In enacting the Dodd-Frank Act, Congress made it clear to everyone, other than the plaintiffs’ bar, that say-on-pay votes were advisory only, did not create or imply any change in fiduciary duties of directors, or create or imply any additional fiduciary duties of directors. 15 USCS § 78n-1. In the eyes of the plaintiffs’ bar, failed advisory votes have become the basis of lawsuits. The question then is whether the federal statute mandating say-on-pay votes confers jurisdiction on the federal courts.
In an opinion issued earlier this week, a panel of the Ninth Circuit Court of Appeals held that the argument that Congress did not intend to create additional liability for failed votes did not create a significant federal question conferring jurisdiction. Dennis v. Hart, 2013 U.S. App. LEXIS 15648 (9th Cir. July 31, 2013) As a result, the Court of Appeals instructed the District Court to remand the case to the California Superior Court.
The ruling represents a set-back for the defendants who evidently preferred to have the case tried in federal court.