May 29, 2018

Aruba Networks: VC Laster Meant What He Said

Vice Chancellor Laster’s ruling earlier this year in the Aruba Networks appraisal case raised a lot of eyebrows. In that case, he determined that since the market for Aruba’s stock was efficient, the stock’s unaffected market value prior to the deal was the right approach for determining its fair value – even though neither of the parties argued for that approach, and even though it resulted in a value that was lower that the price that Aruba itself advocated.

As I blogged at the time over on “John Tales”, some even suggested a “Straussian” reading of the opinion. This interpretation holds that the Vice Chancellor was frustrated by the Supreme Court’s approach to appraisal in recent cases, and therefore his goal in Aruba Networks might have been “to embarrass the Supreme Court into reversing him again and admitting that markets aren’t that efficient.”

The plaintiffs seem to have incorporated this idea into their motion for reargument – suggesting at one point that the Vice Chancellor “misapprehended the law due to [his] ‘frustration with many of the Supreme Court’s pronouncements.'” That may not have been their best play, but this excerpt from his opinion denying the motion shows that it certainly got Vice Chancellor Laster’s attention:

The petitioners initially argue that I issued the Post-Trial Ruling as an act of political theater designed to show the Delaware Supreme Court the error of its ways. They sympathize that the Post-Trial Ruling must reflect my “frustration with many of the Supreme Court’s pronouncements,” only to posit that this frustration led me to pen a decision designed to show “the absurdity of the literal application of certain pronouncements made by the Supreme Court in Dell and DFC to appraisal actions.”

They conclude that I must be engaging in a “battle of legal titans” with the Delaware Supreme Court and that the emotional fervor of intellectual combat led me to impose an unjust ruling. The motion strives to remind me that the petitioners are not characters in an academic hypothetical but “real” litigants with “real dollars at stake” who should not be turned into “collateral damage.”

Laster went on to make it clear that he wasn’t buying any of this “political theater” argument:

For starters, I am not a legal titan. I am a state court trial judge. I personally do not think that the role of a trial judge accommodates active resistance to Delaware Supreme Court pronouncements. I rather view the job as calling for adherence to Delaware Supreme Court precedent. While I think it is fair game for a trial judge to suggest potential changes in the law, I do not believe that a trial judge has the flexibility to disregard the Delaware Supreme Court’s holdings, nor do I think that a trial judge should look for clever ways to evade their implications. When a new precedent arrives, I view my job as requiring that I update my understanding of Delaware law to incorporate the new precedent.

In fact, the Vice Chancellor wasn’t buying anything that the plaintiffs were selling – he reiterated that he meant exactly what he said in his prior opinion, and denied the motion for reargument.

John Jenkins