Delaware Court Rules Nevada Law Governs But Applies Delaware Law


Although there are many significant differences between the corporate laws of Nevada and Delaware, the Nevada Supreme Court has often looked across the country to Delaware.  Thus, the Nevada high court has adopted Delaware’s test for demand futility articulated in Aronson v. Lewis, 473 A.2d 805 (Del. 1984) (overruled in part on other grounds by Brehm v. Eisner, 746 A.2d 244 (Del. 2000)).  Shoen v. SAC Holding Corp., 122 Nev. 621, 641 (2006).  It has also adopted Delaware’s standards for aiding and abetting a breach of fiduciary duty claim articulated in Malpiede v. Townson, 780 A.2d 1075, 1096 (Del. 2001).  Kahn v. Dodds (In re AMERCO Derivative Litig.), 252 P.3d 681, 701 (Nev. 2011).

It’s rare, however, to find the Delaware Court of Chancery applying Nevada law, but that is what happened in a ruling issued earlier this month by Vice Chancellor John W. NobleHamilton Partners, L.P. v. Highland Capital Management, L.P., 2014 Del. Ch. LEXIS 72 (May 7, 2014).  That case involved stockholder challenge to a complicated restructuring that involved the reincorporation of a Delaware corporation into a Nevada corporation.  Given the transition, this didn’t involve a straightforward application of the internal affairs doctrine.  The Vice Chancellor ruled that Delaware law would apply to claims relating to what was agreed to in the restructuring agreement because the corporation was a Delaware corporation when that agreement was entered into.  However, Nevada law was applied to claims related to breach of fiduciary duty claims regarding post reincorporation conduct.

Having ruled that Nevada law governed post reincorporation conduct, the Vice Chancellor then proceeded to apply Delaware law.  Why?  He found that there was no Nevada precedent on point and that the Nevada Supreme Court would likely follow Delaware!

Here, the plaintiff had asserted a breach of fiduciary duty claim against a single director.  Vice Chancellor Noble ruled that Delaware law requires the plaintiff to rebut the business judgment standard of review as to at least half of the directors who approved the challenged decision.  Alternatively, the Court found that the director was exculpated from liability by virtue of NRS 78.138(7)(b).

You May Be Speaking Etruscan

In yesterday’s post, I briefly mentioned the role of the Etruscans in the creation of the Latin and ultimately English alphabets.  No one knows for certain where the Etruscans came from before they settled in what is now modern Tuscany.  As I mentioned, they spoke a non Indo-European language.  English, Latin and Greek are Indo-European languages (as are the Romance languages, Armenian, Farsi and many other modern and dead languages).  Because the Etruscans were neighbors and erstwhile rulers of Rome, many Etruscan words found their way into Latin and ultimately into English.  Some examples of modern English words that can be traced through Latin to the Etruscans are: anchor (ancora), atrium (atrium), cistern (cisterna), lantern (laterna), military (miles)tavern (taverna), and turret (turris).


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.

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