Metropolitan Life Ins. Co. v. RJR Nabisco Inc. (SDNY 1989)

Questions:

1. MetLife, a very sophisticated creditor of RJR, claimed that the leveraged buyout of RJR by KKR was an entirely unanticipated event that violated RJR's implied duty of good faith and fair dealing towards its creditors. The court doesn't buy it. Do you?

2. Regardless, notice the striking contrast between the treatment of creditors and shareholders in this and other 1980s takeover cases. In MetLife, the court blesses a takeover that clearly reduced creditor value by billions of dollars without the deal-specific approval of creditors. At about the same time, Delaware cases empowered and even required boards to defeat takeovers in the name of “inadequate value” to shareholders even when the latter would have approved the deal. Does this make sense?

NB: The book Barbarians at the Gate tells the tale of the “bidding war” referred to in Judge Walker's introduction — it is a fun read.