the corporate litigation area.  His firm has represented a number of institutions on the plaintiff side and apparently done quite well (see the fee discussion in Loral Space & Communs., Inc. v. Highland Crusader, 2009 Del. LEXIS 384(Del. July 23, 2009) where the firm received a $10 million fee).  Of course, the appointment is to a person and not a firm.  Laster came out of Richards Layton, a pro-management firm.  Moreover, his political leanings (based on contribution records) are apparently conservative. 

Likewise, Joel Friedlander has a good chance of making the cut.  His firm, while mostly on the defense side (representing, for example, Disney in the Ovitz matter, see Brehm v. Eisner, 906 A.2d 27 (Del. 2006)), has also done some plaintiff's work. See In re Countrywide Corp. S'holders Litig., 2009 Del. Ch. LEXIS 44 (Del. Ch. March 2009).  Moreover, he has had the temerity to criticize some doctrines emanating from the Delaware courts.  See Joel Edan Friedlander, Overturn Time-Warner Three Different Ways, Del. Law., Spring 2008.  Friedlander joined his firm after working at Skadden, the same firm by the way that employed Vice Chancellor Lamb before he joined the bench.  His political contributions?  We found one to Guiliani. 

Both men have been described as smart, with one Delaware lawyer using the word brilliant.  They are both Delaware insiders, knowledgeable about the bar and the bench.   

So what is likely to happen?

For Delaware, the dark horse is Judge Johnston.  The governor would be able to add diversity to a court that is sorely lacking in that area.  On the other hand, while untested judicially in the corporate governance area, her background before joining the bench is similar to the others on the Chancery Court.  

Of course, the main check on any jurist willing to take a more pro-shareholder perspective is the threat of reversal by the Supreme Court.  In short, the selection could benefit shareholders on the margin but likely have no profound impact on the pro-management nature of the judiciary in Delaware. 

Full post as published by The Race to the Bottom on August 11, 2009 (boomark / email).