A Program Guide To The Facebook Fairness Hearing

by Allen Matkins
Contact

As discussed in this earlier post, Facebook, Inc. has requested a fairness hearing before the California Department of Corporations.  Technically, the hearing is being held pursuant to Corporations Code Section 25142 in connection with Facebook’s application for a permit authorizing the issuance of securities to effect its proposed acquisition of Instagram, Inc.   Since a permit may be issued without a hearing, the raison d’être for the hearing is to obtain the exemption from federal registration pursuant to Section 3(a)(10) of the Securities Act of 1933.  In general, the fairness hearing process is both quicker and cheaper than federal registration.

One unusual aspect of fairness hearings is that they are held before the Department of Corporations, rather than an administrative law judge on the staff of the Office of Administrative Hearings.  Thus, fairness hearings are governed by the Commissioner’s hearing rules, 10 CCR § 250.17 et seq., rather than Chapter 5 of the Administrative Procedure Act (§ 11500 et seq.) governing formal agency adjudications.  As a practical matter, the Commissioner doesn’t usually serve as the hearing officer, as she or he will invariably appoint a senior lawyer in the Securities Regulation Division.  The Department itself will be represented at the hearing by another SRD attorney.  In this case, I understand that Rafael Lirag and Ivan Griswold will be serving as the hearing officer and counsel, respectively.

Also present at the hearing will be the lawyers representing Facebook and Instagram and their respective witnesses.  The hearing will be transcribed (at the applicant/issuer’s expense).  I expect that Facebook’s hearing will proceed as follows:

  • The hearing officer will make opening remarks announcing the time, date and place of the hearing;
  • The individuals present will introduce themselves for the record;
  • The court reporter will administer oaths to the witnesses;
  • The Department’s counsel will introduce as evidence the application, notice of hearing and certificate of posting of the notice;
  • Facebook’s counsel will introduce the applicant’s exhibits, including (and this is very important) an affidavit of mailing;
  • Facebook’s counsel will make an opening statement and then call the applicant’s witnesses;
  • Instagram’s counsel will make a statement and call his or her client’s witnesses;
  • Any dissenting security holders will be given the opportunity to question the witnesses and/or call their own witnesses.

The hearing officer and the Department’s counsel may also question the witnesses.  I am often asked if the outcome is a foregone conclusion.  It is not.  However, in most cases an applicant will not proceed with the hearing if it appears likely that a permit will be denied.  Furthermore, most hearings are not contested.

If the application is not contested and the hearing officer determines that the transaction meets the Commissioner’s standards, that finding will be stated on the record and a permit will be issued forthwith.  Occasionally, fairness hearings are contested.  If there is a contest, then it is likely that the hearing officer will take the matter under submission and he may ask for additional submissions from the parties and/or the Department’s counsel.  The hearing officer will then prepare and submit to the Commissioner a proposed decision.

Since fairness hearings are evidentiary hearings, they are subject to the general requirements for administrative adjudication pursuant to Chapter 4.5 of the Administrative Procedure Act (Government Code § 11400 et seq.).  These requirements include the administrative adjudication “bill of rights” set forth in Sections 11425.10 – 11425.60.   As such, the hearing must be open to public observation as provided in Section 11425.20 of the Government Code.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Allen Matkins | Attorney Advertising

Written by:

Allen Matkins
Contact
more
less

Allen Matkins on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.