As readers undoubtedly have noted, one of the hot topics these days is the question whether corporations should change their state of incorporation from Delaware to that of another state, usually either Nevada or Texas. The dialog on this topic was already underway when Elon Musk supercharged the conversation by vowing, in reaction to the Delaware court’s disallowance of his $56 billion pay package, to have Tesla change its state of incorporation from Delaware to Texas. I suspect that the state of incorporation debate is going to be with us for some time to come, making it important for those of us who might have to participate in (or at least listen to) the conversation to get a handle on the key differences between the states.Continue Reading Delaware or Another State: What’s the Difference?

It is an idea that suddenly is all the rage – that companies should shake the Delaware dust off their feet and reincorporate elsewhere. Elon Musk has famously said, in the wake of the Delaware Chancery Court’s decision voiding his $55.8 billion pay package, that he will seek to reincorporate Tesla in Texas. (SpaceX, also a Musk company, has in fact already reincorporated in Texas.) The former Attorney General William Barr and another GOP official published a Wall Street Journal column arguing that Delaware’s courts are driving corporations away (as discussed here), and suggesting that companies increasingly will find it more attractive to be incorporated in Nevada or another state. Some companies have indeed left Delaware and reincorporated elsewhere – including not just SpaceX, but also TripAdvisor, for example. Why would a company change its state of incorporation from Delaware to another state? And with reference to the focus of  this blog, does a company’s redomestication from Delaware to another state have implications for the potential liability exposures of the company’s directors and officers?Continue Reading Does a Del. Corp.’s Reincorporation in Another State Reduce D&O Liability Exposure?

Readers will recall that I recently posted about the new Nevada legislation requiring liability insurance policies issued in the state to provide for defense costs outside the limits – in other words, expressly requiring that liability insurers’ payment of defense costs will not erode the limit of liability. This new legislation caused a great deal of concern, both among insurers and insureds. On July 21, 2023, and in response to the concerns, the Nevada Department of Insurance, acting through the state’s Insurance Commissioner, adopted an Emergency Regulation to aid the implementation of the new statute. The Emergency Regulation itself, as well as the Insurance Commissioner’s July 20, 2023, letter to the Nevada Governor explaining the regulatory action, can be found here. In addition, the Department has also separately published Guidance to Insurers with respect to the Emergency Regulation, which can be found here.  Continue Reading Nevada Publishes Emergency Regulation for “Defense Outside the Limits” Bill

A short time ago, a storm of controversy briefly emerged after a Delaware court endorsed a firm’s adoption of a fee-shifting bylaw. The controversy quieted down after the Delaware legislature adopted a statutory provision prohibiting fee-shifting bylaws. The fee-shifting provision controversy could be back, albeit this time in a different state. A Nevada legislator has introduced a bill in the state senate that would explicitly allow Nevada corporations to adopt  provisions requiring fee-shifting in unsuccessful M&A litigation, as long as the deals were approved by a shareholder majority. University of Nevada Las Vegas Law School Professor Benjamin Edwards describes the legislation in a March 18, 2019 post on the Business Law Prof Blog (here).
Continue Reading Proposed Nevada Legislation Introduces Fee-Shifting in Shareholder Litigation

A recent coverage dispute involving a Nevada club’s losses resulting from its employees’ theft from the club’s customers’ credit cards raises interesting issues with implications for coverage questions for other kinds of losses for which policyholders are seeking crime policy coverage. In the recent Nevada club credit card fraud case, District of Nevada Judge Andrew Gordon held that the club’s crime policy did not cover the club’s losses from the employees’ theft of funds from the customers’ credit card accounts because the losses did not result directly from the employees’ theft. Judge Gordon’s August 6, 2018 opinion can be found here. An August 7, 2018 post on the Wiley Rein law firm’s Executive Summary Blog about Judge Gordon’s opinion can be found here.   
Continue Reading Crime Policy Doesn’t Cover Employee Credit Card Overcharge Losses

One of the key elements to establish coverage under a directors and officers insurance policy is the existence of claim is for actions undertaken by an insured individual in an insured capacity – that is, in his or her capacity as a director or officer of the company. Things in life are never simple, and lawsuits often allege that corporate director or officer defendants were acting in multiple capacities – that is, both in their capacity as a director or officer and in other capacities as well. These multiple capacity claims often present policy interpretation and coverage issues under D&O insurance policies.

In a recent case, the District Court of North Dakota (applying North Dakota law) held that coverage under a D&O insurance policy does not apply to a claim alleging that the insured defendant was acting in multiple capacities. The court also held that the Insured vs. Insured exclusion precluded coverage where the claimants included both insured persons and individuals that were not insured persons. The decision raises some interesting policy language and policy interpretation issues. A copy of May 18, 2018 decision by District of Massachusetts Judge William G. Young, sitting by designation in the District of Nevada, can be found here.
Continue Reading D&O Insurance: Coverage Precluded for Insured Director Acting in Multiple Capacities

NevadaAs 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.)