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Will The Courts Stop Deferring To SEC Interpretations?

In 1984, the U.S. Supreme Court announced a foundational principle of administrative law. When a court reviews an agency’s construction of a statute that it administers, the court should...more

11/20/2014 - Chevron Deference SCOTUS SEC

When California Copied Rule 10b-5 Did It Shut The State Courthouse Door To Securities Fraud Suits?

Section 27 of the Securities Exchange Act of 1934 provides: “The district courts of the United States . . . shall have exclusive jurisdiction of violations of [the Exchange Act] or the rules and regulations thereunder,...more

11/19/2014 - Corporations Code Exclusive Jurisdiction Rule 10b-5 Section 25401 Securities Exchange Act Securities Fraud

Nevada’s Business Judgment Rule: FDIC – 4; Management – 0

In recent weeks, the U.S. District Court has issued four separate rulings in cases brought by the Federal Deposit Insurance Corporation (FDIC) against former bank managers for breach of fiduciary duty. Here is a brief recap...more

11/18/2014 - Banks Breach of Duty Business Judgment Rule Directors FDIC Fraud Negligence Officers

Nevada Secretary Of State Denies Hacking Claim

Recently, Cytta Corp., a small Nevada corporation, filed this Form 8-K reporting that it had “discovered that it was the victim of an online hacking incident on October 30th, 2014 in that, unauthorized person or persons...more

11/17/2014 - Hackers Portal Secretary of State Websites

Court Of Appeal Takes A Deep Dive Into Short Selling

In a lengthy opinion issued yesterday, Justice Kathleen M. Banke explains naked short selling, describes the mechanics of executing and clearing stock trades, describes the SEC’s Regulation SHO, and recounts the SEC’s...more

11/14/2014 - Clearing Agencies Goldman Sachs Merrill Lynch Overstock.com Regulation SHO SEC Short Sales

Why Commissioner Gallagher Is Not Mistaken On Political Spending Disclosure

In this post published on October 30, I observed: According to Enver Fitch and Limor Bernstock at ISS ESG Proxy Research, shareholders associated with the Center for Political Accountability submitted 47 proposals this...more

11/13/2014 - Disclosure Requirements ISS Political Contributions SEC Securities Exchange Act Shareholders

Nevada’s Duty Of Care Standard Fails To Win Summary Judgment For Director

NRS 78.138(1) imposes two explicit duties on directors in the exercise of their powers: they must act in good faith and with a view to the interests of the corporation. This contrasts with Delaware case law which speaks of a...more

11/12/2014 - Board of Directors Duty of Care Good Faith Professional Liability Summary Judgment

In Flanders Field . . .

Today is Veterans Day. The date commemorates the ending of the First World War on November 11, 1918 at 11:00 a.m. The following year, President Woodrow Wilson proclaimed the first “Armistice Day”, as it was then known...more

11/11/2014

All Shares Are Equal But With Proxy Access Some Shares Are More Equal Than Others

In George Orwell’s famous satire of Stalin’s Soviet Union, Animal Farm, the animals started out with seven commandments. The seventh commandment was “All Animals Are Equal”. As time passed, three of the original...more

11/10/2014 - Bylaws Proxy Access Rule Shareholder Litigation Shareholder Rights Shareholders

Senator Blumenthal Urges SEC To Investigate Fee-Shifting Charter Provisions

Yesterday, Senator Richard Blumenthal wrote a letter to the Securities and Exchange Commission asking that the “Commission protect investors and America’s capital markets from a serious and imminent threat.” According to the...more

11/7/2014 - Compliance Enforcement Enforcement Actions Fee-Shifting Statutes SEC

Does “Valid Issuance” Require A Stock Certificate?

As I mentioned yesterday, every holder of shares is entitled to a signed certificate pursuant to California Corporations Code Section 416(a) (unless the corporation a system for issuing, recording and transfering...more

11/6/2014 - Issuers Share Certificates Shareholders Validity

A New Fine Question – What Date Should Be Placed On A Stock Certificate?

One fine morning in the middle of the Precession of the Equinoxes, a reader asked me a new fine question that he had never asked before. He asked, “What date should be placed on a stock certificate?”...more

11/5/2014 - Statutory Interpretation Stocks

A Jury Summons Evokes Thoughts Of Pericles, Wasps And Aristotle

Recently, I received a summons for jury service. This reminded me of Pericles, Wasps and Aristotle. I am reminded of Pericles because he is credited with introducing pay for jury service in the mid-fifth century...more

11/4/2014 - Jury Duty

Court Finds Use Of “P” Word Does Not Necessarily A Partnership Make

Last March, I wrote a couple of posts concerning the Nevada Supreme Court’s opinion in In re Cay Clubs, 130 Nev. Adv. 14 (2014). Joint Venturer May Be Partner By Estoppel and “Don’t tell me not to worry, and please don’t...more

11/3/2014 - Estoppel Marketing Partnerships

The Academy Loves Nevada Corporate Law!

The incognoscenti may not know it, but today is Nevada Day. On this date in 1864, Nevada joined the Union and helped support the reelection of Abraham Lincoln and the Thirteenth Amendment. Delaware did not – it joined New...more

10/31/2014 - Business Formation Corporations Code

Political Spending Disclosures – An Idea So Good That I Think You Should Pay For It

In July 2011, a group of ten law professors filed a rulemaking petition with the Securities and Exchange Commission seeking adoption of a rule requiring disclosure of political spending by publicly traded companies. ...more

10/30/2014 - Political Contributions Public Disclosure Publicly-Traded Companies Rulemaking Process SEC Shareholders

Who Is Adolf Berle, Jr. And Why Is Vice Chancellor Laster Quoting Him?

Adolf A. Berle, Jr. wrote Corporate Powers as Powers in Trust more than four score years ago, but Vice Chancellor J. Travis Laster cited the article yesterday as if the Harvard Law Review had published it last week. Quadrant...more

10/29/2014 - Legal History

The Proper Purpose Of Discovery In Derivative Suits

A plaintiff holding less than 2000 shares files a derivative suit against a corporation’s current or former directors and officers. The trial court finds the complaint to be internally inconsistent and that regulatory...more

10/28/2014 - Appeals Derivative Suit Discovery Shareholders

Should The SEC Ask What Would Blackstone Do?

The Securities and Exchange Commission recently trumpeted its enforcement successes for its 2014 fiscal year. For an agency dedicated to full disclosure, there were some notable omissions, including...more

10/27/2014 - Administrative Hearings Enforcement Actions Insider Trading SEC

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

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