Posts Tagged ‘Forum selection’

Governance Issues in Spin-Off Transactions

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Thursday February 19, 2015 at 9:05 am
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Editor’s Note: The following post comes to us from Stephen I. Glover, Partner and Co-Chair of the Mergers & Acquisitions practice at Gibson, Dunn & Crutcher LLP, and is based on a Gibson Dunn M&A Report by Mr. Glover, Elizabeth Ising, Lori Zyskowski, and Alisa Babitz. The complete publication, including footnotes, is available here.

Spin-off transactions require a focused, intensive planning effort. The deal team must make decisions about how best to allocate businesses, assets and liabilities between the parent and the subsidiary that will be spun-off. It must address complex tax issues, securities law questions and accounting matters, as well as issues related to capital structure, financing and personnel matters. In addition, it must resolve a long list of governance issues, including questions about the composition of the spin-off company board, the importance of mechanisms for dealing with conflicts of interest and the desirability of robust takeover defenses.

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2014 Delaware Decisions and What They Mean For 2015

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Monday February 2, 2015 at 9:09 am
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Editor’s Note: The following post comes to us from John L. Reed, chair of the Wilmington Litigation group and a partner in the Corporate and Litigation groups at DLA Piper LLP, and is based on portions of a DLA Piper Corporate Update; the complete publication is available here. 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.

Delaware has long been known as the corporate capital of the world, and it is now the state of incorporation for 66 percent of the Fortune 500 and more than half of all companies whose securities trade on the NYSE, Nasdaq and other exchanges. Each year, the Delaware courts issue a number of significant opinions demonstrating that the Delaware courts are neither stockholder nor management biased. Many of those recent and important cases are discussed in this post, which is intended to provide sufficient detail so as to be helpful to in-house counsel, but is also written in a way so that the often-long and complex Delaware decisions can be easily understood by directors and other fiduciaries. Takeaway observations are also provided.

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The State of Corporate Governance for 2015

Editor’s Note: Holly J. Gregory is a partner and co-global coordinator of the Corporate Governance and Executive Compensation group at Sidley Austin LLP. The following post is based on a Sidley update.

The balance of power between shareholders and boards of directors is central to the U.S. public corporation’s success as an engine of economic growth, job creation and innovation. Yet that balance is under significant and increasing strain. In 2015, we expect to see continued growth in shareholder activism and engagement, as well as in the influence of shareholder initiatives, including advisory proposals and votes. Time will tell whether, over the long term, tipping the balance to greater shareholder influence will prove beneficial for corporations, their shareholders and our economy at large. In the near term, there is reason to question whether increased shareholder influence on matters that the law has traditionally apportioned to the board is at the expense of other values that are key to the sustainability of healthy corporations. These concerns underlie the issues that will define the state of governance in 2015 and likely beyond:

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Forum-Selection Bylaws Refracted Through an Agency Lens

Posted by June Rhee, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Tuesday January 27, 2015 at 9:00 am
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Editor’s Note: The following post comes to us from Deborah A. DeMott, David F. Cavers Professor of Law at Duke University School of Law. 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.

Director-adopted bylaws that affect shareholders’ litigation rights have attracted both praise and controversy. Recent bylaws specify an exclusive judicial forum for litigation of corporate-governance claims, require that shareholder claims be arbitrated, and (most controversially) impose a one-way regime of fee shifting on shareholder litigants. To one degree or another, courts have legitimated each development, while commentators differ in their assessments. My paper, Forum-Selection Bylaws Refracted Through an Agency Lens, brings into clear focus issues so far blurred in the debate surrounding these types of bylaws.

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Delaware Court Curtails Books & Records, Validates Board-Adopted Forum Selection Bylaws

Editor’s Note: William Savitt is a partner in the Litigation Department of Wachtell, Lipton, Rosen & Katz. This post is based on a Wachtell Lipton firm memorandum by Mr. Savitt, Ryan A. McLeod, and A.J. Martinez. 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.

A unanimous Delaware Supreme Court yesterday reaffirmed the ability of Delaware companies to organize corporate litigation in the Delaware courts. United Technologies Corp. v. Treppel, No. 127, 2014 (Del. Dec. 23, 2014) (en banc).

The case involved an action to produce corporate books and records under Section 220 of the Delaware General Corporation Law, an increasingly frequent preliminary battleground in derivative litigation. Following a familiar pattern, stockholder plaintiffs demanded access to certain books and records of United Technologies Corporation, allegedly to assist in their consideration of potential derivative litigation. UTC asked that all demanding stockholders agree to restrict use of the materials obtained in the inspection to cases filed only in Delaware, pointing out that litigation had already been filed relating to the same matters in the Delaware courts and that any derivative lawsuit would be governed by Delaware law. Then, further evincing its concern to organize corporate governance litigation in the courts of Delaware, UTC’s board adopted a forum selection bylaw during the pendency of the Section 220 lawsuit.

…continue reading: Delaware Court Curtails Books & Records, Validates Board-Adopted Forum Selection Bylaws

Advantages of Board Actions on a “Clear Day”

Editor’s Note: Daniel Wolf is a partner at Kirkland & Ellis focusing on mergers and acquisitions. The following post is based on a Kirkland memorandum by Mr. Wolf, Sarkis Jebejian, and Matthew Solum. 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 its landmark 1971 Chris-Craft decision, the Delaware Supreme Court observed that “inequitable action does not become permissible simply because it is legally possible.” This quote aptly captures the two-stage inquiry that Delaware courts will apply when reviewing a challenged board action—first determining the legality of the action, and second appraising the equity, or fairness, of the act and its application under the specific circumstances.

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Ohio Federal Court Enforces Exclusive Forum Bylaw

Posted by Theodore Mirvis, Wachtell, Lipton, Rosen & Katz, on Friday October 3, 2014 at 9:00 am
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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.

In a recent decision, the U.S. District Court for the Southern District of Ohio invoked federal procedural law to enforce a board-adopted forum selection bylaw. North v. McNamara, No. 1:13-cv-833 (S.D. Ohio Sept. 19, 2014). In so ruling, the court recognized that such bylaws can promote “cost and efficiency benefits that inure to the corporation and its shareholders by streamlining litigation into a single forum.”

The litigation involves Chemed, a Delaware corporation headquartered in Cincinnati, Ohio. In August 2013, the corporation’s board adopted a bylaw selecting any state or federal court in Delaware as the exclusive forum for intracorporate litigation. Several months later, a stockholder filed a derivative suit in federal court in Delaware on behalf of the corporation challenging certain conduct dating back to 2010. Shortly thereafter, a different stockholder filed substantially similar litigation, also on behalf of the corporation, against the same defendants concerning the same conduct in Ohio federal court. Invoking the bylaw, defendants moved to transfer the case to the Delaware federal district court under the federal venue statute, essentially seeking to consolidate it with the earlier-filed Delaware federal action.

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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
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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]

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The Battle Against Multiforum Stockholder Litigation

Posted by Theodore Mirvis, Wachtell, Lipton, Rosen & Katz, on Monday August 25, 2014 at 12:17 pm
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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

2014 Mid-Year Securities Litigation Update

Editor’s Note: The following post comes to us from Jonathan C. Dickey, partner and Co-Chair of the National Securities Litigation Practice Group at Gibson, Dunn & Crutcher LLP, and is based on a Gibson Dunn publication.

It almost goes without saying that the first half of 2014 brought with it the most significant development in securities litigation in decades: the U.S. Supreme Court decided Halliburton Co. v. Erica P. John Fund, Inc.—Halliburton II. In Halliburton II, the Court declined to revisit its earlier decision in Basic v. Levinson, Inc.; plaintiffs may therefore continue to avail themselves of the legal presumption of reliance, a presumption necessary for many class action plaintiffs to achieve class certification. But the Court also reiterated what it said 20 years ago in Basic: the presumption of reliance is rebuttable. And the Court clarified that defendants may now rebut the presumption at the class certification stage with evidence that the alleged misrepresentation did not affect the security’s price, making “price impact” evidence essential to class certification.

…continue reading: 2014 Mid-Year Securities Litigation Update

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