July 31, 2004
Two quick notes on the Seattle school assignment case

When I posted the piece about the Seattle school assignment case earlier this week, I said I’d write more about the decision after I had a chance to think about it a bit more.

Instead, John Rosenberg said nearly everything I could possibly have thought to add to my first comments, and then some. Read the whole thing, as they say.

The only other point I’d make relates to the dissent.

If I understand her arguments correctly, I’m forced to wonder what race-based system of allocating governmental services she would agree ran afoul of constitutional protections.

July 31, 2004
Reality triumphs once again.

A few days ago I saw an AP piece about flat peaches, and decided to write a little spoof.  

I quoted the AP story, discussed the Delmarva contribution to watermelon farming, and then went off the factual reservation with a story about a fictitious Delaware melon-grower who was allegedly raising watermelons in the shape of perfect cubes.

(On the other hand, the part about dating a Poultry Princess is true--really.)

Reality triumphs over humor however, despite one’s best efforts to stay a step ahead.

Terry Oglesby sent me a short note pointing to an Internet site devoted to melons. Apparently some Japanese farmers have successfully raised square melons using a method almost exactly like the one I dreamed up for this spoof.

Gad.

I have a new-found appreciation for the folks at The Daily Show.

July 29, 2004
Be careful what you wish for

In 1990 my clients at DelDOT issued a utility permit that very shortly afterward landed them in Chancery Court. The folks who weren’t happy with the decision took the next dozen years or so to try to force a different result, going through several attorneys in the process.

They lost.

I think that’s the longest-lasting case I’ve ever handled, but the attorneys who’ve been fighting the Technicolor case in Chancery Court and the Delaware Supreme Court have me beat by at least 8 years.

Earlier this month Chancellor William Chandler issued the most recent opinion in the lawsuit, and it appeared on the state court’s website yesterday. As usual, Chandler is careful with the facts, forward-thinking with the law, and doesn’t let the solemnity of the occasion impede the use of the occasional witticism.

He also reaffirmed the old adage that one should be careful about one’s wishes, for they may come true. In this case, for example, you might wish for an independent appraisal, but you might not like the result.

Cinerama, Inc. owned 201,200 shares of Technicolor, Inc., a Delaware corporation that went into play in the early 1980s. Ron Perelman arranged for a merger of Technicolor with a company he controlled. Eventually a cash-out offer was made for all shares of Technicolor for $23 per share, which represented nearly a $6 per share premium over the publicly-traded company’s stock value just before the deal.

Nonetheless, Cinerama believed that its stock was worth far more. The corporation filed suit in Chancery Court challenging the fairness of the cash-out transaction, and also filed a separate lawsuit for a judicial appraisal of their stock value under Section 262 of the Delaware Corporation Code.

That’s when the fun began. The two cases were first heard by then-Chancellor William T. Allen, and after several years of litigation he ruled that the merger met the requirements of entire fairness to the stockholders. The Supreme Court upheld this decision. In the second lawsuit, Allen set the stock value at $21.60, $2.40 less than the cash-out price. The Supreme Court reversed this determination, however, and remanded the case back to Chandler, who had taken over the matter when Allen retired.

Chandler made several decisions about the new appraisal proceeding, and Cinerama appealed once again to the Supreme Court. On remand once again, the matter dragged on a bit more until a full-blown trial in May 2003. 

Well before that trial, however, as noted above the Supreme Court upheld the fairness of the transaction. In so holding the Court affirmed the Chancery Court’s finding that the $23 deal price was “the highest price reasonably available. That conclusion is the result of an orderly and logical deductive process.” Technicolor III, 663 A.2d 1156, 1177 (Del.1995).  In addition, Technicolor’s CEO at the time, Morton Kamerman, cashed in his 128,874 shares for the $23 price. So did another director of the firm, who sold his 409,406 shares for the same $23 per.

Undaunted by these three important clues, in the second appraisal trial Cinerama continued to seek a per share value nearly three times that amount.

They lost.

Chandler’s 143-page opinion explains why he decided that the appropriate appraisal price should be $21.98 per share, a $1.02 reduction from the cash-out merger price. His treatment of the valuation evidence looks to be perfectly reasonable. In addition, the opinion is a cautionary tale for those who might be inclined to be, shall we say, aggressive in presenting their appraisal evidence.

As expected, the occasional Chandlerism also makes a very early appearance, on page 3 of the main text.

Although 8 Del. C. § 262 requires this Court to determine “the fair value” of a share of Technicolor on January 24, 1983, it is one of the conceits of our law that we purport to declare something as elusive as the fair value of an entity on a given date, especially a date more than two decades ago.  Experience in the adversarial, battle of the experts’ appraisal process under Delaware law teaches one lesson very clearly:  valuation decisions are impossible to make with anything approaching complete confidence.  Valuing an entity is a difficult intellectual exercise, especially when business and financial experts are able to organize data in support of wildly divergent valuations for the same entity.  For a judge who is not an expert in corporate finance, one can do little more than try to detect gross distortions in the experts’ opinions.  This effort should, therefore, not be understood, as a matter of intellectual honesty, as resulting in the fair value of a corporation on a given date.  The value of a corporation is not a point on a line, but a range of reasonable values, and the judge’s task is to assign one particular value within this range as the most reasonable value in light of all of the relevant evidence and based on considerations of fairness.

The footnote accompanying this passage makes a typically Chandlerian wry note about relative competence:

Many commentators have recognized the indeterminate nature of the search for the fair or intrinsic value of a company.  Professors Allen and Kraakman have also noted the institutional disinclination of Chancery judges to engage in the valuation process in certain circumstances precisely because those judges recognize it as a “daunting task” subject to significant uncertainty.  The same institutional pressures that result in this disinclination at the Chancery Court level, of course, do not apply at the appellate level and may explain why the Supreme Court exhibits more confidence in the ability to ascertain the fair value of an enterprise.  See W. T. Allen and R. Kraakman, Commentaries and Cases on the Law of Business Organization at 312 (2003).

Chandler also makes an interesting point late in the opinion about the equitable considerations to be used in awarding interest on these judgments. In footnote 351, he suggests that the appraisal statute be amended on this issue:

[T]he most equitable approach to all interest issues would be to require the surviving corporation to place the amount offered to the dissenting stockholder in escrow at the time appraisal was sought.  Should the statute ever be changed to reflect this idea, many of the concerns and arguments involving interest rate and form would either disappear or be significantly reduced.

Chandler’s suggestion is somewhat analogous to an escrow requirement DelDOT uses when its contractors are embroiled in payment disputes with the subcontractors. The contractor is told to put the amount in dispute into an escrow account while the two parties seek a binding third-party decision on the merits, typically from an arbitrator. If the contractor balks, DelDOT refrains from making any further contract payments, as an incentive. This procedure tends to concentrate the contractors’ minds wonderfully, and helps lead to a quick resolution of the controversy.

Professor Bainbridge and other corporate law professors may find other parts of the decision worthy of comment. In the meantime, the folks at Cinerama have to start thinking about whether yet another appeal will be worth it.

July 28, 2004
This year’s books, thus far

The other night younger daughter asked my wife and me to estimate how many books we’ve read since adulthood, and how many we now read each year. She quickly added that textbooks for college, law school, or grad school “didn’t count.”

We were both a bit stumped. Neither of us had ever thought to quantify our reading habits.

Here’s what I’ve read thus far this year, in no particular order:

Vamps & Tramps, by Camille Paglia
Ship Ablaze: The Tragedy of the Steamboat General Slocum, by Edward T. O’Donnell
The Meaning of Everything, by Simon Winchester
Tooth and Nail, by Ian Rankin
Justice, by Dominick Dunne
University Boulevard, by A.B. Hollingsworth
Tricky Business, by Dave Barry
Barranca, by Troon McAllister (Lee Gruenfeld)
Caddy for Life, by John Feinstein
Better by Saturday: Driving
Better by Saturday: Iron Play/Long Game
Better by Saturday: Short Game
Better by Saturday: Putting
Sick Puppy, by Carl Hiassen
Stormy Weather, by Carl Hiassen
My Greatest Shot, edited by Ron Cherney and Michael Arkush
The Works of Art, by Art Hills with Michael Patrick Shiels
Shooting for Par, by Arthur and Alice Segal
Stymie, by Peter Jamesson
Putt to Death, by Roberta Isleib
Augusta and Aiken in Golf’s Golden Age, by Stan Byrdy
Jimmy Demaret: The Swing’s the Thing, by John Companiotte
Dr. Divot’s Guide to Golf Injuries, by Larry Foster, M.D.
From Birdies to Bunkers, by Alice Dye with Mark Shaw
Bullets, Bombs, & Birdies, by Dale Concannon

Right now I'm reading The Redneck Manifesto, by Jim Goad, as well as The Gift, by Richard Monette.

That adds up to about one book a week, with a decided emphasis on golf books. Since I'm review them as a sideline and the publishers keep sending the review copies, I have a feeling that trend will continue.

July 28, 2004
Once you get ‘em used to the look, they’ll eat anything--maybe

An Associated Press story today discusses the Saturn peaches that are showing up on produce stands in Pennsylvania this summer, and leaving the shelves almost as fast as they’re stocked.  

These peaches are supposed to be small, sweet, and flat—and it’s that last quality that has agricultural marketers buzzing.

"There's a huge market for smaller, cute things - you can pack it in a school lunch and all that," said Tristan Millar, marketing and product development director for Frieda's[, described in the piece as a California specialty fruit company]. "They are smaller, and so that does appeal for children. And they deliver on taste - they absolutely deliver on taste."

I haven’t seen these peaches yet, but then again I’m still waiting to see my first Watermelon Cube.

Perhaps I should explain.

Southern Delaware and the Eastern Shore of Maryland are very popular watermelon-producing patches. The Laurel Farm Market operates a busy auction each week during the growing season, and there’s even a local Watermelon Queen who sometimes accompanies the National Queen in fulfilling her duties. (Don't laugh--I once dated a Poultry Princess.)

A local Delaware farmer is now trying to create the first marketable cube-shaped Watermelon hybrid. He says it looks like he’s finally found the way to “train” the melons to assume the squared-off look he’s been trying to achieve for over a decade.

Thornton J. Oglesby (His friends call him “Spitter”) has a 35-acre spread off Route 26 over near Shaft Ox Corner, not too far from Gumboro.

Oglesby says it’s not really possible to grow fruit that’s square on all edges, but that hasn’t stopped him from trying. Thanks to the intense real estate development in Sussex County, he’s been taking advantage of one of the byproducts of all the house-building, and “re-cycling” some handy plastic to achieve his cubist desires. 

Here’s how he described his new solution in a recent interview:

“The folks at Sherwin Williams sell these new Twist and Pour Paint Containers for their Dutch Boy Paints, and a lot of folks down here just love those colors. I just go around some of the new neighborhoods, and they’re real happy to gimme the empty square paint boxes. I just make sure the paint’s dry, and then I put a brand-new tiny watermelon in the empty container, about 10 days after the fruit first shows up on the vines.”

“When they’re ready to harvest, I just cut off the boxes, and there you are—a watermelon cube, right before your eyes. They’ll easily go on your refrigerator shelves right next to the milk, and this time they won’t roll out onto the floor when you open the door. How ‘bout that?”

Personally, I find this difficult to believe, but Oglesby insists his plan is working. He says the gallon-sized fruit should max out at about 7 pounds, with a dark green rind and a deep crimson flesh color. Oglesby expects the sweetness scale to reach between 12 and 13, and he’s especially keen on how easy these fruits will ship.

“I mean, can you imagine? With these melon cubes, they can put hundreds more on each truck, and save thousands on the cost of bringing them to market. The profit margins might just double, if we’re lucky,” Oglesby said.

I’m a firm supporter of Delaware agriculture, and I wish Oglesby the best. Just the same, I’m a little dubious about this latest scheme. 

You just shouldn't mess with tradition.

July 27, 2004
Grutter goes to high school

The Ninth Circuit issued a decision today outlawing the race-based system of pupil assignments in the Seattle high schools.

I’m not done reading the 113 pages of the majority decision and dissent, but so far it’s pretty compelling. Judge O'Scannlain's majority opinion gives proper deference to the Supreme Court's Grutter decision, while finding deep fault in the school district's approach to race balancing among its high school students.

Some of the decision's more scathing commentary followed after quoting this passage from deposition testimony of one Board member, in which he dismissed a proposal from the Urban League to alleviate some of the more legally troubling aspects of the existing policy:

Ouch.

More later, after I’ve had a chance to finish reading it and then think about it's implications.

July 26, 2004
Prepping for the Film Festival

Tonight we went to a summer screening sponsored by the Rehoboth Independent Film Festival.

On Monday and Tuesday nights in July and August, several dozen folks gather in a meeting space at Midway Theaters to watch and comment on films that have been submitted for the fall event, scheduled this year for November 10-14.

I’m often startled by the wide variety of reactions to what we see, and last night was no exception.

Summer of the Serpent was the short, a 27-minute story about a little girl at a local pool and her encounter with a Japanese man who appears to be a bodyguard for another pool visitor.

The cinematography and sound are excellent, as were the two leads, Joyce Perrone and Keiichi Kondoh.

My wife and I were intrigued at how well the movie described the intense curiosity of children, largely uninhibited by adult notions of propriety. One of the other viewers suggested it showed the little girl’s first crush, which we just didn’t see.

A Letter to True was the feature film, photographer Bruce Weber’s loosely structured essay on dogs, Dirk Bogarde, Elizabeth Taylor, Haitian refugees, and September 11. The press kit suggests that the varied parts of the documentary are tied together with “a poet’s logic,” which in retrospect may just be correct in the same way as any other oxymoronic phrase.

The reaction to this movie was equally mixed among the audience members. Several said they cried, while others said they fell asleep from sheer boredom. I mostly thought it badly needed more editing. Several of the film clips used in the piece could have been far shorter and still made their point in the overall narrative. It just seemed overindulgent. The segments in which the camera simply watched Weber’s dogs at play were frequently charming, however.

By the way, joining the Film Society has its distinct advantages, especially if you plan to go to the Festival. Among other benefits, members can purchase advance tickets to assure themselves of seeing their preferred movie selections. Sellouts are frequent, and can be frustrating.

July 25, 2004
Yay, Pete!

I have to give Peter Alliss credit--the man knows how to be gracious when admitting he underestimated someone.

As noted in yesterday's post, the BBC/ABC commentator suggested that Pete Oakley would be fortunate to post a score of up to 76 during today's final in the Senior British Open.

Perhaps his somewhat dismissive comment was inspirational, because Oakley put together a fairly steady 2-under par performance for his first major tournament victory.

In today's telecast, Alliss was nice enough to admit that he was pleasantly surprised, while regretting the remark he'd made the day before.

I already have some of the quotes I'll be using in this week's golf column celebrating Oakley's win, but I'm saving them for this Friday.

In the meantime, I'll just say that Oakley's victory means a lot to a whole bunch of Delaware golfers, who haven't had a local pro to cheer about at this level since the days of Porky Oliver.

Yay, Pete!

July 24, 2004
Local lad making good on the world sports stage

Tonight Pete Oakley finds himself in an unusual position.

The Delaware golf professional has a one-shot lead going into tomorrow’s final at the Senior British Open Championship at Royal Portrush Golf Club, in Northern Ireland.

BBC and ABC announcer Peter Alliss suggested during the ABC telecast today that Oakley should be proud of his accomplishment, even if he scores a 4-over par 76 on Sunday.

I have a feeling that Oakley is not yet done surprising Alliss and the others who are stunned to see him ahead of his far better known competition.

Pete was the club pro at Shawnee CC when I joined it 14 years ago, and is now a co-owner and Director of Golf at The Rookery Golf Course near Milton. I wrote a multi-part series about the design and construction of The Rookery in my golf column, and I have spent many hours with Pete over the years.

His sons J.J. and Zac are both good golfers, and the ABC folks mentioned in their Saturday telecast that J.J. plays for the University of Delaware. He’s also caddied for his dad several times this summer, while Pete's been playing on the European Senior Tour.

Pete will probably be a bit nervous tomorrow. If the weather remains dicey, however, I think he’ll remain at or near the top of the leaderboard at the finish.

When next Pete and I chat, I hope I can start off the conversation with “Congratulations on your win!” Later on I'll remind him that he still has one of my golf books.