When it comes to advising leaders of industry, A. Gilchrist Sparks III is Excellence Incorporated
Published in 2009 Delaware Super Lawyers magazine
on May 21, 2009
Updated on September 17, 2009
In 1985, billionaire T. Boone Pickens tried to buy a majority of Unocal’s stock and made an offer to the shareholders for the rest. Unocal’s board of directors offered an issue of debt to all stockholders except Pickens, and his hostile move was blocked. Pickens sued, citing a breach of fiduciary duties by the directors, and won the initial court case. It went up to the Delaware Supreme Court. A. Gilchrist Sparks III argued Unocal’s case.
“If we had lost the case in the Supreme Court,” says Sparks, “the company was going to disappear as a public company. Pickens would have been able to close on his offer. The Supreme Court didn’t have time to write an opinion [until later], so in a sort of Perry Mason moment, they had everybody come back the day after the argument for the announcement of their decision. There was something like 500 people in the courtroom, and the court starts off by saying, ‘In this front-end-loaded, two-tiered, abusive tender offer …’ After hearing those few words, I looked over to the person sitting next to me and said, ‘Nothing can survive that … we’re going to win!’ And sure enough, we did. One of the very senior lawyers of the bar came up to me afterwards and said, ‘That was a career win.'”
Sparks’ victory saved the company, and Unocal remained in business for another 20 years (Chevron bought it in 2005). The Unocal decision affected more than just the fate of one company—it was a landmark case that tilted the playing field away from corporate raiders and gave guidance to boards of directors as to the appropriate way to think about defensive actions that would protect their companies.
“I’ve been fortunate enough to advance various arguments that have over time become part of the law,” he says. Among his many precedents, his cases have set standards for takeover defense and a director’s duties in conducting a sale of the company.
His presence is also felt on the statutory side of corporate law. For more than 25 years, Sparks served on the Corporation Law Council of the Delaware State Bar Association, including a three-year stint as its chairman. “Gil has always demonstrated remarkable insight with respect to corporation law,” says Jim Holzman, the current chairman of the Corporation Law Council, “as well as a viewpoint of balance and fairness that to me is just remarkable. He clearly has been an asset, not only for the council but the state. He’s a leader in thought.”
In 1987, Unocal called again on Sparks, asking him to report to its board of directors on a minor matter. He flew out to California and entered the boardroom. “It turned out they had just lured me out there so the entire board of directors could stand up and give me a round of applause,” Sparks says. “It was one of the nicer things that happened to me.”
Sparks looks out the window of his 19th-floor office in downtown Wilmington, where his father worked for DuPont as a chemical engineer. Then he points across the Brandywine River toward Deerhurst, the tree-lined subdivision where he was raised, just a few miles away. “My mother still lives in the house I grew up in,” he says. “She’s 88, healthy as can be.”
In high school, Sparks ran track and placed fourth in the half-mile at the state meet. He went on to Yale and ran for the school all four years, bringing his mile time down to 4 minutes, 30 seconds. After graduating magna cum laude, Sparks was accepted to Harvard Business School, but elected instead to go to Coast Guard Officer Candidate School. Commissioned as an ensign in 1967, he spent his first year of service on a 311-foot cutter patrolling the coast of South Vietnam.
“At the of age 23, you’re out there running a ship in the middle of the night with 150 people below deck sleeping and trusting that you’re not going to run into something,” he says. “We would run up and down the coast and board everything we saw and check it to make sure it didn’t have weapons. Then we did gunfire support missions with our five-inch gun four or five times.”
After his active-duty service, Sparks remained on the Inactive Ready Reserve, which meant that for the next 16 years he had to get physicals and stay ready in case of a national emergency. “I had mobilization orders to report to Gloucester City, N.J.,” he says, “and if I couldn’t get to Gloucester City, I was then directed to go to Reykjavík, Iceland. I always thought these were the most bizarre orders. I mean, under what horrible circumstance could I not find my way to [Jersey], but I could find my way to Iceland?”
He was interested in business and law and figured he could combine those interests in his career. He attended law school at Penn, which was only 30 miles away from his hometown, and graduated second in his class. Sparks could have gone anywhere but wanted to return to Wilmington. For a business lawyer, this would prove to be a wise choice.
If someone wants to practice corporate law, there’s no better state than Delaware. While other states provide welcome signs with information on their state motto or flower, the road sign greeting motorists to Delaware proclaims: Welcome to Delaware: Home of Tax-Free Shopping. Its business focus is undeniable: more than half of the NYSE and Fortune 500 companies are incorporated in Delaware, with franchise taxes and other monies providing about one-third of the state’s revenue. Why is this?
“Back in colonial times,” Sparks explains, “[colonies] always had a law court and a chancery court. A chancery court dispensed equity and a law court administered statutory law. After the Revolution, most of the colonies merged the two. Delaware never merged law and equity, so we have a separate chancery court. … Equity courts, like the court of chancery, sit without juries. The great uncertainty that most U.S. corporations face in any sort of litigation is that if a matter goes to a jury, you might as well flip a coin as to what’s going to happen. Chances are less uncertain in chancery court as chancellors (equity judges) talk to each other, understand this body of case law, read each other’s opinions, and see so much of this case law that they are experts.”
In other words, Delaware’s a good place for corporations to be. And corporate attorneys.
Sparks started his career in 1973 as a behind-the-scenes guy, working on internal corporate matters. Then he began counseling corporations on mergers and acquisitions and litigation strategies. In 1977, everything changed.
That year the U.S. Supreme Court ruled in Santa Fe Industries, Inc. v. Green that fiduciary corporate governance was the provenance of the states. And Delaware, with its unique judicial system, became the place business leaders chose to file to protect their interests. Courts were inundated with corporate cases, both by companies trying to set protective precedents and by outside entities trying to gain leverage on them. The resulting opinions established precedence for takeover activity in this country.
It was a frenetic time for a corporate lawyer, with cases appearing overnight and often overlapping. “You were writing a brief in the afternoon, putting together the argument in the middle of the night, and getting up at 9 o’clock in the morning and making it before you jumped on a plane to head off to a deposition somewhere on the other side of the country. It was sort of chaotic, a young man’s game. Senior partners didn’t want anything to do with it so it became a relatively small handful of younger partners in this firm who were the point people for [merger and acquisition law],” Sparks says.
Frank Balotti was one of the young lions. He and Sparks have teamed up and, just as frequently, battled each other in court through the years. “He’s easy to work with and willing to take suggestions, to discuss things,” says Balotti, who practices at Richards, Layton & Finger in Wilmington. “And when Gil is on the other side, you know you’re going to get a run for your money. You know that you have to be as prepared as you possibly can, because he will be. He’s a terrific lawyer, sincere, as honest as can be, doesn’t overstate his case, drills into his opponent’s soft points and faces up to his.”
In addition to his caseload, Sparks finds time to serve on the University of Delaware’s board of trustees. “Gil’s advice on what should be brought forward and his questioning as we debate different issues is outstanding,” says Howard Cosgrove, the board’s chairman. “He helps make sure we get the appropriate information to make judgments.”
He makes sure to fit R&R into his schedule as well. A diehard Phillies fan, he went to all but one playoff game last year. “One night I got home at 3 in the morning. I had to be up at 8 for a six-and-a-half-hour board meeting on the phone. Then I got a half-hour nap and I was back in my car on my way to the next game, because you had to get there after the Flyers let out and before the Who concert came in,” he says.
When baseball season ends, he plays tennis, works on his model railroad, and sails his 35-foot boat, Sea Robin, on Chesapeake Bay. “I always said if I ever stop doing this, there’s not going to be any shortage of things that I’m interested in,” he says.
Not that corporate raiders should get too excited. He’s not planning to hang up his career anytime soon; his clients won’t let him. “Once you’re in a plight,” he shrugs, “everybody knows where to find you.”