California Court Of Appeal Applies Three-Year Limitation Under Delaware Law To Claim Against Dissolved Delaware Corporation
In Greb v. Diamond Int’l Corp., 2010 Cal. App. LEXIS 566 (Cal. App. 1st Dist. Apr. 26, 2010), the California Court of Appeal for the First District affirmed the trial court’s dismissal of a personal injury claim against a dissolved Delaware corporation, holding that the claim was filed more than three years after dissolution of the corporation in violation of Delaware General Corporation Law Section 278. In doing so, the Court made it clear that, for purposes of lawsuits filed in California against dissolved non-California corporations, the law of the state of incorporation controls whether claims are timely filed.
United States Supreme Court Clarifies Statute Of Limitations For Private Securities Fraud Actions
In Merck & Co. v. Reynolds, No. 08-905, 2010 U.S. LEXIS 3671 (Apr. 27, 2010), the Supreme Court of the United States held that a private securities fraud claim accrues for statute of limitations purposes at the earlier of when (1) the plaintiff does in fact discover, or (2) a reasonably diligent plaintiff would have discovered, “the facts constituting the violation.” The Supreme Court held further that “facts constituting the violation” include the “fact” of defendants’ scienter, i.e., “a mental state embracing intent to deceive, manipulate, or defraud.” This unanimous clarification by the Supreme Court of how lower courts should apply the statute of limitations for private securities fraud claims provides a bit more breathing room for would-be plaintiffs.
Second Circuit Affirms Dismissal Of Securities Fraud Claims Against Secondary Actors Because Alleged False Statements Were Not Attributed To Them
In Pacific Investment Management Co. LLC v. Mayer Brown LLP, No. 09-1619, 2010 WL 1659230 (2d Cir. Apr. 27, 2010), the United States Court of Appeals for the Second Circuit affirmed the dismissal of securities fraud claims asserted against outside counsel to Refco Inc. (“Refco”), holding that such secondary actors can be held liable for damages in a private securities fraud action only if the alleged false or misleading statements are attributed to that secondary actor at the time the statements were disseminated. Without a showing of this so-called “attribution requirement,” secondary actors who participate in the preparation or creation of false statements can be guilty of no more than “aiding and abetting,” which under Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164 (1994), cannot form the basis of a securities fraud claim. This decision confirms the Second Circuit’s strict application of Central Bank and Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc., 552 U.S. 148 (2008), to limit securities fraud claims against secondary actors.
California Court Of Appeal Affirms Dismissal Of Shareholder Derivative Action Where Company Refused Demand
In Bezirdjian v. O’Reilly, Case No. A124859, 183 Cal. App. 4th 316, 2010 WL 1212437 (Cal. App. Mar. 30, 2010), the California Court of Appeal for the First Appellate District affirmed the dismissal of a shareholder derivative action against current and former board members of Chevron Corporation. The Court held that the plaintiff failed to allege facts with sufficient particularity to rebut the presumption that the company’s refusal to pursue the case in response to the shareholder demand was protected by the business judgment rule. This decision joins the growing body of California cases that follow or apply Delaware law in protecting the integrity of corporate decision-making.
Third Thursday Emerging Company Webinar: SEED AND ANGEL CAPITAL: The Case for Convertible Notes
Third Thursday Emerging Company Webinars
May 20, 2010
LiveMeeting
Thursday, May 20, 2010, 12:00 p.m. - 1:00 p.m. (PDT)
Presented by John Tishler, Partner, Sheppard Mullin
"I've found some angels who like my story and are ready to invest, but we can't agree on valuation. I think my company, with its protected IP, visionary business plan and top-shelf validations, is worth at least $10 million, but the angels want one-third of the company for a $1M investment. Why can't they see what I see? I need the money but I just can't stand giving away that much of my company for so little money. What do I do?"
The technique of using convertible notes for seed and angel financings has a number of advantages over a traditional Series A structure. While the notes initially seem more complicated, the structure is actually simpler to document than a typical Series A preferred round and has a number of advantages. The biggest advantage for founders is the deferral of the valuation decision to a future time when the company will have more accomplishments to ground the founders' valuation expectations.
We'll discuss the advantages of convertibles notes and many of the negotiating parameters for convertible note rounds, including discounts and warrant coverage.
We hope you'll log in for a timely and lively discussion.
This activity complies with standards for Minimum Continuing Legal Education prescribed by the California State Bar and is approved for 1.0 hour of MCLE credit. Sheppard, Mullin, Richter & Hampton LLP is a State Bar of California approved MCLE provider.
This program has been approved in accordance with the requirements of the New York State Continuing Legal Education Board for a maximum of 1 credit hour which may be applied toward the Areas of Professional Practice requirement, and is suitable for non-transitional attorneys.
The WebEx link and dial in will be e-mailed to you once you register. MCLE certificates will be distributed following the webinar.
