Officers And The Internal Affairs Doctrine

My guess is that most attorneys would say that the duty of an officer to the corporation are governed by the law of the state of incorporation under the “internal affairs doctrine”.  As explained by the U.S. Supreme Court, the “internal affairs doctrine” is a conflict of laws principle that “recognizes that only one State should

Delaware Court Rules Nevada Law Governs But Applies Delaware Law

Although there are many significant differences between the corporate laws of Nevada and Delaware, the Nevada Supreme Court has often looked across the country to Delaware.  Thus, the Nevada high court has adopted Delaware’s test for demand futility articulated in Aronson v. Lewis, 473 A.2d 805 (Del. 1984) (overruled in part on other grounds by Brehm v. Eisner,

Internal Affairs Doctrine May Not Control Alter Ego Liability

The internal affairs doctrine “is a conflict of laws principle which recognizes that only one State should have the authority to regulate a corporation’s internal affairs — matters peculiar to the relationships among or between the corporation and its current officers, directors, and shareholders — because otherwise a corporation could be faced with conflicting demands.”

A Shot In A Mug Of Beer May Not Be The Answer To This Exclusive Forum Bylaw Case

In March, Safeway and Albertsons announced that they had entered into a definitive merger agreement.   As night follows day, litigation ensued.  At least 12 class action complaints were filed by alleged stockholders of Safeway against the company, its directors and others.  The seven suits filed in Delaware’s Court of Chancery have been consolidated as In Re

When The Parent Is A Blue Hen And The Subsidiary Is A 49er, What Law Governs?

With most publicly traded companies choosing to incorporate in Delaware, corporate officers are likely to assume that they have the benefit of Delaware law.  Assumptions sometimes can be wrong. FDIC v. Faigin, 2013 U.S. Dist. LEXIS 94899 (C.D. Cal. July 8, 2013) involved a suit by the Federal Deposit Insurance Corporation (which is identified as “Company” in the

Alter Ego And The Internal Affairs Doctrine

The internal affairs doctrine is a conflict of laws principle that recognizes that only one state should have the authority to regulate a corporation’s internal affairs.   Under the internal affairs doctrine, that special state is the state of incorporation.  But what exactly constitutes a corporation’s “internal affairs”?  Many lawyers, particularly those in Delaware, take a broad view of

Is FDIC v. Van Dellen California’s Smith v. Van Gorkom?

Last Friday, the jury in FDIC v. Van Dellen (C.D. Cal. Case No. CV 10-4915 DSF (SHx)) returned a verdict totalling nearly $169 million against three former officers of the home builder division of IndyMac Bank, F.S.B.  The Office of Thrift Supervision closed the bank in 2008.  As the receiver for the bank, the Federal Deposit Insurance Corporation filed

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

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

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,