Updating Corporations Book
My co-editor, Linda Smiddy (Vermont), and I are finishing a 135-page 2009 supplement to our casebook, Corporations and Other Business Organizations. This is the first supplement we’ve done since the current 2006 edition, when I joined the book.
We prepared the supplement with a view towards our next edition, due out in 2010. A lot has happened in this field in those few years and it is a wonderful exercise to bring it all together.
For those teaching Corporations and/or Business Organizations, Linda and are drafting the following letter highlighting what’s new. We are writing it put to let those who use our book, or who might do so, know what they can expect in the supplement and next edition.
I’m posting the draft here for the same purpose, and to invite suggestions from current or prospective users of the book on how we can make it more useful. We want to preserve the enormous value put into it by our predecessor editors, the late Larry Soderquist and the late Al Sommer, as well as Pat Chew, while giving it a fresh, thoughtful and still practical utility.
Chapter 1, Agency Principles, boasts extensive new materials. Agency law materials are now primarily based on the new Restatement (Third) of Agency. The supplement provides fresh authors’ notes on implied authority, inherent agency power, and fiduciary obligations. To reflect these new developments in agency law, the supplement revises our approach to Koval & Koval and also includes three new cases from various jurisdictions around the country, on ratification, vicarious liability in tort and the duty of loyalty (Daynard v. Ness, Motley et al.; Papa John’s Int’l v. McCoy; and Huong Que, Inc. v. Luu).
Chapter 3, Incorporation, now includes a great case on the internal affairs doctrine, the Delaware Supreme Court’s 2005 opinion in VantagePoint Venture Partners. This provides a valuable statement of this fundamental doctrine in an accessible way suitable for early stages of the course.
Chapter 6, Corporate Authority, includes an up-to-date (2006) Delaware case on shareholder inspection rights, Seinfeld v. Verizon, focusing on the question of executive compensation in a likewise relatively early stage of the course. This is a much fresher and more modern opinion for contemporary students to appreciate than the vintage but dated (1971) Pillsbury v. Honeywell, which we propose to delete. Chapter 6 also boasts new authors’ notes on several hot topics: electronic meetings, director elections, digital organizations, and–most dynamic and subject to ongoing change and debate–shareholder access to the ballot for director elections.
Chapter 7, Distributing Corporate Control, adds a very interesting 2006 Massachusetts opinion updating the traditional problems seen in the classic Donahue v. Rodd Electrotype. The case, Brodie v. Johnson, explores remedies for minority shareholder freeze-outs, reversing a lower court decision awarding a buy-out as erroneously putting the aggrieved shareholder in a better position than she reasonably expected. This Chapter also features new authors’ notes updating the law concerning dissolution proceedings and perspectives on contractual control in close corporations.
In Chapter 9, Dividends, we are prepared to retire the old chestnut Randall v. Bailey (1940) as it now appears to be aging poorly–especially for our contemporary students it seems. We have found an excellent replacement in Delaware’s 1997 Klang v. Smith’s Food & Drug Centers case. It is much easier to teach and students find it much easier to learn from.
For Chapter 10, Duty of Care, we note a couple of modest points by including reference to Delaware’s 2009 Gantler v. Stephens decision concerning fiduciary duties of officers–particularly the open issue of whether the business judgment rule applies–and make a cross-reference to Chapter 11 after Caremark as to its enduring status.
Chapter 11, Duty of Loyalty, is considerably enriched by a half dozen new cases and related notes. We think Delaware’s 2006 Benihana opinion is an excellent way to teach the duty of loyalty at this stage and accompany it with what we hope is a clear summary of the law governing interested director transactions across the country. Certainly, as we propose, eliminating the excerpt from Wheelabrator in favor of these materials will make for markedly improved teaching and learning. In addition, we pair up Delaware’s forays into the concept of good faith by presenting a (intensely edited) Disney opinion adjacent to Stone v. Ritter and follow these with three Delaware Chancery Court opinions on executive compensation, including stock options (the Tyson Foods cases and Ryan v. Gifford), to round out the Chapter, along with a brief note on this hot topic of public policy.
Chapter 12, Controlling Shareholders, is supplemented by the very interesting case, although dating to 2001, of Glassman v. Unocal Exploration, for how it advances student knowledge concerning the ease of effectuating short-form mergers under the applicable statutes.
Chapter 13, Changes in Control, is supplemented by both a note on statutory authorization of “force-the-vote” provisions following Caremark plus the very interesting and recent case, Delaware’s 2009 Lyondell Chemical v. Ryan opinion, clarifying some of the perceived mystery about good faith emanating from cases like Disney and Stone and also exploring a contemporary engagement with old favorites like Revlon.
Chapter 17, Proxy Regulation, amplifies the ballot access debate supplemented earlier in Chapter 6 by including the Second Circuit’s prominent 2006 opinion in AFSCME v. AIG. Although debate over ballot access and current SEC rulemaking may tend to render some of the case moot, it remains pedagogically and legally valuable on the history, purpose, and structure of the SEC’s shareholder proposal rule and there may be ongoing debate about the federal-state interface concerning proxy access that keeps the case’s utility strong.
Chapter 19, Insider Trading and Other Securities Fraud, is freshened with the Supreme Court’s opinion in Dura Pharmaceuticals, a case on loss causation that readily displaces the current edition’s Stransky v. Cummins Engine.