Welcome to Texas: Texas Governor Signs Law Creating Specialized Business Courts

Last Friday, Gov. Greg Abbott signed into law House Bill 19, creating Texas “business courts” to hear certain types of complex commercial disputes. These courts will open on September 1, 2024. The creation of these courts raises a host of strategic questions for litigants, as described in detail below. In-house lawyers would do well to start familiarizing themselves with the business courts’ structure and the strategic issues and decision points that may arise when the courts open their doors next year.


The Saga Continues: Part II

On June 1, 2023, the majority of an en banc panel of the Ninth Circuit found that Gap Inc.’s forum selection clause does not violate the anti-waiver provision of the Securities Exchange Act of 1934 (the “Exchange Act”) or Delaware law, entrenching its split with the Seventh Circuit’s circuit ruling on the same questions and ensuring that the enforcement of forum selection clauses across jurisdictions will remain unsettled for the foreseeable future.


You Might Think Your Arbitration Is Confidential…But, In Delaware, The Court Will Decide

Practitioners rely on ostensibly ironclad provisions of protective orders to withhold documents or portions thereof from public view. And that is particularly so in arbitrations, which are generally private proceedings.  But a recent Delaware Court of Chancery opinion issued by Vice Chancellor Paul A. Fioravanti, Jr. serves as a reminder that practitioners should be mindful that rules of the court regarding confidentiality may differ from arbitration rules or even stipulated confidentiality agreements among arbitration parties.


Collision Course: The Consequences of Conflicting Forum-Selection Provisions

On January 6, 2023, Vice Chancellor Laster issued an opinion in Fairstead Capital Management LLC v. Blodgett concerning a “dispute-resolution collision” between two applicable forum-selection clauses. The collision arises from the termination of a principal of an investment fund, whose partners fired him for allegedly breaching his employment agreement and also cancelled his member interests in two LLCs that owned rights to the profits generated by the fund. Unhappy with his ouster, the former principal wanted to litigate against his former partners and the LLCs. But that raised the question at the core of this Vice Chancellor Laster’s opinion: where to litigate?


Court Takes Buzzsaw To Bid To Arbitrate Claims Against Buzzfeed

The Delaware Court of Chancery recently held that BuzzFeed was not required to arbitrate stock conversion claims brought by its former employees following Buzzfeed’s 2021 SPAC merger. Vice Chancellor Zurn granted BuzzFeed and its officers and directors an anti-arbitration injunction and rejected Plaintiffs’ argument that the Court of Chancery lacked subject matter jurisdiction over the claims. In doing so, the court offered a thoughtful application of contract law and law on arbitrability to a post-SPAC transaction dispute.


The Forum Selection Saga Continues

On October 24, 2022, the Ninth Circuit granted en banc review in Lee v. Fisher 34 F.4th 777 (9th Cir. 2022), vacating the Circuit’s prior ruling that the forum selection clause in the bylaws of Gap Inc. (“Gap”) is enforceable. This is the latest chapter in the saga of forum selection enforceability that has gripped the Courts and litigants for years. With this ruling, the  Ninth Circuit is set to consider whether forum selection clauses are enforceable, even if they result in a waiver of substantive rights under federal law. A ruling enforcing Gap’s clause will leave the Ninth and Seventh Circuits in direct conflict, while a ruling against Gap could bring the two circuits back into alignment.


General Counsel’s Natural Habitat: Delaware Court of Chancery Court Holds that LLC Act’s Consent-to-Jurisdiction Statute Extends to a Delaware LLC’s General Counsel

The Delaware Court of Chancery recently interpreted the Delaware Limited Liability Company Act’s (“LLC Act”) provision for service on any “person” who “participates materially in the management” of a Delaware LLC as sufficient to support implied consent to Delaware jurisdiction by a Delaware LLC’s general counsel.  In past cases, the Delaware Court of Chancery found that this material-participation standard applies to LLC officers who hold the title of president and perform functions customarily associated with that role.  But in In re P3 Health Group Holdings, LLC, No. 2021-0518-JTL, Vice Chancellor Laster considered the plain meaning of “participates materially” and those words’ “natural habitat” in other statutes like the federal tax code and Delaware General Corporation Law’s (“DGCL”) consent-to-jurisdiction statute for corporate officers, and held that the LLC Act’s consent-to-jurisdiction statute extends to any person who holds a “C-suite” position in a Delaware LLC, including an LLC’s general counsel.  C-suite executives of Delaware LLCs should thus anticipate that they may be subject to jurisdiction in Delaware for claims involving their actions as senior officers of a Delaware entity going forward.


The Era of Section 11 Litigation in State Courts Appears To Be Ending

On April 28, 2022, a state appellate court for the first time addressed provisions in a public company’s certification of incorporation that designate federal court as the sole forum for the litigation of Section 11 claims.  Wong v. Restoration Robotics, Inc.,  – Cal. Rptr. 3d –, 2022 WL 1261423.  Section 11 of the Securities Act of 1933 gives stock purchasers a claim against stock issuers and a broad range of other defendants for materially false or misleading statements in registration statements.  (more…)

Relearning the ABCs: Delaware Court of Chancery Issues Rulings Making Clear That More Information Is Required in Bankruptcy-Alternative Proceedings

The Delaware Court of Chancery took the old maxim “justice delayed is justice denied” to heart recently when it denied a request for a stay of proceedings hours after the request had been filed.  The ruling from Vice Chancellor Paul A. Fioravanti, Jr. in In re Kidbox.com, Inc., Case No. 2022-0379-PAF, is the latest in a series of rulings from the Delaware Court of Chancery requiring litigants in bankruptcy-alternative proceedings in Delaware to support their petitions for relief with sufficient disclosures and to avoid bare-boned pleadings.  These rulings further signal that counsel engaged in bankruptcy-alternative proceedings in Delaware should be prepared for a higher level of scrutiny from the Court of Chancery. (more…)

Guarding Its Turf: SPAC-Related Chancery Opinion May Force Companies to Defend Disclosure-Based Claims on Multiple Fronts

Companies that have endured a corporate trauma are often faced with a two-headed monster of litigation: first, a federal securities class action, typically alleging that misstatements or omissions inflated the company’s stock price because the company failed adequately to predict, or disclose the likelihood of, the trauma; and, second, stockholder litigation claiming that the company’s directors (and sometimes officers) breached their state-law fiduciary duties in subjecting the company to the costs of defending or settling the securities litigation. In order to avoid (or at least defer unless and until necessary) the expense and distraction of litigating identical or overlapping issues in two or more fora, defendants often have sought a stay, by agreement or motion, of the fiduciary duty litigation, pending at least resolution of a threshold motion to dismiss in federal court. This approach has proven beneficial for all involved because it allows the parties to concentrate their resources in the federal proceeding that will determine whether viable disclosure claims have been alleged; if those claims fail, then there may no longer be any basis to pursue the state-law fiduciary duty claim and all can save the resources of litigating those claims in the meantime. (more…)