Delaware Supreme Court Upholds Federalism, Comity & Finality
In Delaware Court of Chancery “Overrules” Federal Court, I discussed Vice Chancellor J. Travis Laster’s opinion in Louisiana Municipal Police Employees’ Retirement System v. Pyott, C.A. No. 5795-VCL (Del. Ch. June 11, 2012). In that opinion, the Vice Chancellor refused to dismiss a pending Delaware derivative suit after U.S. District Court Judge David O. Carter in the Central California dismissed the plaintiffs’ complaint pursuant to FRCP Read more...
Does A Lawyer Who Files A Derivative Action Have An Attorney-Client Relationship With The Corporation?
Because the California Corporations Code requires that the business and affairs of a corporation be managed by or under the direction of its board of directors, any decision of whether a corporation should bring suit on behalf of the corporation is ultimately vested in the corporation’s board. Cal. Corp. Code § 300(a). Derivative actions are an exception to this general principle. If Read more...
A Forum Selection Clause Issue That You May Not Have Heard About Until Now
In a forthcoming paper, Professor Joseph A. Grundfest at Stanford Law School examined the incidence of forum selection provisions by chartering and headquarters jurisdictions. It may come as a surprise to very few that California ranked first: “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 Read more...
Law Firm Uses Attorney-Client Privilege As Shield In Derivative Suit
Nancy Wojtas at Cooley LLP recently brought an interesting ruling to my attention that involves the interplay between derivative litigation and the attorney-client privilege, IP Telesis Inc. v. Velocity Networks Inc., C.D. Cal. Case No.CV 11-09950 RGK (AJWx) (Nov. 5, 2012). The case involved a derivative suit against a law firm. The plaintiff charged the law firm with aiding, abetting and conspiring in a 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...
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...
When A Corporation Dissolves, Does The Attorney-Client Privilege Live On?
Generally, a corporation’s suit for legal malpractice results in a waiver of the attorney-client privilege. When the corporation’s suit is brought derivatively, however, the privilege is not waived. McDermott, Will & Emery v. Superior Court, 83 Cal. App. 4th 378, 383 (2000). Therein lies a problem. If the attorney-client privilege is not waived by the filing of a derivative suit for Read more...
Does The In Pari Delicto Defense Apply In Derivative Actions?
“In pari delicto” is a Latin phrase meaning in equal fault. It is an equitable defense that precludes a plaintiff from recovering for an injury that arose from a wrongdoing in which she participated. In a shareholder derivative suit, the plaintiff is the corporation. If a shareholder derivative suit is brought against the corporation’s directors and officers, is the in pari delicto defense available? Court Holds That In Pari Delicto Read more...
California Appellate Court Decides California Law Applies “For Now” to Shareholder Derivative Suit Against Directors of a Nevada Corporation
Kruss v. Booth is a “must read” for lawyers confronting Section 2115 of the California Corporations Code. Section 2115 represents the California legislature’s attempt to thumb its nose at the internal affairs doctrine. That doctrine holds that the internal affairs of a corporation should be governed by the law of the state of incorporation. Section 2115 provides that specified provisions Read more...
