On May 24, 2018, President Donald J. Trump signed into law the Economic Growth, Regulatory Relief, and Consumer Protection Act (the “Act”). The Act, which primarily focuses on rolling back certain regulatory provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, also contained a significant change in the law for companies looking to undertake securities offerings in reliance on the revamped Regulation A (commonly referred to as “Regulation A+”) under the Securities Act of 1933. Continue Reading
Contracts with Foreign Companies May Require a Rewrite
Posted in Courts and ADRA recent California case may force companies doing business with foreign entities to reconsider—and maybe rewrite—their contracts. In Rockefeller Tech. Invs. (Asia) VII v. Changzhou Sinotype Tech. Co., No. B272170, 2018 WL 2455092 (Cal. App. June 1, 2018), the California Court of Appeal held that parties may not contract around the formal service requirements of the Convention on the Service Abroad of Judicial and Extrajudicial Documents, commonly referred to as the Hague Service Convention. The decision could have profound implications for international business. Continue Reading
California Court of Appeal Enforces Delaware Forum Selection Clause Contained in Certificate of Incorporation
Posted in Courts and ADRIn Bushansky v. Soon-Shiong, 2018 Cal. App. LEXIS 493 (Cal. App. May 25, 2018), the California Court of Appeal, Fourth Appellate District, affirmed the dismissal of a shareholder derivative action brought in the Superior Court of California, San Diego County, on forum non conveniens grounds based upon an exclusive Delaware forum selection clause in the corporation’s certificate of incorporation. This decision interpreted for the first time a condition in a forum selection clause requiring that the Delaware courts have personal jurisdiction over all indispensable parties in order to trigger exclusive forum selection. The Court rejected plaintiff’s assertion that Delaware personal jurisdiction must exist at the time of the filing of the suit, and instead held that post-filing conduct by a defendant voluntarily accepting Delaware personal jurisdiction within a reasonable timeframe thereafter was sufficient. In so doing, the Court disagreed expressly with a decision from the Washington Court of Appeals. This decision reflects continued deference by the California courts to Delaware forum selection clauses in certificates of incorporation. Continue Reading
United States Supreme Court Holds that Foreign Corporations May Not Be Held Liable Under the Alien Tort Statute
Posted in OtherIn Jesner v. Arab Bank, PLC, 584 U.S. ___, 2018 WL 1914663 (U.S. Apr. 24, 2018) (Kennedy, J.), the Supreme Court of the United States held that foreign corporations may not be sued under the Alien Tort Statute (“ATS”), 28 U.S.C. § 1350. The Court, disagreeing with opinions from the Seventh, Ninth and District of Columbia Circuits (see blog articles here and here), concluded that United States courts do not have authority under the ATS to impose liability on foreign corporations for violations of international human rights laws where the law of nations does not impose such liability. This decision provides relief to foreign corporations that otherwise could have been held liable for committing violations of international law under the ATS, in the area of human rights and beyond. Continue Reading
Ninth Circuit Splits From Other Circuits, Holding That a Negligence Standard Applies to a Claim Challenging Tender Offer Disclosures Under Section 14(e)
Posted in Securities LitigationIn Varjabedian v. Emulex Corp., No. 16-55088, 2018 U.S. App. LEXIS 10000 (9th Cir. Apr. 20, 2018), the United States Court of Appeals for the Ninth Circuit split from the Second, Third, Fifth, Sixth and Eleventh Circuits to hold that the liability standard for challenging alleged misstatements or omissions in connection with a tender offer under Section 14(e) of the Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. § 78n(e), is mere negligence, not fraudulent intent or scienter. The district court had granted defendants’ motion to dismiss plaintiff’s Section 14(e) claim for failure to plead facts showing scienter. The Ninth Circuit, however, reversed and remanded to allow the district court to consider the sufficiency of the complaint under a negligence standard. This is the first instance in which a Court has allowed a Section 14(e) claim to proceed without a showing of scienter. Continue Reading
Second Circuit Limits Reach of SLUSA Preclusion in State Law Variable Annuity Class Action
Posted in Securities LitigationIn O’Donnell v. AXA Equitable Life Insurance Co., No. 17-cv-1085, 2018 WL 1720808 (2d Cir. Apr. 10, 2018), the United States Court of Appeals for the Second Circuit reversed an order dismissing a variable annuity policyholder’s putative class action against AXA Equitable Life Insurance Company (“AXA”) as precluded by the Securities Litigation Uniform Standards Act of 1998 (“SLUSA”), 15 U.S.C. § 78bb(f). Plaintiff alleged that AXA breached its contractual duties by employing a new strategy for its variable annuity policies without obtaining proper approval from the New York State Department of Financial Services (“DFS”). AXA allegedly misled the regulator by failing to adequately inform and explain the significance of the changes to its insurance product in documentation submitted to DFS. The Court held that because the plaintiff and putative class members were unaware of the defendant’s alleged misrepresentation to DFS, the misrepresentation could not have been “in connection with” a purchase or sale of securities, and thus could not be governed by SLUSA. This decision establishes important limits on SLUSA preclusion and the scope of the United States Supreme Court’s seminal SLUSA decision, Merrill Lynch, Pierce, Fenner & Smith Inc. v. Dabit, 547 U.S. 71 (2006). Continue Reading
SEC Takes Baby Steps on Cyber, but Signals Greater Vigilance
On February 21, the Securities and Exchange Commission issued new Interpretive Guidance regarding disclosures of cybersecurity-related information by publicly traded companies. This guidance comes in the context of public pressure on the SEC to update its 2011 Division of Corporation Finance guidance regarding cybersecurity risks and incidents. According to SEC Chairman Jay Clayton’s statement, this new document serves to reinforce and expand the prior guidance. It lays out principles that companies should follow in determining when cybersecurity information should be disclosed, and what should be disclosed. Continue Reading
Higher Filing Thresholds for HSR Act Premerger Notifications and Interlocking Directorates Announced
Posted in Antitrust/Merger Control- Higher Thresholds For HSR Filings
On January 26, 2018, the Federal Trade Commission announced revised, higher thresholds for premerger filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The filing thresholds are revised annually, based on the change in gross national product and will be effective thirty days after publication in the Federal Register. Publication is expected within one week, so the new thresholds will likely become effective in late February 2018. Acquisitions that have not closed by the effective date will be subject to the new thresholds. Continue Reading
Delaware Supreme Court Imposes New Limits on Stockholder Ratification Defense In Connection With Equity Incentive Plans
Posted in Corporate Governance, Executive CompensationIn In re Investors Bancorp, Inc. Stockholder Litigation, No. 169, 2017, 2017 WL 6374741 (Del. Dec. 13, 2017), the Delaware Supreme Court limited the ability of directors to assert the stockholder ratification defense when facing a challenge to their implementation of equity incentive plans (“EIP”). When properly invoked, the stockholder ratification defense entitles directors to have a court review their conduct under the more deferential business judgment rule standard, rather than the more stringent “entire fairness” standard. The Delaware Supreme Court held that where stockholders approve an EIP containing general parameters that afford directors discretion to determine specific awards, and their exercise of discretion is properly challenged as a breach of fiduciary duty due to alleged self-dealing, a board must prove that its actions were entirely fair to the corporation and its stockholders. This ruling has the important effect of shifting the burden from complainant stockholders to defending directors and subjects their awards of grants to stricter scrutiny. Continue Reading
The Effects of Tax Reform on Private Equity
Posted in Private EquityOn December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act (TCJA), the most extensive overhaul of the United States tax regime in over thirty years. The new tax law will have a significant impact upon individual taxpayers in all income tax brackets, all businesses and every sector of the economy, including private equity. This alert provides a brief summary of some of the provisions that are likely to impact private equity, both at a fund level and the portfolio company level, and provides some insight in terms of what private equity professionals should consider in their tax structuring going forward. Continue Reading
