Page 20 - Delaware Lawyer - Issue 3 - 2024

FEATURE | DRIVE-THROUGH CRITIC
JASON MINTO
of a particular case. It is not something
that an economist can reduce to a for-
mula and graph. So while some level of
uncertainty might exist, characterizing
good faith as a connivance to attract
litigation is unjustified.
Equally important, the concept of
good faith operates within a larger
system of standards of review that
balance society’s interest in policing
misconduct against limited judicial re-
sources and the inevitable errors that
result from trying to read minds. The
business judgment rule and the asso-
ciated deference for director decision-
making is only the default standard of
review. If directors face a decision that
involves actual self-interest, like set-
ting their own compensation, then the
directors must prove that the trans-
action is fair to stockholders. And if
directors face a decision that involves
indirect conflicts of interest, such
as voting on a merger proposal that
could cost them their jobs, then the
directors must show that they acted
reasonably.
These are not only problems for
corporate law. Similar questions arise in
criminal law (did the accused act with
criminal intent?), tort law (did the de-
fendant intentionally hit the victim or
was it an unpreventable accident?) and
constitutional law (did the legislators
have a compelling justification for in-
terfering with a protected right?). The
outcomes in Delaware cases reflect re-
ality, which is messy. Fallible humans
should welcome debates over whether
a legal system operates effectively. Only
authoritarian states claim invariably to
reach the right result.18
Weitzman also criticizes what he
regards as the outsized role of indi-
vidual Chancery judges, who he claims
“clearly bring their own perspective to
cases.”19 As support, he cites the Gatz
case, where the Delaware Supreme
Court chastised the trial judge for us-
ing dictum to express his personal views
about fiduciary duties.20 But Weitzman
stops his account too soon. Weeks later,
another trial judge followed the first
judge’s reasoning in a case that squarely
18 DELAWARE LAWYER ISSUE 3 2024
presented the issue. And several months
later, the Delaware General Assembly
codified both trial court rulings.21 The
real story is not about trial judges ex-
pressing personal opinions, but a dy-
namic system of checks and balances.
Weitzman misses the bigger story.
II. What’s the Matter with
Everything?
It’s easy enough for a Delaware
lawyer writing in a publication called
Delaware Lawyer to argue that some-
one else’s characterization of Delaware
law is flawed. That’s what we do here!
But Weitzman has a bigger problem:
His categorical suspicion of Delaware
obscures broader accounts of political
economy that have greater explana-
tory power but lack Delaware-specific
causes. Many features of Delaware that
Weitzman targets are local manifesta-
tions of national and global trends. By
missing the big picture, Weitzman’s
account falls short.
A. Delaware’s Shifting Jobs Mix
Weitzman mourns the shift in Dela-
ware’s job mix away from manufactur-
ing and towards services. According to
Weitzman, Delaware prioritized its pur-
suit of corporate charters, rather than
protecting its manufacturing base.22
But that shift reflected a national
trend caused by global changes. The
1970s saw the United States and other
leading economic powers replace the
Bretton Woods system that facilitated
trade through capital controls with
a new vision of free trade and unre-
strained capital mobility. Manufacturers
moved to lower-cost jurisdictions,
strengthening the financial economy at
the expense of the real economy in de-
veloped nations.23 Deregulatory trends
during the 1980s accelerated the hol-
lowing out of America’s industrial base.
Banking deregulation in the 1990s and
accommodative monetary policy fur-
ther empowered capital at the expense