Emerging Legal Trends
Chief Justice Norman Veasey, senior partner with Weil, Gotshal & Manges LLP, opened up Monday’s session of the conference by discussing emerging legal trends with panelists Chancellor Leo Strine Jr., chancellor of the Delaware Court of Chancery, Randall Baron, partner with Robbins, Geller Rudman & Dowd LLP and Rachelle Silverberg, partner with Wachtell, Lipton, Rosen & Katz. The session focused on the means of avoiding or surviving a shareholder lawsuit against the board. Panelists included tips on how to come out of a lawsuit “looking good.”
Chancellor Strine offered an overview on current legal challenges in the court and offered several ways to survive a lawsuit. The first among Strine’s tips was to understand how the company makes money. He suggested that directors get in trouble when they do not know the fundamental business of the organization and when management sometimes leads the company down a wrong path. Strine suggests establishing governance policies for M&A transactions because, as both Strine and Silverberg stressed, boards will invariably get sued during M&A events and good policies to review and approve the transactions are essential. Strine also recommended the use of advisors, and he and other panelists emphasized the need for good outside advisors to arm directors with the answers to any questions from those challenging a transaction.
Randall Baron gave his best advice for avoiding lawsuits: understand the “motivations for action” of management, other directors, and outside advisors. He provided several examples of boards following the advice of others with questionable motivations, including investment bankers. The lesson to be learned was that directors have to know what management, investment bankers and other board members are getting out of any action.
Rachelle Silverberg shared some tips for defending against lawsuits by highlights several case examples.