Delaware chief justice to retire, leaves mark on U.S. takeover law

[July 09, 2019]  By Tom Hals

WILMINGTON, Del. (Reuters) - Chief Justice of the Delaware Supreme Court Leo Strine will retire in the next few months, Governor John Carney announced on Monday, a leadership change in the court system that decides disputes for more than two-thirds of Fortune 500 companies.

The governor will nominate a replacement, who faces confirmation by the state Senate. A list of potential nominees will be drawn up by a selection committee and given to the governor, a process that usually takes months.

Strine, 55, said in a letter to the governor he was prepared to serve until the end of October so a replacement could be identified, according to Carney.

He did not say why he was retiring or what he planned to do next.

Delaware is one of the smallest U.S. states by land area, but more than two-thirds of Fortune 500 companies incorporate there because of the business expertise of its courts.

As a result, Delaware's judicial system plays a preeminent role in shaping relations between companies and their investors, and the chief justice of the state Supreme Court holds outsize influence.

Strine, who has been chief justice since 2014 and a Delaware judge since 1998, has issued rulings that have sharply reduced shareholder litigation against corporate boards and made it easier for companies to merge without facing investor lawsuits.

"Leo Strine as chief justice has had more influence in a short time on the Supreme Court than probably any chief justice in Delaware, maybe any jurist for the amount of time he has spent on the court," said Stuart Grant, a high-profile shareholder lawyer who retired last year.

RULINGS HAVE PLEASED BOTH SIDES

Strine, who grew up and lives in Hockessin, Delaware, and attended University of Pennsylvania Law School, is not easy to pigeonhole as a jurist, with rulings that have favored both investors and management.

At the time he became chief justice in 2014, shareholder class actions were being filed against almost all merger deals. The business community protested, leading the U.S. Chamber of Commerce in 2015 to question whether Delaware should remain the preferred home for corporate America.

The Chief Justice of Delaware's Supreme Court, Leo Strine, speaks with a reporter in his office in Wilmington, Delaware, U.S., July 2, 2019. REUTERS/Jason Minto

But in a series of rulings, Strine and fellow judges mapped out procedures that would protect mergers from lawsuits and shift the policing of acquisitions away from courts to shareholder votes.

"People should litigate where there's a really a beef," Strine told Reuters in an interview last week. "If you want to not like a deal, vote against it."

Pension funds and mutual funds have gotten the governance they wanted, with independent corporate boards stripped of defenses against takeovers, Strine said.

"Plaintiffs lawyers have been very successful in Delaware," said Strine. "They wanted boards of directors to be open to the M&A market."

Strine gained the attention of Wall Street in 2001 when he prevented Tyson Foods Inc from wiggling out of a deal to buy meat producer IBP Inc. In 2012, Strine blocked the $4.9 billion unsolicited takeover offer for Vulcan Materials Co by Martin Marietta Materials.

In 2011 he awarded around $300 million in fees to plaintiffs' attorneys in a case involving Southern Copper Corp, which worked out to $35,000 an hour.

Strine called it "incentives for real achievement," but some dealmakers considered the ruling a welcome mat to the plaintiffs' bar.

The chief justice has also written decisions that curtailed a hedge fund strategy aimed at squeezing cash from merger deals through a type of litigation known as appraisal.

Strine expressed satisfaction that, in his view, the current deal environment offers a level playing field.

"We have other problems in American corporate governance, but this tired old problem that somehow you can't get treated fairly in a takeover is not one of them," he said.

(Editing By Cynthia Osterman)

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