Bill Allen in Class

• Publication year: 1997
• Citation: Vol. 21 No. 02

SEATTLE UNIVERSITY LAW REVIEWVolume 21, No. 3WINTER 1998

Bill Allen in Class

Eric A. Chiappinelli(fn*)

In the Fall of 1996 I read a news article about a Delaware Supreme Court case involving corporate law.(fn1) Buried at the end of the article was the suggestion that William T. Allen, Delaware's Chancellor for over ten years, was contemplating leaving the bench.(fn2) My first reaction was surprise coupled with sadness. Chancellor Allen was, I thought, at fifty-two, well under the age when many people retire. Although the heyday of takeovers had passed, there surely were many such battles going on in which he could have a say. Takeovers aside, corporate law as a discipline seemed as alive today as it ever had. Surely the Chancellor would have been reappointed for the asking.(fn3) Even if he did not intend to serve out a full twelve year term, he could serve half or so and then retire.

Startled as I was to learn that he was leaving, I was delighted to discover where he was going. The article said he was deciding between teaching jobs at Harvard, NYU, and Stanford.(fn4) Delighted, but not surprised. He had visited at law schools a few times while Chancellor.(fn5) I also had seen him several times as a speaker at Northwestern's Securities Regulation Institute, and Tulane's Corporate Law Institute.(fn6) Over the intervening months, the grapevine reported that NYU was the school of choice for the Chancellor. In due time, NYU law school's glossy magazine featured Professor William T. Allen among its new faculty hires.(fn7)

Given the scholarliness of his opinions and his experiences as a visiting professor, it was clear that Professor Allen would start his new life as an academic of the first water. This was my vision of the Chancellor as Professor: All of us in academia would look forward to having Bill Allen as a colleague and to seeing his effect on the academic side of corporate law. We'd mingle with him at conferences and read the no doubt prolific scholarship he would produce. These meetings and written pieces would in turn prod our own thoughts and thus work their way to our students. By the close of his career in academia, students throughout the country would have been exposed indirectly to, and influenced enormously by, the mind of William Allen. If Holmes's aphorism about the life cycle of case law were true,(fn8) Bill Allen seemed likely to extend his influence, perhaps by decades, by shifting from the judiciary to the professoriate.(fn9)

But then I realized that Bill Allen's classroom influence was enormous already. I don't mean simply the students he has taught when a visiting professor. Nor do I mean, exactly, the oeuvre of opinions which has educated all of us interested in corporate law. Rather, it suddenly occurred to me that Allen's thoughts have directly shaped the views of literally thousands of law students already. His opinions and articles are featured prominently in the corporations casebooks used in virtually all American law schools. I find this aspect of Bill Allen's influence to be truly astonishing. A trial court judge whose first opinions appeared only twelve years ago finds his thoughts pervasively presented to nearly every law student in America. It may not be an exaggeration to say that, in moving from enormously influential judge to professor, Bill Allen will both effect and affect law in a way matched only by that of Joseph Story, who combined teaching at the Harvard Law School and service as an Associate Justice on the Supreme Court of the United States. I can think of no other important judge who moved to teaching after a distinguished career on the bench. Nor is Bill Allen represented in the casebooks by just a leading opinion or two. Once I began to look through the current casebooks, I was struck by the variety of issues the editors had chosen to illustrate through the work of Bill Allen. Half a dozen casebooks published by the three principal casebook publishers deal with corporate law.(fn10) All of them have at least one excerpt from an opinion or an article by Chancellor Allen. Four of them have at least five different excepts and one, the most magisterial of corporation law casebooks, has seven.(fn11) In all, no fewer than fifteen different opinions and three different articles are presented in the various casebooks.(fn12) What follows is a brief precis of the pedagogical settings for Allen's work.

A. A Typical Casebook

Let me start by describing to what students in a typical corporations class might be exposed. One of the most popular casebooks is O'Kelley and Thompson's. The authors of that book use six of Chancellor Allen's cases in five different settings. Assuming the professor moves through the material in the same order as the casebook presents it, a student's first encounter with the Chancellor is through Grimes v. Donald,(fn13) an illustration of the scrutiny courts will give management agreements that arguably infringe on the board's statutory duty to manage the corporation.(fn14) Chancellor Allen views the issue in the Grimes case as an example of the larger social choice of locating all corporate power in the board rather than in the ultimate owners (i.e., the shareholders) or the corporate executives (i.e., management).(fn15) The student is also exposed to a description of a complicated employment agreement which the Chancellor deftly distills to two pages.(fn16) Finally, the student gets the benefit of Chancellor Allen's analysis, not only of the corporate law issues, but of the drafting issues as well. Evaluating the central contractual language, the Chancellor calls it "foolish," "ill-conceived," "unskillful," and "badly flawed."(fn17)

The student's second exposure to Chancellor Allen is in a corporate opportunity case, Cellular Information Systems, Inc. v. Broz (Broz).(fn18) The student learns that the corporate opportunity doctrine is an offshoot of the basic duty of loyalty and that it is roughly analogous to the tort of misappropriation.(fn19) But then, having explained generally what corporate opportunity is about, the Chancellor introduces a factual wrinkle that, in other hands, might have muddied the opinion. In the Broz case, though, Chancellor Allen uses the quirk to explicate how corporate opportunity and misappropriation are different and shows how the duty of loyalty is fundamentally grounded in the director's agreement to serve as a director.(fn20) As an extra fillip, the student sees Chancellor Allen grappling with a recurrent issue of equity: how the appropriate remedy is to be shaped.(fn21)

The importance of remedy is brought home in the next encounter with Chancellor Allen. It is difficult to imagine a more recondite corporate law issue for a student in a survey course than the question of whether a shareholder may recover rescissionary(fn22) damages in a cash out merger. The issue is an important one, though, because the availability of rescission rather than appraisal provides enormous incentives for management to structure transactions that arguably overcompensate shareholders; conversely, the absence of rescission as an available remedy encourages management...