You Won't Find This "Bedrock" Delaware Doctrine In California Case Law (At Least Not Yet)

Allen Matkins
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Allen Matkins

In Orzeck v. Englehart, 195 A.2d  375 (Del. 1963), the Delaware Supreme Court adopted what the Court of Chancery subsequently described as a "bedrock" doctrine of Delaware corporate law - the "Doctrine of Independent Legal Significance".   Warner Communications Inc. v. Chris-Craft Indus., Inc., 583 A.2d 962, 970 (Del. Ch.), aff’d, 567 A.2d 419 (Del. 1989).   The Delaware high court defined the doctrine as being applied as follows:

action taken under one section of that law is legally independent, and its validity is not dependent upon, nor to be tested by the requirements of other unrelated sections under which the same final result might be attained by different means.

Despite the doctrine's bedrock status in Delaware, I have been unable to find a single published opinion of a California appellate court that adopts the doctrine.  Failure to recognize the doctrine of independent legal significance  introduces a "wild card" element to corporate planning by creating uncertainty as to whether the form of a transaction will be recognized. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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