Last night, we discussed the In re Oracle Derivative Litigation, 824 A.2d 917 (Del. Ch. 2003), in Corporations.
We read the case at an early summary judgment phase. It was interesting in that it dealt with how a company may assess the actions of its own directors and officers in the context of insider trading claims brought by shareholders in a derivative action. Companies may, as a last resort, establish Special Litigating Committees composed of uninterested directors and others to assess the merits of a claim made against a company’s officers or directors. In many cases these SLCs can terminate the litigation where they deem it is not in the best interests of the company.
Plaintiffs challenged the independence of the SLC members. Here, Oracle’s SLC said that its members were independent because they were not under the “domination and control” of the officers who had been charged with insider trading, suggesting that because the members were not directly benefiting financially from the defendants, they were still independent. The court doesn’t buy this as a primary motivator of human actions and judgment and lays this gem of a quote on us:
Delaware law should not be based on a reductionist view of human nature that simplifies human motivations on the lines of the least sophisticated notions of the law and economics movement. Homo sapiens is not merely homo economicus. We may be thankful that an array of other motivations exist that influence human behavior; not all are any better than reed or avarice, think of envy, to name just one. But also think of motives like love, friendship, and collegiality, think of those among us who direct their behavior as best they can on a guiding creed or set of moral values.
The court in this opinion goes on to rule that the members of the SLC could not possibly have been independent, but you can read all about it at the link above. Ultimately, the case is dismissed for want of evidence that the defendants possessed any insider information.
No related posts.
Something tells me that one of the primary motivations to become a judge is to write opinions like this.
Insanity! Nonsense! Doesn’t this judge know that that the Economic Laws are the equal to the Laws of Physics! “Markets” are the same as gravity! We must . . .
Whoops! I was just reading off a Club for Growth cocktail napkin. My mistake.
idwsj-
that’s the why i would want to be a judge. opining to a captive audience? priceless!
Ahh, it’s so liberating to be reminded that I am more than just a rational, economically self-interested and motivated being.
You, Magnus? I’m not sure . . .