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CALIFORNIA CORPORATE & SECURITIES LAW

Want To File A Derivative Suit? You May Soon Be Required To Read Statutes

I have been writing recently about SB 203, a bill that is now pending in the Nevada legislature.  As introduced, the bill would, among other things, require the following: In an action involving or relating to a domestic corporation that is subject to the provisions of NRS 41.520 or alleges a breach of a fiduciary duty by a director…

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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 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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10th Circuit Highlights Difference Between Delaware And Nevada Exculpatory Statutes

Because the power to manage a corporation’s affairs rests with the board of directors, it is normally up to the board to decide whether the corporation will pursue a claim.  A shareholder who believes that the corporation should sue must therefore make a demand on the board.  If the board decides against suing, then the…

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Court Finds Plaintiffs Are Not Privies

Yesterday’s post noted that the plaintiff in a derivative suit is bringing claims on behalf of the corporation.  Thus, when a derivative suit is dismissed, does that dismissal have any effect on other pending or subsequently filed derivative suits?  This is a topic that I first discussed a few years back in Delaware Court of Chancery “Overrules” Federal Court.  That post was critical of…

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Court of Appeal Says Same Counsel Can’t Represent Corporation And Individual Defendants in Derivative Suit

Derivative suits put the corporation in the odd position of simultaneously occupying the position of a defendant and plaintiff.  When the suit is initiated, the corporation is named as a nominal defendant.  If, however, the suit is allowed to proceed, then the corporation is the “real” plaintiff.   What does this mean for attorneys who seek…

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The Investment Company Act And Roy M. Cohn

Last week, UFCW Local 1500 Pension Fund filed a class action and derivative lawsuit against Yahoo! Inc., its board of directors and some of its current and former officers.  (N.D. Cal. Case No. 3:16-cv-00478-RS).  According to the complaint, Yahoo describes itself as a global Internet new media company that offers a branded network of media, commerce,…

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The Most Important Principles of Delaware Corporate Law Can’t Be Found In the DGCL

I have often observed that you can read every section of the Delaware General Corporation Law and learn almost nothing about Delaware corporate law.  Here are three of the most fundamental principles of Delaware corporate law that you won’t find in the DGCL: The business judgment rule.  This venerable presumption is derived from, but not stated…

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Here’s One Way To Recover Attorneys’ Fees Without Adopting A Fee Shifting Bylaw

With the ongoing hullabaloo concerning the legislative demise of fee shifting bylaw provisions under Delaware law, little attention has been paid to California law.  More importantly, no one seems to have noticed that California law already provides a mechanism for the collection of attorneys’ fees and other costs by the prevailing corporation or defendant in a derivative suit…

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