Corporate & Securities Law Blog

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On May 25, 2023, the Texas Legislature enacted the biggest structural change to the Texas court system in recent memory. House Bill 19 (“HB 19”)—signed by Governor Greg Abbott in June—creates a new “Business Court” system for the Lone Star State. HB 19’s passage comes after four previous legislative efforts to enact a business court system in Texas failed. Texas’s Business Courts will activate on September 1, 2024, and will handle complex commercial disputes with significant amounts in controversy. The purpose is to create an efficient, specialized court for complex, high-value commercial disputes needing timely resolutions—matters that could otherwise
Continue Reading Texas Revolution: State Legislature Creates New Business Court System to Handle Significant Commercial Disputes

In Anderson v. Magellan Health, Inc., No. 2021-0202, — A.3d —-, 2023 WL 4364524 (Del. Ch. July 6, 2023) (McCormick, C.), the Delaware Court of Chancery addressed the circumstances under which the Court will award a shareholder plaintiff attorneys’ fees in disclosure-based deal litigation. In particular, Anderson analyzed the history of disclosure-based deal litigation in Delaware and the Court’s evolving standard for awarding fees where shareholder action has caused a company to issue additional pre-merger disclosures “mooting” pending deal litigation. Prior to the decision in Anderson, the state of the law was unsettled. The first line of cases would award fees
Continue Reading Delaware Court of Chancery Clarifies Heightened Standard for Recovery of Attorneys’ Fees in Disclosure-Based Deal Litigation

The term “Acqui-hire” is commonly used to describe an M&A transaction where the buyer is predominantly interested in acquiring key employees of the target and not specifically the underlying business and/or assets. This type of transaction is particularly common in the technology and software industries, where key talent can often be more valuable than the underlying product or service, although it has become more prevalent in other industries as well. For the target employees and founders, such an acquisition may represent a “soft landing” in the event that they find that their organization won’t scale in the way that was previously
Continue Reading What You Need to Know about Acqui-Hires

In a blog earlier this year, we discussed the Delaware Chancery Court’s refusal to enforce a sale of business non-compete in Kodiak Building Partners, LLC v Adams. We wondered then whether Kodiak represented a one-off decision or whether it augured a trend that might give buyers of businesses pause. Delaware courts seem to have answered the question. In what constitutes a notable trend for buyers of businesses, Delaware courts have twice more refused to enforce non-competes under a sale of a business analysis. 
Continue Reading Buyer Beware: Delaware Courts Continue to Refuse to Enforce Deal-Based Non-Competes

The Corporate Transparency Act (“CTA”) was enacted as part of the National Defense Authorization Act for Fiscal Year 2021. The CTA aims to enhance transparency of beneficial ownership information for certain types of business entities in an effort to combat money laundering, terrorist financing, and other illicit activities. The CTA becomes effective on January 1, 2024 (“Effective Date”), but reporting companies will have either 30 days or one year to comply, depending on whether they were formed before or after the Effective Date.
Continue Reading Corporate Transparency Act: Reporting Requirements; Preparing Your Company and Other Related Considerations

In Lee v. Fisher, No. 21-15923, 2023 U.S. App. LEXIS 13521 (9th Cir. June 1, 2023), the United States Court of Appeals for the Ninth Circuit, sitting en banc, affirmed the dismissal of a shareholder derivative complaint alleging, among other things, violations of Section 14(a) of the Securities and Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. § 78n(a), and SEC Rule 14a-9, 17 C.F.R. § 240.14a-9 (collectively, the “Proxy Claims”), enforcing a forum-selection clause in the defendant company’s bylaws designating the Delaware Court of Chancery as the exclusive jurisdiction for adjudicating any derivative claims involving the company.
Continue Reading Ninth Circuit Enforces Delaware Forum Selection Clause to Affirm Dismissal of Derivative Claim for Alleged Violation of Section 14(a) of the Securities Exchange Act of 1934

The past few years have seen dramatic shifts for mergers and acquisitions involving automotive dealerships. It has been estimated that approximately 3% of dealerships undergo a change of ownership in an average year. In the early days of the COVID-19 pandemic, however, deal flow in this sector nearly came to a complete halt due to the nationwide lockdown and a lack of demand. By early 2021, the industry had effectively made a full recovery in spite of supply chain and inventory challenges and M&A activity in this space rebounded accordingly, with a record 383 transactions completed in 2021, and an estimated 374 transactions
Continue Reading The Art of the Dealership: A Legal Road Map for Buying and Selling Automotive Dealerships

In Slack Technologies, LLC v. Pirani, No. 22-200, 2023 U.S. LEXIS 2301 (U.S. June 1, 2023), the Supreme Court of the United States (Gorsuch, J.) held that Section 11 of the Securities Act of 1933 (the “Securities Act”), 15 U.S.C. § 77k, requires plaintiffs to show that they purchased securities registered under the registration statement they seek to challenge, a requirement the Supreme Court referred to as “tracing.” In Slack, the public offering occurred under circumstances that did not allow the plaintiff or other purchasers to trace any security to the challenged registration statement. As a result, the
Continue Reading United States Supreme Court Holds That Section 11 Plaintiffs Must Purchase Securities Issued Under the Registration Statement They Seek to Challenge

This article was originally published in Law360 on April 14, 2023.

Providing legal advice to business entities raises important issues regarding the application of attorney-client privilege between the entity and its directors. Delaware’s approach to corporate privilege springs from the recognition that corporate directors and the corporation they control are deemed “joint clients” of legal advice received while the directors form part of the board.
Continue Reading Protecting Privilege in Case of a Dispute with Former Director

Retailers and service providers with US business operations should take note: the Federal Trade Commission (FTC) is increasing its scrutiny of negative option marketing activity to combat unfair or deceptive practices related to subscriptions, memberships and other recurring-payment programs. The FTC just issued a notice of proposed rulemaking as part of its ongoing review of its 1973 Negative Option Rule—one of the primary guides for the FTC’s enforcement focus.
Continue Reading Negative Option Practices Under Increased Scrutiny in the US

Following the FDIC’s actions on Friday to place Silicon Valley Bank (“SVB”) in receivership, the Department of the Treasury, the FDIC, and the Federal Reserve announced several measures on Sunday, March 12, 2023 aimed at avoiding contagion in the banking sector and protecting depositors.
Continue Reading Summary of Actions Taken by US Government on Sunday, March 12 in Response to SVB Failure and Related Fallout

Inside and outside counsel should know that the way they guide clients through legal and business issues may need to change based on a recent Ninth Circuit case governing the protections afforded to those communications.[1] The following update and insights will help you mitigate against the risk of attorney-client emails being produced in litigation: 
Continue Reading SCOTUS (Almost) Weighs in on Attorney-Client Privilege for Dual Purpose Communications: 5 Practical Tips to Protect Privilege

In In re McDonald’s Corp. Stockholder Derivative Litigation, No. 2021-0324 (Del. Ch. Jan. 26, 2023), the Delaware Court of Chancery (Laster, V.C.) held that officers of a Delaware corporation are subject to a fiduciary duty of oversight as articulated in In re Caremark International Inc. Derivative Litigation, 698 A.2d 959 (Del. Ch. 1996). In doing so, the Court allowed stockholder derivative plaintiffs to proceed with oversight claims against the company’s former Global Chief People Officer, who allegedly presided over a corporate culture that condoned sexual harassment. The decision builds on Delaware jurisprudence to extend the duty of oversight to
Continue Reading Delaware Court of Chancery Holds that Officers of a Delaware Corporation Are Subject to Fiduciary Duty of Oversight

1. Higher Jurisdictional Thresholds For HSR Filings

On January 23, 2023, the Federal Trade Commission announced revised, higher thresholds for premerger filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The jurisdictional thresholds are revised annually based on the change in Gross National Product (GNP).
Continue Reading Higher Jurisdictional and Filing Fees Thresholds for HSR Act Premerger Notifications and Interlocking Directorates Announced

Courts and state legislatures continue to take aim at post-employment non-competes. In a companion blog, we recently detailed the Federal Trade Commission’s proposed rule banning post-employment non-competes. However, for years (and even under the FTC’s overreaching proposed rule), non-competes in the sale of business context have generally received less scrutiny.
Continue Reading Buyer Beware: Delaware Declines to Enforce Sale of Business Non-Compete

FINRA punctuated its annual post-New Year’s Report on FINRA’s Examination and Risk Monitoring Program (the “Report”), by including a new target category “Financial Crimes.” The inclusion of this category is noteworthy not only for its newness but also because FINRA, as a non-governmental self-regulatory organization, does not have authority to prosecute criminal activity.
Continue Reading Financial Crimes Makes Debut in FINRA Annual Priorities Preview