In 2024, the Supreme Court will be looking once again at the federal securities laws in Macquarie Infrastructure Corp. v. Moab Partners, L.P., Dkt No. 22-1165. The question presented to the Court this time is: Whether the U.S. Court of Appeals for the Second Circuit erred in holding that a failure to make a disclosure required under Item 303 of SEC Regulation S-K can support a private claim under Section 10(b) of the Securities Exchange Act of 1934, even in the absence of an otherwise misleading statement. The Court thus is primed to resolve a split between the Second Circuit and three other courts—the Third, Ninth and Eleventh Circuits—and will contend with the reach of the court-created implied private right of action to enforce Section 10(b). (more…)
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2023/12/MN-18360_Updated-Enhanced-Scrutiny-Blog-imagery_833x606_33.jpg606833Jaime A. Bartletthttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngJaime A. Bartlett2023-12-06 11:00:292024-02-06 12:54:59Petitioners Make Their Case That Pure Omissions Are Not Actionable Under Section 10(b) and Rule 10b-5.
Naming a registered investment company will become more challenging now that the Securities and Exchange Commission has significantly broadened the scope of the rule governing fund names. Moreover, the SEC estimates that when the Names Rule goes into effect, three out of four registered funds will be subject to the new requirements.
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.png00Jay G. Barishttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngJay G. Baris2023-11-28 11:42:042023-12-01 11:14:16What’s in a Name, Part II
Following a bench trial, the Delaware Court of Chancery recently denied a company director’s advancement of legal fees in connection with an alleged investigation into that director’s conduct. This is a double-rarity of sorts. Advancement disputes rarely go to trial, and advancement is rarely denied. As befits a post-trial ruling, unique facts resulted in a unique result.
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.png00Jon Muenzhttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngJon Muenz2023-11-21 09:04:102025-09-30 14:36:21A Rare Advancement Trial Ends in a Rare Result
Vice Chancellor Sam Glasscock III recently declined to grant a motion to dismiss in Paul Capital Advisors, L.L.C. et al. v. Holland, 2023 WL 5551017, C.A. No. 2022-0167-SG (Del. Aug. 29, 2023) (“Paul Capital”), which involved claims arising out of an intricate set of transactions intended to monetize certain illiquid assets. In sustaining the claims, the Court of Chancery colorfully outlined the challenges of deciphering a highly complex, “monkey’s fist of contracts” without accompanying provisions describing the purpose for such complexity in the first place, and encouraged practitioners to instead choose the path of simplicity.
In an October 31, 2023 decision sure to spook practitioners, the Court of Chancery called into doubt the enforceability of “Con Ed provisions.” Con Ed provisions, so-named for the 2005 Second Circuit decision prohibiting stockholders from pursuing a $1.2 billion merger premium damages claim, create a path for the target’s recovery of lost merger premium if the buyer breaches and a deal fails.
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2023/05/MN-18360_Updated-Enhanced-Scrutiny-Blog-imagery_833x606_32.jpg606833Andrew W. Sternhttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngAndrew W. Stern2023-11-09 15:12:352024-02-06 12:54:03Con Ed Uncertainty: Court of Chancery Questions Enforceability of Merger Agreement Provisions Allowing Target to Seek Lost Merger Premium
Resolving an issue that had split the trial courts in New York (and has also divided state courts across the country), the First Department ruled yesterday that the PSLRA discovery stay applies in state court. In Camelot Event Driven Fund et al. v. Morgan Stanley & Co. et al, Case No. 2023-03270, 2023 WL 7198938 (1st Dep’t Nov. 2, 2023), the court stated that “the plain language of the statute demonstrates” that the discovery stay provision applies to “any private action, whether brought in state or federal court.”
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.png00Francesca E. Brodyhttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngFrancesca E. Brody2023-11-03 10:04:062023-11-03 10:04:06New York Court Confirms: No Discovery Pending Motions To Dismiss Securities Claims
While there are limits to a stockholder’s right to inspect books and records under Section 220 of the Delaware General Corporation Law or other sections allowing inspection—and corporations can negotiate the scope of inspection—there are also limits to how vigorously a corporation can resist a stockholder’s inspection demand, particularly when it does not present novel legal issues. Two recent fee-shifting decisions issued by Vice Chancellor Zurn provide a cautionary reminder of those limits, which were previously set out by the Court of Chancery in opinions such as Pettry v. Gilead Scis. Inc. (2020), Marilyn Abrams Living Trust v. Pope Invs. Inc. (2017), and McGowan v. Empress Entm’t (2000). The unmistakable message: if the right to inspection is clear, a defendant should think twice about a blanket opposition, unless the defendant does not mind paying the plaintiff’s legal fees in the end.
Petitioners Make Their Case That Pure Omissions Are Not Actionable Under Section 10(b) and Rule 10b-5.
In 2024, the Supreme Court will be looking once again at the federal securities laws in Macquarie Infrastructure Corp. v. Moab Partners, L.P., Dkt No. 22-1165. The question presented to the Court this time is: Whether the U.S. Court of Appeals for the Second Circuit erred in holding that a failure to make a disclosure required under Item 303 of SEC Regulation S-K can support a private claim under Section 10(b) of the Securities Exchange Act of 1934, even in the absence of an otherwise misleading statement. The Court thus is primed to resolve a split between the Second Circuit and three other courts—the Third, Ninth and Eleventh Circuits—and will contend with the reach of the court-created implied private right of action to enforce Section 10(b). (more…)
Jaime A. Bartlett
San Francisco
jbartlett@sidley.com
What’s in a Name, Part II
Naming a registered investment company will become more challenging now that the Securities and Exchange Commission has significantly broadened the scope of the rule governing fund names. Moreover, the SEC estimates that when the Names Rule goes into effect, three out of four registered funds will be subject to the new requirements.
(more…)
Jay G. Baris
Louisa Kiu
A Rare Advancement Trial Ends in a Rare Result
Following a bench trial, the Delaware Court of Chancery recently denied a company director’s advancement of legal fees in connection with an alleged investigation into that director’s conduct. This is a double-rarity of sorts. Advancement disputes rarely go to trial, and advancement is rarely denied. As befits a post-trial ruling, unique facts resulted in a unique result.
(more…)
Jon Muenz
New York
jmuenz@sidley.com
“Simplify, simplify, simplify”: Delaware Chancery Declines to Dismiss Claims Regarding a Gordian Knot of Private Equity-Related Contracts
Vice Chancellor Sam Glasscock III recently declined to grant a motion to dismiss in Paul Capital Advisors, L.L.C. et al. v. Holland, 2023 WL 5551017, C.A. No. 2022-0167-SG (Del. Aug. 29, 2023) (“Paul Capital”), which involved claims arising out of an intricate set of transactions intended to monetize certain illiquid assets. In sustaining the claims, the Court of Chancery colorfully outlined the challenges of deciphering a highly complex, “monkey’s fist of contracts” without accompanying provisions describing the purpose for such complexity in the first place, and encouraged practitioners to instead choose the path of simplicity.
(more…)
Courtney Okwara
New York
cokwara@sidley.com
Alex J. Kaplan
New York
akaplan@sidley.com
Con Ed Uncertainty: Court of Chancery Questions Enforceability of Merger Agreement Provisions Allowing Target to Seek Lost Merger Premium
In an October 31, 2023 decision sure to spook practitioners, the Court of Chancery called into doubt the enforceability of “Con Ed provisions.” Con Ed provisions, so-named for the 2005 Second Circuit decision prohibiting stockholders from pursuing a $1.2 billion merger premium damages claim, create a path for the target’s recovery of lost merger premium if the buyer breaches and a deal fails.
(more…)
Andrew W. Stern
Charlotte K. Newell
New York
cnewell@sidley.com
Arthur E. Adler
New York
aadler@sidley.com
New York Court Confirms: No Discovery Pending Motions To Dismiss Securities Claims
Resolving an issue that had split the trial courts in New York (and has also divided state courts across the country), the First Department ruled yesterday that the PSLRA discovery stay applies in state court. In Camelot Event Driven Fund et al. v. Morgan Stanley & Co. et al, Case No. 2023-03270, 2023 WL 7198938 (1st Dep’t Nov. 2, 2023), the court stated that “the plain language of the statute demonstrates” that the discovery stay provision applies to “any private action, whether brought in state or federal court.”
(more…)
Francesca E. Brody
New York
fbrody@sidley.com
Matthew J. Dolan
Palo Alto
mdolan@sidley.com
Two Cautionary Tales: Fee Shifting Imposed for Litigating Books-and-Records Inspection Demands
While there are limits to a stockholder’s right to inspect books and records under Section 220 of the Delaware General Corporation Law or other sections allowing inspection—and corporations can negotiate the scope of inspection—there are also limits to how vigorously a corporation can resist a stockholder’s inspection demand, particularly when it does not present novel legal issues. Two recent fee-shifting decisions issued by Vice Chancellor Zurn provide a cautionary reminder of those limits, which were previously set out by the Court of Chancery in opinions such as Pettry v. Gilead Scis. Inc. (2020), Marilyn Abrams Living Trust v. Pope Invs. Inc. (2017), and McGowan v. Empress Entm’t (2000). The unmistakable message: if the right to inspection is clear, a defendant should think twice about a blanket opposition, unless the defendant does not mind paying the plaintiff’s legal fees in the end.
(more…)
Hille R. Sheppard
Chicago
hsheppard@sidley.com
Thomas H. Collier
Chicago
tcollier@sidley.com
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