Leo Strine: Sharp-tongued judge has a nose for 'hinky' boardroom behaviour

There is no lunch hour in Leo Strine's courtroom.

Lawyers filing into a recent hearing in front of America's most influential corporate judge know to come prepared, whispering furtively about energy bars squirrelled away in jackets and briefcases. That's because the judge, the first to say no to a Conrad Black deal, is only hungry for results when on the job.

On this chilly March day in Wilmington, Judge Strine, the Chancellor of North America's only specialized corporate court, the Delaware Court of Chancery, has pushed a hearing past noon, then 1 o'clock. Dressed in a grim grey and black-trimmed robe, he will decide whether there is sufficient evidence to send six directors of Barnes & Noble to civil trial to face claims that they acted improperly by approving a $514-million (U.S.) sweetheart merger that enriched the book chain's founder and chairman, Leonard Reggio.

Following what he will later call the court's "hunting dog's nose for hinky behaviour," Judge Strine spends most of his time chewing through shareholder allegations that the merger vote was tainted by directors' close ties to Mr. Reggio.

Judge Strine quickly waves off evidence against four of the directors, but zeroes in on two who have benefited from new business or bonuses from Mr. Reggio. When the lawyer for one director, Lawrence Zilavy, protests his client did not know Mr. Reggio would bless him with a $1-million bonus after the merger, the horseshoe bald judge registers his disbelief with a tart, withering comment.

"Strine may have lost his hair, but it wasn't from falling off the vegetable truck," he says.

He then does something impossible to imagine in Canada's glacially slow commercial courts. Without benefit of a break or notes, he delivers a 20-minute oral decision on a complex motion, sending two directors to trial to face claims that the "thickness" of their relationships with the chairman tainted their approval of the deal. "The world is a complex place and relationships matter," the judge concludes.

Minutes later, shortly before 2 p.m., I am ushered into Judge Strine's chambers for a prearranged, but delayed, lunch interview. The judge's robe is gone, revealing a white shirt, taupe suspenders and a colourful tie depicting bookshelves.

The business wardrobe is at odds with the dormitory décor of the judge's office. There are posters of the music buff's favourite performer, James Taylor, coffee table books about the Beatles, a wall of CDs and books, along with a vintage drawing of one of the lifelong Democrat's political heroes, Franklin Delano Roosevelt.

Hunched over a Styrofoam cup of yellow chicken noodle soup, the judge leans back and breaks into a huge smile when I ask why he didn't linger on a written decision for the recently concluded hearing.

"I love oral decisions," he shouts, waving a plastic spoon. "I am not one of those judges that has to go to Vanity Island all the time to write a decision." Such self-indulgence, he says crinkling his nose, slows timely decisions on pressing business disputes.

But Judge Strine is not a complete stranger to Vanity Island. He has written over 100 decisions since he was named a Vice-Chancellor of Delaware court in 1998 at the impossibly young age of 34. His eloquent phrasing and stinging verbal slap-downs of corporate bad boys have earned him a broad and sometimes controversial following, well beyond the Delaware legal fraternity.

He has been called a "prophet" and "brilliant" by some leading legal columnists. But shareholder groups grumble the Chancery Court is too deferential to directors, especially after a decade of epic boardroom failures. Business leaders who have been at the wrong end of his acidic remarks complain he is unduly harsh. The legal publisher Lawdragon.com has likened his appetite for "skewering fat cats" to the way "Hannibal Lecter loves fava beans and a nice Chianti."

Judge Strine disagrees that he punches too hard. He says the Chancery Court's mandate is to ensure that corporate officers fulfill their legal duty protect their corporation's interests. When improper behaviour threatens those duties, he says he must act to restore the balance between boardroom duties and stockholder rights.

The hammer came down on Conrad Black in 2004, reversing the fallen media mogul's back-door deal to sell the British newspaper The Telegraph without proper approval. In a widely read decision, Judge Strine concluded Lord Black's testimony did "not have the ring of truth."

His barbed observations grabbed headlines again in early March when he chastised Goldman Sachs Group Inc. for its "troubling" conflicts as an adviser on both sides of the $21-billion merger of pipeline companies Kinder Morgan Inc. and El Paso Corp. The conflicted roles played by Goldman and others, he fumed, meant the deal was "tainted by disloyalty."

Judge Strine declines to talk about the decision. But associates say he was stunned that his decision garnered so much attention in the mainstream media. Delaware decisions seldom have any currency outside corporate legal circles, but his stern reprimand appears to have resonated with so many because it ranks as one of the few judicial raps against the controversial Wall Street powerhouse.

To this point, he will only say: "My duty is to call it as I see it. I write plainly. I don't believe in being quiet."

Judge Strine has a deep passion for social equity that is partly informed by his upbringing. "We never had a lot of money," he says of his parents, whom he describes as "Baltimore row house children" who married as teenagers and juggled numerous jobs to support him and his younger brother. Another big influence was British author and social activist George Orwell who "had compassion for the have-nots of society."

His first ambition was politics. After a brief career as a Wall Street litigator, he served for six years in the early nineties as a senior aide to Delaware's then-governor Thomas Carper, now a Democratic senator. Although he is proud of the welfare, education and financial reforms that helped revitalize a troubled state, he says he quickly realized he lacked the financial resources and diplomatic skills to succeed in politics.

"I am fairly plain spoken and our electoral system encourages people to hide their real views," he says.

The political dead end led him to Delaware Court of Chancery, a unique 220-year-old court that presides over estate, trusts, contract and boardroom disputes. His 1998 appointment as Vice-Chancellor came on the eve of a decade of corporate and market failures that culminated in the global financial crisis of 2008.

The turmoil thrust the Delaware court into the centre of a furious debate over who should be held accountable for the crisis. Faced with limited regulatory actions against players entangled in the financial breakdown, investors are turning to Delaware and its sharp-tongued Chancellor for redress through shareholder lawsuits.

"When things go wrong, everyone wants a scapegoat and it's a pressure we want to resist," he says wearily, explaining that the Chancery Court operates under the narrow legal mandate of enforcing directors' duties to act in the best interests of their companies.

The culprits for the financial meltdown, Judge Strine believes, will not be found in the boardroom.

"The biggest scandal of the financial crisis was not that the actions were illegal, but that they were legal as a result of deregulation," he says.

CURRICULUM VITAE

Roots

Born in 1964 in Baltimore, Md.

Education: Political science major, University of Delaware

Law degree, Pennsylvania Law School

Personal

Lives in the Wilmington, Del., suburb of Hockessin with his wife, Carrie, an occupational therapist, and two sons.

Career

1993: Becomes corporate litigator at Skadden Arps Slate Meagher & Flom

1994: Appointed senior aide to then-Delaware governor Thomas Carper

1998: Appointed Vice-Chancellor, Delaware Court of Chancery

2011: Becomes Chancellor of Court of Chancery

Hobbies

Cooking, soccer, reading and listening to music

About the court

The Court of Chancery was founded in 1792 in Delaware and has evolved into a forum for resolving corporate disputes. Today, 850,000 U.S. companies are registered in Delaware to take advantage of the uniquely focused corporate court, which is famous for delivering timely orders on complex corporate matters. The court has one chancellor, and four vice-chancellors who are nominated by the Governor and typically serve 12 years.