Removing Revlon

This Article advocates the abolition of the Revlon doctrine— the junior partner in Delaware’s corporate takeover jurisprudence, which governs certain contests involving auctions and sales of control. Revlon arose in the twilight zone created by the overlap between defenses to hostile tender offers and efforts by directors to avoid or coerce a shareholder vote on corporate mergers and sales (shotgun corporate marriages). The narrow holding of the case stands for the common sense proposition that if directors decide to sell their corporation by choosing between two bids, both of which will pay all of the shareholders cash for all of their shares, the directors should pick the bid that pays the most cash. The problems arose when Delaware courts assumed that the case had something to say about situations in which the directors were not choosing between two all-cash all-shares bids. Specifically, it has been difficult sensibly to decide in which other cases Revlon has something relevant to say and to figure out what this something is. These problems in applying Revlon are not the typical results one must inevitably expect when courts apply any legal doctrine to the multitude of grey areas that determine a rule’s scope and impact. Instead, they reflect a more fundamental difficulty: The doctrine arising from Revlon has no sensible underlying policy rationale to guide courts in its application. This is not simply because courts and commentators have not articulated a sensible policy. Rather, this is because there is no sensible policy that one can articulate for Revlon beyond the narrow confines of the original decision