Category Archives: Courts and ADR

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Eleventh Circuit Holds That a Corporation Is Not Distinct From Its Agents For Purposes of a RICO Enterprise, Following Sister Circuits

In Ray v. Spirit Airlines, Inc., No. 15-13792, 2016 WL 4578347 (11th Cir. Sept. 2, 2016), the United States Court of Appeals for the Eleventh Circuit held that a defendant corporation is not distinct from its own officers and employees for purposes of forming an “enterprise” under the Racketeer Influenced and Corrupt Organizations Act, 18 … Continue Reading

Delaware Court of Chancery Addresses the “Cleansing Effect” of Stockholder Approval In Post-Closing M&A Damages Actions

In two recent decisions, City of Miami General Employees’ & Sanitation Employees’ Retirement Trust v. Comstock, C.A. No. 9980-CB, 2016 Del. Ch. LEXIS 133 (Del. Ch. Aug. 24, 2016) (Bouchard, C.) (“Comstock”), and Larkin v. Shah, C.A. No. 10918-VCS, 2016 Del. Ch. LEXIS 134 (Del. Ch. Aug. 25, 2016) (Slights, V.C.), the Delaware Court of … Continue Reading

Seventh Circuit Criticizes Disclosure-Only M&A Litigation Settlements, Holding That Supplemental Proxy Disclosures Must Address and Correct a Plainly Material Misrepresentation or Omission

In In re Walgreen Co. Stockholder Litigation, No. 14 C 9786, 2016 WL 4207962 (7th Cir. Aug. 10, 2016) (Posner, J.), the United States Court of Appeals for the Seventh Circuit issued a highly charged opinion critical of an unopposed settlement of a stockholder class action “strike suit” which provided “nonexistent” benefits to class members … Continue Reading

Tenth Circuit Upholds Nevada Law By Denying Stockholders Standing to Bring Claims on Behalf of Nevada Corporation

In In re Zagg Inc. Shareholder Derivative Action, No. 15-4001, 2016 U.S. App. LEXIS 11095 (10th Cir. June 20, 2016), the United States Court of Appeals for the Tenth Circuit held that stockholders of a Utah-based, Nevada corporation, who failed to make pre-suit demand that the corporation’s board of directors cause the corporation to file … Continue Reading

Delaware Supreme Court Holds That a Stockholder Plaintiff Must Plead a Non-Exculpated Claim to Avoid Section 102(b)(7)-Based Dismissal When Seeking Damages From Independent and Disinterested Directors

In the consolidated appeal In re Cornerstone Therapeutics Inc., Stockholder Litigation and In re Zhongpin Stockholders Litigation, Nos. 564, 2014 and 706, 2014, 2015 Del. LEXIS 231 (Del. May 14, 2015), the Delaware Supreme Court considered for the first time the pleading burden a stockholder plaintiff must meet when seeking to recover monetary damages from … Continue Reading

California and Delaware Courts Agree: Amendments to Corporate Bylaws Do Not Apply Retroactively to Impair Pursuit of Previously Accrued Claims

Two recent decisions, one from the Delaware Court of Chancery and one from the California Court of Appeal, Fourth Appellate District, refused to apply bylaws that impaired a shareholder/member plaintiff’s ability to pursue his or her claims against the corporation where the the relevant bylaw was adopted after the plaintiff’s claims accrued.… Continue Reading

Delaware Court of Chancery Rejects Share-Tracing Standing Requirement for Appraisal Petitioners

The Delaware Court of Chancery issued companion opinions clarifying Delaware’s standing requirements for appraisal petitions under 8 Del. C. § 262.  In In re Appraisal of Ancestry.com, Inc., C.A. No. 8173-VGC, 2015 WL 66825 (Del. Ch. Jan. 5, 2015), and Merion Capital LP v. BMC Software, Inc., C.A. No. 8900-VCG, 2015 WL 67586 (Del. Ch. Jan. … Continue Reading

Delaware Supreme Court Confirms Chancery Court’s Broad Authority to Impose Use Restrictions on Information Obtained From Section 220 Books and Records Inspections

In United Technologies Corp. v. Treppel, No. 127, 2014, 2014 Del. LEXIS (Del. Dec. 23, 2014), the Delaware Supreme Court held that the Delaware Court of Chancery is authorized regulate how stockholders use information obtained through books and records inspections under Section 220 of the Delaware General Corporation Law (“Section 220”).  The defendant corporation, in … Continue Reading

Ninth Circuit Holds that Under Nevada Law, a Prior Stockholder’s Litigation of Demand Futility Precludes Another Stockholder From Litigating Demand Futility In a Subsequent Derivative Action

In Arduini v. Hart, 2014 WL 7156764 (9th Cir. Dec. 17, 2014), the United States Court of Appeals for the Ninth Circuit considered whether the doctrine of issue preclusion prevents a stockholder from relitigating a prior adverse determination concerning demand futility in derivative action brought by a different stockholder.  Applying Nevada law, the Court held … Continue Reading

FINRA Issues Guidance Notice on Confidentiality Provisions in Settlement Agreements and the Arbitration Discovery Process

In Regulatory Notice 14-40, FINRA reminds members that it is a violation of FINRA Rule 2010 (Standards of Commercial Honor and Principles of Trade) to incorporate into a settlement agreement a confidentiality provision restricting or prohibiting a customer or other person from communicating with the Securities and Exchange Commission (SEC), FINRA, or any federal or … Continue Reading

Second Circuit Holds Forum Selection Clause Supersedes FINRA’s Mandatory Arbitration Rule

In Goldman, Sachs & Co. v. Golden Empire Schools Financing Authority, No. 13-797-cv, 2014 WL 4099289 (2d Cir. Aug. 21, 2014), the United States Court of Appeals for the Second Circuit held that a forum selection clause in a broker-dealer agreement superseded FINRA’s mandatory arbitration rule.  FINRA Rule 12200 compels members to arbitrate disputes if … Continue Reading

Second Circuit Defines “Customer” for Mandatory FINRA Arbitration

In a case of first impression, the United States Court of Appeals for the Second Circuit in Citigroup Global Markets, Inc. v. Abbar, No. 13-2172, 2014 WL 3765867 (2d Cir. Aug. 1, 2014), established a bright-line definition of “customer” under FINRA’s mandatory arbitration provision.  Absent a written agreement to arbitrate, FINRA Rule 12200 compels FINRA … Continue Reading

Delaware Court of Chancery Rejects Indemnification Sleight of Hand

In Branin v. Stein Roe Inv. Counsel, LLC, C.A. 8481-VCN, 2014 WL 2961084 (Del. Ch. June 30, 2014), the Delaware Court of Chancery held that a vested right to indemnification may not be rescinded by a subsequent amendment to the governing corporate document. Francis S. Branin Jr. (“Branin”) owned and managed the investment management firm … Continue Reading

Second Circuit Overturns District Court’s Rejection of SEC-Citigroup Fraud Settlement

In a closely-watched decision involving judicial review of agency settlements, the Unites States Court of Appeals for the Second Circuit vacated United States District Court Judge Jed Rakoff’s 2011 order rejecting a proposed $285 million settlement between the Securities and Exchange Commission (“SEC”) and Citigroup Global Markets Inc., finding that the judge applied an incorrect … Continue Reading

First Circuit Affirms District Court’s Exclusion of Event Study as Unreliable Under Daubert

In Bricklayers & Trowel Trades Int’l Pension Fund v. Credit Suisse Sec. (USA) LLC, No. 12-1750, 2014 U.S. App. LEXIS 8994 (1st Cir. May 14, 2014), the United States Court of Appeals for the First Circuit affirmed a district court’s exclusion of an event study as unreliable under Daubert v. Merrell Dow Pharm., Inc., 509 … Continue Reading

Second Circuit Applies Morrison v. National Australia Bank to Allow Certain Extraterritorial Application of RICO

In European Community v. RJR Nabisco, Inc., Case No. 11-CV-2475 (2d Cir. Apr. 23, 2014), the United States Court of Appeals for the Second Circuit held that the Racketeer Influenced and Corrupt Organizations (“RICO”) statute, 18 U.S.C. § 1961, et seq., could apply to conduct outside the territory of the United States.  In doing so, the … Continue Reading

Appellate Court Issues Opinion on SEC’s Conflict Minerals Rule

Yesterday, the Court of Appeals for the D.C. Circuit issued its opinion in the challenge to the SEC’s Conflict Minerals Rule.  We have reviewed the D.C. Court of Appeals decision and find that it leaves much of the SEC’s rule intact.  It is specifically the requirement that companies describe products as not “DRC conflict free” … Continue Reading

United States Supreme Court Holds That Section 806 of the Sarbanes-Oxley Act Extends to Employees of Private Companies Who Are Contractors or Subcontractors for Covered Public Companies

In Lawson v. FMR, LLC, No. 12-3, 2014 WL 813701 (U.S. Mar. 4, 2014), the Supreme Court of the United States, in a 6-3 decision reversing the United States Court of Appeals for the First Circuit, held that the whistleblower protection provision in Section 806 of Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1514A (“SOX”), protects … Continue Reading

United States Supreme Court Resolves Circuit Split and Narrows Scope of SLUSA

In Chadbourne & Parke LLP v. Troice, Nos. 12-79, 12-86 and 12-88, 2014 U.S. LEXIS 1644 (U.S. Feb. 26, 2014), the Supreme Court of the United States resolved a split in the circuits regarding whether alleged misrepresentations were made “in connection with the purchase or sale of a covered security” for purposes of the Securities … Continue Reading

United States Supreme Court Holds That Non-U.S. Corporations Are Subject to General Personal Jurisdiction in U.S. States Only in States Where They Are “At Home”

In Daimler AG v. Bauman, No. 11-965, 2014 U.S. LEXIS 644 (U.S. Jan. 14, 2014) (Ginsburg, J.), the Supreme Court of the United States held that a court may not exercise general personal jurisdiction over a non-U.S. corporation unless that corporation’s contacts with the forum state are so continuous and systematic as to render the … Continue Reading

United States Supreme Court Holds that Contractual Forum-Selection Clauses Deserve Near Absolute Deference In Considering Changes of Venue Under 28 U.S.C. § 1404(a)

In Atlantic Marine Construction Co., Inc. v. United States Dist. Ct. for W.D. Tex., No. 12-929, 2013 U.S. LEXIS 8775 (U.S. Dec. 3, 2013), the Supreme Court of the United States held unanimously that when parties have agreed contractually to a valid forum-selection clause, the analysis for a motion to transfer venue under 28 U.S.C. … Continue Reading

California Court of Appeal Holds That Challenges to Corporate Elections Under Corporations Code Section 709 May be Predicated Upon Breach of Fiduciary Duty and Conflict of Interest Allegations

In Morrical v. Rogers, No. A137011, 2013 Cal. App. LEXIS 811 (Cal. App. Oct. 10, 2013), the California Court of Appeal, First District, held that the summary procedures set forth in California Corporations Code § 709 may be used to contest corporate elections predicated upon complex and substantive allegations of corporate or directorial misconduct, such as … Continue Reading

Second Circuit Rejects the Application of American Pipe‘s Tolling Rule and Rule 15(c)’s “Relation Back” Doctrine to the Three-Year Statute of Repose for Section 11 and 12(a) Claims

In In re IndyMac Mortgage-Backed Securities Litigation, No. 11-2998-CV, 2013 WL 3214588 (2d Cir. June 27, 2013), the United States Court of Appeals for the Second Circuit held that the tolling rule established by the United States Supreme Court in American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974), which suspends the applicable … Continue Reading

Fifth Circuit Holds That Securities Fraud Defendants May Not Rebut the Fraud-on-the-Market Presumption at the Class Certification Stage Through Evidence of No Price Impact

In Erica P. John Fund, Inc. v. Halliburton Co., No. 12-10544, 2013 WL 1809760 (5th Cir. Apr. 30, 2013), the United States Court of Appeals for the Fifth Circuit held that a defendant in a securities fraud class action is not entitled to rebut the fraud-on-the-market presumption of reliance at the class certification stage by … Continue Reading
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