Mergers & Acquisitions
Delaware’s feared litigator rounds on
Stuart Grant says its courts and
politicians are too keen to woo corporations
'Delaware has understood all along . . . that we have to be
protective of our corporations, but it was never protective at
the expense of the shareholders'
Sujeet Indap in Wilmington
[JUNE 19, 2018]
long career that has made him the most feared corporate lawyer in
Delaware, home to a majority of the largest companies in the US,
Stuart Grant’s legal work helped expand shareholder rights and secured
investor victories over the likes of Hank Greenberg and Mark
Zuckerberg among others.
retirement from his firm Grant & Eisenhofer later this month may help
company executives sleep a little easier, but Mr Grant is going out in
typically ferocious style.
an interview with the Financial Times, he launched a broadside against
Delaware’s judges and legislators for kowtowing to corporations and
now shield most M&A from litigation.
“Delaware has understood all along . . . that we have to be protective
of our corporations, but it was never protective at the expense of the
shareholders,” he said.
than 60 per cent of the S&P 500 is incorporated in the small
mid-Atlantic state of just 1m people and its sophisticated corporate
law doctrines. Many of them forged in the litigation over hostile
takeover battles of the 1980s, are emulated in several others.
Grant, a native New Yorker who began his career in the Wilmington
outpost of the powerhouse law firm Skadden in the late-1980s, said the
financial crisis’s impact on the state’s banking sector led the
establishment in Delaware to emphasise steadier corporate fees which
in 2017 were more than a quarter of total revenues.
“After the Great Recession there was a change within Delaware.”
said he was also uncomfortable about how members of the court were
also involved in promoting the state on trips organised by Delaware’s
of the things about Delaware — and I have some qualms about it — is
that our judiciary considers themselves ambassadors for Delaware,
unlike any other judiciary . . . They’d have these junkets to talk
about why Delaware law is so great, why the Delaware judiciary is
great. And as part of that they’d spend a lot of time also at
conferences, the overwhelming majority of which were sponsored by
Corporate America and its lawyers.”
Unsurprisingly, local corporate and plaintiffs lawyers are
disproportionately powerful in Delaware. Mr Grant himself has raised
hundreds of thousands of dollars for state and national Democrats and
has been involved in the group that helps nominate state judges.
58, he resembles what you would expect of a middle-aged lawyer outside
of Manhattan: white, balding, bespectacled, and sporting plain
business-casual clothes. He is candid and philosophical in his office
overlooking the Christina River.
and Jay Eisenhofer launched their eponymous firm in 1997 as ownership
of public equities began to be dominated by mutual funds and pensions,
who wanted attorneys with the Skadden pedigree that could litigate
breaches of fiduciary duty by a company’s board of directors. He has
tangled with the likes of Mr Zuckerberg, who was sued by Mr Grant for
trying to create a
new class of Facebook stock
that would have perpetuated his control of the company.
Mr Zuckerberg withdrew his plan before the Delaware Court of Chancery
could rule on its validity.
other achievements include the largest M&A settlement in Delaware
history — $430m for shareholders of Digex related to its sale to
WorldCom — and a suit over the 2011 buyout of Del Monte by KKR, which
effectively ended the Wall Street practice of staple financing, in
which sellside bankers offer financing to the private equity buyers.
is a passionate, ferocious advocate for his clients. I have tremendous
respect for him. He is a shark,” said Daniel Fischel, a University of
Chicago professor who has been an expert witness several times on the
opposing side of Mr Grant’s clients.
Others, however, wonder if his success has made him a bully. Multiple
people noted that he can be rough in dealing with both colleagues and
Mr Grant’s retirement is not without controversy. Reuben Guttman, a
former lawyer at G&E who is being sued by the firm over a fee dispute,
accused Mr Grant, in his legal defence submission, of harassing female
associates, though without giving specifics.
Grant vehemently denied Mr Guttman’s allegation and said his
retirement had nothing to do with the claim. “This is a case of fake
news put out by someone who had a motive to put out fake news. What
has been written about me is false, is offensive and its been
Grant’s firm said no sexual harassment complaint had ever been made
and the allegation was a “smear campaign”. Mr Guttman did not respond
to request for comment.
Shareholders’ lawyers, like Mr Grant, believe that litigation acts as
a deterrent against bad behaviour by chief executives and boards.
However, breach of fiduciary duty claims became
tougher to win
after a 2015 decision in what is known as the Corwin case, and Mr
Grant has been on the losing end of several recent “appraisal”
judgments, including over the buyout of Dell, where shareholders had
tried to get judges to bump up the price of a takeover to a higher
Grant said that activist investors cannot alone police companies. “I’m
not sure that institutional investors fully understand how the
courthouse door has effectively been slammed in their face. And they
do not have a viable alternative of the ballot box.”
While Mr Grant is leaving his firm, he is not leaving litigation. A
litigation finance firm he co-founded, Bench Walk Advisors, now has
close to $1bn in assets under management and he plans to expand it
further, with a mandate to fund “anything with a legal thesis” around
the world. So far it has financed lawsuits in areas as diverse as
German insurance claims, Australian class actions and US intellectual
Despite his courtroom warrior reputation, Mr Grant said litigation was
just a job for him. He recalled a courtroom exchange with Leon Black,
founder of the private equity group, Apollo. “It got a little testy
and I said to him on a break this isn’t personal to me. And Leon puts
his arm around me and he says, ‘Stuart, if you win, we’ll take some
money and we’ll push it over to your side. If we win, you’ll take some
money and you’ll push it over to our side, that’s all that this is
Copyright The Financial Times Limited 2018.