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CALIFORNIA CORPORATE & SECURITIES LAW

Delaware Special Litigation Committee Review “Could Stand A Good Tweaking”

UCLA Law School Professor Stephen Bainbridge recently critiqued the Nevada Supreme Court’s decision to follow Auerbach v. Bennett, 419 N.Y.S.2d 920 (1979) rather than Delaware’s Zapata Corp. v. Maldonado, 430 A.2d 779 (Del. 1981).  He concludes: To be sure, Delaware law in this area could stand a good tweaking. The Aronson/Zapata framework continues to rely unduly on…

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Does California Side With Delaware Or New York On Special Litigation Committee Reviews?

As discussed in the two preceding posts, Nevada’s Supreme Court last week decided to adopt New York’s standard of review of special litigation committee recommendations to dismiss stockholder derivative suits.  In re Dish Network Derivative Litigation, 133 Nev. Adv. Op. 61 (2017).  The New York Court of Appeals described this standard as follows: While the substantive aspects of a…

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Court Of Appeal Holds LLC’s Former Counsel May Represent Insider Defendants In Derivative Suit

Derivative actions can be somewhat confusing.  Although the entity is essentially the plaintiff, it is named as a defendant.  Initially, one might question why must the corporation be named as a party?  I can think of at least two reasons.  First, the litigation involves the rights of the entity directly.  Second, including the entity as a party…

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Federal Judge Rules Out Private Cause Of Action Under California Control Person Statute

Some persons may be deemed to violate the Corporate Securities Law of 1968 even though they did not directly violate the law.  Corporations Code Section 25403(a) provides that a person who with knowledge directly or indirectly controls and induces any person to violate any provision of the CSL or any rule or order thereunder is deemed to be…

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U.S. District Court Finds Personal Jurisdiction In Derivative Suit

I think it is beyond peradventure that a state enjoys personal jurisdiction over corporations incorporated within that state.  What about the personal jurisdiction over the corporation’s directors and officers?  That was the question addressed by U.S. District Judge Jennifer A. Dorsey in Sonoro Invest, S.A. v. Miller, 2017 U.S. Dist. LEXIS 9657 (D. Nev. Jan. 24,…

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How Does One Know When A Corporation Is Antagonistic?

When a shareholder files a derivative suit in state court, the defendants often will try to have the case removed to the federal district court. Federal courts, however, are courts of limited jurisdiction and not every plaintiff can make a “federal case” out of their complaint.  When federal court jurisdiction is based on diversity (28 U.S.C.…

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Court Rejects Challenge To Internal Affairs Doctrine

Marvell Technology Group, Ltd. is a publicly traded company that is incorporated in Bermuda.  Marvell’s U.S. operating subsidiary is based in California.  A year ago, an institutional stockholder filed a derivative suit against Marvell and several of its officers and directors.  The factual bases for the plaintiff’s suit were securities law violations but the plaintiff…

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Court Addresses “Fair Value” Determination In Statutory Buyout Proceeding

When when a shareholder sues for involuntary dissolution, the corporation, or the holders of 50% or more of the voting power of the corporation, may avoid the dissolution by purchasing for cash the plaintiff’s shares at their “fair value.”  Cal. Corp. Code § 2000.  The statute establishes several parameters for determining “fair value”.  Thus, “fair value” must…

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Shareholder Derivative Action Or Shareholder Derivative Suit?

A legal proceeding brought in a representative capacity is sometimes referred to as a “shareholder’s derivative action” and sometimes as a “shareholder’s derivative suit”.  Which is correct? It turns out that the General Corporation Law doesn’t use the term “derivative”.  Section 800 of the Corporations Code refers to an action “instituted or maintained in right…

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Agreement To Arbitrate “Any Disputes” Doesn’t Reach Derivative Claims

Corn v. Superior Court, 2016 Cal. App. Unpub. LEXIS 6182 (Cal. App. 2d Dist. Aug. 22, 2016) is a case about the meaning of one sentence in a settlement agreement consisting of just seven words – “The Parties agree to arbitrate any disputes”.  The precise question was whether these seven words barred the petitioner from instituting a derivative action.  The…

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