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Monday
Mar172008

The Intellectual Justification for a Non-Judicial Temperament

We have been writing about the propensity of Delaware judges to give talks and write articles that set out views and positions on various matters in the corporate governance debate.  Specifically, we have discussed an article (really a speech) written by VC Strine and published in the Journal of Corporation Law by the University of Iowa. 

In that regard, we note the recent article written by the Chief Justice of the Delaware Supreme Court, Myron Steele, "Delaware's Guidance:  Ensuring Equity for the Modern Witenagemot," 2 Virginia Law & Business Review 189 (2007).  The piece is not as colorful as the one written by VC Strine and is less opinionated with respect to the assorted corporate governance issues.  But the article is a full blown justification for the use of speeches and dicta in cases to provide "guidance" to participants in the corporate governance process. 

The purpose of the piece is to respond to scholars who claim that Delaware's dominance in the market for corporate charters is "the result of the indeterminacy of Delaware corporate law."  In other words, uncertainty in the law works to Delaware's advantage.  The challenge, which is made mostly by a small number of academics who are searching for an explanation for the preeminence of Delaware in the race for charters that is other than the obvious pro-management bias of the courts and legislature, apparently struck home.  Much of the article is the Chief Justice's attempt to dispel the "indeterminate" label.

In doing so, the Chief Justice points to "the Delaware judiciary's exhaustive extrajudicial activities to minimize the level of uncertainty in corporate law." In other words, the Chief Justice of the Delaware Supreme Court is aware of and indeed encourages judges to engage in "extrajudicial activities" in an effort to influence the law.  Of course, as the article discusses in detail, the methods used by these judges are not entirely "extrajudicial."  He affirmatively approves of the use of dicta to provide participants with guidance on Delaware legal issues.  He further notes and approves of efforts by Delaware judges to make suggestions to the legislature about appropriate amendments to the corporate code. 

Does the Chief Justice acknowledge any concerns over this type of behavior?  He concedes that "[c]ritics might assert that communications outside the four corners of legal holdings, especially in the form of speeches and articles, risks running afoul of the canons of judicial ethics" but quickly pushes the criticism aside, concluding that a judge is "free to ignore" his or her own secondary writings if they are cited back in a brief.  Instead, he views the behavior in lofty terms.  Judges are embracing the role of "academic thinker," something that "is a relatively recent development of the last two centuries, one which Delaware has embraced to the benefit of its Guidance Function specifically, and to the body of decisions that constitute corporate law more generally." 

There would be plenty of reasons to challenge this approach even if it amounted to little more than judges expounding upon legal issues.  At some level, Chief Justice Steele approves of his judges acting as lobbyists in the corporate governance debate, behavior that is highly political and damages the integrity of the courts.  The approach makes it easer to see the Delaware courts not as neutral jurists but as one more interest group and makes the idea of preemption at the federal level far more palatable.  

But even more so, allowing, indeed encouraging, judges to engage in "extrajudicial activities" can easily result in external statements that go well beyond clarification of legal principles.  The article written by VC Strine is not an exposition of the law but is a discussion of the elements of the corporate governance process that the Vice Chancellor likes and dislikes.  The article is an outgrowth of the policy articulated by the Chief Justice.

In truth, the system of corporate governance that relies on courts with a decidedly pro-management bias who have no qualms at using speeches and dicta to influence the process is antiquated and under attack.  Whether SOX, "say on pay," tougher listing standards or, as will eventually occur, access to the company's proxy statement for shareholder nominees, the center of corporate governance for public companies is and will continue to move away from Delaware.  The "extrajudicial activities" of the judges in that state will only accelerate the process. 

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