Welcome to the Boardroom Governance Podcast. I’m your host, Evan Epstein. In this episode, I talk with Joel Friedlander, from Friedlander & Gorris, a litigation boutique focusing on corporate law litigation, alternative entity disputes, commercial litigation, and federal securities law cases in Delaware state and federal courts. Joel has over 25 years of experience litigating breach of fiduciary duty actions and contract disputes relating to the control of Delaware entities. Notable representations include obtaining the two largest cash settlements in the history of the Court of Chancery: $275 million, on behalf of Activision Blizzard, and $237.5 million on behalf of The Boeing Company. In this podcast, we talk about the evolution of stockholder litigation and its current role in corporate governance. We also discuss the evolution of Section 220 books and records demands, the concept of “Fraud on the Board”, and how director oversight duties have evolved, particularly post-Marchand and Boeing. We finally address litigation in private venture-backed companies, including the Good Technology case (that he litigated), and Silicon Valley cases generally. If you like this show, please consider subscribing, leaving a review or sharing this podcast on social media. You can find all the show notes on the website boardroom-governance.com and please feel free to subscribe to the Boardroom Governance Newsletter at evanepstein.substack.com
0:00 Intro.
1:37 Start of interview
2:19 Joel's "origin story". He grew up in Stamford, Connecticut ("it was a land of many corporate headquarters"). He went to Wharton undergrad and U. Penn Law School. Later, he clerked at the Court of Chancery in Delaware and worked at Skadden's Wilmington office in Delaware "[the office] had been built around the hostile takeover litigation in the 1980s." In 1995, he joined a new litigation boutique with Stephen Lamb (later Vice-Chancellor of the DE Court of Chancery). Andre Bouchard (later Chancellor of the DE Court of Chancery) joined in 1996.
5:35 The difference between plaintiff and corporate/defense firms, starting at law schools and law student recruitment.
7:04 On the historical evolution of stockholder litigation. Joel teaches a course on stockholder litigation at Penn Law School and Michigan Law School. On how the hostile deals in the 1980s changed the stockholder litigation landscape: "Many of the largest and most sophisticated law firms were suing each other, and that's where most of the law was created."
10:50 On the evolution of class action and derivative actions in stockholder litigation.
13:01 On the concept of Fraud on the Board. "Commission of fraud on the board is an omnipresent temptation for self-interested controllers, activist stockholders, officers, financial advisors, and their legal counsel. Fraud can be used to put a company in play, steer a sale process toward a favored bidder, suppress the sale price to a controller, or make a favored bid look more attractive."
15:56 "Not long ago, over 90% of deals over $100m were sued on, and in most of those cases the stockholders got nothing (prevalence of disclosure settlements)." He advocated for the elimination of disclosure settlements. "In about 2015, the litigation landscape changed."
23:40 On the evolution of Section 220 books and records stockholder demands.
26:37 How director oversight duties have evolved ("Caremark claims"). The impact of the Delaware Supreme Court case of Marchand (2019) focused on food safety.
30:12 How Boeing’s stockholders obtained approval from the Delaware Court of Chancery for a landmark US$237.5 million settlement of derivative claims targeting the company’s board for safety failures that led to catastrophic crashes of two 737 MAX jetliners in 2018 and 2019. *The company disclosed that the two crashes caused US$20 billion in non-litigation costs and more than US$2.5 billion in litigation costs.
35:16 On private venture-backed company deal-making and litigation, particularly in Silicon Valley. The Good Technology case, where director defendants and their affiliated VC funds settled for $17m and the financial advisor JP Morgan settled for $35 million for claims against arising out of challenge to dual-track sale/IPO process that resulted in sale of company to BlackBerry Limited.
40:24 "It's hard to find plaintiffs [in Silicon Valley], there are different obstacles and roadblocks to litigation."
42:38 "In [private venture-backed companies] sometimes you don't have directors who have experience in certain situations, like selling a public company (sophistication of M&A in public settings)."
43:48 "What is ubiquitous is financial advisor conflicts of interest, in Silicon Valley or in any other public company scenario." The example of the Good Technology case.
45:35 On conflicts of legal counsel in deal-making (criticism of law firm behavior). Example: $690 million damages award based on controller’s reliance on outside counsel’s legal opinion.
47:44 The 1-3 books that have greatly influenced his life (that he's re-read the most):
49:08 - Who were your mentors, and what did you learn from them?
53:04 - Are there any quotes you think of often? In a NYT review of the autobiography of Sammy the Bull Gravano he read a quote that said "At some point you've got to ask yourself, are you going to continue being a punk, or are you going to become a racketeer?"
52:40- An unusual habit or an absurd thing that he loves: Twitter.
53:27 - The living person he most admires: Volodymyr Zelensky.
Joel Friedlander is a partner at Friedlander & Gorris. He has over 25 years of experience litigating breach of fiduciary duty actions and contract disputes relating to the control of Delaware entities.
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Twitter: @evanepstein
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Music/Soundtrack (found via Free Music Archive): Seeing The Future by Dexter Britain is licensed under a Attribution-Noncommercial-Share Alike 3.0 United States License