AMC: Is This the Closing Credits, a Post-Credits Scene, or a New Sequel Trailer?
Situating ourselves in the AMC/DCC Universe; just kidding, it's actually a novella
It’s been a long time since we popped the first batch of popcorn and dared to mention the AMC case in a post back on March 7th, right before the now-somewhat-infamous stockholder vote was held (and then held in abeyance by the Court at the agreement of the parties, in the even-more-[in]famous Status Quo Order, which -- as of this writing -- is still in effect).
What a Trip
And what a long, strange trip it has been since then.
It's hard to believe it’s only been four months, because a lot has transpired. We’ve been through so much: insanely late nights, a complete backgrounder on the entire sordid tale, an insanely-long disquisition on a single motion to take the plaintiffs’ depositions, the unsealing of the complaint and other documents, not to mention, the botched attempt to settle without notice to the class, and along the way, various updates, debriefs, and attempts to recap the situation, and even a bit of unmitigated gloating and some moments of contrition. Most recently, things culminated in a two-day hearing in Delaware that many of you listened to, and about which you have been somewhat-patiently awaiting my thoughts.
Let me preface this, as always and again by saying, no, I will not edit myself down, or make myself smaller, or shorter-winded, or less voluminous, to meet your standards or desires. And although I suppose I might apologize generally that a product or service does not exist to meet your desires out there in the world, I will not apologize that it is not me. I am not here to serve everyone. If I am not here to serve you in this format, so be it. You actually do not need to comment on that, if you can believe it. Some of you apparently find that very hard to believe. Please, do us all a favor if this annoys you and rage quit now while you’re less behind. If you are going to complain because this piece is a bazillion (23,103) ((yes, seriously)) words long, just don’t. And trust me, it discusses every ridiculous aspect of Delaware everything, and it roams all over the blessed place. If you’re not into that, you should definitely leave, fair warning. If you are looking for a debrief, this ain’t it. I’m sorry that I’m not sorry. And by all means, if you would like my concision, my precision, and my impeccably-formed thoughts, tailored immaculately for your absolutely particular ends to your exacting standards, you are more than welcome to pay my hourly rate.
Anyhoo, by the time I hit publish on this piece (or in any event, by the time the first person has a chance in Hades of making it through to the end of reading it), the Opinion may have even beat me to the punch and most of these thoughts been rendered superfluous, this diegesis perhaps relegated to the dustbin of history as just so much more profligate post-hoc noise from the online commentariat, but regardless of the timing of things, it’s my hope that our work at TCD (throughout this case and all the others that we cover) functions to some degree in the manner and spirit of Vice Chancellor Laster’s brief assumption of the Statler-esque character at the Bench and Bar back in June when he sat himself down next to Vice Chancellor Fioravanti, who was previously situated in the quite balcony-like upper corner of the room, and upon whom (I imagine) VCL somewhat foisted the role of Waldorf, when he shouted down to Chancellor McCormick and Vice Chancellors Cook and Will, who themselves were at the front of the room and about to begin their presentation -- in a quintessentially pitch-perfect heckler tone, admonishing them lovingly to: “Tell the truth!”
Law, Equity, and All the Rest
There are a million things I’ve thought about this case, and probably a thousand things I’ve forgotten already, and I’ll try to cover as much of the landscape here as I can to close this out. Because, honestly? I’m ready to move on. But before that, let’s go on a journey, one last time over this ground, with this crew, for old times’ sake. Shall we? You should probably get a beverage. This is going to be a long haul. If that’s not your cup of tea, feel free to exit out.
I know some of you have a lot at stake in this case, and I guess that’s capitalism for ya – you’re allowed to make those choices, for better or for worse, and with fewer and fewer guardrails and protections. And unfortunately, as Vice Chancellor Zurn recently reiterated in another case, the Delaware Court of Chancery is proudly a court of limited jurisdiction, as Vice Chancellors Slights observed in Perlman v. Vox Media: “the Court may hear a claim only if it is equitable in nature, if it seeks equitable relief, or if there's a statutory basis for jurisdiction.”
Many of the kinds of legal claims and legal complaints that people have with AMC that they have brought to the Delaware Court of Chancery over the past long hundred and thirty-odd days since the case was filed back in late February have been just that – claims and complaints that would actually sound in law, if at all. The distinction might not be one that resonates loudly or clearly to the untrained ear, but the distinction is nonetheless important.
The distinction between law and equity is a somewhat squishy one, due to the fact that many courts effectively have to serve both roles, and as many times as I tried to explain it on various podcasts (find them here if you want to relive last year in excruciating detail, or get a Twitter v. Musk-skewed backgrounder on the Court of Chancery), I haven’t landed on an incredibly simplified way to carve up the distinction (shocking, I know). The oversimplification is that there are two types of claims: legal and equitable. In general, if you are pursuing a legal claim, you are asking a court to award money damages, but if you are bringing an equitable claim, you are asking a court to either make something happen (like, say, forcing Elon Musk to close on the Twitter acquisition) or stop a particular action or event from happening (like, say, stopping the results of the March 14th AMC vote from being effectuated and preventing the collapse of AMC common and preferred stock).
So, the most notable power of the Court of Chancery as a court of equity is its ability to issue injunctions and temporary restraining orders and these powers are most frequently exercised in corporate differences over mergers or acquisitions. Many times, a plaintiff will seek temporary relief to preserve the status quo until a trial or hearing can occur, as originally occurred in the AMC matter.
As the sine qua non history on the Court of Chancery states: “equitable judging  requires an individual craftsman to analyze the facts, apply the ancient principles, carve the specific remedy and communicate the result. The product is human art; it cannot be scientifically produced.”
The Court of Chancery is one of the very few remaining pure courts of equity in this country where legal claims are mostly only heard ancillary to equitable ones under what we call the “clean-up doctrine” (or, lamentably, under one of the statutory grants including that newer bit of statutory carve-out that has herniated into a bit of a problematic bulge over the past few years, but which the courts have managed to shove back into some workable shape with the “Order to Put Things Back In Their Proper Place” which is technically called the Cross-Designation Order for § 111 cases or something less snarky than my rendition, but there should definitely be a spidermanpointing.gif meme for it because that order is only re-designating the originally-properly designated judges for the job that they originally had until someone had the bright idea to slip a bill to the judiciary for signature that expanded the Court of Chancery’s jurisdiction in a way that has since required the Court of Chancery to do a bunch of work undoing that expansion of its jurisdiction. Harumph.)
I think I have digressed, but since we are talking about the legislature, this is probably the best time of any to let you know that the DGCL amendment that absolutely most definitively was not (was) created around the facts of the AMC case passed the legislature despite a fine effort by Representative Madinah Wilson-Anton to put forth a Proposed Amendment to the Proposed Amendment that would have actually cabined the originally-proposed amendment to doing what it said it was going to do, and not a whole bunch of other unlimitedly-dilutive things, but you know – what can I say – my blog posts and tweets were not enough to overcome desperate pleas from scammy corporations like Nikola sent to the entirety of the Delaware legislature that absolutely do not read like total desperation (yes they do). Because honestly, don’t you think if they could just up and leave Delaware, they would? You think they have loyalty? Ha! Instead of sending desperate letters in the middle of the night whinging and talking about jobs? A company like Nikola? Seriously, give me a break. I mean, that’s always the threat: we’ll have to leave Delaware! You wouldn’t want us to leave Delaware! And no, of course, we wouldn’t. But why do you think they protest so much? Because there are a million complexities and complicacies facing general counsel when deciding where to incorporate, and if you think that screwing over stockholders in this one particular way is going to take the cake and make the move to … where are you moving to exactly again? … lemme know when you get there … anyway, if you think all the other benefits that Delaware brings -- one or two of which are ackshually integrity and stockholder protections, by the way -- are not going to keep companies incorporating here, well, you might be a Delaware legislator who got the wool pulled over their eyes again and voted out of fear or ignorance to pass the bill that will allow companies to issue unlimited new shares under a new voting standard. No more majority of outstanding shares required. All you need now is a majority of votes cast. You can already see Nikola jumping into action to take advantage. I’m sure they won’t be the last. (But muh capital markets access, they said! I know, y’all have had such a hard time accessing the capital markets over the past decade. It’s been truly devastating, the lack of access to capital markets, my g-d, I don’t know how any companies have even survived. /s) If you want to learn more about the original proposed amendment (now the law) and its overreach, read the synopsis of Rep. Wilson-Anton’s proposed amendment thereto, which garnered eleven votes but ultimately failed. Once you really see what a company can do with headroom without even a vote on forward splits and a reduced voting standard on reverse splits, it’s … eye-opening. Also, feel free to join your hedge fund bros and be insanely condescending when you tell me the ways in which I don’t understand this issue. It’s totally the case that the more condescendingly you say something, the more convincing your argument is. Did they teach you that at Wharton? Because when I took Negotiations with Diamond at Wharton, I learned a totally different way of being. Anyhoo.
AM-See You on the Other Side
I guess it’s time to actually talk about the AMC case on all fours, how we got here, what the fck just happened, where we are, what I think will happen, and how this whole thing might end. Deep breaths.
Let’s dive in behind the paywall. If you need a free trial because you aren’t going to give a single f—k about the Delaware Court of Chancery after the AMC case is over, you can access one here, or email me. If you would prefer to whine about me earning a living for the work that I do, please do not. Conversely, if you are awesome and you can, become a Founding Member and show off how much you just are the rockstar that you are.