Business Law

When lawyers say that hard cases make bad law, they usually mean that extreme or unusual circumstances provide poor basis for making legal rule that would have to be applicable to a wider range of more common cases. Sometimes the phrase describes cases that involve a party whose hardship draws sympathy even if its legal case is weak. But sometime hard cases can make good law, when they present smart judges with difficult dilemmas and force them to think hard and deep on their ruling and its broader consequences. Yet courts don't always choose the cases that come before them and the possibility of a hard case making bad law is an occupational hazard of the legal system.

Published in the Globe and Mail on November 29, 2016.

Rare is the precedent-setting securities case that emerges from the Yukon Court of Appeal. The recent attempted arrangement between InterOil Corp. and Exxon Mobile Corp., however, has given rise to such a case. The decision contains a welcome judicial pronouncement on fairness opinions in the context of corporate mergers.

InterOil was set to merge with another corporation before Exxon came forward with a “white knight” offer. InterOil’s financial adviser, Morgan Stanley, provided it with a fairness opinion stating that the merger (which was structured as an arrangement) was fair from a financial point of view.

While fairness opinions are common in merger transactions, their purpose may be legitimately questioned. Should they provide shareholders with information about their investment and the transaction under consideration? Or, in the words of the judge at first instance, are they simply “comfort letters” that provide boards with support for their decision to enter into the merger?