Final blog — until the Delaware Supreme Court gives the final word — on the Martin Marietta-Vulcan case.
What are the lessons for practicing attorneys?
The first lesson is: wait for the Delaware Supreme Court to hear and rule on Martin Marietta's appeal, before drawing final conclusions.
The second lesson is, regardless of how the Supreme Court decision comes out, remember that a confidentiality agreement or nondisclosure agreement is, first, foremost and last, a contract, and the law lens that should be used in drafting a confidentiality agreement is the law of contracts of the applicable jurisdiction. In his decision, the Chancery Court judge both expressly and analytically emphasized this over and over. It is an obvious point, and every attorney who has worked on confidentiality agreements will readily say that contract law is the most important applicable legal discipline, but in practice there is a great deal of boilerplate usage and casualness in assembling the NDA, frequently because business clients regard these agreements more like "fill in the blank" forms and become upset, not over the terms in the contract, but in the "delay" caused by attorneys in getting these "nuisance" agreements final and executed. (See my first blog in this string for further comment on this topic.) The Chancery Court's decision should bring some respect to the process (at least in the headquarters of Martin Marietta).
The third lesson is really a corollary of the second. Vulcan didn't prevail because the language of the NDA clearly and unequivocally supported its position but instead because the language of the NDA did not support Martin Marietta's position. As mentioned in my previous blog, Martin's strongest argument probably was that the NDA lacked a standstill agreement but the remedy ordered by the court, at Vulcan's prayer, was effectively a reduced standstill; Martin Marietta's attorneys therefore contended that the judge erred in supplying a common provision to the agreement which the parties had omitted, and thus the court was rewriting the NDA. I disagree with Martin Marietta's attorneys on the ground that their contention would lead to an absurd result: yes, judge, we violated the agreement by misusing the confidentiality information provided by Vulcan but no, there is no remedy for the breach because we did not misuse the information in a particular fashion which could have been contracted against. But the Vulcan attorneys must have released a huge sigh of relief on this point, and counseled their client not to ever, ever, ever, again leave the door even slightly open on this point: if you want to have a standstill, THEN WRITE IN A STANDSTILL.
The fourth lesson is another corollary of the second. Draft carefully and thoughtfully. Avoid ambiguity and vagueness, or allow it at your own risk.
And the fifth and final lesson (or maybe the first lesson, but I just saved the most important for last): take NDAs seriously! It seems to me that Martin Marietta failed this lesson abysmally, and not just at the stage where it entered into the Vulcan NDA, but much more so later, when Martin Marietta decided to launch a hostile tender and proxy contest and obviously thought it could skirt the NDA through some pseudo-lawyer tricks like putting the Vulcan written material into a box, placing the box in its in-house counsel's office, and telling its insiders organizing the takeover attempts not to lift the lid of that box! That was not only silly and sophomoric, the trick actually evidenced that Martin Marietta DID realize it was misusing information supplied by Vulcan. Had Martin Marietta also placed in that box every Martin Marietta employee who had had access to that material, so that no one working on the takeover knew any of Vulcan's confidential information, Martin Marietta's "Chinese wall" argument might have caused the court to hesitate. But of course, Martin did not, and the very Martin personnel who best knew Vulcan's confidential information were intimately involved in the strategy and tactics for the takeover.
Oh, and one more lesson: Martin Marietta should get a CEO with a smaller ego and lower hubris, because that is probably the real reason for the Martin Marietta mess.