Corporate Governance

Of Pilgrims and Puritans and the Role of Delaware Courts: In re Revlon (The Concerns)

By J Robert Brown Jr.

VC Laster has a number of concerns with plaintiffs' counsel in this case.   There were two problems that ran through the opinion.  First, he viewed the case as not having been adequately prosecuted.  As he writes:

• I find that Old Counsel has not provided adequate representation in this case.   After the initial skirmish over consolidation and lead counsel status, Old Counsel fell blithely into Cox Communications mode. They literally did nothing. To put the best spin on it, Old Counsel seemingly recognized that they filed their complaints prematurely and that the consolidated case was subject to a motion to dismiss. I infer that the defendants did not challenge the premature litigation because they wanted the case to stay alive to support a settlement. Everyone knew their parts.

He also viewed the case as having unique warning bells that ought to have induced greater activity from counsel.

• But at some point, Old Counsel should have woken up and conducted a meaningful assessment of their claims. This was a case in which the financial advisor to the Special Committee refused to render a fairness opinion on the same Series A Preferred that, with one change, would be offered in the Exchange Offer. This was a case where the Special Committee declined to recommend the Original Merger. This was a case where the Schedule TO indicated that counsel to MacAndrews & Forbes and counsel to the Special Committee then cooked up the Exchange Offer as an alternative.

Second, he raised concerns about whether counsel incorrectly described their efforts in the MOU.  Id.  at 15 ("Unfortunately, the MOU contains a number of recitations that appear, at best, to exaggerate the contributions of Old Counsel."). 

Apparently in defending themselves, counsel didn't score points with VC Laster.  He describes counsel as having made "hyperbolic representations" and having "approached the concept of candor to the tribunal as if attempting to sell me a used car." 

VC Laster opted in these circumstances to replace counsel.  We will discuss the selection of replacements in a subsequent post.

Primary materials are, as usual, posted on the DU Corporate Governance website.

Full post as published by The Race to the Bottom on April 29, 2010 (boomark / email).