UT Soft Law Review

UT Soft Law Review No.2 2010the road of that evolution. The Bull-Dog Sauce case, which was decided by three differentJapanese courts—a trial court and two appellate courts—generated two quite differentapplications of the Guidelines and, thus, two quite distinct rationales for upholding theparticular anti-takeover defense in that case.That divergence of views within the Japanese judiciary raised three questions. First, didthe original Guidelines give sufficient guidance to the judiciary presumably being chargedwith their application and enforcement? Second, given Japan’s unique business and legalculture, is the Delaware-style common law judicial lawmaking approach the most appropriateto regulate Japanese board responses to hostile takeovers, or is that better accomplished bylegislation, administrative rulemaking, or some combination thereof? And third, if theJapanese judiciary is the appropriate rule-making institution, how will the judges allocate thedecision-making power as between the directors and the shareholders of Japanese targetcompanies, and what will be the standard for judicial review of Japanese anti-takeoverdefensive board conduct?The first question prompted the CVSG to issue a Supplemental Report that apparently wasintended to offer the Japanese courts further guidance as to how (in the CVSG’s view) theGuidelines should properly be interpreted and applied in various circumstances, includingthose involved in Bull Dog Sauce. 6 The second and third questions, however, remainunanswered and form the subject of what we will be discussing today.Before doing that, allow me to answer one question that you are likely asking yourselves:what do I, an American judge who is not a Japanese law scholar, bring to this discussion? Icertainly claim no special expertise from the Japanese legal perspective. That expertisebelongs to Professor Milhaupt, who is one of America’s most prominent Japanese Lawscholars, and with Professor Hideki Kanda, who is perhaps Japan’s preeminent Japanesecomparative corporate law scholar. Both of these gentlemen will grapple with these issues intheir own remarks, which follow mine. My goal is far more modest: to set the stage for theirremarks by recounting how the American institutional framework for expounding andenforcing takeover rules evolved under U.S. federal securities law and Delaware fiduciary law.My hope is that Japanese policymakers may find Delaware’s experience useful in decidingwhat Japanese institution or institutions should shape the future direction and form of Japan’stakeover jurisprudence.II. EVOLUTION OF AMERICA’S ANTI-TAKEOVERLAW-MAKING INSTITUTIONAL FRAMEWORKOne cannot meaningfully discuss the evolution of Delaware’s institutional framework forregulating anti-takeover board behavior without understanding the broader American(“Bull-Dog Sauce II”);; 1909 Shoji Homu 16 (Sup. Ct., Aug. 7, 2007) (“Bull Dog Sauce III”).6 On June 30, 2008, the Corporate Value Study Group published a Report entitled Takeover DefenseMeasures in Light of Recent Environmental Changes ( the “2008 Supplemental Report”). One of the“environmental changes” discussed in that Report was the trilogy of Bull-Dog Sauce decisions.12