Website Heading

CALIFORNIA CORPORATE & SECURITIES LAW

Court Rejects Challenge To Internal Affairs Doctrine

Marvell Technology Group, Ltd. is a publicly traded company that is incorporated in Bermuda.  Marvell’s U.S. operating subsidiary is based in California.  A year ago, an institutional stockholder filed a derivative suit against Marvell and several of its officers and directors.  The factual bases for the plaintiff’s suit were securities law violations but the plaintiff…

Share on:

Shareholder Derivative Action Or Shareholder Derivative Suit?

A legal proceeding brought in a representative capacity is sometimes referred to as a “shareholder’s derivative action” and sometimes as a “shareholder’s derivative suit”.  Which is correct? It turns out that the General Corporation Law doesn’t use the term “derivative”.  Section 800 of the Corporations Code refers to an action “instituted or maintained in right…

Share on:

Compromising and Settling of Derivative Suits In California

When a shareholder sues derivatively, the shareholder is seeking relief not for itself, but for the corporation.  Therefore, it should be expected that the shareholder is not free to compromise or dismiss the suit absent court oversight.  For example, Rule 23.1 of the Federal Rules of Civil Procedure provides: A derivative action may be settled, voluntarily…

Share on:

Why Is California’s Derivative Suit Statute Stuck In 1977?

California Corporations Code Section 800 governs derivative suits brought by both domestic and foreign corporations.  The statute provides a modicum of protection to defendants by establishing a procedure by which either the corporation or an individual defendant may move the court to require the plaintiff, as a condition to maintaining the action, to supply a…

Share on:

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…

Share on:

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…

Share on:

Dismissal Of Involuntary Dissolution Action Pulls The Plug On Corporate Buy Out

Sometimes, shareholders are divided on whether a corporation should live or die.  In these cases, the California Corporations Code provides an option that allows for the continued existence of a corporation.  In any action for involuntary dissolution, or in any proceeding for voluntary dissolution initiated by the vote of shareholders representing only 50% of the voting…

Share on:

California RULLCA’s Impossible Pleading Requirement For Derivative Suits

California’s Revised Uniform Limited Liability Company Act requires a member of a domestic or foreign LLC to include two specific allegations in any complaint brought in the right of the company.  Failure to include these two allegations could bar the member from instituting or maintaining the suit.  Cal. Corp. Code § 17709.02(a).  The two allegations are:…

Share on:

This Plaintiff Dreamed Of Shares That Never Were

It’s hard for me to imagine being the owner of something that doesn’t exist.  It’s even harder to imagine being the equitable owner of something that doesn’t exist.  However, some people dream bigger dreams as was the case in White v. Demaray, 2014 U.S. Dist. LEXIS 10505 (N.D. Cal. Jan. 27, 2014). The case was…

Share on:

Court Decides Demurrer To Derivative Suit – What About California Law?

Yesterday, the California Court of Appeal affirmed California Superior Court Judge James P. Kleinberg’s judgment sustaining a demurrer in a shareholder derivative action against the officers and directors of Yahoo! Inc.  Leyte-Vidal v. Semel, 2013 Cal. App. LEXIS 849 (Cal. Ct. App. 2013).  The Court of Appeal’s opinion contains a clear and cogent explanation of demand…

Share on: