For the second time, there has been a successful challenge to the constitutionality of California law requiring increased diversity on boards of directors.
On May 13, 2022, Judge Maureen Duffy-Lewis of Los Angeles Superior Court struck down California’s first board diversification law on the heels of an April 1, 2022, ruling by Judge Terry A. Green, also at Los Angeles Superior Court, each holding the respective board diversification law before them (one addressing gender discrimination and the other addressing racial, ethnic, and sexual orientation discrimination, respectively) to be unlawful. While these rulings are unlikely to be the last word on the viability of such statutes, they are the first to address their constitutionality head-on through lengthy, detailed rulings. As such, their reasoning may resonate with judges facing similar challenges in federal court and at the appellate level as well as in jurisdictions outside of California.
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.png00Wendy M. Lazersonhttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngWendy M. Lazerson2022-05-23 08:45:302023-09-08 11:11:02Second California Law Mandating Specific Number of Underrepresented Board Members Struck Down as Unconstitutional
As stockholders continue to seek expansive books and records collections, and particularly as requests for materials outside “formal” board materials become routine, it is worth reflecting on areas in which Delaware courts have continued to uphold boundaries with respect to Section 220 obligations. In a recent decision announced from the bench, Vice Chancellor Joseph R. Slights III recently offered a reminder of one such area: the non-company email accounts of outside directors. (more…)
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.png00Elizabeth Y. Austinhttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngElizabeth Y. Austin2022-05-17 09:51:382023-09-08 11:11:57A Recent Reminder For Outside Directors: Your Emails May Be Fair Game
The Delaware Chancery Court’s recent post-trial decision in In re Tesla Motors, Inc. Stockholder Litigation, C.A. No. 12711-VCS (April 27, 2022), includes a helpful discussion of the importance of fair price when analyzing a transaction under the entire fairness analysis. There, Tesla stockholders brought claims against members of Tesla’s board of directors and Tesla’s CEO and controlling shareholder Elon Musk related to Tesla’s acquisition of SolarCity Corporation. (more…)
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.png00Jim Ducayethttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngJim Ducayet2022-05-11 09:27:032023-09-08 11:12:37All Roads Lead to Fair Price: The Tesla Decision
A recent decision from the United States District Court for the Southern District of New York represents a significant further development in extending into federal court the Delaware Chancery Court’s resistance to disclosure-only settlements in the M&A litigation context. Plaintiff stockholders in a M&A target company often file lawsuits challenging disclosures made to them in proxy statements soliciting support for the M&A transaction. Such suits have served as a vehicle for plaintiff lawyers to collect fees when they are “mooted” by the target company making additional disclosures in response to the lawsuit. The cases are very rarely litigated, allowing plaintiff lawyers to collect fees for limited effort and little risk. (more…)
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.png00Matthew J. Dolanhttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngMatthew J. Dolan2022-05-09 11:52:282023-09-08 11:13:20More Pushback to Disclosure-Only Settlements
Recent efforts by the California Legislature to increase corporate boardroom diversity hit a road bump due to the Los Angeles County Superior Court decision earlier this month in Crest v. Padilla, Case No. 20-STCV-37513, which held that California Corporations Code § 301.4 (“Section 301.4”) is unconstitutional. The statute, ruled the court, poses a “present total and fatal conflict” with the Equal Protection Clause of the California Constitution. (more…)
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.png00Jaime A. Bartletthttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngJaime A. Bartlett2022-04-26 09:04:582023-09-08 11:14:07Fate of Board Diversity Requirements In Jeopardy
Being asked to join the board of directors of a public corporation is an honor. Board membership can be an enriching experience and an avenue for personal and professional growth. However, in an increasingly litigious, regulated and complex public company landscape, director candidates should conduct thoughtful and targeted due diligence on a company and its existing board practices before committing to a role that should be expected to extend over multiple years. The following are ten questions director candidates should ask themselves and the prospective company. The answers to many of these questions can be found in a company’s public disclosures. To demonstrate diligence and an earnestness in learning more about a company, a prospective board candidate may choose to start there before confirming the answers through conversations with current and former directors, senior management or a recruiter. (more…)
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.png00Sara B. Brodyhttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngSara B. Brody2022-04-20 11:22:332023-09-08 11:14:47Ten Questions To Ask Before Joining a Public Company Board of Directors
Securities class actions against life sciences companies are almost always second-order problems. The first-order problem is a business or regulatory setback that, when disclosed by the company or a third party, is followed by a stock price drop. Following the decline, plaintiffs’ class-action attorneys will search the company’s previous public statements in search of inconsistencies between past positive comments and the current negative development. In most cases, plaintiffs’ attorneys will seek to show that any arguable inconsistency amounts to fraud—that is, they will claim that the earlier statement was knowingly or recklessly false or misleading. Where a company makes the challenged statement in a public offering document (that is, a registration statement or prospectus), plaintiffs need only show that the statement was materially false or misleading, not that it was made with scienter, i.e., the requisite state of mind.
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.png00Sara B. Brodyhttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngSara B. Brody2022-04-11 08:45:022023-09-08 11:15:29Securities Litigation Against Life Sciences Companies: Eleven Takeaways from 2021
Second California Law Mandating Specific Number of Underrepresented Board Members Struck Down as Unconstitutional
For the second time, there has been a successful challenge to the constitutionality of California law requiring increased diversity on boards of directors.
On May 13, 2022, Judge Maureen Duffy-Lewis of Los Angeles Superior Court struck down California’s first board diversification law on the heels of an April 1, 2022, ruling by Judge Terry A. Green, also at Los Angeles Superior Court, each holding the respective board diversification law before them (one addressing gender discrimination and the other addressing racial, ethnic, and sexual orientation discrimination, respectively) to be unlawful. While these rulings are unlikely to be the last word on the viability of such statutes, they are the first to address their constitutionality head-on through lengthy, detailed rulings. As such, their reasoning may resonate with judges facing similar challenges in federal court and at the appellate level as well as in jurisdictions outside of California.
(more…)
Wendy M. Lazerson
Palo Alto, San Francisco
wlazerson@sidley.com
Katherine A. Roberts
Los Angeles, San Francisco
kroberts@sidley.com
Galit A. Knotz
A Recent Reminder For Outside Directors: Your Emails May Be Fair Game
As stockholders continue to seek expansive books and records collections, and particularly as requests for materials outside “formal” board materials become routine, it is worth reflecting on areas in which Delaware courts have continued to uphold boundaries with respect to Section 220 obligations. In a recent decision announced from the bench, Vice Chancellor Joseph R. Slights III recently offered a reminder of one such area: the non-company email accounts of outside directors. (more…)
Elizabeth Y. Austin
Chicago
laustin@sidley.com
Mark C. Priebe
All Roads Lead to Fair Price: The Tesla Decision
The Delaware Chancery Court’s recent post-trial decision in In re Tesla Motors, Inc. Stockholder Litigation, C.A. No. 12711-VCS (April 27, 2022), includes a helpful discussion of the importance of fair price when analyzing a transaction under the entire fairness analysis. There, Tesla stockholders brought claims against members of Tesla’s board of directors and Tesla’s CEO and controlling shareholder Elon Musk related to Tesla’s acquisition of SolarCity Corporation. (more…)
Jim Ducayet
Chicago
jducayet@sidley.com
Marlow Svatek
More Pushback to Disclosure-Only Settlements
A recent decision from the United States District Court for the Southern District of New York represents a significant further development in extending into federal court the Delaware Chancery Court’s resistance to disclosure-only settlements in the M&A litigation context. Plaintiff stockholders in a M&A target company often file lawsuits challenging disclosures made to them in proxy statements soliciting support for the M&A transaction. Such suits have served as a vehicle for plaintiff lawyers to collect fees when they are “mooted” by the target company making additional disclosures in response to the lawsuit. The cases are very rarely litigated, allowing plaintiff lawyers to collect fees for limited effort and little risk. (more…)
Matthew J. Dolan
Palo Alto
mdolan@sidley.com
Fate of Board Diversity Requirements In Jeopardy
Recent efforts by the California Legislature to increase corporate boardroom diversity hit a road bump due to the Los Angeles County Superior Court decision earlier this month in Crest v. Padilla, Case No. 20-STCV-37513, which held that California Corporations Code § 301.4 (“Section 301.4”) is unconstitutional. The statute, ruled the court, poses a “present total and fatal conflict” with the Equal Protection Clause of the California Constitution. (more…)
Jaime A. Bartlett
San Francisco
jbartlett@sidley.com
Jennifer H. Lee
San Francisco
jhlee@sidley.com
Ten Questions To Ask Before Joining a Public Company Board of Directors
Being asked to join the board of directors of a public corporation is an honor. Board membership can be an enriching experience and an avenue for personal and professional growth. However, in an increasingly litigious, regulated and complex public company landscape, director candidates should conduct thoughtful and targeted due diligence on a company and its existing board practices before committing to a role that should be expected to extend over multiple years. The following are ten questions director candidates should ask themselves and the prospective company. The answers to many of these questions can be found in a company’s public disclosures. To demonstrate diligence and an earnestness in learning more about a company, a prospective board candidate may choose to start there before confirming the answers through conversations with current and former directors, senior management or a recruiter. (more…)
Sara B. Brody
San Francisco, Palo Alto
sbrody@sidley.com
Jason T. Nichol
Securities Litigation Against Life Sciences Companies: Eleven Takeaways from 2021
Securities class actions against life sciences companies are almost always second-order problems. The first-order problem is a business or regulatory setback that, when disclosed by the company or a third party, is followed by a stock price drop. Following the decline, plaintiffs’ class-action attorneys will search the company’s previous public statements in search of inconsistencies between past positive comments and the current negative development. In most cases, plaintiffs’ attorneys will seek to show that any arguable inconsistency amounts to fraud—that is, they will claim that the earlier statement was knowingly or recklessly false or misleading. Where a company makes the challenged statement in a public offering document (that is, a registration statement or prospectus), plaintiffs need only show that the statement was materially false or misleading, not that it was made with scienter, i.e., the requisite state of mind.
(more…)
Sara B. Brody
San Francisco, Palo Alto
sbrody@sidley.com
Robin E. Wechkin
Seattle
rwechkin@sidley.com
Francesca E. Brody
New York
fbrody@sidley.com
Matthew J. Dolan
Palo Alto
mdolan@sidley.com
Sarah A. Hemmendinger
San Francisco
shemmendinger@sidley.com
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Jim Ducayet
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James Heyworth
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Alex J. Kaplan
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Ian M. Ross
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Robert S. Velevis
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