The Consequences of the Delaware Guidance Function

There recently was a bit of an unexpected exchange between the Delaware Supreme Court and the Chancery Court over the use of dictum in an opinion.  The Delaware Surpreme Court chastized the trial court for using dicta in Gatz v. Auriga.  

As we noted, the criticism came despite an article written by the Chief Justice encouraging judges to do exactly that as part of what he characterized as the Delaware guidance function.  See Myron Steele & J.W. Verret, "Delaware's Guidance:  Ensuring Equity for the Modern Witenagemot," 2 Virginia Law & Business Review 189 (2007) ("The Delaware courts recognize the need to wait for a live controversy to resolve an issue definitively, but fortunately they also recognize that this does not mean that they cannot, or should not, use the attention paid to a published opinion to offer guidance on uncertain but vital areas of corporate law."). 

In Gatz, the Supreme Court instructed the lower court to stay away from dicta.  The Court did not, however, back away from the guidance function.  Instead, the trial court was encouraged to use other avenues such as speeches and law review articles.  See Gatz v. Auriga ("To the extent Delaware judges wish to stray beyond those issues and, without making any definitive pronouncements, ruminate on what the proper direction of Delaware law should be, there are appropriate platforms, such as law review articles, the classroom, continuing legal education presentations, and keynote speeches."). 

The latest salvo in the debate was fired by another jurist in the Chancery Court.  In Feeley v. Nhaocg LLC, the Vice Chancellor considered the disavowed dicta from Gatz.  The trial court noted that the language was "dictum without any precedential value."  Nonetheless, he opted to give the language "the same weight as a law review article, a form of authority the Delaware Supreme Court often cites." 

The approach suggests several things.  First, to the extent dicta is used in an opinion in a manner the Supreme Court finds inappropriate, trial courts may nonetheless cite it and use it in their analysis.  They will not give it precedential weight, but it will be a source that can assist in determining the analysis. In other words, there are no real limits on the use of dicta by the Delaware courts. 

Second, the Supreme Court's concern was not over the right of Chancellors or Vice Chancellors to speak on an issue that might come up in their courts but, apparently, over the precedential value attached to a decision.  See Gatz ("It is axiomatic, and we recognize, that once a trial judge decides an issue, other trial judges on that court are entitled to rely on that decision as stare decisis.").  Thus, a jurist can say the same thing but only in a law review article that has no precedential value. The Vice Chancellor in Feely handled the concern by disavowing the precedential value of the dicta in Gatz.  

Third, Feeley gave the dicta "the same weight" as a law review article.  It showed that law review articles written by other jurists on the Delaware bench can be a source of persuasive reasoning.  See Feeley (the "explanation of the rationale for imposing default fiduciary duties remains persuasive").