Archive for the ‘Court Cases’ Category

Delaware Court Finds Two Transactions Not Entirely Fair

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Thursday September 18, 2014 at 9:07 am
  • Print
  • email
  • Twitter
Editor’s Note: The following post comes to us from David J. Berger, partner focusing on corporate governance at Wilson Sonsini Goodrich & Rosati, and is based on a WSGR Alert memorandum. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

On September 4, 2014, the Delaware Court of Chancery issued two lengthy post-trial opinions, [1] both authored by Vice Chancellor John W. Noble, finding that recapitalization or restructuring transactions did not satisfy the entire fairness standard of review. Although plaintiffs in each instance had received a fair price, the court found that the defendants had employed unfair processes and breached their fiduciary duties.

Significantly, one of the cases involved a recognizable set of facts: various plaintiff stockholders challenged a recapitalization that was approved at the same time the company conducted an “insider” round of financing as the company was running out of cash. The recapitalization and financing were approved by a five-member board of directors, three of whom were designated by venture capital funds that either participated in the financing or were said to have received a special benefit, with no participation by the company’s other stockholders. While the company received an informal and insider-led valuation of $4 million at the time of the recapitalization, the court found that the company’s equity at that time actually had a value of zero. However, as a result of the recapitalization, the company was able to acquire new lines of businesses. Four years after the recapitalization, the company was sold for $175 million. Following the sale, six years of litigation unfolded.

…continue reading: Delaware Court Finds Two Transactions Not Entirely Fair

Delaware Court of Chancery Upholds Forum Selection Bylaw

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Monday September 15, 2014 at 9:04 am
  • Print
  • email
  • Twitter
Editor’s Note: The following post comes to us from David J. Berger, partner focusing on corporate governance at Wilson Sonsini Goodrich & Rosati, and is based on a WSGR Alert memorandum. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

On September 8, 2014, Chancellor Andre G. Bouchard issued a notable decision in City of Providence v. First Citizens BancShares, Inc., upholding—as a matter of facial validity and on an “as-applied” basis at the motion to dismiss stage—a forum selection bylaw adopted by a Delaware corporation selecting another jurisdiction (North Carolina, where the company is headquartered) as the forum for intra-corporate disputes. This decision is important not only because it reaffirms the decision last year by then-Chancellor, now Chief Justice, Leo E. Strine, Jr. in Boilermakers Local 154 Retirement Fund v. Chevron Corporation, 73 A.3d 934 (Del. Ch. 2013), upholding the facial validity of forum selection bylaws, but also because it includes notable pronouncements from the current Chancellor on the application of such provisions. [1]

…continue reading: Delaware Court of Chancery Upholds Forum Selection Bylaw

How Efficient is Sufficient? Securities Litigation Post-Halliburton

Posted by June Rhee, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Tuesday September 9, 2014 at 9:06 am
  • Print
  • email
  • Twitter
Editor’s Note: The following post comes to us from Bradford Cornell at California Institute of Technology.

In its recent decision in Halliburton Co., et al. v Erica P. John Fund, Inc., the U.S. Supreme Court upheld the legal standard for reliance in Rule 10b-5 securities fraud class actions that it had established some 25 years ago in Basic, Inc. v. Levinson. This standard, known as the fraud-on-the market doctrine, created a rebuttable presumption that plaintiffs relied on the integrity of the market price if they can establish that the market for that security was efficient. Defendants can rebut this presumption in several ways, including showing that the market for the security was not efficient or that the security’s price was not affected by the misrepresentations at issue. In delivering its ruling, the Halliburton Court noted that market efficiency is not a binary, yes-or-no proposition but is instead a matter of degree, pointing out that “a public, material misrepresentation might not affect a stock’s price even in a generally efficient market.” (Halliburton, 573 U.S. ___ at 10.)

…continue reading: How Efficient is Sufficient? Securities Litigation Post-Halliburton

Bankruptcy Court Holds Secured Creditors Can Be “Crammed Down” With Below-Market Replacement Notes

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Saturday September 6, 2014 at 9:00 am
  • Print
  • email
  • Twitter
Editor’s Note: The following post comes to us from Mark I. Bane, Partner focusing on corporate restructurings at Ropes & Gray LLP, and is based on a Ropes & Gray Alert.

On August 26, 2014, in the case In re MPM Silicones, LLC, Case No. 14-22503 (Bankr. S.D.N.Y.) (“Momentive”), the United States Bankruptcy Court for the Southern District of New York held that secured creditors could be “crammed down” in a chapter 11 plan with replacement notes bearing interest at substantially below market rates. Unless overturned on appeal, this decision will introduce a new level of risk to leveraged lending—secured lenders will face the specter of losing in a bankruptcy restructuring not only their negotiated rates, but any semblance of market treatment. This risk could result in a tightening of availability and increased costs to borrowers in levered transactions.

…continue reading: Bankruptcy Court Holds Secured Creditors Can Be “Crammed Down” With Below-Market Replacement Notes

So Much for Bright-Line Tests on Extraterritorial Reach of US Securities Laws?

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Tuesday September 2, 2014 at 9:24 am
  • Print
  • email
  • Twitter
Editor’s Note: The following post comes to us from Jonathan E. Richman, Partner in the Litigation Department and a co-head of the Securities Litigation Group at Proskauer Rose LLP, and is based on a Proskauer publication authored by Mr. Richman, Ralph C. Ferrara, Ann M. Ashton, and Tanya J. Dmitronow.

In its landmark 2010 decision in Morrison v. National Australia Bank, the Supreme Court articulated what seemed to be a bright-line test for determining the extent to which the U.S. securities laws apply to transactions with international elements. In so doing, the Court harshly rejected the fact-intensive “conduct/effects” tests propounded several decades ago by the Second Circuit and followed by many other courts throughout the country.

Last week, the Second Circuit got its revenge. In a long-awaited decision in ParkCentral Global Hub Limited v. Porsche Automobile Holdings SE, the court declined “to proffer a test that will reliably determine when a particular invocation of [the Securities Exchange Act's anti-fraud provision] will be deemed appropriately domestic or impermissibly extraterritorial.” Instead, the Second Circuit held that courts must carefully consider the facts and circumstances of each case to avoid the very result that the Supreme Court had hoped to prevent in Morrison: promiscuous application of the U.S. securities laws to transactions that have little, if any, relationship to the United States.

…continue reading: So Much for Bright-Line Tests on Extraterritorial Reach of US Securities Laws?

The Tension Between Conservative Corporate Law Theory and Citizens United

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Tuesday September 2, 2014 at 9:20 am
  • Print
  • email
  • Twitter
Editor’s Note: The following post is based on a recent article forthcoming in Cornell Law Review, earlier issued as a working paper of the Harvard Law School Program on Corporate Governance, by Leo Strine, Chief Justice of the Delaware Supreme Court and a Senior Fellow of the Program, and Nicholas Walter, law clerk at the U.S. Court of Appeals for the Ninth Circuit, and a former law clerk at Delaware Court of Chancery. The article, Conservative Collision Course?: the Tension Between Conservative Corporate Law Theory and Citizens United, is available here. Work from the Program on Corporate Governance about corporate political spending includes Shining Light on Corporate Political Spending by Lucian Bebchuk and Robert Jackson, discussed on the Forum here, and Corporate Political Speech: Who Decides? by Lucian Bebchuk and Robert Jackson, available here.

Leo Strine, Chief Justice of the Delaware Supreme Court Review and a Senior Fellow of the Harvard Law School Program on Corporate Governance, and Nicholas Walter recently issued an essay with that is forthcoming in Cornell Law Review. The essay, titled Conservative Collision Course?: the Tension Between Conservative Corporate Law Theory and Citizens United, is available here.

The abstract of Chief Justice Strine’s and Walter’s essay summarizes it briefly as follows:

…continue reading: The Tension Between Conservative Corporate Law Theory and Citizens United

Securities Litigation in the Roberts Court: An Early Assessment

Posted by John Coates, Harvard Law School, on Wednesday August 27, 2014 at 9:02 am
  • Print
  • email
  • Twitter
Editor’s Note: John Coates is the John F. Cogan, Jr. Professor of Law and Economics at Harvard Law School.

This article, Securities Litigation in the Roberts Court: An Early Assessment, provides a preliminary quantitative and qualitative appraisal of the Roberts Court’s securities law decisions. In the Roberts Court, decisions that “expand” or “restrict” the reach of securities law have occurred in roughly the same 50/50 proportion as in the Rehnquist Court after the departure of Justice Powell, and polarization (5-4 votes and dissents) has decreased. A simple political attitudinal model fails to account for these developments. The article proposes that Roberts Court’s securities law decisions are better understood in the context of Chief Roberts’ background as an appellate litigator and the Roberts Court’s broader “procedural revolution,” which has been more prominent in contract, commercial, and antitrust cases. This procedure-based analysis is then used to predict likely outcomes of securities law cases to be argued in the October 2014 term and to forecast the types of cases that are likely to gain the Court’s attention moving forward.

…continue reading: Securities Litigation in the Roberts Court: An Early Assessment

The Battle Against Multiforum Stockholder Litigation

Posted by Theodore Mirvis, Wachtell, Lipton, Rosen & Katz, on Monday August 25, 2014 at 12:17 pm
  • Print
  • email
  • Twitter
Editor’s Note: Theodore N. Mirvis is a partner in the Litigation Department at Wachtell, Lipton, Rosen & Katz. The following post is based on a Wachtell Lipton memorandum by Mr. Mirvis, David A. Katz, William Savitt, and Ryan A. McLeod. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here. Additional posts discussing Roberts v. TriQuint SemiConductors, Inc. are available here

Just over a year ago, the Delaware Court of Chancery upheld the facial validity of exclusive forum bylaws adopted by corporate boards as a means of rationalizing stockholder litigation. In the time since Chancery’s landmark Chevron opinion, numerous corporations have adopted exclusive forum bylaws, and courts in New York, Texas, Illinois, Louisiana, and California have enforced such bylaws against stockholders bringing duplicative lawsuits in violation of their terms. The result, as one commentator recently noted, has been to disincentivize duplicative filings and reduce the concomitant litigation “deal tax” on merging parties. Yet, despite this progress, pernicious multijurisdictional litigation persists. A recent decision from a court in Oregon (Roberts v. TriQuint SemiConductor, Inc., No. 1402-02441 (Or. Cir. Ct. Aug. 14, 2014)) illustrates the potential harm from such litigation and the importance of continued authoritative articulation of the law to ensure the efficacy of exclusive forum bylaws.

…continue reading: The Battle Against Multiforum Stockholder Litigation

Back-to-Back Court of Appeals Decisions Apply Morrison

Posted by John F. Savarese and George T. Conway III, Wachtell, Lipton, Rosen & Katz, on Tuesday August 19, 2014 at 4:08 pm
  • Print
  • email
  • Twitter
Editor’s Note: John F. Savarese and George Conway are partners in the Litigation Department at Wachtell, Lipton, Rosen & Katz. The following post is based on a Wachtell Lipton firm memorandum by Mr. Savarese and Mr. Conway.

In a one-two punch illustrating the continuing vigor of the presumption against extraterritoriality, the United States Court of Appeals for the Second Circuit, on consecutive days last week, issued important decisions applying Morrison v. National Australia Bank in two disparate but significant contexts under the federal securities laws. Last Thursday, in Liu v. Siemens AG, No. 13-4385-cv (2d Cir. Aug. 14, 2014), the court rejected the extraterritorial application of the whistleblower anti-retaliation provision of the Dodd-Frank Act. And on the very next day, in Parkcentral Global Hub Ltd. v. Porsche Automobil Holdings SE, No. 11-397-cv (2d Cir. Aug. 15, 2014), the court rejected the extraterritorial application of Rule 10b-5 to claims seeking recovery of losses on swap agreements that reference foreign securities.

…continue reading: Back-to-Back Court of Appeals Decisions Apply Morrison

Delaware Court Affirms Order Requiring Production of Privileged Documents

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Tuesday August 19, 2014 at 9:16 am
  • Print
  • email
  • Twitter
Editor’s Note: The following post comes to us from Lewis R. Clayton, partner in the Litigation Department and co-chair of the Intellectual Property and ERISA Litigation Groups at Paul, Weiss, Rifkind, Wharton & Garrison LLP, and is based on a Paul Weiss client memorandum. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

In Wal-Mart Stores, Inc. v. Indiana Electrical Workers Pension Trust Fund IBEW, the Delaware Supreme Court formally recognized the “Garner doctrine,” an exception to the attorney-client privilege, in connection with a stockholder’s demand for records under Section 220 of the Delaware General Corporation Law, and confirmed that the exception also applies to other stockholder claims. The decision may allow derivative plaintiffs to obtain certain sensitive privileged communications and attorney work-product in cases involving substantial allegations of serious fiduciary misconduct.

…continue reading: Delaware Court Affirms Order Requiring Production of Privileged Documents

Next Page »
 
  •  » A "Web Winner" by The Philadelphia Inquirer
  •  » A "Top Blog" by LexisNexis
  •  » A "10 out of 10" by the American Association of Law Librarians Blog
  •  » A source for "insight into the latest developments" by Directorship Magazine