Vice Chancellor Travis Laster is much aggrieved about the reception accorded to his ruling last month in the Allergan derivative litigation.

In case you don't remember the decision, Laster ruled that plaintiffs' lawyers in a derivative suit against Allergan's directors and officers can proceed with their case in Delaware Chancery Court, even though a federal judge in California threw out a parallel suit brought by a different set of plaintiffs' firms. I'm drastically simplifying a very complex decision, but Laster essentially concluded that Delaware law prevails, and under Delaware law the California plaintiffs didn't stand in the shoes of the corporation -- the nominal plaintiff in derivative litigation -- because their claims were dismissed. That left the door open to the Delaware case. Laster also said there was no collateral estoppel because the fast-to-file firms that brought the California case hadn't done an adequate presuit investigation using a books and records demand.

The much-discussed June ruling was unquestionably a rebuke to plaintiffs' firms with what Laster called a "hit-and-hope" business model and was interpreted by some to be a slap at the California judge who tossed the parallel case. Allergan's lawyers at Gibson, Dunn & Crutcher and Morris, Nichols, Arsht & Tunnell promptly moved for leave to appeal to the Delaware Supreme Court, arguing that Laster's "groundbreaking" decision had effectively "changed the course of derivative litigation" because of his "explicit policy determination about how (such) litigation ought to be conducted."

At a hearing last Friday that offers fascinating insight into Laster's thinking, the vice chancellor said Allergan's lawyers -- and plenty of other people -- are wrong in just about everything they've said about his ruling. He insisted that he had stayed well within the bounds of Delaware precedent and chided Allergan's lawyers for the "kitchen sink" tactic of dragging constitutional due process and the Commerce Clause into their brief. He also informed the plaintiffs' lawyers in the case that they "still aren't getting" his reasoning on who controls the board's right to sue corporate executives, and scalded a legal blogger (not me!) who, in Laster's view, misstated either the Allergan ruling or relevant precedent at every turn of his analysis.

For good measure, Laster tossed in some nasty remarks about a plaintiffs' firm that isn't even in this case but lost the federal court case that led to precedent on collateral estoppel in multijurisdictional derivative litigation. He also ruminated, again, on the scourge of plaintiffs' lawyers racing to various courthouses to file their derivative suits, and pointed out that most plaintiffs' firms (with the noted exceptions of Prickett, Jones & Elliott, Chimicles & Tikellis and Rosenthal Monhait & Goddess) don't know anything about the technicalities of Delaware law. This transcript is really quite something.

Almost as an aside, the vice chancellor agreed to certify the case for interlocutory appeal, although he said he doesn't know if the Delaware Supreme Court will take the case and doesn't believe Allergan has a chance of winning even if the high court agrees to hear it.

Substantively, the hearing gave Laster a chance to explain what he meant to accomplish in his ruling, which wasn't to demean the federal judiciary or to give plaintiffs' lawyers the right to file successive derivative suits alleging the same facts as one after the other is dismissed. His point, he said, was that "diligent plaintiffs should get to litigate," whether in Delaware or another jurisdiction. And if his ruling means that defendants have to litigate twice, once against fast filers who didn't bother to sue for books and records before asserting breach-of-duty claims and once against the diligent plaintiffs who waited to file an informed complaint, well, that's no worse than the way things stand today, Laster said.

At the end of the hearing, Laster apologized for "the overly lengthy nature of these comments" but said they were necessary "because of the number of arguments that were raised in the papers, some of which were rather extreme, and the need, therefore, to address them in the context of evaluating the likelihood of success on the appeal."

I think we're now all clear on where the vice chancellor stands.

(Reporting by Alison Frankel)

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