Delaware Chancellor Clarifies Standards in Lead Counsel Selection Process
By Alison Frankel
November 02, 2009
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Halloween put Delaware Chancellor William Chandler III of Delaware Chancery Court in a playful mood in an October 28 letter opinion denying a motion to reconsider his choice of lead counsel in a shareholder class action challenging the merger of Dress Barn and Tween Brands. One of the arguments for rehearing made by the firm Chandler didn't pick--Rigrodsky & Long--was that the chancellor erroneously relied on his mistaken impression that the designated lead plaintiffs had agreed to work together. "This assertion is simply false," Chandler wrote, adding in a footnote, "This court appreciates holiday festiveness and cheer, but even at this time of year, it is best not to dress up or disguise a court's legal reasoning." [Hat tip to the Delaware Corporate and Commercial Litigation Blog.]In a ruling that provides a helpful summary of the criteria for lead counsel in Delaware class actions, Chandler analyzed Rigrodsky & Long's four arguments for why he shouldn't have chosen Levi & Korsinsky as lead counsel, and methodically dismissed all of them. In addition to asserting that Chandler mistakenly believed the Levi firm's clients would cooperate with one another, Rigrodsky alleged that its complaint was better pled and its client had suffered greater economic harm. It also argued that because Levi & Korsinsky had filed a complaint in Ohio before filing in Delaware, Chandler's selection of the firm as lead counsel "will encourage certain plaintiffs who routinely file elsewhere to game the system and seek a second bite at the apple when they are shut out in a competing jurisdiction."
Though the chancellor had his tongue in his cheek when disposing of some of Rigrodsky's assertions, he wasn't all fun and games. "Despite [Rigrodsky & Long's] assertion to the contrary, what I am doing is examining, applying, and upholding Delaware law," he wrote. "Our precedent clearly holds that the court should consider several factors when deciding which plaintiff the court will appoint as lead plaintiff. In [the ruling naming Levi & Korsinsky lead counsel], I listed these criteria and applied them to the facts of this case. For several of the factors, the race between potential lead plaintiffs was too close to call. But in no way do such close races mean the plaintiffs never even had the opportunity to lace up their shoes."
We left messages with Seth Rigrodsky and Brian Long but didn't hear back.
