In Starr International Co. v. Federal Reserve Bank of New York, No. 12-5022-cv, 2014 U.S. App. LEXIS 1770 (2d. Cir. Jan. 29, 2014), the United States Court of Appeals for the Second Circuit affirmed the dismissal of claims against the Federal Reserve Bank of New York (“FRBNY”) for alleged breaches of its fiduciary duties, holding that federal common law preempted state fiduciary duty law.  This decision provides an example of circumstances in which federal common law preempts state law.  Where, as here, a uniquely federal interest in the stability of the economy conflicts with state law, federal common law will prevail.
Continue Reading Second Circuit Holds Delaware Fiduciary Duty Law Preempted By Federal Interest In Fiscal Stability

In Blaustein v. Lord Baltimore Capital Corp., No. 272, 2013, 2014 Del. LEXIS 30 (Del. Jan. 21, 2014), the Delaware Supreme Court held that a closely-held corporation’s directors owe no fiduciary duty to decide, free from conflicts of interest, whether a corporation will repurchase a minority stockholder’s shares in the corporation.  Additionally, the Supreme Court held that the implied covenant of good faith and fair dealing contained in a shareholders agreement did not give a minority stockholder the right to a good faith, conflict-free negotiation over the repurchase of her stock.  If a minority stockholder wishes to have the right to put his or her stock to the corporation at a fair price to be set through negotiations with independent and disinterested decision makers at the corporation, the stockholder must contract for that right expressly in advance.
Continue Reading Delaware Supreme Court Holds That a Minority Stockholder Has No Common Law Right to a Conflict-Free Board Decision Regarding the Repurchase of Shares

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 corporation “at home” there.  The Supreme Court also held that a non-U.S. corporation will not be subject to a state’s general jurisdiction simply because the corporation’s subsidiary is “at home” in the forum state and the subsidiary’s contacts with the state are imputed to the corporation.  Daimler limits the situations under which a large, multinational corporation will be subject to general personal jurisdiction.  As a result, plaintiffs may have more difficulty establishing jurisdiction over an foreign corporation when the claims sued upon do not arise in or relate to the forum state.
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”

1. Higher Thresholds For HSR Filings

Higher thresholds for premerger filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 will become effective on February 24, 2014. The filing thresholds are revised annually, based on the change in gross national product.Continue Reading Higher Filing Thresholds for HSR Act Premerger Notifications Effective February 24, 2014

On January 9, 2014, the Securities and Exchange Commission released its examination priorities for 2014 (the “2014 Exam Priorities Release”), covering a wide range of issues at financial institutions, including investment advisers and investment companies, hedge funds and private equity funds.  The 2014 Exam Priorities Release highlights a number of areas and key risks that the SEC will be monitoring and examining in 2014.  The SEC has identified the following core risk areas for investment advisers:
Continue Reading SEC Announces 2014 Examination Priorities for Investment Advisers

In Busse v. United Panam Fin. Corp., No. G046805, 2014 Cal. App. LEXIS 11 (Cal. App. Jan. 8, 2014), the California Court of Appeal, Fourth Appellate District, held that when parties to a buyout are under common control, dissenting minority shareholders have the right to set aside or rescind an invalid corporate buyout under Section 1312(b) of the California Corporations Code.  The Court also held that dissenting minority shareholders may not seek monetary damages under Section 1312(b).  This decision clarifies that Section 1312(b) acts as a limited exception to Section 1312(a) of the California Corporations Code by providing dissenting shareholders not only with the general remedy of appraisal, but also with the right to stop or rescind a buyout if the transaction is invalid.  Furthermore, Busse emphasizes that dissenting shareholders may not seek damages arising out of a buyout, even in common control situations.
Continue Reading California Court of Appeal Clarifies Rights of Dissenting Minority Shareholders Under California Corporation Code § 1312(b)

Individuals form limited partnerships, limited liability companies and corporations to limit their personal liability.  These legal structures encourage entrepreneurs to take risks.  The California Court of Appeal, Second Appellate District, however, has made it easier to add a business owner to a judgment that initially was entered only against the corporate or limited partnership entity he or she owns.  In Relentless Air Racing LLC v. Airborne Turbine Ltd Partnership (Dec. 31, 2013) 2d Civil No. B244612, the Second Appellate District reversed the trial court’s finding that the business owner could not be added to the judgment under an “alter ego” theory.  The Court of Appeal required the limited partners, as well as current and former general partner entities to be added to the judgment against the limited partnership.
Continue Reading California Court of Appeal Makes It Easier to Add Business Owners to a Judgment

2014 Proxy Season

Following are some topics that public companies may want to consider in preparation for the 2014 proxy season.

Shareholder Proposals

The 2013 proxy season reflected a continued increase in the number of shareholder proposals submitted to public companies, while the SEC no-action relief process resulted in fewer successful efforts of public companies to exclude shareholder proposals from proxy statements compared to recent years.  However, public companies appear to be having success in negotiating with shareholders as an increased number of shareholder proposals were withdrawn prior to the stockholder meeting in 2013 compared to prior years.  Common shareholder proposals in 2013 included (i) proposals to appoint an independent board chair, (ii) proposals to declassify classified boards of directors (and dismantle other similar protective provisions), and (iii) proposals to increase the diversity of the board of directors.  Shareholder proposals for 2014 are expected to include (i) elimination of super-majority provisions to amend by-laws, (ii) proxy access, (iii) ability of stockholders to act by written consent and/or call special meetings, and (iv) social and environmental proposals related to political contributions, human rights policies and environmental sustainability.  In its 2014 Policy Update, ISS stated that (a) starting in 2014 it will review the responsiveness of a board to any shareholder proposal that receives one year of a majority of votes cast in support (rather than the previous triggers of either two years of a majority of votes cast in a three-year period or one year of a majority of shares outstanding); (b) ISS has adopted a case-by-case approach, including a list of factors for analysts to consider, for assessing board implementation of prior successful shareholder proposals, and (c) ISS provided analysts with broader discretion when determining which directors to hold accountable in the event the level of responsiveness to shareholder proposals is found to be insufficient.  Among the changes for 2014 related to board action on successful shareholder proposals is that ISS will consider in the case-by-case analysis the board’s rationale provided in the proxy statement for not adopting a shareholder proposal.Continue Reading Client Alert – Considerations for 2014 Proxy Season and Beyond

In Anderson v Krafft-Murphy Co. Inc., 2013 Del. LEXIS 597 (Del. Nov. 26, 2013), the Delaware Supreme Court held that Sections 278 and 279 of the Delaware General Corporation Law, 8 Del. C. §§ 278-279, require a dissolved corporation to act through a court-appointed trustee or receiver to defend against third party lawsuits brought after the corporation winds-up its business.  Further, the Court held that Sections 278-279 contain no generally applicable statute of limitation for third party lawsuits against dissolved corporations.  This decision signals that long-tail tort liability can follow a dissolved corporation for decades under Delaware law, underscoring the importance of properly handling a corporation’s dissolution.
Continue Reading Delaware Supreme Court Holds Receiver is Required to Defend Lawsuits Brought After a Corporation is Wound-Up; Finds No Generally Applicable Statute of Limitation for Claims Against a Dissolved Corporation

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. § 1404(a) is adjusted as follows:  (1) a court should give no weight to the plaintiff’s choice of forum; (2) a court should not consider arguments about the parties’ private interests; and (3) if a court transfers a case to the parties’ preselected venue, the transferee court will not carry with it the transferring venue’s choice-of-law rules.  This adjusted Section 1404(a) analysis requires near absolute deference to the forum designated in a valid contractual forum-selection clause.  As a result, in all but the most unusual cases a district court will transfer venue to the preselected forum.
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)