Delaware Supreme Court Justice Jack B. Jacobs ()
Editor’s note: This is part one of an interview with retired Justice Jack B. Jacobs.
Delaware Supreme Court Justice Jack B. Jacobs has finished nearly three decades on the bench, including 18 years as a vice chancellor on the Delaware Court of Chancery. In an interview with Delaware Law Weekly sibling publication Delaware Business Court Insider, he reflected upon the challenges facing the Supreme Court in the corporate law arena.
Q: You were appointed to the Delaware Court of Chancery in 1985 during the height of the M&A litigation mania. How exciting was it to be on the court during such a pivotal time in its history?
A:It was terribly exciting. By sheer happenstance, I had the rare privilege to be at the center of the action and play a role in the fast-moving litigation that no one would have predicted 10 years earlier. Because of the rapidity of the development of that body of law, that era was also one of the most challenging eras for judges and lawyers in the history of modern American corporation law.
Q: How has the Delaware General Corporation Law changed during your 29-year tenure on the bench?
A:There have been many changes. First, there was the development of intermediate standards of review that address hostile takeover defenses. Second, there has been further development of what I call the conventional, pre-1985 standards of review—business judgment rule and entire fairness—both in terms of their content and their proper application. Those developments still continue to occur. Two recent examples are the 2006 Disney case [In re The Walt Disney Co. Derivative Litigation] and [In re MFW Shareholders Litigation], the latter having been decided only last year.
Q: What do you view as your most significant opinion on either court?
A: That’s a difficult question because I’ve authored a lot of opinions in many different areas of law over the last 29 years. Although I wish I could give you a straight direct answer, but I think, in all candor, that question is one better answered by other people.
Q: When you came to the Supreme Court, you had an extensive corporate law background. First you were a litigator at Young Conaway Stargatt & Taylor and then you were a Chancery Court vice chancellor. How big of an adjustment was it for you to suddenly be faced with criminal and civil cases?
A: There were two major adjustments. As a Chancery Court judge, I decided the case, right or wrong, and that decision had the force of law unless and until it was overturned. There was no need to consult with any other judge, although I often did. As an appellate judge I cannot decide anything by myself. It takes at least three votes to decide a case.
When I was appointed, I had not sharpened the skills of persuading other justices to accept my point of view. Those skills I quickly had to develop. Our Supreme Court values collegiality and, whenever possible, unanimous decisions. The court has five members and so it is expected that my colleagues would have differing points of view on a particular issue, but we all need to accommodate so that the final opinion represents the view of the entire court and not some fraction of its members.
I had no family law or criminal law practice experience when I joined the court. Obviously, I had a lot of catching up to do. Fortunately, I had colleagues in those areas who were willing to educate me. The reality is that whoever is appointed to the court will not be an expert in all subject areas that the Supreme Court is called upon to decide.
Q: What can judges do to prevent shareholder lawsuits from further exploding without giving boards carte blanche to operate without any checks and balances?
A: There is no one answer to that question. The landscape at this moment may be thought of as an experimental laboratory where many different approaches are being attempted. One of those is the exclusive forum bylaw. Another is the refinement of forum non conveniens law. A third consists of efforts of judges in the different forum courts to communicate with one another, with the consent of the parties, in order to coordinate the litigation and either center it in one court or, failing that, to avoid duplicative judicial and lawyer activity. The overall objective is to control the processing of multiforum disputes, which otherwise would be oppressive to the defendant corporation being forced to defend in multiple courts all at once.
Q: How can judges balance having corporate boards acting in the best interest of shareholders without instituting onerous regulations and laws?
A: Any answer must necessarily be case-specific. For decades, that has been the major challenge for the Delaware courts, indeed for all courts called on to apply corporate fiduciary doctrine to specific facts, because those fiduciary principles are very broad. They are not like the published regulations of the Securities and Exchange Commission or the Internal Revenue Service, which are quite specific and legislative in character. They are broad principles with imprecise wording and must be applied by human beings bringing to bear their best judgment on a case-by-case basis.
Q: Other jurisdictions such as Connecticut and West Virginia are seeking to capture some of Delaware’s corporate law litigation business. How seriously should Delaware take these threats?
A: As a judge, I don’t have a separate opinion about that. As a lawyer observer, I find it flattering that Delaware’s court systems has enjoyed such success that other states have sought to emulate that model. The business courts of Connecticut and West Virginia, and other states as well, are purposefully designed to encourage lawyers in those states litigating disputes involving corporations chartered in those states from litigating elsewhere. I don’t view that as ‘capturing’ corporate law business from the Delaware courts. Rather, it is a sensible effort to center in those state courts corporate law disputes that properly belong there in the first place.
This article first appeared in Delaware Business Court Insider, a DLW sibling publication.