The Omnipresent Specter of Omnicare

By Griffith, Sean J. | Journal of Corporation Law, Summer 2013 | Go to article overview

The Omnipresent Specter of Omnicare


Griffith, Sean J., Journal of Corporation Law


I. INTRODUCTION II. TWO READINGS OF OMNICARE III. OMNICARE IS DEAD IV. OMNICARE LIVES       A. The Standstill Cases       B. Ancestral Spirits V. PUTTING THE SPIRITS TO REST       A. The Doctrinal Dilemma       B. Enhancing Enhanced Scrutiny           1. All Deal Protections Should Receive Enhanced Scrutiny           2. Enhanced Scrutiny Is Not Confined to Unocal           3. Enhanced Scrutiny Applied to Deal Protections VI. CONCLUSION 

I. Introduction

The Delaware Supreme Court's opinion in Omnicare, Inc. v. NCS Healthcare, Inc. (1) is widely regarded as the most controversial opinion of that court in a quarter century. (2) It had immediate and wide-ranging implications both for transactional practice, effectively requiring a fiduciary out in every merger agreement, (3) and for the doctrinal underpinnings of Delaware corporate law, drawing into question the traditional change-of-control paradigm and elevating the duty to be "fully informed" to an absolute. (4) It attracted controversy immediately, starting with the strongly worded dissents of the immediate former and current Chief Justices and soon followed by a raft of commentary from practitioners and academics alike. (5)

Yet, it is also commonplace to hear that Omnicare is dead. Not long after the decision, Chief Justice Steele confidently predicted that the opinion would have "the life expectancy of a fruit fly." (6) Other voices from the bench have suggested that the opinion is "of questionable continued vitality" (7) and an "aberrational departure." (8) Practitioners, meanwhile, counsel their clients on how to avoid the implications of the holding.(9) Academics, accordingly, have begun to eulogize the decision. (10)

However, to paraphrase Mark Twain, the reports of Omnicare's demise have been greatly exaggerated. My descriptive thesis in this Article is that far from having been buried and forgotten, the underlying principles of the Omnicare decision continue to animate Delaware corporate law jurisprudence and continue to channel the actions of transaction planners. I will demonstrate the continued vitality of Omnicare by separating two readings of the decision: a weak reading, focusing narrowly on the facts of the case, and a strong one, based upon the broad language of the opinion. (11) Those who claim Omnicare is dead can support their view by pointing to a line of cases that indeed challenges the weak reading of the opinion. (12) However, I shall show that neither the factual context nor the doctrinal underpinnings of these cases challenges the strong reading of Omnicare. (13) Rather, the core reasoning underlying the strong reading recently arose as the basis for the holding in a number of important Court of Chancery decisions. (14) This, I argue, is the omnipresent specter of Omnicare.

What ought we to make of this? In the wake of Omnicare, I argued in the pages of the Journal of Corporation Law that the decision was a mistake. (15) Ten years later, it still is. In my earlier analysis of the opinion, I focused on its economic consequences, building a simple game theoretic model to illustrate the intuitive proposition that the ability to trade certainty has value and that taking this ability away may prove detrimental to the merger marketplace. (16) Several of my co-panelists have arrived at a contrary view of the economics, pointing out that mergers have not dried up (17) and that making targets say "no" or "not-for-sure" to an initial bidder may in some cases lead to higher transaction prices. (18) Fair points, but as to the first, much of what influences the merger market is exogenous to Delaware law, making it difficult or impossible to gauge the good or ill effects of the decision from transaction statistics. As to the second, while standard auction theory recognizes that the seller will always be tempted to renege, it also recognizes that the ability to do so will change bidders' strategies and destroy the ability of sellers to control the sale process, making the ability to renege undesirable overall. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

The Omnipresent Specter of Omnicare
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.