Abstract

http://ssrn.com/abstract=1254648
 
 

Footnotes (236)



 


 



How to Prevent Hard Cases from Making Bad Law: Bear Stearns, Delaware and the Strategic Use of Comity


Marcel Kahan


New York University School of Law; European Corporate Governance Institute

Edward B. Rock


University of Pennsylvania Law School


Emory Law Journal, Vol. 58, p. 713, 2009
U of Penn, Inst for Law & Econ Research Paper No. 08-17
NYU Law and Economics Research Paper No. 08-40

Abstract:     
The Bear Stearns/JP Morgan Chase merger placed Delaware between a rock and a hard place. On the one hand, the deal's unprecedented deal protection measures - especially the 39.5% share exchange agreement - were probably invalid under current Delaware doctrine because they rendered the Bear Stearns shareholders' approval rights entirely illusory. On the other hand, if a Delaware court were to enjoin a deal pushed by the Federal Reserve and the Treasury and arguably necessary to prevent a collapse of the international financial system, it would invite just the sort of federal intervention that would undermine Delaware's role as the de facto provider of U.S. corporate law.

Faced with a choice between undermining the delicate and subtle balance struck between managers and shareholders and standing in the way of the imperatives of national and international economic policy, Delaware found a third way that avoided both horns of the dilemma: it took advantage of a pending New York action to stay the Delaware action and avoid making any decision at all. In this article, we tell this story, analyzing the doctrinal issues under Delaware corporate and procedural law, and discussing the implications of this episode for our understanding of the landscape of US corporate law making.

Number of Pages in PDF File: 49

Keywords: corporate takeovers, Federal Reserve, Treasury Department, intervention, deal protection measures, Delaware courts, corporations, Delaware corporate and procedural law, conflict of laws, financial collapse, mergers and acquisitions, corporate charter competition

JEL Classification: G15, G18, G21, G28, G34, K22

working papers series





Download This Paper

Date posted: August 27, 2008 ; Last revised: April 4, 2009

Suggested Citation

Kahan, Marcel and Rock, Edward B., How to Prevent Hard Cases from Making Bad Law: Bear Stearns, Delaware and the Strategic Use of Comity. Emory Law Journal, Vol. 58, p. 713, 2009; U of Penn, Inst for Law & Econ Research Paper No. 08-17; NYU Law and Economics Research Paper No. 08-40. Available at SSRN: http://ssrn.com/abstract=1254648 or http://dx.doi.org/10.2139/ssrn.1254648

Contact Information

Marcel Kahan
New York University School of Law ( email )
40 Washington Square South
New York, NY 10012-1099
United States
212-998-6268 (Phone)
212-995-4341 (Fax)
European Corporate Governance Institute ( email )
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
Edward B. Rock (Contact Author)
University of Pennsylvania Law School ( email )
3501 Sansom Street
Philadelphia, PA 19104
United States
215-898-8631 (Phone)
215-573-2025 (Fax)
Feedback to SSRN


Paper statistics
Abstract Views: 3,113
Downloads: 520
Download Rank: 29,727
Footnotes:  236

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo1 in 0.375 seconds