Next week marks the return of the annual Ruby R. Vale corporate moot competition. We obviously hope that the event provides a worthwhile educational experience for the competitors, who hail from 22 law schools throughout the country. But there’s also a little bit of guilty pleasure on my part in watching the final oral arguments, with members of the Delaware Supreme Court and Court of Chancery presiding. It’s a chance to tease out their reactions to knotty legal issues that my colleague Paul Regan or I gin up every year. Next week’s all-star cast of good sports includes Justices Jack Jacobs and Henry Ridgely, Vice Chancellors John Noble and Sam Glasscock, and our distinguished visitor Richard Climan, of Dewey & LeBoeuf in Palo Alto. Along the way to the finals, competitors will encounter daunting questioning from a bevy of Delaware corporate practitioners and academics, including me and my fellow semi-finals judges, former Chief Justice E. Norman Veasey and senior Skadden partner Edward Welch.
This year’s problem (available here) raises an issue I trot out periodically in my business organizations class. We all know at least two things about Delaware corporate law: (1) it’s designed to be flexible and to accommodate a broad range of departures from default legal rules, especially when those departures are specified in the certificate of incorporation; and (2) directors’ fiduciary duties require them to obtain the highest current value reasonably available when the company is sold. What happens when these two principles collide? Specifically, can a charter provision validly require directors to consider nonstockholder interests, and even explicitly permit them to accept a lower takeover bid based on such consideration? Put more succinctly, is Revlon’s key holding a mandatory aspect of Delaware corporate law?
This year’s competition also raises another issue – whether the Delaware Supreme Court’s 2003 ruling in Omnicare should be overruled, particularly in light of subsequent cases limiting its reach and recognizing the validity of mergers approved by rapid written consent by controlling stockholders.
Unfortunately, the only ruling that comes out of the final oral argument is which team wins. But it’s fun to hear the judges kick around the issues. Got an issue you’d like to see mooted next year? Write to Regan – it’s his turn to write the problem next year.