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Adjudicate or Rule Make? That May Not Be A Question For The Courts

Professor Stephen Bainbridge yesterday passed along Henry G. Manne’s criticism of the SEC’s use of adjudication in lieu of rulemaking. For those who haven’t taken my Administrative Law class, there are actually two types of...more

10/24/2014 - Adjudicatory Process Administrative Procedure Act Enforcement Actions Rulemaking Process SEC

If Bylaws Are Contracts, Where’s The Boilerplate?

Bylaws hardly constitute literature. For the most part, they simply regurgitate the applicable general corporation law with a few permitted changes here and there. In general, there seems to be two schools of thought when...more

10/23/2014 - Boilerplate Language Bylaws Contract Formation Corporate Governance

Can An Employment Agreement Be A Wee Bit Too Integrated?

The Bylaws of many public companies provide for mandatory indemnification of directors and officers (and sometimes other agents as well). Often, Bylaws describe these indemnity obligations as contract rights. For example...more

10/22/2014 - Bylaws Corporate Officers D&O Insurance Directors Employment Contract Indemnification Publicly-Traded Companies

Forum Selection Clauses Were Here Before They Were In Bylaws

Recent rulings by judges in Delaware and other states have given impetus to the adoption of exclusive forum bylaws. To the casual observer, the idea might seem entirely novel. But as Koheleth (the Gatherer) wrote “What has...more

10/21/2014 - Breach of Duty Bylaws Corporate Officers Delaware General Corporation Law Derivative Suit Directors Forum Selection Clause Internal Affairs Doctrine

This Hobby Lobby Proposal Is Much Mistaken

Suzanne Weakley, editor-in-chief of the CEB Business Law Practitioner, recently called my attention to this letter from six professors at U.C. Berkeley (Robert P. Bartlett III, Richard Buxbaum, Stavros Gadinis, Justin...more

10/20/2014 - Burwell v Hobby Lobby Contraceptive Coverage Mandate Healthcare HHS Hobby Lobby Religious Exemption SCOTUS

The Point Of An Unenforceable Noncompete May Be Very Sharp Indeed

Writing for Mother Jones, Kevin Drum recently asked “What’s the point of an unenforceable noncompete agreement?” He posits two possible answers: First, it’s just boilerplate language they don’t really care about but...more

10/17/2014 - Adverse Employment Action Compensatory Damages Emotional Distress Damages Employer Liability Issues Employment Contract Non-Compete Agreements Punitive Damages Restrictive Covenants Walia v Aetna

Why The SEC Should Stay Out Of The Fee-Shifting Charter Debate

In a recent post, Columbia Law School Professor John C. Coffee Jr. argues that the Securities and Exchange Commission should take a number of steps to challenge and discourage the adoption of fee-shifting charter provisions. ...more

10/16/2014 - Compliance Fee-Shifting Fee-Shifting Statutes SEC

Why Including The Year Of Enactment Can Be Important

Several provisions of the California Corporate Securities Law of 1968 need to be brought up to date. Section 25100(i) is one of them. That section exempts from the qualification requirements of Sections 25110, 25120 and...more

10/16/2014 - CPUC Securities Utilities Sector

New LLC Act May Curtail Authority Of Managers Of Pre-Existing LLCs

California’s Revised Uniform Limited Liability Company Act (RULLCA) took effect on the first of this year. The RULLCA repealed California’s first LLC law – the Beverly-Killea Limited Liability Company Act. The forced...more

10/14/2014 - LLC Mergers RULLCA

SEC ALJs Face Free Enterprise Challenge

Several years ago, I testified as an expert witness in an administrative proceeding brought by the Securities and Exchange Commission. The hearing was held in what looked like a courtroom before what appeared to be a judge...more

10/13/2014 - Article III Federal Rules of Civil Procedure SEC Standing

Is A “Rule” An “Order” And Why Would Anyone Care?

Pay-to-Play Rule Challenged - Doug Cornelius recently wrote about the dismissal of a lawsuit challenging the Securities and Exchange Commission’s anti “pay-to-play” rule under the Investment Advisers Act of 1940. New...more

10/10/2014 - Administrative Procedures Act Government Entities Investment Adviser Investment Advisers Act of 1940 Pay-To-Play SEC Stare Decisis Subject Matter Jurisdiction

Why Does Determining A Quorum Have To Be So Complicated?

California’s quorum requirement for meetings of directors appears on its face to be straightforward – a majority of the authorized number of directors constitutes a quorum of the board for the transaction of business. Cal....more

10/9/2014 - Board of Directors Corporate Governance Directors Quorum

Court Of Appeal Embraces De Facto LLC Dissolution

Under the former Beverly-Killea Limited Liability Company Act, a limited liability company was dissolved upon the first to occur of any of the following three events...more

10/8/2014 - Corporate Dissolution Limited Liability Companies

Imposing The Corporate Death Penalty

In this post published yesterday, UCLA Law Professor Stephen Bainbridge challenges the following statements attributed to Robert F. Kennedy Jr.: I do, however, believe that corporations which deliberately,...more

10/7/2014 - Corporate Dissolution Corporations Code Revocation

Legend Removal Requires Proper “Request To Register Transfer”

Removal of legends from restricted securities (i.e., securities issued without registration under the Securities Act of 1933) can be a tricky business for transfer agents, issuers and their counsel. Improperly removing...more

10/6/2014 - Corporate Issuers Delaware General Corporation Law Issuers Stocks Transfer Agents Transfer Restrictions UCC Financing Statements

Bill Aims At Clarifying Status Of Ex Officio Directors

Yesterday’s post considered the various paths to becoming a director under the California General Corporation Law. The California Nonprofit Corporation Law defines “directors” in a similar fashion but makes it clear that the...more

10/3/2014 - Board of Directors Directors Non-Profits

Just How Many Ways Are There To Become A Director?

Lao Tzu is said to have written that there a many paths to enlightment, but how many paths are there to becoming a director? To answer the question, let’s look at the definition of “directors” in the California General...more

10/2/2014 - Board of Directors Directors

The General Counsel Is Not The Shareholders’ Agent

A recent paper by Adair Morse, Wei Wang, and Serena Wu, Executive Gatekeepers: Useful and Divertible Governance, tackles interesting questions about the the effectiveness of internal gatekeepers and the impact of equity...more

10/1/2014 - Agents Attorney-Client Privilege Conflicts of Interest Shareholder Litigation Shareholders

Governor Signs Bill Narrowing Grounds For Business Entity Reinstatement

Over the years, I’ve received several calls asking what can be done when a business entity has been wrongfully terminated. Answering this question became a bit easier in 2006 with the enactment of AB 2588 (Runner) which...more

9/30/2014 - Business Interruption New Legislation Reinstatement Secretary of State

1, 2 or 3 Years? How Should Boards Decide The Frequency Of Say-On-Pay Votes?

Although the initial ruckus over how to determine the outcome of executive compensation say-on-frequency votes has subsided, I still maintain that the Securities and Exchange Commission botched the rule (§240.14a-21(b)). ...more

9/29/2014 - Board of Directors Corporate Governance Say-on-Pay SEC Shareholder Votes Shareholders

NLRB Rules It Illegal For Employer To Say It Will Comply With The Law

Recently, the National Labor Relations Board concluded that an employer violated the law when it adopted a policy requiring employees to “Keep customer and employee information secure. Information must be used fairly,...more

9/26/2014 - Employer Liability Issues Enforcement NLRB

Is The LLC A Party To Its Own Operating Agreement?

Is an LLC a party to its own operating agreement? California’s new Revised Uniform Limited Liability Company Act (RULLCA) defines “operating agreement” as “the agreement, whether or not referred to as an operating...more

9/25/2014 - Choice of Entity LLC Operating Agreements RULLCA

Court Addresses Jurisdiction Over Alleged Tortious Internet Conduct

By dramatically lowering the cost of disseminating information, the internet has made it possible for companies to “cybersmear” their competitors before a large potential audience at very little cost. The internet also...more

9/24/2014 - Cybersmears Intentional Torts Internet Jurisdiction

Oxfam America Takes A Stand, But Does It Have Standing?

Recently, I wrote about Oxfam America’s new lawsuit against the Securities and Exchange Commission for failing to adopt a final rule implementing Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. ...more

9/23/2014 - Article III Dodd-Frank Oxfam SEC Standing

SEC Advisory Committee To Consider Fee-Shifting Bylaws, But Why?

One agenda item for the upcoming meeting of the Investor Advisory Committee is a “Discussion of Issuer Adoption of Fee-Shifting Bylaws for Intra-Corporate Litigation”. This is indeed an interesting and timely topic in light...more

9/22/2014 - Bylaws Fee-Shifting Fee-Shifting Statutes SEC

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