Delaware Court of Chancery Holds that a Stockholder’s Disagreement with a Board’s Business Judgment and Intent to Pursue a Proxy Contest is Not a “Proper Purpose” for a Section 220 Demand

By Jeffrey Fessler, John Stigi and Justin Anslow on November 19, 2019 Posted in Corporate Governance, Courts and ADR

In High River Limited Partnership v. Occidental Petroleum Corp., C.A. No. 2019-0403-JRS, 2019 WL 6040285 (Del. Ch. Nov. 14, 2019) (Slights, V.C.), the Delaware Court of Chancery held that a stockholder’s mere disagreement with a business decision of a board of directors and intent to pursue a bone fide proxy contest is not a “proper purpose” to support a demand to inspect the corporation’s books and records under Section 220 of the Delaware General Corporation Law, 8 Del. C. § 220. By declining the stockholder’s invitation to adopt a “new rule entitling stockholders to inspection documents under Section 220 if they can show a credible basis that the information sought would be material in the prosecution of a proxy contest,” this decision clarifies what had been a “murky” legal landscape under Section 220. Continue Reading

Start Spreadin’ the News: California Court Says No to New York, New York; Rejects Forum Selection Clause

By Steven Cardoza and Jacqueline Gottlieb Luther on November 19, 2019 Posted in Courts and ADR, Mergers & Acquisitions, Securities Litigation

Sinatra may have found success in the city that never sleeps, but a California court has just made it more difficult for any party doing business with a California resident to do the same. At least, when it comes to resolving disputes without a jury in a New York courtroom, or in the courtroom of any other jurisdiction that enforces pre-dispute jury trial waivers. This case will be of major interest to commercial lenders, and other businesses, who prefer to use states like New York and Delaware as their jurisdiction of choice for governing law and adjudicating disputes.

While it is well-settled law in California that pre-dispute contractual jury waivers are unenforceable (see, e.g., Grafton Partners L.P. v. Superior Court (2005) 36 Cal. 4th 944 (“Grafton”)), in most instances forum selection and choice-of-law provisions have been respected by California courts. However, the Court of Appeal for the First Appellate District recently expanded upon Grafton in Handoush v. Lease Financing Group, LLC. The Court dealt a commercial equipment lessor a significant blow by holding that the equipment lessee who signed a lease agreement with the lessor that was governed by New York law, identified New York as the appropriate forum for resolving disputes and included a pre-dispute jury waiver (which is enforceable under New York law), was nevertheless entitled to a trial by jury in California. Continue Reading

The Increased Role of Sustainability in the Food and Beverage Industry

By Ariel Yehezkel and Sarah Ben-Moussa on November 15, 2019 Posted in Other

*This post originally appeared as an article on Sustainable Food News.

Sustainability initiatives have taken on increasing significance in the food and beverage industry in recent years. With an increased focus on branding through social media and consumer demand for environmentally conscious business practices, companies are under increased pressure to demonstrate a commitment to conservation.

This has led many companies to begin investing in developing alternative business practices, aimed at creating an overall positive environmental impact and staying current in a market that has experienced rapid changes in recent years. Continue Reading

Delaware Update: Court of Chancery Declines to Bind a Non-signatory Parent Corporation to Forum Selection Clause

By Stephanie Zeppa and Robert Kay on November 11, 2019 Posted in Foreign Investment, Mergers & Acquisitions, Private Equity

In Neurvana Med., LLC v. Balt USA, LLC, No. 2019-0034-KSJM, 2019 Del. Ch. LEXIS 995 (Ch. Sep. 18, 2019), the Court of Chancery declined to exercise personal jurisdiction over Balt International, S.A.S. (“Balt International”), a company headquartered in France and a non-signatory entity to a purchase agreement that included a forum selection clause, on the grounds that Balt International was not ‘closely related’ to a purchase agreement entered into by Balt International’s wholly owned U.S. subsidiary, Balt USA, LLC (“Balt USA”). A key takeaway for practitioners is that the court sets a fairly high bar for plaintiffs to overcome when trying to enforce a forum selection clause against a non-signatory, and further provides a helpful guidepost for foreign organizations when conducting operations through a domestic subsidiary in the United States and the likelihood of a Delaware court exercising personal jurisdiction as a result thereof. Continue Reading

Third Circuit Reversal a Pyrrhic Win for SEC in Ongoing Statute of Limitations Saga

By Jeff Kern and Christopher Bosch on October 16, 2019 Posted in Investigations and Enforcement

In Securities & Exchange Comm. v. Gentile, No. 18-1242, 2019 WL 4686251 (3d Cir. Sept. 26, 2019), the United States Court of Appeals for the Third Circuit took up the question of whether Securities and Exchange Commission (“SEC”) injunctions constitute penalties subject to a five-year statute of limitations. In vacating a district court decision holding that they do, the Third Circuit held in this case of first impression that injunctions properly tailored to prevent future harm are not penalties. However, the opinion did not reach a determination as to whether the specific relief at issue had been so tailored, remanding that decision to the lower court along with the admonition that relief extending beyond the preventative into the punitive may not issue as an injunction. While the Third Circuit’s decision shielded the SEC’s injunctive powers from wholesale subjection to a five-year statute of limitations, it charted what qualifies as appropriate injunctive relief and, ultimately, may operate to curtail unduly broad injunctions. Continue Reading

Third Circuit Holds that SLUSA Does Not Preclude Class Action Opt-Outs from Pursuing Individual Actions

By Jonathan Moss, David Berger and Angela Reid on October 3, 2019 Posted in Securities Litigation

In North Sound Capital, LLC v. Merck & Co, Inc., No. 18-2317, 2019 WL 4309663, 2019 U.S. App. LEXIS 27518 (3d Cir. Sept. 12, 2019), the United States Court of Appeals for the Third Circuit reversed a New Jersey district court ruling, which held that the Securities Litigation Uniform Standards Act of 1998 (“SLUSA”) precluded state law claims in lawsuits brought by investors who opted-out of class action lawsuits. In reversing, the Third Circuit determined that the opt-out plaintiffs could indeed bring their state law fraud claims against the same defendants as the class action lawsuits because their subsequently filed suits did not fall within the definition of a “covered class action” under SLUSA. The decision provides helpful guidance as to whether investors who choose to opt-out of class action lawsuits may be precluded under SLUSA from proceeding with individual lawsuits seeking similar relief. Continue Reading

Gauging Interest: SEC Votes to Approve Proposal to Expand “Test-the-Waters” Rules

By Alexander Yarbrough and Richard A. Friedman on October 2, 2019 Posted in Capital Markets, Securities and Exchange Commission

The Securities and Exchange Commission (“SEC”) announced on September 26, 2019 that it voted to adopt the application of “testing-the-waters” rules to all issuers who engage in raising capital in the public markets. This represents a significant expansion of that accommodation, as those rules were previously only available to certain issuers classified as emerging growth companies or “EGCs.” The new Rule 163B will become effective 60 days after publication in the Federal Register. Continue Reading

SEC Looks to Modernize Disclosure Approach

By Justin Anslow, Alexander Yarbrough and Jeffrey Fessler on September 18, 2019 Posted in Disclosure, Securities and Exchange Commission

On August 8, 2019, the Securities and Exchange Commission (the “SEC”) announced that it voted to propose rule amendments to modernize the description of business, legal proceedings, and risk factor disclosures that public companies are required to make pursuant to Regulation S-K under the Securities Act of 1933 and the Securities Exchange Act of 1934. Continue Reading

How FDA Considerations Impact Food and Beverage Acquisitions

By Allison Fulton, Ariel Yehezkel and Allison Wu Troianos on August 16, 2019 Posted in Life Sciences, Mergers & Acquisitions

This post was originally published on FoodDive.com.

When considering an acquisition of a food and beverage company, potential buyers of a company or its assets should pay particular attention to U.S. Food and Drug Administration requirements and their implications on the target’s business.

Buyers should be cognizant of the regulatory issues at the beginning of the process so that their risk can be assessed in the context of the transaction, and in turn, be addressed by specific representations, covenants and indemnification provisions in the transaction documents. The following considerations should be top of mind throughout the course of due diligence and negotiations. Continue Reading

New York Commercial Division Justices Provide Dueling Approaches to Discovery Stays in State Court Securities Litigation

By Kate Ross on August 14, 2019 Posted in Securities Litigation

In In re Everquote, Inc. Securities Litigation, 2019 N.Y. Slip Op. 29242, No. 651177/2019, 2019 WL 3686065 (Sup. Ct. N.Y. Cnty. Aug. 7, 2019), Justice Andrew Borrok of the New York County Commercial Division stayed discovery pending a motion to dismiss a federal securities class action pursuant to the Private Securities Litigation Reform Act of 1995 (the “PSLRA”), diverging from the handful of state courts that have grappled with that statute’s application since the Supreme Court’s ruling last year in Cyan, Inc. v. Beaver County Employees Retirement Fund, 138 S.Ct. 1061 (2018) (“Cyan”). The PSLRA provides for an automatic discovery stay pending adjudication of motions to dismiss private securities actions, and has been interpreted to be a procedural mechanism meant to curb litigation abuses in securities cases. See 15 U.S.C. § 77z(b)(1). In his decision, Justice Borrok joined the ever-growing list of judges tasked with deciding whether such mechanisms apply to state court securities litigation in the wake of Cyan. Continue Reading

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