Disney Prescience or Stomach Virus?

I have been flat on my back and sicker than a dog for 36 hours. I thought it was a stomach virus. It seems that it might have instead been a sense of impending doom. The Disney opinion came out tonight. The link is:

http://courts.delaware.gov/opinions/(feyliwan32li1i55zzlkgaew)/download.aspx?ID=77400.

I do not have the energy in me to do a fancy blue shortened hyperlink. I have to save my meager energy to rage about blasphemous statements such as “a plaintiff who fails to rebut the business judgment rule presumptions is not entitled to any remedy unless the transaction constitutes waste.”

And the specific discussion on good faith doesn’t get any better. After making that odd statement about the BJR, the court criticizes the appellants’ assertion that “directors violate their duty of good faith if they are making material decisions without adequate information and without adequate deliberation.” Hello pot? This is the kettle, you are black. If we want to compare “unjustifiable statements that might make sense,” I have to believe that the appellants win in this situation. Is the Delaware Supreme Court really trying to say that “making material decisions without adequate information and without adequate deliberation” *ARE* acts of good faith?

Read that again:

Based on the Delaware Supreme Court’s critique on page 63 of the Slip Op. of the appellants’ assertion that “directors violate their duty of good faith if they are making material decisions without adequate information and without adequate deliberation,” am I to believe that the good court is saying that such decisions *are* acts in good faith? Colleagues, we know that good faith means, roughly, acting in the best interests of the corporation. How can acts “without adequate information and without adequate deliberation” be acts “in the best interests of the corporation?”

I am so disappointed, but I am not shocked. As could be expected, the Delaware Supreme Court implicitly concedes to bastardizing the phrase “not in good faith” to mean “bad faith.” For those who missed it the first few times I made the argument, I maintain that “not in good faith” (as it appears in the BJR or in DGCL 102(b)(7)) covers ABDICATION of duty. Apparently this version of the Delaware Supreme Court has abandoned their previously held opinion that good faith is an affirmative obligation, requiring action in the best interest of the shareholders. Instead, it seems that the 2006 Delaware Supreme Court is of the view that “bad faith” is a good shorthand for the absence of affirmative action in the shareholders’ best interest. Kind of like a McDonald’s hamburger is a good shorthand for “a steak from Peter Luger’s.”

I need to go rest – I cannot tell if I am still feeling my stomach virus or I am just physically put off by 89 pages of words that bode ill for the American investor. I have much respect for Justice Jacobs, the author of the opinion, Chief Judge Steele, and Justices Berger, Holland, and Ridgely, but I have to sadly admit that I am of the view that they failed to produce the best, most-justified, most solidly-reasoned and strongly principled opinion possible. I will post my specific objections later.

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