Delaware\u27s Non-Waivable Duties

This Article disputes the view - seemingly settled among scholars, judges, and lawyers - that recently - enacted statutes in Delaware legally permit fiduciary duties to be waived in noncorporate business associations. The argument is a rarity in business law because it is a constitutional argument, not one initially based on policy considerations or statutory interpretation, and it seeks to harmonize judicial review of fiduciary duties in noncorporate businesses with that in Delaware corporations, where waivers are not permitted. Delaware’s Constitution vests the Delaware Court of Chancery with general equity jurisdiction and powers of a kind that cannot be curtailed by legislative action. Consequently, neither the new and much-heralded waiver statutes, nor the private agreements they endorse, have divested Delaware courts of their traditional power and responsibility over fiduciary duties in limited liability companies (LLCs) or partnerships. In addition to raising a serious and unresolved separation-of-powers issue for Delaware, the practical consequences of the argument made here are far-reaching. First, the argument casts substantial doubt on the efficacy of all those provisions in extant partnership and LLC agreements that seek to eliminate fiduciary duties. Second, the argument challenges the judges of the Court of Chancery to reassert their constitutional authority - and responsibility - over this field of jurisprudence and restore time-honored fiduciary duties to the law of unincorporated business associations in Delaware. The judges can exercise their inherent power to articulate fiduciary duties both where private agreements fail to address that subject at all and, where agreements do address the subject of duties ex ante - including agreements with waivers - the judges ex post should apply traditional duties in the manner a particular context may, to achieve commutative justice, equitably require. The key point is that, in every case, that specific determination must be made judicially; it cannot, by the constitutional nature of equity, be made a priori and categorically, either by the General Assembly or private contract or both together. Third, the law of noncorporate business associations in Delaware is, accordingly, far more indeterminate than widely believed and more indeterminate than the law of other states, thereby more closely resembling Delaware corporate law in this regard

Corporate Law Professors as Gatekeepers

None available

Individual and Collective Sovereignty in the Corporate Enterprise (reviewing Frank H. Easterbrook & Daniel R. Fishel, The Economic Structure of Corporate Law (1991) and Robert N. Bellah et al., The Good Society (1991)

Not available

Securities Fraud and the Mirage of Repose

After decades of confusion, in 1991 the Supreme Court articulated a uniform federal limitations period for securities fraud claims grounded on Rule 10b-5. The court further held that the new limitations period was not subject to equitable tolling. This Article argues that the court wrongly conflated into a singular equitable tolling doctrine two historically and normatively distinct bases for tolling a limitations period. Only claims of securities fraud uncomplicated by a later cover-up of the original fraud are free from tolling principles. The limitations period for fraud which is subsequently concealed by an original wrongdoer remains, because of the still viable doctrine of fraudulent concealment, subject to tolling. This result flows from the longstanding normative preference for denying repose to a wrongdoer who camouflages fraud, lest a perverse incentive to engage in a post-transactional cover-up be created. This preference-long-housed in the equitable and common law doctrine of fraudulent concealment-was endorsed by the Supreme Court in several decisions and nowhere was abjured by Congress in enacting the federal securities laws. The Supreme Court\u27s recent decision, not having appreciated the distinctive doctrinal and normative grounds for tolling a limitations period, likewise did not renounce the doctrine of fraudulent concealment. At a more general level, the Article insists that only by respecting the subtleties of legal doctrine-even at a time of skepticism about doctrine\u27s formal qualities-can the nuances of altered normative assessments be maintained

Beyond the Inevitable and Inadequate Regulation of Bankers

None available

Minnesota\u27s Control Share Acquisition Statute and the Need for New Judicial Analysis of State Takeover Legislation

Conventional wisdom holds that corporate takeovers benefit both shareholders and society in general. In examining the constitutionality of state takeover statutes, numerous courts have uncritically adopted this view of takeovers. As a result, they have consistently invalidated state statutes as burdening interstate commerce, both by depriving shareholders of premiums and supposedly impeding an efficient reallocation of resources. This conventional wisdom has been challenged by recent empirical evidence on the adverse efficiency effects of many mergers. In light of this evidence indicating a divergence of investor and other interests in takeovers, Professor Lyman Johnson argues for revised judicial analysis of takeover legislation which will acknowledge a state\u27s interest in determining how to reconcile investor and non-investor claims on the modern corporation

Unsettledness in Delaware Corporate Law: Business Judgment Rule, Corporate Purpose

This Article revisits two fundamental issues in corporate law. One — the central role of the business judgment rule in fiduciary litigation — involves a great deal of seemingly settled law, while the other — is there a mandated corporate purpose — has very little law. Using the emergent question of whether the business judgment rule should be used in analyzing officer and controlling shareholder fiduciary duties, the latter issue having recently been addressed by Chancellor Strine in the widely-heralded MFW decision, this Article proposes a fundamental rethinking of the rule’s analytical preeminence. For a variety of reasons, it is suggested that fiduciary duties should be made more prominent and the business judgment rule should be dramatically deemphasized. The policy rationales for the rule are sound, but they have no relevance for shareholders and introduce needless complexity. For directors, those rationales do not apply in the loyalty setting, and in the care setting, can be achieved by recalling simply that there is no substance to judicial review in that context. As to corporate purpose, the Article advocates that Delaware law permit a pluralistic approach in the for-profit corporate sector. Long agnostic about ultimate corporate objective, Delaware law may have turned unnecessarily toward a strict shareholder primacy focus in the 2010 eBay decision. To bring clarification and to foster flexibility, Professor Johnson recommends a legislative default provision, with an opt-out feature. This feature should be in the business corporation statute itself. Delaware’s new benefit corporation law laudably advances the goal of institutional pluralism, but does so at the ironic risk of reinforcing a belief that business corporations themselves are legally permitted only to maximize profits. Judges in a democratic society should not dictate institutional goals