The 2004 Strine Decision: Not That Damning In Retrospect

Vice-Chancellor Leo G. Strine's opinion regarding takeovers were featured in a recent Globe and Mail article, by Jacquie McNish, dealing with the impending takeover of BCE Inc. Vice-Chancellor Strine is of the opinion, officially, that a company's board of directors need to take charge of any sale of the company itself. A separate article contains quotes from V-C Strine's decisions, including one from the Feb. 26, 2004 decision for the Hollinger International v. Black case. (You can try looking for it in this list of decisions, by selecting "2004" from the drop-down menu on the top left of the case list and finding the decision by its date.)

Legally, the decision is set in stone. Even though the revelation of KPMG documents that disclosed the individual non-compete agreements and the largely ruinous cross-examination of both Marie-Josée Kravis and former Gov. Thompson are now known, that decision against Conrad Black still stands. Vice-Chancellor Strine covered his bases thoroughly enough for his decision not to be impugned, even in the Monday-morning-quarterback circuit. In fact, there's a hint on p. 65 of the PDF file of the decision (p. 61 of the decision itself) that V-C Strine was unsure whether or not the documentation for the individual non-compete agreements, which neither the Special Committee nor Mr. Black's legal team could find at the time of the associated trial, did in fact exist.

What's interesting about the decision, to a non-lawyer, is found in the factual background to the case. Evidently, by that time, Conrad Black had felt that he had been snubbed, as both a "mere CEO" and as a "mere shareholder, no better than the rest." His actions are consistent both with those belittlings and the conviction that the board of directors had breached the Strategic Process agreement first.

It's almost certain that the 'breach' that set him off is described in p. 35 of the PDF file of the decision (p. 31 of the decision itself): "Among other things, the [Hollinger] Inc. audit committee recommended that Black, Radler, and Boultbee immediately resign from their management positions at Inc., and that Atkinson, Boultbee, and Radler resign from Inc.‘s board of directors." Those resignations were not required as part of the "Restructuring Proposal," an integral part of the "Strategic Process," agreed to by Mr. Black and the board of Hollinger International. That Proposal required resignations from Peter Atkinson, David Radler, Jack Boultbee, and Mark Kipnis from their Hollinger Int'l executive postions, but not for them to resign from anywhere else.

This later revolt being the trigger that set Mr. Black off is consistent with his insistence, ever since 1982, that there was some sort of conspiracy afoot to defame him when Norcen was investigated by the police for producing a "forgery" that was actually an offer to buy back 4.99% of its stock. (This part of Conrad Black's life is detailed in Shades of Black by Richard Siklos, pp. 90-98.) Even though I myself an a Torontonian, and have lots of respect for the Toronto police force, I find it hard to justify why a good-faith written offer by a company to buy back its own shares would constitute any kind of fraudulent document, let alone a "forgery." If an out-of-towner, especially one from Wall Street, questioned me about that, I would probably show a little embarrassment.

It could certainly be concluded that Mr. Black positing a conspiracy afoot back then was unreasonable, but the quite bizarre nature of the forgery charge, which was predicated upon the assumption that Norcen would follow through on its offer, euchres out any credible psychoanalyzing of the man at that time. It is a matter of record, though, that Mr. Black does think in terms of conspiracies when things go wrong for him in series. So, this proneness is, at least plausibly, sufficient to explain why the Hollinger Inc. directors' revolt would have been pegged by him as a long-distance aggressive attack from his foes at Hollinger Int'l, which would have prompted him to treat his consent to respect and go along with the "Strategic Process" as voided by the opposite party. Of course, he couldn't say it in court, as there was no evidence of any conspiracy beyond a surmise from he himself, so he tried to use what he could claim was court-worthy: the allegation that he was "fraudulently induced" to agree to the Strategic Process. That argument, of course, was shot down by V-C Strine. (p. 75-87 of PDF, pp. 71-83 of the decision itself.)

Beyond the "going animal" element, it's clear, in retrospect, that Conrad Black thought he could do a better job as sole vendor-agent of the Telegraph than the board could, and that as a negotiator, he habitually uses secrecy to advantage. Thanks to earlier testimony in the current trial which disclosed that Mr. Black got the better of the Aspers, alone, the supposed underhandedness in he going it alone looks less vindictive than it did back in '04, even if the low price agreed to between he and the Barclay brothers does appear to like it contained an element of vindictiveness. (If none, then Lazard's range estimate for Hollinger Intl'l value was too high.)

As far as Mr. Black's credibility in the Delaware Chacery Court is concerned, though, the third paragraph of Page 27 of the PDF (p. 21 of the decision) says it all: "Simultaneously, Black did what he had previously and adamantly refused to do: HE REACHED OUT TO THE BARCLAYS." Put in full context, Conrad Black breached a contract. How seriously Vice-Chancellor Strine took this is indicated by the fact that he used all caps, which is unusual for him.

I note in closing that in order for Conrad Black's positing of conspiracies to be plausible, they would have to be conspiracies of snitches, of the kind who think it's okay to run to the law to settle a score.

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Richard J. Finlay, in "Finlay ON Governance," has some informed comments about the Globe article by Jacquie McNish linked to at the top of this entry. Chief among them is his note that V-C Strine's point of view has been standard Chancery Court Policy for about twenty years at the minimum.