Corporate Considerations

A new presidential administration always brings changes that impact a broad spectrum of industries.  And the Biden Administration figures to be no exception.  There have been numerous thoughtful articles about how President Biden’s administration could reshape federal agencies’ priorities and impact various industries.  One such article, by my Wiley colleague Duane Pozza, focuses on the FTC.  Duane identified five areas that a Biden FTC is likely to prioritize.  Duane’s whole article is interesting in its own right, but one point jumps out that will almost certainly impact the D&O insurance world—an increase in seeking individual liability for directors and officers.

Continue Reading Changes at the FTC Could Increase D&O Exposure

A California court ruled that a forum selection provision in a Delaware company’s registration statement requiring that certain securities litigation be brought solely in federal court was enforceable.  Wong v. Restoration Robotics, Inc., Case No. 18CIV02609 (Cal. Sup. Ct., San Mateo County, Sept. 1, 2020).  The California court’s ruling could signal the beginning of a broader trend, started in Delaware, that would be helpful to securities defendants, and, in turn, to insurance carriers.

Continue Reading California Court Enforces Federal Forum Selection Provision For 1933 Act Claims

The Delaware Supreme Court today handed securities defendants a major victory, concluding that forum selection provisions in Delaware companies’ registration statements that required that certain securities litigation be brought solely in federal district court were facially valid.  Salzberg, et al. v. Sciabacucchi, Case No. 314 2019 (Del. Mar. 18, 2020).  In doing so, it overturned the Delaware Chancery Court’s previous conclusion that such provisions were unenforceable to the extent that they required any claim under the Securities Act of 1933 (the 1933 Act) to be filed exclusively in federal court.

Continue Reading Delaware Supreme Court Reverses Chancery Court; Concludes Federal Forum Selection Provisions Enforceable For 1933 Act Claims

In an issue of first impression in California, a California appellate court has rejected a shareholder plaintiff’s effort to avoid enforcement of a Delaware company’s forum selection bylaw, despite the shareholder’s arguments that the bylaw was inconsistent with California law and was otherwise unreasonable given the manner and timing of its adoption.  Drulias v. 1st Century Bancshares, Inc., __ Cal.Rptr.3d __, 2018 WL 6735137 (Cal. Ct. App. Dec. 21  2018).  While Delaware law plainly authorizes such forum selection bylaws, this ruling by a non-Delaware court is a welcomed confirmation that these provisions can be enforced in proceedings brought outside of the state.

Continue Reading Corporate Coverage Considerations: California Appellate Court Confirms Enforceability of Delaware Forum Selection Bylaws

Ruling on summary judgment, the Delaware Chancery Court has held that forum selection clauses in three separate companies’ corporate charters requiring that any claims under the Securities Act of 1933 be brought in federal court are “ineffective and invalid.”  Sciabacucchi, et al. v. Salzberg, et al., C.A. No. 2017-0931-JTL (Del. Ch. Dec. 19, 2018).  In doing so, the court noted that the source of the 1933 Act claims was federal law, distinct from any right created under Delaware law, and thus beyond the power of the companies to control through their bylaws in this manner.

Continue Reading Delaware Chancery Court Rules Federal Forum Selection Clause in Corporate Charter Unenforceable

The Delaware Chancery Court has dismissed an action brought by three plaintiffs’ law firms seeking legal fees in connection with merger litigation that was initially successful, but which ultimately failed on appeal when the transaction closed and the objector lost standing.  Bragar Eagel & Squire, PC, et al. v. Kinder Morgan Energy Partners, LP, et al., C.A. No. 2017-0841-JTL (Del. Ch. Apr. 9, 2018).  The court determined that principles of res judicata required that it reject the firms’ subsequent action to recover fees and that, even if that were not the case, the firms’ prior efforts had not produced a “cognizable benefit” for the objecting plaintiff sufficient to justify a fee award.

Continue Reading No Legal Fees for M&A Objector Where Transaction Resulted in Loss of Standing to Object

A New York trial court has rejected a “disclosure-only” settlement in a shareholder class action, determining that the disclosures were not sufficiently beneficial to the class to support the settlement or the related plaintiffs’ fee award.  City Trading Fund v. Nye, Index No. 651668/2014 (Sup. Ct. NY County Feb. 8, 2018).

Continue Reading NY Court Rejects Disclosure-Only Shareholder Class Action Settlement

The Delaware Supreme Court, once again addressing questions of issue preclusion in the context of shareholder derivative litigation, has rejected suggestions by the Chancery Court that giving preclusive effect to initial, unsuccessful efforts to litigate demand futility violates the Due Process rights of shareholders attempting to bring a subsequent action elsewhere. California State Teachers’ Retirement System, et al. v. Aida M. Alvarez, et al. and Wal-Mart Stores, Inc., No. 295, 2016 (Del. Jan. 25, 2018).  According to the Court, such issue preclusion does not necessarily violate Due Process rights, at least where the various plaintiffs have a common interest and legal representation is adequate in the initial action.

Continue Reading No Second Bite for Derivative Plaintiffs: Delaware Supreme Court Rebuffs Invitation to Undermine Preclusive Effect of Prior Unsuccessful Derivative Action

In response to the Delaware Supreme Court’s question in connection with remand, the Delaware Chancery Court has suggested reevaluation of its prior willingness to dismiss subsequent derivative litigation where an earlier derivative action has been dismissed due to demand futility.  In re Wal-Mart Stores, Inc. Delaware Derivative Litigation, C.A. No. 7455-CB (consol.), supp. op. (Del. Ch. July 25, 2017).  Where the court previously would dismiss subsequent efforts to re-litigate demand failure, the new approach suggested by the Chancery Court provides that an earlier action should not be given preclusive effect if it failed to survive a motion to dismiss pursuant to Delaware Chancery Court Rule 23.1, the Delaware analog to Federal Rule of Civil Procedure 23.1.

Continue Reading Inviting a Second Bite at the Apple: Delaware Chancery Court Suggests New Approach to Evaluating Preclusive Effect of Prior Unsuccessful Derivative Litigation