A new federal court decision, Madsen v. Sidwell Air Freight1, addresses the scope of general personal jurisdiction over corporations after the Supreme Court’s 2023 decision in Mallory v. Norfolk Southern Railway2. Madsen suggests that many states’ laws stop short of asserting the kind of registration-based jurisdiction that Mallory approved. This decision highlights key arguments that in-house litigators should bear in mind if their companies do business in multiple states.
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.png00Tobias S. Loss-Eatonhttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngTobias S. Loss-Eaton2024-04-17 09:04:482024-04-17 09:34:26Corporate Personal Jurisdiction, Mallory, and Forum-Shopping: What’s Next for Multistate or International Corporations?
Securities class actions against life sciences companies are mostly second-order problems. The first-order problem is a business or regulatory setback that, when disclosed by the company or a third party, triggers a stock price decline. Following the decline, plaintiffs’ class-action attorneys search the company’s previous public statements and seek to identify inconsistencies between past positive comments and the current negative development. In most cases, plaintiffs’ attorneys then 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. When the challenged statement appears 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 or caused their losses.
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2024/04/MN-23201-Securities-Class-Actions-in-the-Life-Sciences-Sector-Survey-2023_600x400.jpg400600Robin E. Wechkinhttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngRobin E. Wechkin2024-04-12 11:35:072024-04-12 13:56:50Securities Litigation Against Life Sciences Companies: 2023
Following amendments in August 2022 to Section 102(b)(7) of the Delaware General Corporate Law (“DGCL”) to allow corporations to include provisions in their respective charters exculpating officers for breaches of the duty of care, a number of corporations naturally took steps to add such provisions. Stockholder challenges followed in In re Fox Corp./Snap Section 242 Litigation, No. 120, 2023, 2024 WL 176575 (Del. Jan. 17, 2024), as revised (Jan. 25, 2024), which involved parallel lawsuits contesting the manner in which two separate corporations with multi-class capital structures adopted amendments providing for officer exculpation. The Delaware Supreme Court ultimately affirmed a lower court decision in favor of the corporations, holding that, consistent with their respective charters, the corporations validly obtained approval from stockholder classes permitted to vote and validly excluded from the vote non-voting stockholder classes.
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.png00Alex J. Kaplanhttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngAlex J. Kaplan2024-04-09 10:25:482024-04-09 11:23:14The Powers That Be: Supreme Court Holds That Non-Voting Stockholder Classes Cannot Invoke the “Powers, Preferences or Special Rights” Exception in Section 242, to Vote on Charter Amendments to Exculpate Officers From Duty of Care Breaches
On March 27, 2024, Chancellor McCormick granted the Carvana Special Litigation Committee’s motion to dismiss after finding no wrongdoing by the Company’s controlling stockholders in connection with its March 2020 direct offering and the controlling stockholders’ subsequent sale of Company stock for over US$1 billion. See https://courts.delaware.gov/Opinions/Download.aspx?id=362010.
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. Bartlett2024-04-04 09:02:462024-04-10 10:09:14Carvana SLC Drives Away Derivative Case
Last month, in an oral ruling likely to bring great joy to the Delaware defense bar, Vice Chancellor Zurn issued an atypical “Statement of the Court” in Garfield v. Getaround that swiftly rejected an $850,000 fee request in a derivative action. Plaintiff sought the fee for its efforts in prompting Defendant Getaround Inc. to make changes to its voting structure. Calling attention to the slew of similar actions by stockholders following Garfield v. Boxed, Vice Chancellor Zurn said the “game is over” for attorneys’ “making a literal fortune off of a minuscule number of hours of work.”
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2023/09/MN-18360_Updated-Enhanced-Scrutiny-Blog-imagery_833x606_29.jpg606833Jon Muenzhttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngJon Muenz2024-03-27 11:02:042024-03-29 16:59:30Delaware Court of Chancery Says It’s Game Over on Massive Fees for “Miniscule” Work
When companies settle proxy contests with activist stockholders, the activists generally give up stockholder-level influence in exchange for board-level influence. In a typical agreement in this setting, activists gain board seats in exchange for a commitment to vote their shares with the board’s recommendation on proposals put to stockholders. Activists also agree to standstill periods in which they refrain from taking actions opposed to the board, and from increasing their holdings above a specified cap.
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.png00Robin E. Wechkinhttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngRobin E. Wechkin2024-03-21 09:04:112024-03-21 09:37:37Voting Commitments Matter and Will Be Enforced: Delaware Supreme Court Affirms Chancery Decision Holding Activist Stockholders to Their Bargain
Last November, Vice Chancellor J. Travis Laster issued an Opinion in Sunder Energy, LLC v. Jackson denying a company’s application for a preliminary injunction against a former employee based on restrictive covenants embedded in that employee’s Incentive Units. The Court held that the company could not enforce the covenants because the company’s Managers breached their fiduciary duties in the creation of those covenants, and because the covenants themselves are “overly broad” and “unreasonable.” The Court noted, for example, that covenants in this residential solar panel sales company’s Incentive Units could theoretically have indefinitely prevented the former employee’s daughter from door-to-door sales of Girl Scout cookies. (more…)
https://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.png00James Heyworthhttps://ma-litigation.sidley.com/wp-content/uploads/sites/3/2022/08/sidleyLogo-e1643922598198.pngJames Heyworth2024-03-19 09:00:352024-03-19 09:10:41On the Efficacy of Litigating Post-Employment Disputes in Delaware (Reciprocity Is a Two-Way Street)
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Corporate Personal Jurisdiction, Mallory, and Forum-Shopping: What’s Next for Multistate or International Corporations?
A new federal court decision, Madsen v. Sidwell Air Freight1, addresses the scope of general personal jurisdiction over corporations after the Supreme Court’s 2023 decision in Mallory v. Norfolk Southern Railway2. Madsen suggests that many states’ laws stop short of asserting the kind of registration-based jurisdiction that Mallory approved. This decision highlights key arguments that in-house litigators should bear in mind if their companies do business in multiple states.
(more…)
Tobias S. Loss-Eaton
Washington, D.C.
tlosseaton@sidley.com
Chike B. Croslin
Washington, D.C.
ccroslin@sidley.com
Securities Litigation Against Life Sciences Companies: 2023
Securities class actions against life sciences companies are mostly second-order problems. The first-order problem is a business or regulatory setback that, when disclosed by the company or a third party, triggers a stock price decline. Following the decline, plaintiffs’ class-action attorneys search the company’s previous public statements and seek to identify inconsistencies between past positive comments and the current negative development. In most cases, plaintiffs’ attorneys then 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. When the challenged statement appears 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 or caused their losses.
(more…)
Robin E. Wechkin
Seattle
rwechkin@sidley.com
Sarah A. Hemmendinger
San Francisco
shemmendinger@sidley.com
Francesca E. Brody
New York
fbrody@sidley.com
Sara B. Brody
San Francisco, Palo Alto
sbrody@sidley.com
Matthew J. Dolan
Palo Alto
mdolan@sidley.com
The Powers That Be: Supreme Court Holds That Non-Voting Stockholder Classes Cannot Invoke the “Powers, Preferences or Special Rights” Exception in Section 242, to Vote on Charter Amendments to Exculpate Officers From Duty of Care Breaches
Following amendments in August 2022 to Section 102(b)(7) of the Delaware General Corporate Law (“DGCL”) to allow corporations to include provisions in their respective charters exculpating officers for breaches of the duty of care, a number of corporations naturally took steps to add such provisions. Stockholder challenges followed in In re Fox Corp./Snap Section 242 Litigation, No. 120, 2023, 2024 WL 176575 (Del. Jan. 17, 2024), as revised (Jan. 25, 2024), which involved parallel lawsuits contesting the manner in which two separate corporations with multi-class capital structures adopted amendments providing for officer exculpation. The Delaware Supreme Court ultimately affirmed a lower court decision in favor of the corporations, holding that, consistent with their respective charters, the corporations validly obtained approval from stockholder classes permitted to vote and validly excluded from the vote non-voting stockholder classes.
(more…)
Alex J. Kaplan
New York
akaplan@sidley.com
Natalie Jean
New York
njean@sidley.com
Carvana SLC Drives Away Derivative Case
On March 27, 2024, Chancellor McCormick granted the Carvana Special Litigation Committee’s motion to dismiss after finding no wrongdoing by the Company’s controlling stockholders in connection with its March 2020 direct offering and the controlling stockholders’ subsequent sale of Company stock for over US$1 billion. See https://courts.delaware.gov/Opinions/Download.aspx?id=362010.
(more…)
Jaime A. Bartlett
San Francisco
jbartlett@sidley.com
Delaware Court of Chancery Says It’s Game Over on Massive Fees for “Miniscule” Work
Last month, in an oral ruling likely to bring great joy to the Delaware defense bar, Vice Chancellor Zurn issued an atypical “Statement of the Court” in Garfield v. Getaround that swiftly rejected an $850,000 fee request in a derivative action. Plaintiff sought the fee for its efforts in prompting Defendant Getaround Inc. to make changes to its voting structure. Calling attention to the slew of similar actions by stockholders following Garfield v. Boxed, Vice Chancellor Zurn said the “game is over” for attorneys’ “making a literal fortune off of a minuscule number of hours of work.”
(more…)
Jon Muenz
New York
jmuenz@sidley.com
Maya S. Shair
Associate
mshair@sidley.com
Voting Commitments Matter and Will Be Enforced: Delaware Supreme Court Affirms Chancery Decision Holding Activist Stockholders to Their Bargain
When companies settle proxy contests with activist stockholders, the activists generally give up stockholder-level influence in exchange for board-level influence. In a typical agreement in this setting, activists gain board seats in exchange for a commitment to vote their shares with the board’s recommendation on proposals put to stockholders. Activists also agree to standstill periods in which they refrain from taking actions opposed to the board, and from increasing their holdings above a specified cap.
(more…)
Robin E. Wechkin
Seattle
rwechkin@sidley.com
On the Efficacy of Litigating Post-Employment Disputes in Delaware (Reciprocity Is a Two-Way Street)
Last November, Vice Chancellor J. Travis Laster issued an Opinion in Sunder Energy, LLC v. Jackson denying a company’s application for a preliminary injunction against a former employee based on restrictive covenants embedded in that employee’s Incentive Units. The Court held that the company could not enforce the covenants because the company’s Managers breached their fiduciary duties in the creation of those covenants, and because the covenants themselves are “overly broad” and “unreasonable.” The Court noted, for example, that covenants in this residential solar panel sales company’s Incentive Units could theoretically have indefinitely prevented the former employee’s daughter from door-to-door sales of Girl Scout cookies. (more…)
James Heyworth
New York
jheyworth@sidley.com
Andrew A. Kunsak
akunsak@sidley.com
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