In Pension Trust Fund for Operating Engineers v. Mortgage Asset Securitization Transactions, Inc., No. 12-3454, 2013 WL 5184064 (3d Cir. Sept. 17, 2013), the United States Court of Appeals for the Third Circuit joined the Seventh, Ninth and Eleventh Circuits, holding that Section 13 of the Securities Act of 1933 (“1933 Act”), 15 U.S.C. § 77m, does not require plaintiffs asserting a claim under the 1933 Act to plead with particularity compliance with the statute of limitations.  In doing so, the Third Circuit split from the First, Eighth and Tenth Circuits, potentially triggering review by the United States Supreme Court.
Continue Reading Third Circuit Joins With the Seventh, Ninth and Eleventh Circuits in Holding That Plaintiffs Asserting 1933 Act Claims Need Not Plead Compliance With the Statute of Limitations, Splitting With the First, Eighth and Tenth Circuits

In United States v. McKye, No. 12-6108, 2013 U.S. App. LEXIS 17297 (10th Cir. Aug. 20, 2013), the United States Court of Appeals for the Tenth Circuit reversed the conviction of Brian William McKye for securities fraud in violation of Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b).  The Tenth Circuit held that in a criminal action for securities fraud, the jury must be permitted to determine whether a “security” actually exists.  The Tenth Circuit held that the United States District Court for the Western District of Oklahoma erred in not leaving this issue for the jury to decide and instead giving the jury an instruction that “notes” are “securities.”
Continue Reading Tenth Circuit Finds that Jury Must Determine Whether “Notes Are Securities” in a Securities Fraud Action

On Friday October 3, 2013, Governor Brown signed into law AB 1412, which provides full relief for individuals affected by the decision in Cutler v. Franchise Tax Board, where the California Court of Appeal held that the California tax incentives relating to the sale of qualified small business stock discriminated against interstate commerce and were therefore unconstitutional.

Continue Reading California Tax Relief for Sellers of Qualified Small Business Stock

The recent United States Supreme Court ruling in United States v. Windsor (see prior blog article here) invalidated Section 3 of the Defense of Marriage Act, which had defined marriage as a union between a man and a woman.  The ruling greatly expands the estate and tax planning techniques available for married same-sex couples who live in a state like California that recognizes same-sex marriage.Continue Reading IRS Issues Guidance Regarding Tax Treatment of Married Same-Sex Couples

In almost all corporate transactions, the first piece of written documentation the parties exchange and execute (after a non-disclosure agreement) is a letter of intent or term sheet (“LOI”), which is intended to summarize the main deal points. And as many corporate transactions involve entities organized in Delaware, these documents often select Delaware as the governing law.Continue Reading When Is a Non-Binding Term Sheet or Letter of Intent Enforced as a Binding Contract?

The Delaware General Corporation Law, 8 Del. Code (the “DGCL”), has been amended to add a new Section 251(h) providing for, subject to certain conditions, a more expeditious and less costly closing of a two-step transaction. This new section will simplify and streamline the going private process by eliminating the need for stockholder approval in the second step of a two-step merger transaction. Under this new rule, completing a going private transaction in Delaware will be faster, more efficient and less costly than before.Continue Reading Delaware General Corporation Law Amended to Speed Up the Consummation of Two-Step Merger Transactions

In In re Trados Inc. Shareholder Litigation, Case No. 1512-VCL, 2013 Del. Ch. LEXIS (Del. Ch. Aug. 16, 2013), Vice Chancellor Laster of the Court of Chancery of the State of Delaware resolved the long-pending dispute involving the 2005 sale of Trados Inc. (“Trados”) to SDL plc for approximately $60 million. The Court held that the transaction, which benefited the preferred stockholders and certain executives of Trados but left the common stockholders with nothing, was procedurally flawed but ultimately fair to the company’s stockholders. The Court reviewed the decision of the board of directors approving the sale under the “entire fairness standard” which is the most stringent standard of review in Delaware. The decision serves as a cogent reminder to private equity and venture capital investors that they should run a proper sale process when planning a liquidity event in particular if certain constituents of the corporation will not benefit from the liquidation.Continue Reading Delaware Chancery Court Finds Merger “Entirely Fair” to Common Stockholders Despite the Merger Leaving Common Stockholders With No Consideration for Their Shares

In Dennis v. Hart, 2013 U.S. App. LEXIS 15648 (9th Cir. July 31, 2013), the United States Court of Appeals for the Ninth Circuit held that plaintiffs’ “say-on-pay” shareholder derivative suits alleging breach of fiduciary duty were improperly removed to federal court, vacated the district court’s decisions and dismissed the parties’ cross-appeals for lack of jurisdiction. The Ninth Circuit held that the federal court did not have jurisdiction to hear the action because defendants had held an advisory vote in compliance with the federal Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”), 15 U.S.C. § 78n-1, and plaintiffs had only alleged state law causes of action. This holding indicates that challenges to board actions in response to “say-on-pay” votes are not enough to confer federal jurisdiction without additional, specific violations of federal law.Continue Reading Ninth Circuit Vacates Dismissal and Remands Shareholder Derivative “Say-on-Pay” Suits to California State Court

In SEC v. Das, No. 12-2780, 2013 U.S. App. LEXIS 15327 (8th Cir. July 29, 2013), the United States Court of Appeals for the Eighth Circuit affirmed the district court’s delivery of jury instructions applying a negligence standard to alleged violations of Section 14(a) of the Securities Exchange Act of 1934 (“1934 Act”) and Securities & Exchange Commission (“SEC”) Rules 14a-9, 13b2-1 and 13b2-2. This decision indicates that it is becoming easier for corporate officers to be held liable for violations of Section 14(a), Rule 14a-9, Rule 13b2-1 and Rule 13b2-2.Continue Reading Eighth Circuit Applies Negligence Standard to SEC Enforcement Claims for Violations of Section 14(a) and Rules 14a-9, 13b2-1 and 13b2-2

On September 21, 2012, S.B. 323, the California Revised Uniform Limited Liability Company Act (known as the RULLCA), was signed into law by Governor Jerry Brown and is scheduled to take effect on January 1, 2014. As described in more detail in the prior March 22, 2013 post California’s Revised Uniform Limited Liability Company Act, the RULLCA entirely replaces the Beverly-Killea Limited Liability Company Act and revises certain rules for formation and operation of Limited Liability Companies (LLCs) in the state of California. There is a possibility, however, that the RULLCA will be modified prior to January 1, 2014 and thus the law governing LLCs may still be subject to change and clarification prior to its effective date.

Continue Reading Potential Challenges Associated With California’s Revised Uniform Limited Liability Company Act Scheduled to Take Effect on January 1, 2014