Deal makers delivered a verdict on snarky judges at the annual M.&A. jamboree in New Orleans this week. The spectacle of Delaware jurists bashing the clever bromides and superfluous legal rulings of colleagues elicited hoots of delight from the assembled lawyers and bankers. The criticism is on target. To avoid any confusion, courts should stick to the facts and the law.
It’s rare for judges to call out other judges beyond the formal appeals process. Last July, the U.S. Supreme Court sprung leaks about justices ostracizing their chief, John Roberts, for voting to uphold the health care law. In September, Delaware Supreme Court Chief Justice Myron Steele criticized controversial Chancellor Leo Strine for going on a “diatribe†in a recent opinion.
The scarcity of such criticism explains why merger practitioners almost dropped their beignets on Thursday as Delaware judges, past and present, ripped their colleagues. Justice Steele led the way, scolding peers for their colorful but extraneous comments. Every time a judge “opens his mouth in a courtroom, he makes the law,†he said.
It sounded like a thinly veiled poke at Chancellor Strine, but others were subjected to similar treatment. Delaware Supreme Court Justice Randy Holland, for instance, wrote a 2003 opinion barring a company from committing to sell itself despite the possibility of a better offer. Former Judge William Allen on Thursday called it the “worst Delaware opinion†ever, largely because it wandered unnecessarily from established law.
The invective, while entertaining, also makes a useful point. When ordinary legal constraints fall short, judges can use the bully pulpit to right wrongs and guide the behavior of lawyers and their clients. Chancellor Strine is a master of the method, as evidenced by his targeting Wall Street conflicts of interest.
Straying too far, however, can create uncertainty. It’s often tough to know whether a judge is signaling how he will rule in the future or simply popping off. As Mr. Allen pointed out, Justice Holland’s 2003 opinion created widespread confusion over when a merger could actually close.
The topic clearly struck a chord among the gathered professionals who handle the nuts and bolts of putting companies together. As they shuffled out for a session break, laudatory comments rippled across the hall. Of course, their opinion won’t necessarily stand up in court.
Reynolds Holding is a columnist at Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.
