Category Archives: Courts and ADR

Delaware Supreme Court Provides Important Guidance Regarding Section 220 Demands, Rejecting Several Limiting Principles Frequently Offered By Corporations Resisting Stockholder Inspection Demands

By Alejandro Moreno and Kristin Housh on December 23, 2020 Posted in Corporate Governance, Courts and ADR

Section 220 of the Delaware General Corporation Law, 8 Del. C. § 220 (“Section 220”), permits a stockholder of a Delaware corporation to inspect corporate books and records upon a showing of a proper purpose. The Delaware courts have long urged stockholders to avail themselves of Section 220 — the “tools at hand” — to inspect … Continue Reading

Delaware Court of Chancery Clarifies that Management Cannot Unilaterally Curtail a Director’s Access to Corporation’s Privileged Information

By John Stigi and Alejandro Moreno on September 9, 2020 Posted in Corporate Governance, Courts and ADR

In In re WeWork Litigation, 2020 Del. Ch. LEXIS 270 (Del. Ch. Aug. 21, 2020) (Bouchard, C.), the Delaware Court of Chancery considered an issue of first impression: Does the management of a Delaware corporation have the unilateral authority to preclude a director from obtaining the corporation’s privileged information? The Court held it cannot. The … Continue Reading

Delaware Court of Chancery Applies the Internal Affairs Doctrine to Deny Stockholder Inspection Rights Under a Foreign State’s Law

By John Stigi and Alejandro Moreno on August 18, 2020 Posted in Courts and ADR

In Juul Labs, Inc. v. Grove, 2020 Del. Ch. LEXIS 264 (Del. Ch. Aug. 13, 2020) (Laster, V.C.), the Delaware Court of Chancery held that the “internal affairs doctrine” bars a stockholder of a Delaware corporation headquartered in a foreign jurisdiction from seeking to inspect corporate books and records pursuant to the statutory law of … Continue Reading

Delaware Court of Chancery Addresses Pleading ‘With Particularity’ Under Rule 23.1

By John Stigi and Alejandro Moreno on April 28, 2020 Posted in Courts and ADR

Rule 23.1 of the Delaware Court of Chancery Rules requires a plaintiff asserting a shareholder derivative action to plead “with particularity the efforts, if any, made by the plaintiff to obtain the action the plaintiff desires from the directors or comparable authority and the reasons for the plaintiff’s failure to obtain the action or for … Continue Reading

Second Circuit Holds that Registering to do Business in New York Under Section 1301 of the Business Corporation Law Does Not Constitute Consent to General Personal Jurisdiction in New York Courts

By Sarah Aberg and Bochan Kim on April 3, 2020 Posted in Courts and ADR

In Chufen Chen v. Dunkin’ Brands, Inc., No. 18-CV-3087, 2020 WL 1522826 (2d Cir. Mar. 31, 2020), the United States Court of Appeals for the Second Circuit held that the act of registering as a foreign corporation under Section 1301 of the New York Business Corporation Law (“BCL”) does not constitute consent to general personal … Continue Reading

Delaware Supreme Court Confirms That Federal Forum Provision Is Facially Valid, Reversing Court of Chancery

By John Stigi and Meilissa Mikail on March 19, 2020 Posted in Courts and ADR, Securities Litigation

In Sciabacucchi v. Salzberg, No. 346, 2019, 2020 WL 1280785 (Del. Mar. 18, 2020), the Delaware Supreme Court reversed a Delaware Court of Chancery (Laster, V.C.) decision declaring invalid a federal forum selection provision in a Delaware corporation’s charter or bylaws. The federal forum selection provision was intended to require claims by investors under the … Continue Reading

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 … 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 … Continue Reading

Court Finds Cybersecurity-Related Claims Sufficient in Securities Class Action

By Jonathan E. Meyer and Elfin Noce on February 6, 2019 Posted in Courts and ADR, Cybersecurity, Disclosure, Securities Litigation

In the aftermath of Equifax’s data breach, a federal court recently found that allegations of poor cybersecurity coupled with misleading statements supported a proper cause of action. In its decision, the U.S. District Court for the Northern District of Georgia allowed a securities fraud class action case to continue against Equifax. The lawsuit claims the company issued … Continue Reading

Delaware Courts Address Production of Emails and Other Electronically Stored Information In Response to Section 220 Demands

By Jeffrey Fessler, John Stigi and Justin Anslow on January 31, 2019 Posted in Corporate Governance, Courts and ADR

UPDATE: On August 5, 2020, the Delaware Supreme Court summarily affirmed the judgment of the Court of Chancery “on the basis of and for the reasons stated in its January 25, 2019 opinion.” Section 220 of the Delaware General Corporation Law, 8 Del. C. § 220, provides that any stockholder of a Delaware corporation “shall, … Continue Reading

California Court of Appeal Enforces Delaware Forum Selection Bylaw

By John Stigi and Meilissa Mikail on January 25, 2019 Posted in Courts and ADR, Securities Litigation

In Drulias v. 1st Century Bancshares, Inc., No. H045049, 2018 WL 6735137 (Cal. App. Dec. 21, 2018), the California Court of Appeal, Sixth Appellate District, affirmed an order staying a stockholder lawsuit brought in the Superior Court of California, Santa Clara County, on forum non conveniens grounds based upon enforcement of an exclusive Delaware forum … Continue Reading

Delaware Court of Chancery Declares Ineffective Exclusive Federal Forum Provision for 1933 Act Claims

By John Stigi and Meilissa Mikail on January 14, 2019 Posted in Courts and ADR, Securities Litigation

In Sciabacucchi v. Salzberg, C.A. No. 2017-0931-JTL, 2018 WL 6719718 (Del. Ch. Dec. 19, 2018), the Delaware Court of Chancery (Laster, V.C.) held that a forum-selection provision in a Delaware corporation’s charter or bylaws which purported to govern external investor claims not involving the internal affairs of the corporation are not authorized under Delaware law. … Continue Reading

New York Court of Appeals Rules that Civil Securities Fraud Claims Brought Under Martin Act are Subject to Three-Year Statute of Limitations

By Sarah Aberg and Kate Ross on July 13, 2018 Posted in Courts and ADR

In People v. Credit Suisse Securities (USA) LLC, No. 40, 2018 WL 2899299 (N.Y. June 12, 2018), the Court of Appeals for the State of New York ruled that the three-year statute of limitations of Section 214(2) of the New York Civil Practice Law & Rules (“CPLR”) applies to civil enforcement actions brought under the … Continue Reading

Contracts with Foreign Companies May Require a Rewrite

By Hwan Kim and Neil Popovic on June 13, 2018 Posted in Courts and ADR

A 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 … Continue Reading

California Court of Appeal Enforces Delaware Forum Selection Clause Contained in Certificate of Incorporation

By John Stigi on June 5, 2018 Posted in Courts and ADR

In 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 … Continue Reading

Delaware Court of Chancery Holds that Cancellation of Shares Through Merger Deprives Stockholder of Standing in Section 220 Action

By John Stigi and Ryan D. Schiedermayer on March 9, 2017 Posted in Courts and ADR, Mergers & Acquisitions

In Weingarten v. Monster Worldwide, Inc., C.A. No. 12931-VCG, 2017 WL 752179 (Del. Ch. Feb. 27, 2017), the Delaware Court of Chancery (Glasscock, V.C.) clarified when a plaintiff has standing to vitiate inspection rights under Delaware General Corporation Law Section 220, 8 Del. C. § 220. In a case of first impression, the Court decided that … Continue Reading

New York Appellate Division Revives Non-Monetary Class Action Settlement in M&A Class Action with Revised Standard of Review

By John Stigi and Christopher Bosch on March 2, 2017 Posted in Courts and ADR, Mergers & Acquisitions

In Gordon v. Verizon Communications, Inc., No. 653084/13, 2017 WL 442871 (N.Y. App. Div. Feb. 2, 2017), the Appellate Division of the Supreme Court of the State of New York, First Judicial Department (the “First Department”), reversed an order denying plaintiffs’ motion for final approval of a proposed non-monetary settlement in a shareholder class action … Continue Reading

Delaware Court of Chancery Dismisses Post-Closing Disclosure Claims for Damages, Cautioning That Such Claims Are Best Pursued Pre-Closing

By John Stigi, John Landry and Robin Achen on October 6, 2016 Posted in Courts and ADR, Mergers & Acquisitions

In Nguyen v. Barrett, C.A. No. 11511-VCG, 2016 WL 5404095 (Del. Ch. Sept. 28, 2016) (Glasscock, V.C.), the Delaware Court of Chancery dismissed an amended complaint seeking damages for alleged disclosure violations in connection with a tender offer that had already closed. The Chancery Court’s opinion demonstrates the challenges plaintiffs face when they pursue non-exculpated … Continue Reading

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

By Jeff Kern and Sarah Aberg on September 16, 2016 Posted in Courts and ADR

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

By John Stigi, John Landry and Robin Achen on September 2, 2016 Posted in Courts and ADR, Mergers & Acquisitions

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

By Kenneth E. Rechtoris and John Stigi on August 12, 2016 Posted in Courts and ADR, Mergers & Acquisitions

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

By John Stigi and John Landry on July 1, 2016 Posted in Courts and ADR

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

By John Stigi, John Landry and Robin Achen on May 19, 2015 Posted in Courts and ADR, Mergers & Acquisitions

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

By John Stigi and Madalyn Macarr on March 31, 2015 Posted in Corporate Governance, Courts and ADR

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

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