In this contribution to a symposium on "Legal Realism and Legal Doctrine," I examine the role that jurisprudence plays in corporate law doctrine. Through an examination of paired cases from the United States and United Kingdom, I offer a case study of the contrasting influence on corporate law judging of American Legal Realism versus traditional UK. Doctrinalism.
Specialist judges in both systems, aided by specialist lawyers, clearly identify and understand the core policy issues involved in a dispute and arrive at sensible results. Adjusting for differences in background law and institutions, it seems likely that the disputes would ultimately be resolved in more or less the same way in each system. This is unsurprising in afield such as corporate law, where market and institutional pressures demand practical solutions to practical problems.
On the other hand, the differences in style are inescapable. While Delaware corporate law judges openly identify gaps and resolve them by reference to policy, UK. judges employ a traditional historical/doctrinal approach, working through precedent and, in doing so, developing principles to resolve the case at bar. These differences in style, it seems to me, are a legacy of the impact of American Legal Realism on legal education in the United States, in contrast to the more traditional approach dominant in the United Kingdom. Explicit policy analysis is far more acceptable and natural in the Delaware approach than in the United Kingdom, and this difference in legal culture has effects on how lawyers present cases.
Introduction I. The Legacy of American Legal Realism II. The Core of American Legal Realism: The "Underdetermination" Thesis and the Role of Facts III. The Critical Legal Studies Extension: A Brief Digression IV. American Legal Realism and Doctrine V. Controlling Shareholder Freezeouts A. Delaware #1: The MFW Litigation B. United Kingdom #1: The Definition of "Class" in a Scheme of Arrangement VI. The Treatment of Exit Consents in Bond Exchange Offers A. Delaware #2: Katz v. Oak Industries B. United Kingdom #2: Assenagon and Azevedo VII. The Legal Realist Versus the Traditional Style Conclusion Introduction
American Legal Realism (ALR) has penetrated American legal thinking so deeply that nearly every lawyer, judge, or legal academic educated in an American law school began to absorb its core lessons from the time he or she started studying law. At the same time, as corporate lawyers, judges, and corporate law academics, we spend much of our time discussing, describing, and contesting corporate law doctrine. Should the persistence of doctrine be surprising to a Legal Realist? Does a Legal Realist approach legal doctrine differently from a legal formalist? What role does corporate law doctrine play in a corporate law system populated by actors educated in the Legal Realist tradition?
The Legacy of American Legal Realism
In law schools, we spend little time talking with our students or with each other about the fundamental jurisprudential commitments that form the foundation of our views of law. Although law schools offer courses in Jurisprudence or Legal Philosophy, these courses are not mandatory, and most law students graduate without receiving any systematic overview of these subjects. But there are core jurisprudential commitments that form the foundation of American legal education and that distinguish it from legal education in other countries. I submit that most of us who were educated in American law schools came away with some version of the following understandings of law.
First, American lawyers, to one degree or another, all subscribe to the notion that in many litigated cases--especially those that get to the Courts of Appeals and form the foundation of our casebooks--traditional legal materials (i.e., statutes and case law) rarely suffice to determine the outcome. We identify a gap between those materials and a case's result that is not filled by logical deduction, regardless of how a court ultimately explains the outcome. In nearly all interesting cases, we teach and believe that there is enough slack that a court can come out either way. In casebooks, cases with similar fact patterns but different outcomes are often paired. We typically teach these cases as illustrations of the manipulability of doctrine, rather than as opportunities for fine-grained distinctions. (1)
Second, when we identify these gaps, we teach that judges make new law--not discover law that was somehow already there--and ask our students to articulate the "policy" considerations that explain the result or could motivate a different result.
For purposes of this Article, assume that, as a descriptive matter, I am more or less right in this characterization of American legal education. Where do these ideas come from and what implications do they have for the role of corporate law doctrine?
THE CORE OF AMERICAN LEGAL REALISM: THE "UNDERDETERMINATION" THESIS AND THE ROLE OF FACTS
In an extremely valuable reconstruction that I rely on heavily here, Brian Leiter distinguishes several strands that broadly characterize the fairly heterogeneous group of scholars who can be labeled American Legal Realists: Karl Llewellyn, Underhill Moore, Walter Wheeler Cook, Herman Oliphant, Leon Green, Jerome Frank, Thurman Arnold, Felix Cohen, Max Radin, and others. (2)
First, all Realists agree that the traditional style of judicial opinions provides an inaccurate description of the actual process of adjudication when it expresses the conclusion as the result of a sort of syllogism in which the major premise is "the law," the minor premise is "the facts," and the conclusion follows with logical certainty. (3) This view is sometimes ridiculed as "mechanical jurisprudence." (4)
Second, all Realists agree that traditional legal materials underdetermine the outcome in two related senses.5 As Leiter explains, the law is "rationally indeterminate" in that the available legal reasons drawn from statutes and cases do not justify a unique decision in a significant number of cases. (6) In addition, the law is "causally or explanatorily indeterminate" in that legal reasons do not suffice to explain why a judge decided as he or she did. (7)
In justifying the indeterminacy thesis, Realists go beyond the lawyers' sense of uncertainty and identify a particular source of uncertainty in legal decisionmaking: conflicting but plausibly applicable lines of precedent and tools that allow a judge to legitimately choose either outcome. (8) Karl Llewellyns famous article on canons of statutory construction is a paradigmatic example of this approach. (9)
The idea that there are situations in which the law "runs out" and judges make law "interstitially" is not unique to Realism. (10) H.L.A. Hart, who argued strongly against Realism's "rule skepticism," acknowledged that judges can and must make law. (11) What separates the Realists from Hart (12)--indeed, what separates the implicit jurisprudence of American legal education from the prevailing view in the United Kingdom and the rest of the world--is (a) a sense of how often the law runs out and (b) how gaps are and should be filled.
Hart argued that the Realists overstated the extent of indeterminacy and misconceived how judges fill gaps. In cases not addressed by the relevant statute, Hart argued that the judicial role is fundamentally different from the legislative role: "[N]ot only are the judge's powers subject to many constraints narrowing his choice from which a legislature may be quite free, but since the judge's powers are exercised only to dispose of particular instant cases he cannot use these to introduce large-scale reforms or new codes." (13)
Rather, for Hart, the judge's role as an interstitial lawmaker is best analogized to the "delegated rulemaking power [of] an administrative body." (14) In this model, courts have authority to make rules for unregulated cases and are instructed to do so with reference to the principles and standards established in the authoritative provisions. (15) Hart further argued that "legal decisionmaking does not proceed in vacuo but always against a background of a system of relatively well established rules, principles, standards, and values." (16)
The Realists had a very different view. Mainstream Realists, including Llewellyn, Oliphant, Green, and others, thought that the gap was filled by some combination of "fact-scenarios" and industry practice. (17) Thus, in understanding tort law, Leon Green argued that traditional tort law--with its doctrinal categories including negligence, intentional torts, and strict liability--was misleading and should instead be thought of as organized by factual scenarios such as "surgical operations," and "traffic and transportation." (18) Similarly, Oliphant, in his reconstruction of the law of contractual promises not to compete, claimed that the decisions could be understood only by reference to the factual circumstances of the cases: an employee's promise to an employer (often invalid) versus a business seller's promise not to compete with the buyer (often valid). (19) For Realists such as Llewellyn, Green, Oliphant, and others in the group Leiter refers to as the "Sociological Wing," the law cannot be understood without attention to the underlying and determinative factual and industry details. (20) These are the "materials" that were thought necessary to supplement the cases and statutes in our typical "Cases and Materials on the Law of X."
For these Realists, "what judges decide on the facts in such cases falls into one of two patterns[:] either (1) judges enforce the norms of the prevailing commercial culture; or (2) they try to reach the decision that is socioeconomically best under the circumstances." (21) This latter category is the domain of "policy."
This vision differs from Hart's and points judges in a very different direction. In Hart's view, the role of the judge, as...