Should Your Articles Of Incorporation Include A Choice of Law Provision?
In yesterday’s post, I considered the fundamental question of why indemnification provisions are included in articles of incorporation. State general corporation laws typically contain express provisions empowering or authorizing corporations to indemnify other persons, including directors, officers and agents. For example, California has its Section 317, Delaware has Section 145 and Nevada has NRS 78.7502. When an indemnity provision is included in the articles (or Read more...
Can It Be So? Court Holds That A Nebraska Corporation Is Not A Corporation
Section 2010(b) California Corporations Code provides that no action or proceeding to which a corporation is a party abates by dissolution of the corporation. The statute imposes no time limit on suing dissolved corporations for pre-dissolution activities. In Robinson v. SSW, Inc.,209 Cal. App. 4th 588 (2012), the Court of Appeal considered whether Corporations Code Section 2010 applies to a dissolved Nebraska corporation. Read more...
Justice Scalia, Liberal Construction & The Finance Lenders Law
A few weeks ago, I purchased a copy of Reading Law: The Interpretation of Legal Texts by Justice Antonin Scalia and Bryan Garner. According to the cover, the authors “carefully and engagingly explain 57 valid canons of construction and dispel 13 false notions about legal interpretation . . . .” While it is true that the book is engaging (and I would Read more...
Second Circuit Declines To Apply California Securities Law In Auction Rate Securities Case
In May 2011, I wrote about U.S. District Court Judge Susan Illston’s decision allowing a purchaser of auction rate securities to pursue claims under the California Corporations Code against Deutsche Bank Securities Inc. Anschutz Corp. v. Merrill Lynch & Co., 785 F. Supp. 2d 799 (N.D. Cal. 2011). Judge Illston distinguished her ruling from a seemingly contrary decision by Judge Read more...
California Is Ground Zero For Forum Selection
In a forthcoming paper to be published in the Delaware Journal of Corporate Law, former SEC Commissioner Joseph A. Grundfest concludes that the forum selection is a peculiarly California-Delaware pas de deux: The largest percentage of publicly traded entities with intra-corporate forum selection provisions, 31.6% of the sample (42 of 133), are headquartered in California, and all of these entities designate Delaware Read more...
Delaware Court of Chancery “Overrules” Federal Court
I’ve often heard the claim that one reason to incorporate in Delaware is that the courts won’t surprise you. When I hear this, I recall the surprise, and even outrage, in the aftermath of Smith v. Van Gorkom, 488 A.2d 858 (Del. 1985) . See, e.g., Fischel, The Business Judgment Rule and the Trans Union Case, 40 Bus. Law. 1437, 1455 (1985) Read more...
California Court Distinguishes Delaware’s VantagePoint Opinion
Typically, corporate bylaws provide that officers serve at the pleasure of the Board of Directors and any officer may be removed, either with or without cause, by the Board of Directors. This right of removal is consonant with the notion that an officer’s relationship with the corporation is the subject of corporate law. However, another body of law can, and does, intrude. If Read more...
Court Applies California Demand Requirement To Scottish Company (Again)
Last December, I wrote about U.S. District Court Judge Jeremy Fogel’s decision in Johnson v. Myers, 2011 U.S. Dist. LEXIS 112897 (N.D. Cal. Sept. 30, 2011). The case involved an attempt by some of the stockholders of a liquidated Scottish corporation to maintain a breach of contract action derivatively. The contract at issue included a California choice of law provision. Judge Read more...
Ninth Circuit Strikes Down Choice Of State Of Incorporation Law
No one puts a choice of law provision at the beginning of a contract. They are nearly always relegated to the boilerplate provision at the end. This placement often belies their critical importance. Cases are lost or won on the basis of the choice of law. It’s no secret that a great many corporations located in California are incorporated in Delaware. Is the fact of Delaware incorporation sufficient to uphold a Read more...
Court Rules Choice Of Law Provision Takes Precedence Over Internal Affairs Doctrine
To say that the Delaware courts and bar are very fond of the internal affairs doctrine is about as controversial as wearing white before Labor Day. If you have any doubts about the sacred status of the doctrine in Delaware, I refer you to the Delaware Supreme Court’s decision in Vantagepoint Venture Partners 1996 v. Examen, Inc., 871 A.2d 1108 (2005). Read more...
