Delaware judge sends warning to zealous lawyers

Corporate lawyers always prefer to hide in the background, putting the spotlight on clients and their game-changing deals. Yet in a trio of recent rulings, a prominent Delaware judge, Vice Chancellor Travis Laster of the Delaware Court of Chancellery, not only burned corporate executives for wrongdoing in mergers and acquisitions that hurt. turned, he focused on the conduct of lawyers. who put the chords together.

Elite law firms were not initially the targets of allegations of misconduct. But the discovery of emails and other documents revealed that an aggressive lawyer was at the heart of the betrayal the judge attributed to their clients.

Most US public companies are legally domiciled in Delaware. Part of the state’s appeal is its sophisticated corporate law, as well as a court system respected for its impartiality in resolving shareholder-company disputes.

But it’s also a small state where the plaintiff and corporate lawyer community, whether in Wilmington or visiting from New York, remains distinguished. Laster’s increasingly harsh words towards members of the bar raised eyebrows and wondered if it was he or the profession that had changed.

Last month, Laster ruled that conglomerate Loews Corporation had short-term public shareholders in a 2018 $ 1.5 billion buyout of its energy pipeline subsidiary, Boardwalk. He found out that Loews owed minority investors $ 690 million.

The keystone of this discovery was the legal opinion of the famous law firm Baker Botts (the “Baker” is Republican political legend James Baker). He issued a notice to Loews saying the 2018 regulatory policy changes were severe enough to hurt the value of Boardwalk’s pipelines, allowing the parent company to exercise a pre-existing repurchase right.

Laster found, based on the evidence in the trial, that Baker Botts’ attorneys came to their conclusion not with objective analysis but in an effort to please their client.

In a 194-page decision, he wrote: “The conduct of Baker Botts supports a finding of bad faith. Baker Botts declined to comment. Loews said in a statement he disagreed with the ruling and would appeal to the Delaware Supreme Court.

In another instance, Laster took aim at another luminary, Gibson Dunn & Crutcher, in a 2020 decision. Gibson had represented Chinese company Anbang in the sale of an American luxury hotel group to Korean company Mirae in 2019. Mirae wanted to withdraw from the deal amid the Covid-19 pandemic as well as the charges she had made against Anbang. has not fulfilled the other closing conditions.

Laster discovered that the title deeds of Anbang hotels were the subject of a fraud that was not disclosed to Mirae in a timely manner by the Chinese company and Gibson Dunn. Later in the ruling, Laster added, “Frankly speaking, they committed fraud over fraud. For several reasons, Mirae was then legally exempted from making the purchase.

In the third case, in 2020, Laster lambasted the law firm Wachtell, Lipton, Rosen & Katz for carrying out a “secret communications campaign” with the public relations group Teneo to defeat a merger agreement signed between the insurer Anthem and Cigna. Wachtell’s client Cigna wanted to retire. Laster ultimately forced Cigna to waive a $ 1.85 billion termination fee after the deal collapsed.

Laster noted in his Boardwalk opinion that Loews’ general counsel “has demonstrated that he knows how to manipulate his outside lawyer into providing the answers he wants to receive.” In the Cigna and Boardwalk cases, several law firms were in the mix, giving a sense of competition over who could step in to achieve the client’s goals.

Lawyer ‘Can-do’ has gone mad, ”said a prominent Delaware lawyer, referring to the professional duty to zealously represent the interests of clients. “Yet you don’t want to be the lawyer who just says ‘no’. You will never get there.

Laster declined to comment on a specific decision, but shared his thoughts with the Financial Times on the rise of aggressive lawyers: “Commercial pressure is one of them. But so does the general polarization of society. There is an ambient negativity in our discourse that has infiltrated professional interactions. Seeing yourself as the client’s champion also plays a major role. The idea that you are acting for someone else can create a sense of moral license that loosens the constraints.

Laster added: “Another piece of the puzzle is the clients that large corporations represent. They have a goal they want to achieve and they want a lawyer to help them achieve it. This is how avocado adds value. The role of the lawyer as a conscience, as a wise counselor, has been underestimated. The role of the lawyer, the facilitator, has been emphasized.

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