Litigation

Delaware Fiduciary Duties and the Bear Stearns Imbroglio

By Francis G. X. Pileggi, Esq.

Prof. Gordon Smith comments here on the "fire sale"(?) at $2 per share of Bear Stearns on Sunday night to JP Morgan, with apparent pressure from the U.S. Treasury Department and the Federal Reserve Bank [despite statements days earlier that the value of the stock was much, much higher], and the application to the situation of Delaware corporate law. For example, did the Bear Stearns board of directors meet their Revlon duties to get the highest price? Also, if they were insolvent, did the directors fulfill their duties to creditors (some observers said that the only other option was bankruptcy). The good professor cites to a Delaware Chancery Court case that applied the Business Judgement Rule  to an apparently similar situation where a board was forced to choose between bankruptcy or another unpalatable option. See Odyssey Partners, L.P. v. Fleming Companies, Inc., 735 A.2d 386 (Del. Ch. 1999).

Prof. Larry Ribstein also comments on the situation here, citing to his prior writings on the issues.

Kevin LaCroix comments here on the inevitable lawsuits that have already been filed v. Bear Stearns.

Full post as published by Delaware Corporate and Commercial Litigation Blog on March 18, 2008 (boomark / email).