I so often find Keith Bishop's blog, California Corporate & Securities Law, both informative and entertaining.  Monday's post in that forum is no exception.  In that post, Keith describes three important principles of Delaware corporate law that are not codified in the General Corporation Law of the State of Delaware (commonly and fondly known as the Delaware General Corporation Law or DGCL).  No surprise, but the three principles he identifies and describes are:

• the business judgment rule;
• derivative suit pleading requirements; and
• the intermediate standard of review applicable in certain limited fiduciary duty actions.

Great list.  And I agree with what he says.

Of course, anyone who teaches corporate law has had to consider (and, to sone degree, call out) the areas of that body of law that derive from decisional, rather than statutory, law.  I often have been heard to say, in the basic Business Associations course, that if students forget–or need to leave behind–one of the two required texts (a casebook and a statutory resource book) when they come to class, most days, they should forget/leave behind the casebook, since it is more important for them to have the statutory law in front of them to answer most Business Associations law questions.  I note, however, that there are two large areas of exception:  veil piercing and fiduciary duty.  For those two doctrinal areas, I inform them that they won't need the statutory resource book as much as the casebook.

Keith's post covers three key areas in Delaware fiduciary duty law that come from decisional law.  Keith might object, but I would add to his list substantive fiduciary duty doctrine (the standards of conduct for the duties of care and loyalty themselves) and the "entire fairness" standard of review (although there is a limited codification in DGCL Section 144(a)(3) with respect to conflicting interest transactions–"[t]he contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified, by the board of directors, a committee or the shareholders").  Of course, if we broaden the exercise to include the Model Business Corporation Act (MBCA), then we must acknowledge more codification of fiduciary duty doctrine and related civil procedure.  See, e.g., MBCA Chapter 8, Subchapter F & Chapter 8, Subchapters C and D.

While I am thinking about non-Delaware corporate law doctrine, I must mention another area of corporate common law that does not exist in Delaware.  That area comprises the "de facto doctrines"–de facto incorporation, de facto merger, etc.  Because of the strength of the doctrine of independent legal significance (or equal dignity) in Delaware, these decisional law contributions to corporate law doctrine do not exist in Delaware.  But some other jurisdictions still have not dispensed with these equitable judicial alterations to statutory corporate law.  As a transaction planner, I infinitely prefer Delaware doctrine in this area.  I tell my students that, and I typically use the de facto doctrines to re-enforce the students' understanding of the doctrine of independent legal significance.

Finally, there is veil piercing . . . .  I always have found it difficult to teach this part of the traditional Business Associations course.  At the moment, I try to let the students discover the doctrine through reading and digesting the cases in various ways.  In the last few years, I have asked them to write "story" that outlines their understanding of the doctrine after reading the assigned cases.  Some students have written actual fictional tales that illustrate the law of veil piercing (not what I intended).  Regardless, for those who undertake the exercise (I ask everyone to do it, for their benefit, but I do not have them hand it in), it seems to enable them to both see the fluidity of the doctrine and grape the essence of the key principles.  I have students  post some of their stories after reading them in class (or in lieu of reading them in class), and I post my own story in response.

Enough on my musings about corporate common law and the teaching of it in law school.  Thanks to Keith for inspiring me to jot down these thoughts.  Maybe this post will be useful to some of my Business Associations students, who are taking their exam next week.  (I did make Keith's post available to my students.)  Of course, the post only will contribute to their learning if they take time out of their studying to read the Business Law Prof Blog this week . . . .  Doubtful, right?  Maybe I should alert them to this post . . . .  :>)