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Latest from Corporate & Securities Law Blog

On July 16, 2021, Governor Newsom signed California Assembly Bill 150 into law, allowing certain owners of passthrough entities to find a way around the current $10,000 federal cap on state and local tax (SALT) deductions for individuals.  The new law, applicable to tax years beginning on or after January 1, 2021 and ending before January 1, 2026, allows for many partnerships, limited liability companies taxed as partnerships, and S-Corporations to pay an entity level tax based on electing individual owners’ share of income, and then grants the owners a credit against California personal income tax for the full amount…
In Coster v. UIP Companies, Inc., No. 49-2020, 2021 WL 2644094 (Del. June 28, 2021), the Delaware Supreme Court reversed a Court of Chancery ruling, No. 2018-0440-KSJM, 2020 WL 429906 (Del. Ch. Jan. 28, 2020) (McCormick, V.C.), that members of a board of directors did not breach their fiduciary duties when they approved a transaction with an “inequitable purpose” because the process and substance of the transaction were “entirely fair” to the aggrieved stockholder.  The Court held that even though the board’s action passed Delaware’s rigorous “entire fairness” review, the Court of Chancery should have further considered whether…
On June 16, 2021, the U.S. House of Representatives voted (215-214) to pass the ESG [Environmental, Social and Governance] Disclosure Simplification Act of 2021 (H. R. 1187) (the “Bill”).[1]  This legislation would build on the Biden Administration’s push for major corporations to be more transparent in disclosing economic and social risks to investors, including climate-related risks. If signed into law, H. R. 1187 would, among other things, require the Securities and Exchange Commission (“SEC”), for the first time, to define, in regulations, “ESG metrics,” for the purpose of guiding required corporate disclosures under the Securities Exchange Act of 1934…
In Shareholder Representative Services LLC v. Albertsons Companies, Inc., 2021 WL 2311455 (Del. Ch. June 7, 2021), the Delaware Court of Chancery (Slights, V.C.) provided key guidance on mergers and acquisitions (“M&A”) earnout disputes regarding contractual earnout language, the applicability of the implied covenant of good faith and fair dealing, extra-contractual discussions and promises and post-closing behavior of the acquirer.  This opinion serves as a reminder to M&A transaction parties on important drafting concepts in earnouts, as well as how to conduct themselves during the negotiations and earnout period.…
In Van Buren v. United States, No. 19-783, 2021 WL 2229206 (U.S. June 3, 2021), the United States Supreme Court issued an opinion drastically limiting the application of the Computer Fraud and Abuse Act (CFAA) (18 U.S.C. § 1030 et seq.), holding that the “exceeds authorized access” clause of the Act applies only to those who obtain information from particular areas in the computer—such as files, folders, or databases—to which the individual is not authorized to access under any circumstances. However, the Supreme Court excluded application of the clause to individuals who misuse their access to obtain…
This article originally published on Food Manufacturing.com on June 1. 2020 was an up-and-down year for mergers and acquisitions in the food and beverage industry.  With the onset of the COVID-19 pandemic in the first half of the year, deal making activity was largely put on hold.  In the second half of the year, however, M&A activity resumed in force such that the total number of food and beverage transactions for 2020 actually ended up slightly exceeding 2019.  And with private equity firms sitting on a large amount of cash that needs to be deployed and strong corporate balance sheets…
During a May 19, 2021 webcast at the Financial Industry Regulatory Authority’s (“FINRA”) annual conference, Amy Sochard, FINRA’s Vice President of Advertising Regulation, indicated that the organization will seek public feedback on gamification practices utilized by some stock trading platforms to attract investors with a view toward issuing new rules or guidance.  “Gamification” refers to the application of typical elements of game playing, such as point scoring, competition with others, and rules of play, by trading platforms, online retailers or vendors to encourage engagement with a product or service.…
All states but one that impose a sales and use tax now have laws requiring out-of-state companies to collect tax if they have a significant economic presence in a state.  The Governor of Missouri, the last remaining state, is expected to sign a similar law this month.  The change stems from a 2018 United States Supreme Court case, the impact of which is far broader than many realize.…
On April 29, 2021 Governor Newsom signed California A.B. 80, largely conforming to Federal rules relating to deductibility of expenses paid with funds from forgiven Paycheck Protection Program (PPP) loans.  The $150,000 limitation in prior versions of A.B. 80 was removed, and replaced with a requirement that only non-publicly traded companies who reported losses of at least 25% in gross receipts during one quarter of 2020 can deduct such expenses.  That 25% decrease in gross receipts was also a condition for receiving a PPP loan in the second round of loans made available in late 2020.  Publicly traded companies cannot…
In Ocegueda v. Zuckerberg, No. 20-CV-04444, 2021 WL 1056611 (N.D. Cal. Mar. 19, 2021), the United States District Court for the Northern District of California became the first court to rule on a motion to dismiss claims alleging deficiencies in a company’s compliance with policies intended to promote diversity.  The plaintiff, a common stockholder of Facebook, Inc. (“Facebook” or the “Company”), alleged claims for breach of fiduciary duty and further alleged defendants made false and misleading statements in the Company’s Proxy Statement in violation of Section 14(a) of the Securities Exchange Act of 1934.  The plaintiff alleged that…
During a March 9, 2021 industry conference, one of the four current U.S. Securities and Exchange (“SEC”) commissioners floated a new approach to calculating penalties for corporate misconduct.  Caroline A. Crenshaw, who was tapped by President Donald Trump last June to fill one of the Democratic slots on the Commission, told attendees at the Council of Institutional Investors virtual conference that the SEC needed to revisit its approach to assessing corporate penalties, and implement a new approach that tailored penalties to the “egregiousness of the actual misconduct,” accounted for all benefits of the misconduct that accrued to the corporation, and…
A recent decision by a New York federal district court illustrates significant potential pitfalls for sellers in leveraged buyouts and similarly structured transactions.  In particular, it highlights the potential risks under fiduciary duty theories to directors and private equity-appointed directors, even in multi-step transactions with customary disclaimers and exculpatory by-laws.…
The Office of New York State Attorney General Letitia James (“NYAG”) has filed a lawsuit to shut down technology company Coinseed.  The state has accused the firm of selling unregistered securities in the form of digital tokens and operating as an unregistered broker-dealer while making material misrepresentations about the company, its management team, and fees charged to investors in connection with cryptocurrency trades.…
In Swipe Acquisition Corp. v. Krauss, CA No. 2019-0509-PAF, 2021 WL 282642 (Del. Ch. Jan. 28, 2021), the Delaware Court of Chancery held that California public policy prohibited a purported waiver of a contractual party’s right to assert a claim under the California Securities Act by reason of a Delaware choice of law provision in the parties’ stock purchase agreement.  Delaware courts will not enforce a choice of law provision if it would be contrary to a fundamental policy of the state whose law would apply but for the choice of law provision (here, California).  California law prohibits contractual…
As anyone who follows the industry can tell you, mergers and acquisitions activity in the aerospace and defense industry has remained robust over the past decade.  In 2019 alone, there were 460 corporate acquisitions in this sector.  And while a slowdown in 2020 deal activity is certainly expected as a result of the COVID-19 pandemic, results for at least the second quarter remained strong, with 84 deal closings.  Further, analysts project that activity in certain subsegments of the industry, including defense, space technology and cyber security, will remain vigorous for the foreseeable future, at least partially offsetting any declines in…

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