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CALIFORNIA CORPORATE & SECURITIES LAW

Can Pseudo-Foreign Corporations Exonerate Their Directors?

Corporations Code Section 2115 is not an easy read.  Fortunately, California Supreme Court Chief Justice Tani Cantil-Sakauye has provided a more digestible overview of the statute: Section 2115 was enacted as part of a comprehensive revision of the Corporations Code in the mid-1970s.  The section addressed so-called pseudoforeign corporations—entities incorporated outside California, but that meet two…

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Officers Of Foreign Corporations And The California Courts

Yesterday’s post concerned Section 2116 of the California Corporations Code.  Courts sometimes describe Section 2116 as codifying the internal affairs doctrine.  See, e.g., Vaughn v. LJ Internat., Inc., 174 Cal. App. 4th 213, 223 (2009) and Voss v. Sutardja, 2015 U.S. Dist. LEXIS 8795 (N.D. Cal. Jan. 26, 2015).  To the extent that Section 2116 codifies the…

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Nevada Legislature Mulls Codification Of The Internal Affairs Doctrine

Delaware and Nevada are each in the business of marketing their corporate laws to businesses in other states.  Thus, it should surprise no one that these states don’t appreciate it when their legal offerings are undermined by other states.  One way to protect the franchise is by embracing the “internal affairs doctrine”. The internal affairs…

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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…

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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,…

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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.”…

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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…

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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…

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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…

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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…

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