UPDATED 4/24/13: Francis Pileggi has further details and analysis at the Delaware Corporate and Commercial Litigation Blog. Like Professor Bainbridge, Francis has been posting on Revlon-related issues for many years.
The estimable Professor Stephen Bainbridge has written an article entitled "The Geography of Revlon-Land." The article, which is forthcoming in the Fordham Law Review, gets its name from the pivotal decision in Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173 (Del. 1986), a landmark decision of the Delaware Supreme Court on analyzing issues of duty and accountability for directors of a corporation that is the target of a hostile takeover. The Court held that, under certain circumstances tending to indicate that the sale of the company is essentially fait accompli, the singular responsibility of the board being to maximize immediate stockholder value by securing the highest price available. Later cases expanded on these issues.
The article is available for download here. In his abstract, Bainbridge writes:
Academic critics of Delaware’s jurisprudence typically err because they are preoccupied with accountability at the expense of authority. In contrast, or so I will argue, Delaware’s takeover jurisprudence correctly recognizes that both authority and accountability have value. Achieving the proper mix between these competing values is a daunting — but necessary — task. Ultimately, authority and accountability cannot be reconciled. At some point, greater accountability necessarily makes the decision-making process less efficient. Making corporate law therefore requires a careful balancing of these competing values. Striking such a balance is the peculiar genius of Unocal and its progeny.
In recent years, however, the Delaware Chancery Court has gotten lost in Revlon-land. A number of Chancery decisions have drifted away from the doctrinal parameters laid down by the Supreme Court. In this article, I argue that they have done so because the Chancellors have misidentified the policy basis on which Revlon rests. Accordingly, I argue that Chancery should adopt a conflict of interest-based approach to invoking Revlon, which focuses on where control of the resulting corporate entity rests when the transaction is complete.