As readers of this blog will recall, Delaware’s courts have held that under Delaware law bylaws designating Delaware’s courts as the exclusive forum for corporate and shareholder disputes are facially valid. Last summer, Delaware’s legislature adopted a statutory provision adding the permissibility of forum selection bylaws to the Delaware Corporations Code. In response to these judicial and legislative developments, many Delaware corporations have adopted forum selection bylaws. But whether these new bylaw provisions will have their intended effects will depend in part on what the courts in other jurisdictions do. If an action in another jurisdiction is permitted to go forward notwithstanding the bylaw specifying Delaware’s courts as the designated forum, the bylaw’s purpose would be frustrated. A recent decision from the Oregon’s highest court suggests that this potentially frustrating outcome is less likely.
Continue Reading Oregon Supreme Court Holds Delaware Corporation’s Forum Selection Bylaw Valid and Enforceable
A Trio of Delaware Decisions Reaffirms Corporate Director Protections
Because the vast majority of U.S. publicly traded companies are incorporated in Delaware, legal developments in Delaware have a particularly important impact on legal standards governing corporate conduct in the U.S. Delaware law is particularly influential with respect to the responsibilities and potential liability exposures of corporate directors. In a series of recent opinions written by Chief Justice Leo E. Strine Jr., the Delaware Supreme Court has, according to an October 22, 2015 memo from the Skadden law firm (here) “reaffirmed Delaware’s deference to the business judgment of disinterested corporate decision-makers and restored important protections for directors that had been weakened by prior court decisions.”
Continue Reading A Trio of Delaware Decisions Reaffirms Corporate Director Protections
A Look at the Modern Business Judgement Rule
Under time-honored standards, and as developed over time by Delaware’s court, the business judgment rule is, as is often stated, a “presumption that in making a business decision, the directors of a company have acted on an informed basis, in good faith, and in the honest belief that the action taken was in the best interests of the corporation.” However, as discussed in an interesting paper, in more recent times, courts have had to consider these principles in more troubling contexts, such as takeover battles or controlling shareholder transactions. As a result the courts have developed what BYU Law Professor D. Gordon Smith in his August 6, 2015 post on the CLS Blue Sky Blog (here) calls “the Modern Business Judgment Rule.” A longer version of Professor Smith’s paper can be found here.
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Should Nevada Be the New Preferred Forum? (That’s Right, Nevada.)
As I noted in a recent post, when the Wall Street Journal has a front-page article asking the question whether Delaware’s claim as the preferred home jurisdiction for many U.S. corporations continues to be warranted, it might be time to wonder whether Delaware’s preeminence might actually be under serious challenge. And if a recent article on Law 360 is any indication, the good citizens of Nevada – or at least one member of its legal bar in particular – are quite sure where U.S. companies should turn next, at least for the resolution of corporate disputes. That is, Nevada.
That’s right, Nevada.
In an August 11, 2015 article entitled “Strike Suit Certainty Remains the Status Quo in Nevada” (here, subscription required), Jeffrey S. Rugg of the Browstein Hyatt Farber Schreck law firm in Las Vegas argues that Nevada provides an advantageous forum compared to Delaware because of the expeditiousness with which Nevada courts resolve M&A-related strike suits. In Delaware, Rugg argues, “the consideration and resolution of strike suits … has become increasingly uncertain and, as a result, expensive,” whereas Nevada “continues to provide all parties with the certainty of consistent application of law and efficient resolution of motions.”
Continue Reading Should Nevada Be the New Preferred Forum? (That’s Right, Nevada.)
So Why Should Delaware Corporate Law Predominate?
One feature of the U.S. corporate law environment that always strikes outside observers and new initiates as odd is the predominance on the legal landscape of the law of Delaware. The tiny Eastern seaboard state is the second smallest U.S. state by size; only five states are smaller by population, yet its corporate laws outweigh those of any other state. Over half of the U.S. listed companies are incorporated in Delaware. Nearly two thirds of Fortune 500 companies are organized under the laws of Delaware.
Questions about Delaware’s outsized role in the corporate legal world are nothing new. But when the Wall Street Journal runs a front page article questioning Delaware’s role, it might be time to start wondering of Delaware’s predominance might actually be under challenge.
Continue Reading So Why Should Delaware Corporate Law Predominate?
Protecting Corporate Executives’ Rights to Advancement and Indemnification
Most senior corporate executive have a general understanding of the importance to them of their corporate indemnification rights. As discussed here, a related but sometimes even more important corporate benefit is the right to advancement – that is, the right to have their defense fees paid on a contemporaneous basis while legal proceedings against
A Q&A with Mark Lebovitch of Bernstein Litowitz: A Plaintiffs’ Counsel’s Perspective on the Fee-Shifting Bylaw Debate
One of the more significant recent developments in the corporate and securities litigation arena has been the emergence of the debate over fee-shifting bylaws following the Delaware Supreme Court’s May 2014 decision in ATP Tour, Inc. v. Deutscher Tennis Bund. Draft proposed legislation is now being considered by the Delaware legislature that would address