By Professor Christine Sgarlata Chung

Last month, I received my copy of Business Organizations in Focus in the mail from Wolters Kluwer.  I am incredibly grateful to have had the opportunity to work on this book with my wonderful co-author Deborah Bouchoux.  Every so often, I will post about recent developments relevant to the book and to the teaching of business organizations.  Please let me know if you have any questions or comments!

This purpose of this book update post is to alert readers to  In re Books-A-Million, Inc. Stockholders Litigation, C.A. No. 11343-VCL (Del. Ch. Oct. 10, 2016), a recent decision from the Delaware Chancery Court in which Vice Chancellor Laster addressed issues relating to the obligations of a controlling stockholder in so-called going private transactions.  The post relates to the material discussed in Chapter 11 (Changes in Corporate Structure and Corporate Combinations), and specifically to the discussion  at pp. 664-679 concerning Kahn v. M&F Worldwide Corp., 88 A.3d 635 (Del. 2014).

In a going private transaction, a corporation’s controlling shareholder seeks to buy out minority shareholders via a statutory merger.  See Del. Code Ann. tit. 8, § 251(a)–(c). Traditionally, Delaware courts subjected going private transactions to review under the entire fairness standard.  The entire fairness standard is the highest level of scrutiny applicable to takeover challenges under Delaware law.  It requires a reviewing court to evaluate the fairness of both the price (via the court’s own valuation assessment) and the process/course of dealing (focusing on the timing, structure, negotiation and disclosures, approval process, etc.) leading up to a challenged transaction.  See Weinberger v. UOP, Inc., 457 A.2d 701, 711 (Del. 1983).  Delaware courts initially placed the burden of demonstrating entire fairness upon the controlling shareholder-defendant.  In its 1994 decision Kahn v. Lynch Commc’n Sys., Inc., 638 A.2d 1110, 1117 (Del. 1994), however, the Delaware Supreme Court left the entire fairness in place, but held that controller-defendants could shift the burden of persuasion under entire fairness review to plaintiffs by showing that the transaction was either (i) negotiated by a well-functioning special committee of independent directors or (ii) conditioned on the approval of a majority of the minority shareholders.  The applicable standard of review for transactions employing both procedural devices remained an open question.

Read more at Forum on Financial Market Regulation

By Professor Stephen J. Clark

A single word in the lede of a new CNN story signals a potential turn toward sexual McCarthyism in the furor over sexually graphic remarks by Donald Trump. The word? “Threesomes.”

Reviewing Trump’s sexual banter over his 17 years of appearances on Howard Stern’s radio show, the story emphasized Trump’s odd fixation on the sexual attractiveness of his own daughter, Ivanka, whom he eagerly described as “voluptuous.” He is also heard giving Stern permission to refer to her as “a piece of ass.” Yeah, gross.

Like the initial furor over Trump’s boasts about groping women, drawing critical attention to comments with an incestuous connotation seems fair game. Incest is a crime, of course, and although there is some limited debate about that, there is no cogent contention that the suppression of incest is unjust. Drooling over your daughter isn’t a civil right.

But slipped into the lede alongside those incestuous remarks and some sexist ones too was a casual reference to threesomes. “Among the topics Trump discussed: his daughter Ivanka’s physique, having sex with women on their menstrual cycles, threesomes, and checking out of a relationship with women after they turn 35.” Whoa! Has no one at CNN ever played Which of These Is Not Like the Others?

Sure enough, later in the story, CNN reporters breathlessly recounted a trite exchange with Stern’s co-host, an exchange in which Trump is said to have “willingly” admitted to having once had group sex with three women. My goodness, admitting to, well, technically a four-way without having it dragged out by waterboarding! What kind of modern-day Sodom has this country become?

What had made Trump’s previously reported remarks so outrageous was his sense of privileged entitlement to sexually assault any woman he finds attractive. Yes, that initial story was obviously sensational because of his colorful language; “grab ’em by the pussy” was indeed a click-baiter’s dream. But what most responsible commentators highlighted as most problematic was Trump’s cavalier disregard for consent. Here was a man who so casually presumed consent from every woman he met that he imagined he could just proceed with sexual touching at will without even considering the possibility of an objection.

But the “threesome” exchange was very different. It did have its own colorful motif about the cumulative weight of the three participants: “I would say could be about 375 [pounds]…. I figure 125 apiece.” Still, the number of participants joining in a sexual encounter tells us exactly nothing about the presence or absence of consent. No, it is not sufficient to declare that anyone wanting to participate has “false consciousness” and may be infantilized as incapable of consent. Approving the sexual choices of other people is not a precondition for keeping your nose out of them.

Sexual freedom matters most when disapproval is greatest. People may look askance at a pansexual dominatrix, but there is no threat to the freedom of a husband and wife to have unshackled intercourse in the missionary position with the lights out and the curtains drawn. As Justice Blackmun has correctly observed, “a necessary corollary of giving individuals freedom to choose how to conduct their lives is acceptance of the fact that different individuals will make different choices.” Let them.

As the media continue in the days ahead to unearth more sexually graphic commentary by Trump, it should be imperative in each instance to understand clearly why, if at all, any particular remark may be disqualifying for public office. Bragging about groping women without their consent is disqualifying; talking about past participation in a threesome should not be.

Commentators and voters who would never say that having a premarital hookup, a gay spouse, or an elective abortion disqualifies a candidate from office should extend the same deference to sexual freedom generally. Undifferentiated condemnation of Trump for remarks that include mere candor about consensual sex sets a precedent that is primed to boomerang. It also happens to be unjust.

Don’t like threesomes? Don’t have one.