The commenter you are responding to is explicitly intending to place more emphasis on the reason why the lawsuit failed. That is why they used the phrase “burying the lede” in their initial comment.
Hold on, I feel like everyone's missing that theres a real argument here. I think the key point was:
>They are just judging if anything reaches the point where shareholders were legally harmed, which still gives a lot of gray area to the acquiring company.
This distinguishes the lawsuit failing from the idea that a fair price was paid. The competing contentions are (a) fair price vs (b) unfair but beneath threshold of legally punishable harm.
Note that this is a civil suit, so the concept of a “threshold of legally punishable harm” doesn’t apply. There’s no “punishment,” and the plaintiff doesn’t need to meet the high standards (proof beyond a reasonable doubt, etc.) for imposing a punishment.
Under Delaware law, there’s two standards for evaluating this kind of claim. When there is no conflict of interest, the court applies the “business judgment rule,” which is similar to what you seem to be thinking—it gives corporate officers wide latitude.
But when there is a conflict of interest, the court applies the “entire fairness” standard, which requires both fair dealing and a fair price. And a fair price means what it sounds like—it’s what an objective businessman would consider a fair price under the circumstances. It doesn’t need to be the best price, but it must be within the range of fair. And to establish a fair price, the court relies on evidence from financial valuation experts. It’s a rigorous standard that’s hard to meet.
> And to establish a fair price, the court relies on evidence from financial valuation experts.
I generally find expert testimony to be suspect. Anyone can be trotted forward as an expert, rattle off their credentials, and say whatever they feel like saying, depending on who is paying them to testify. And financial valuation is not a science; there is of course plenty of math involved that takes into account hard, objective numbers, but a good chunk of it is opinion, too, as no one an know the future.
Having said that, the Delaware Chancery Court of course has more experience in these matters than any other state's courts, so I am of the opinion that they're less likely to be duped by "experts", but sill... it can and does happen.
I agree with you to a degree about expert testimony. But I’d argue that a Delaware Chancery Judge reviewing expert opinions from major investment banks is more likely to come to an accurate assessment than many other people offering view on the transaction. The legal ruling isn’t definitive for anything more than the case that was before the court, but I think it should be heavily weighted by anyone trying to inform their views about what happened.
I’d also point out that, in the legal industry, Delaware’s entire fairness standard is seen as a rigorous standard that typically results in victory for the plaintiff. The Chancery Court ruling resulted in various law firm updates using the case as an example of how the entire fairness standard isn’t always a death sentence for defendants.
NCEES has brought back the controls systems professional engineering licensure. This is the same license that civil engineers use to stamp designs for example.
Of course, the license doesn’t mean anything if everyone falls under an industrial exemption. I’d be in favor of safety-critical software requiring a PE stamp.
I have two feelings on this. One of which is alarm because it is a sentiment like this which is the backbone of misinformation believers and spreaders and we're in the worst era of misinformation I think that we've been in in a long time. Certainly the worst since the dawn of the digital age. Experts are right about vaccines. Right about building your savings with a 401k. They're right about using sunscreen. They're right about not ingesting too much sugar. They're right about reading to your kids from an early age and right about the impacts of tariffs on the economy. They're right about climate change. They're right about the Higgs Boson, etc. etc. In almost every case, the people going against the experts on these things are cranks, frauds, or confused conspiracy theorists.
But my other feeling is one of agreement in a very qualified sense. I believe that within the U.S. legal system, people who are presented as experts in certain forms of science, are able to invoke an unearned professional authority and legitimacy that has nothing in common with genuine expertise. When we talk about pseudoscience in the modern age, a lot of the time it's about new age crystals or evolution denial, but I think expert witnesses presented as authoritative in courtrooms have been responsible for generations upon generations of pseudoscience of various types. Everything from penmanship analysis to bite mark analysis to body language experts to, rather remarkably, supposed 911 phone call tonality analysis experts Who can include that wrongly timed emotional tremors or presence or absence of emotions prove the callers involvement in a crime.
And while it might be a gray area, I suspect there's at least a fair amount of crankery or motivated reasoning with hired gun economic experts summoned to Delaware courts to testify in favor of major corporate acquisitions.
I feel like this fixation on "punishment" as a legal term of art is not strictly necessary and my point can be reinterpreted in a charitable way that restates the same thing using different but functionally equivalent magic words.
So swap out "punishable" and instead say "legally actionable" (or other preferred synonym) and you nevertheless have an assessment that falls under what you noted is the entire fairness standard and the upshot is the same.
Also my understanding is that courts defer to the experts of the acquiring company. And if those experts are predisposed to have a favorable interpretation that favors the acquiring company, the valuation is in the less than optimal range of a range of values produced even by them, and they, by contrast to an actual market, might be much more lenient than a market would be in determining the price. So there's a convergence of variables that underscore the difference between fair as we conventionally understand the term (which is what we were all interested in here) and whatever it means to have survived legal scrutiny in Delaware.
Which again I would say means that this debate has real teeth and it's more than semantically equivalent differences in emphasis.
(c) no fair price can possibly be determined but the burden of proof lies with the claimant
(d) a court has no idea what a fair price would look like but made a finding of fact based on expert testimony despite being poorly situated to evaluate it
That’s generous. One party is stubbornly missing that the Delaware court’s ruling is weak evidence of a proper valuation having been done, but wants to parrot an irrelevant textbook understanding that obfuscates that conclusion.
