Chancellor Allen and the Fundamental Question

Abstract

During his tenure on bench, Chancellor William Allen was widely regarded as leading judicial expert on matters of corporate law. In this Article, I attempt to explain Chancellor Allen's expansive reputation by examining his ability to speak to what philosopher John Danley calls the fundamental question: What is appropriate role of modern corporation in a free society? Nowhere in corporate law is fundamental question more conspicuous or more relevant than in takeover cases implicating shareholder primacy norm. When a board of directors has elected to sell control of a corporation, Delaware courts evaluate behavior of directors pursuant to standards announced in Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., which requires directors to obtain the highest price for benefit of stockholders. Chancellor Allen began his judicial tenure shortly before Delaware Supreme Court decided Revlon, and Allen's first opinion citing Revlon appeared less than one month after Supreme Court's opinion was issued. Allen's final Revlon opinion was written shortly before he left bench. In 11 years between his first and last opinions dealing with Revlon, Chancellor Allen successfully defended traditional allocation of power over corporate decision making among directors, shareholders, and courts by artfully and insistently rebuffing attempts of Delaware Supreme Court to expand role of courts into areas where they have no useful role. In so doing, Chancellor Allen helped to ensure that appropriate role of modern corporation in a free society would be decided by individual actors in that society rather than by judicial fiat.