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CALIFORNIA CORPORATE & SECURITIES LAW

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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Can In-House Counsel Have Sexual Relations With His Or Her Client?

Can an in-house lawyer have sexual relations with his or her client?  To answer this question, it is necessary to identify the lawyer’s client.  The California Rules of Professional Conduct provide a clear answer to this question: In representing an organization, a member shall conform his or her representation to the concept that the client…

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The General Counsel Is Not The Shareholders’ Agent

A recent paper by Adair Morse, Wei Wang, and Serena Wu, Executive Gatekeepers: Useful and Divertible Governance, tackles interesting questions about the the effectiveness of internal gatekeepers and the impact of equity incentives on those gatekeepers.  However, I couldn’t get past the second sentence of the paper that asserts, without authority: These executive gatekeepers, typically holding the…

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SEC Acknowledges Ethical Obligations May Preclude Voluntary Reporting Out By Attorneys

In 2003, the Securities and Exchange Commission adopted rules that purportedly immunized attorneys who, subject to specific conditions, reveal confidential information to the SEC.  17 C.F.R. § 205.3(d)(2).  Technically, the rule permits, but does not require such disclosure without the consent of the “issuer” (who may or may not be the attorney’s client). The SEC’s adoption…

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Why “Independent Legal Counsel” Is A Splendid Lie

The 1735 edition of Jonathan Swift’s Gulliver’s Travels includes a frontpiece portrait of Capt. Lemuel Gulliver.  Beneath the portrait is a Latin phrase – Splendide Mendax.  This phrase is a snippet from the Roman Poet Horace’s Odes (Book III, Poem 11).  It means splendidly false.  The phrase is perhaps one of the most famous literary…

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Can An Attorney Blow The Whistle On His Client?

This month’s issue of California Lawyer magazine includes this long piece discussing the case of Dimitrious P. Biller, a former in-house attorney.  In 2011, an arbitrator order Mr. Biller to pay his former employer $2.6 million in damages and $100,000 in punitive damages.   According to the arbitrator, Hon. Gary L. Taylor (Ret.), Mr. Biller “did the professionally unthinkable: he betrayed…

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Compensation Committees – Whom Do You Represent?

Amongst the many, many, changes wrought by the Dodd-Frank Wall Street Reform & Consumer Protection Act, is this requirement in Section 952(d)(1):   “The compensation committee of an issuer, in its capacity as a committee of the board of directors, may, in its sole discretion, retain and obtain the advice of independent legal counsel and other advisers”. …

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