That everyone is a media critic these days is something of a truism. But when criticism comes from as unlikely a quarter as Delaware's Court of Chancery, it can turn heads, or at least this one. So when Delaware Vice Chancellor and judicial raconteur Leo Strine Jr. recently opined on deal journalism's "gossipy quality," which he described as "very People magazine, very National Enquirer, very E! channel," we couldn't help but notice.
Strine's musings came during a recent hearing in a suit against J.P. Morgan Chase & Co. relating to its purchase of Bear Stearns Cos. Leena Langeland, a Connecticut dentist who owns 400 shares of J.P. Morgan, believed the bank, or its deal attorneys at Wachtell, Lipton, Rosen & Katz, possibly engaged in wrongdoing when they initially agreed to guarantee Bear's trades for a year -- even if Bear's shareholders voted against J.P. Morgan's offer of $2 a share. Langeland asked for access to the deal's "books and records" so she could investigate exactly how the deal, which was later renegotiated to $10 a share, got done.
To bolster her request, Langeland's lawyers submitted the "accounts of certain journalists," including passages from William Cohan's book on Bear's failure, "House of Cards," and stories on the deal by Kate Kelly of The Wall Street Journal and Andrew Ross Sorkin of The New York Times, who all reported that J.P. Morgan CEO Jamie Dimon believed his lawyers made a mistake when they included the guarantee in the initial agreement.
Strine, however, pointed out that none of the journalists quoted Dimon directly on this point, sourcing the information instead to an interview with former Bear CEO Alan Schwartz or, in the case of Sorkin, who reported that Dimon was "apoplectic" over the guarantee, to an unnamed person involved or briefed on the talks. He found this problematic.
"[I]f you took all the Serenities and all the Depends, adult diapers, in the world and then added on top of them every cloth and child diaper in the world and you covered Wall Street and the financial district, it would still be insufficient to stop the leakage," Strine opined, according to a transcript. "I mean, that is the leakiest community that exists on earth. And, not saying they don't say truthful things, but they clearly say wildly ridiculous things."
Langeland's lawyer, Matthew Miller of Cuneo Gilbert & LaDuca LLP in Washington, insisted these reports are well sourced, particularly Sorkin's, since "Sorkin publicly announced the terms of the revised deal before they were announced by the parties. So he clearly had access to an inside source. That's an additional point of corroboration."
Strine remained unmoved by Miller's argument. "I gave you the chance to point me to your best thing, and you gave me something that wasn't sourced," the vice chancellor declared. "I'm not saying -- again, if what you're saying by 'sourced' is X, who the journalist talked to, X says he talked to Y, who talked to Z, who talked to A, and because X is X unidentified but in a position to have talked to Y, who's in a position to have talked to Z, who's in a position to have talked to A, the journalist can pass journalistic muster and write the story, is that what you mean by 'sourced'?"
Miller responded that Strine's description of Sorkin's piece was "accurate." Strine, not surprisingly, went on to deny Langeland's request and to opine some more on deal, or as he called it, "transactional" journalism. "I'm not impugning the journalistic integrity of anybody who wrote these books or articles," he said. "They have different standards than a court." But he can't help but believe that if the journalists "had someone who was willing to be on the record, they would quote him or her. They don't have somebody." So their reports are not credible.
Strine took great pains to distinguish between the court's standards and those of the rest of the world, where most deal journalism is consumed. But at a time when sourcing standards continue to erode against a rising tide of gossip, his skepticism is worth noting. "Doesn't mean they're not good journalists, but they're telling stories in colorful ways," he said. To consider something credible, he added, "I want a journalist to identify the source and the source to actually make the accusation with some particularity."
Maybe in another life Strine can become the New York Times' public editor.
Yvette Kantrow is executive editor of The Deal.