In Crest v. Padilla, No. 20STCV37513 (Cal. Super. Apr. 1, 2022), the Superior Court of California for the County of Los Angeles (Green, J.) declared that Section 301.4 of the California Corporations Code is unconstitutional under the California state Constitution.  Section 301.4 requires publicly held corporations which have their principal executive offices located in California to include “underrepresented communities” on their boards of directors.  The trial court granted the taxpayer plaintiffs’ motion for summary judgment, concluding that the statute violated equal protection clause of the California Constitution.  The court’s decision renders the constitutionality of Section 301.4 ripe for appellate review by the California Court of Appeal.
Continue Reading Los Angeles Superior Court Invalidates California Board Diversity Statute, Rendering It Ripe for Review by the California Court of Appeal

In Tola v. Bryant, No. 16150, 2022 Cal. App. LEXIS 241 (Cal. App. Mar. 24, 2022), the First Appellate District of the California Court of Appeal applied Delaware’s new formulation of the test for determining whether a stockholder has standing to assert derivative claims on behalf of a company.  Under the test articulated by the Delaware Supreme Court in United Food & Commercial Workers Union v. Zuckerberg, 262 A.3d 1034, 1058 (Del. 2021), a stockholder of a Delaware corporation has standing to assert derivative claims when the stockholder can plead particularized facts, on a director-by-director basis, demonstrating that at least half of the board in place at the time the complaint is filed:
Continue Reading California Court of Appeal Addresses Derivative Standing and Failure of Oversight Claims Under Delaware Law

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 Securities Act of 1933 (“1933 Act”) to be brought solely in federal court, thereby avoiding the likelihood of defending duplicate, concurrent state and federal court 1933 Act claims.  The Delaware Supreme Court’s decision provides clear guidance to companies preparing for securities offerings for implementing a tool to limit the cost of defending duplicative 1933 Act litigation.
Continue Reading Delaware Supreme Court Confirms That Federal Forum Provision Is Facially Valid, Reversing Court of Chancery

In Jensen v. iShares Trust, 2020 Cal. App. LEXIS 61 (Cal. App. Jan. 23, 2020), a rare state court decision addressing claims under the Securities Act of 1933 (“1933 Act”), the California Court of Appeal rejected plaintiffs-appellants’ attempt to evade the “tracing” requirement under Section 11, 15. U.S.C. § 77k, which provides standing only to those plaintiffs who can trace their shares purchased in a secondary market transaction to an initial offering made under a misleading registration statement.  Appellants argued that they were not subject to the tracing requirement because the respondent, an open-end management investment company, also was governed under the Investment Company Act of 1940 (“ICA”), 15 U.S.C § 80a, et. seq., which appellants argued extends standing to purchasers no matter how or from whom their shares were purchased.  The Court rejected the argument, unequivocally reaffirming that the 1933 Act is focused only on initial public offerings and other primary market transactions, and so any claims brought thereunder must satisfy its strict standing (i.e., tracing) requirements.
Continue Reading California State Court Declines to Expand Standing for Claims Under 1933 Act

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 selection bylaw. This decision confirms that California courts will enforce forum selection bylaws designating Delaware as the exclusive venue for intra-corporate claims. 
Continue Reading California Court of Appeal Enforces Delaware Forum Selection Bylaw