• Home
  • About This Blog
  • White and Williams LLP
    • Corporate and Securities
    • Commercial Litigation
    • Cyber Law and Data Protection
    • Finance
    • Financial Lines
    • Financial Restructuring and Bankruptcy
    • Intellectual Property
    • Labor and Employment
    • Real Estate
    • Tax and Estates
  • Subscribe
Taking Care of BusinessTaking Care of Business
  • Home
  • About This Blog
  • White and Williams LLP
    • Corporate and Securities
    • Commercial Litigation
    • Cyber Law and Data Protection
    • Finance
    • Financial Lines
    • Financial Restructuring and Bankruptcy
    • Intellectual Property
    • Labor and Employment
    • Real Estate
    • Tax and Estates
  • Subscribe
Move Over California, Delaware Law Applies to Internal Corporate Affairs

Move Over California, Delaware Law Applies to Internal Corporate Affairs

Aug 24, 2020

By: Marc S. Casarino, Lori S. Smith and Jeremy M. Miller

The Delaware Court of Chancery recently made news when it ruled that Delaware law, not California law, applied to a minority shareholder’s request to inspect the books and records of a Delaware corporation with its principal place of business in California. In Juul Labs, Inc. v. Daniel Grove [1], the principal substantive issue was whether Daniel Grove (Grove) waived his inspection rights concerning Juul Labs, Inc., a Delaware corporation (Juul Labs), with its principal place of business in San Francisco, California. Grove contended, among other things, that California Corporations Code Section 1601 applied, which expressly permits inspection rights of a corporation with its principal place of business in California, irrespective of the corporation’s domicile. [2] Juul Labs argued that Grove allegedly waived his inspection rights under certain private option and investor agreements, the California law is not applicable and Section 220 of the Delaware General Corporation Law applies,[3] and the exclusive forum selection clause in Juul Labs’ certificate of incorporation must be enforced.

(more…)

From Both Sides Now: Looking at Contracts Through a Post-Pandemic Lens

From Both Sides Now: Looking at Contracts Through a Post-Pandemic Lens

Jun 9, 2020

By: Lori S. Smith

A little over a year ago, I wrote a blog post about the danger of relying on precedent. Now, more than ever, clients and their advisors need to revisit contract forms on which they may have been relying for years. While many of us have lived through times that required certain adjustments in how we viewed contractual obligations — recessions, wars, oil embargoes, natural disasters, 9/11 — none of these events had the widespread and long-lasting impact that the current COVID-19 pandemic is having. None of these events shut down the U.S. economy and impacted global supply chains across every industry in the manner we are now experiencing. (more…)

Signed, Sealed, Delivered, I’m (Not) Yours: How a Lapse in Record Keeping Can Lead to Non-Binding Contracts

Signed, Sealed, Delivered, I’m (Not) Yours: How a Lapse in Record Keeping Can Lead to Non-Binding Contracts

Aug 29, 2019

By: Lori Smith and Gwenn Barney

Usually, once a contract is signed, sealed and delivered, it is a binding agreement between the parties. However, a recent Delaware case serves as a reminder that a murky path to a signed agreement and lack of good record-keeping can lead to a finding of non-enforceable contracts. (more…)

Third Circuit Decision Highlights Important Distinction Between Directors and Board Observers

Third Circuit Decision Highlights Important Distinction Between Directors and Board Observers

Jul 26, 2019

By: Lori Smith, Ryan Udell and Adam Chelminiak

A recent decision by the U.S. Court of Appeals for the Third Circuit offers an important reminder of the distinction between the roles (and exposure to liability) of corporate directors and board observers. In a precedential opinion on a matter that previously lacked judicial guidance, the appeals court held that as a matter of law the functions of the defendant nonvoting board observers were not “similar” to the functions of board directors for purposes of imposing liability under Section 11 of the Securities Act of 1933.

(more…)

Delaware Chancery Court Addresses the Seller’s Preservation of Privilege Post-Closing

Delaware Chancery Court Addresses the Seller’s Preservation of Privilege Post-Closing

Jun 18, 2019

By: Marc Casarino and Ryan Udell

Preserving privilege with respect to pre-closing communications between a selling corporation’s counsel and its management is an important negotiation point in many transactions, so that the seller can prevent the buyer from using such communications against the seller in disputes between the buyer and the seller, but the buyer can continue to assert that privilege in disputes with third parties. The default rule under Delaware law is that the privilege passes to the buyer post-closing. More specifically, section 259 of the Delaware General Corporation Law provides, in part, that “all property, rights, privileges, powers and franchises” shall pass to the surviving corporation. However, the parties may negotiate around this provision in the transaction documents according to the Delaware Court of Chancery’s decision in Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLLP.[1]

(more…)

Delaware Chancery Court Relies Upon Judicial Dissolution Power to Break Management Deadlock

Delaware Chancery Court Relies Upon Judicial Dissolution Power to Break Management Deadlock

May 22, 2019

By: Lori Smith and Patrick Devine

Shareholder agreements and operating agreements contain a variety of knobs and levers, many of which a company’s founders hope never to invoke. Chief among them are the provisions for resolving disputes or deadlocks in decision-making on fundamental matters and the dissolution provisions. The former sets forth the roadmap for dealing with situations where there is disagreement among the decision-makers regarding actions fundamental to the business and operations of the company, and the latter sets forth the means and methods for disbanding the company and winding up its affairs (generally based on a vote of the stakeholders). Under ordinary circumstances, when a company’s end is near, its constituents amicably initiate the dissolution process without court intervention. However, on rare occasions, they may find themselves in an intractable deadlock as to whether dissolution is necessary or appropriate. Thus, one faction may ask a court to dissolve the company by judicial decree, while another faction may oppose that request. The Delaware Chancery Court visited upon one such occasion in the case of Acela Investments, LLC v. DiFalco. On May 17, 2019, the court issued its Acela decision, which offers a rare example of the circumstances under which the court may invoke its judicial dissolution powers.

(more…)

The Dangers of Copy and Paste: Using Corporate Statutory Language in an LLC May Result in Unintended Consequences

The Dangers of Copy and Paste: Using Corporate Statutory Language in an LLC May Result in Unintended Consequences

May 20, 2019

By: Lori Smith and Adam Chelminiak

Limited liability companies (LLCs) are famously referred to as “creatures of contract”, whereas the governance of a corporation is comparatively fixed by statute. When forming an LLC, the members have broad discretion to determine the substance and scope of fundamental features including management, tax and indemnification matters. Parties are largely free to draft an LLC’s operating agreement as they desire, and Delaware law will “give maximum effect to the principle of freedom of contract and to the enforceability of limited liability company agreements.”[1]

(more…)

The Dangers of Transactional Precedent – The Times They Are-A-Changing

The Dangers of Transactional Precedent – The Times They Are-A-Changing

Mar 13, 2019

By: Lori Smith

The other day I had a client ask me to review some form documents that another party wanted to use in connection with the client’s website. The basis of the request was that he thought I had prepared, or at least reviewed, these documents when they were originally created – over 10 years ago (coincidentally I had reviewed them, but had been somewhat critical, in part, at that time as off-market). This got me thinking about how many companies (and lawyers) rely on templates or precedential deal documents collected over many years, without thinking about the specific facts and circumstances of the deal they are doing or the passage of time and how that might implicate the need for updates and revisions.

(more…)

SEC Adopts New Hedging Disclosure Rules

SEC Adopts New Hedging Disclosure Rules

Jan 21, 2019

By: Jamie Wang

On December 18, 2018, the Securities and Exchange Commission (SEC) announced that it had approved and adopted final rules requiring public companies to disclose, in proxy or information statements for election of directors, any of their policies and practices regarding the ability of the company’s employees, officers and directors to engage in certain hedging transactions with respect to the company’s equity securities. The final rules implement provisions of Section 14(j) of the Securities Exchange Act of 1934, which was added pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act. The effective date of the new rules is 30 days after publication in the federal register. As noted in the release of the final rules, the new requirements are intended to provide shareholders with information, at the time that they are asked to elect directors, about whether employees, officers or directors may engage in transactions that could reduce the extent to which their equity holdings and equity compensation are aligned with shareholders’ interests.

(more…)

Delaware Chancery Court Orders Papa John’s to Deliver Materials Responsive to a Director’s Books and Records Demand

Delaware Chancery Court Orders Papa John’s to Deliver Materials Responsive to a Director’s Books and Records Demand

Jan 17, 2019

By: Marc Casarino

On January 15, 2019, the Delaware Court of Chancery ruled that Papa John’s International, Inc. must allow its director John Schnatter access to materials responsive to his demand pursuant to the books and records inspection statute, 8 Del. C. § 220, subject to certain restrictions on use of the materials.[1] Schnatter is Papa John’s founder, its largest stockholder and a director on its board. Until recently, he served as the company’s Chairman of the Board, CEO and spokesman. He resigned as Chairman and CEO following much publicized reports of his commentary on the NFL’s handling of player protests and his use of a racially charged term during a company training session. His spokesman role was terminated following recommendations by a special committee comprised of his fellow board members.
(more…)

  • 1
  • 2

Recent Posts

  • Corporate Transparency Act and Implications for Entity Formation and Transaction Structures
  • Nasdaq’s Giant Leap Towards Diversity on the Board
  • The Marijuana Opportunity Reinvestment and Expungement Act of 2019
  • IRS to Allow “Workaround” to Deduction Limits for State and Local Income Taxes
  • Finders May Finally Be Keepers: SEC Proposes Rules Allowing for Unregistered Broker-Dealers to Participate in Capital-Raising Transactions Under Certain Circumstances

Disclaimer: The information on this site does not convey legal advice of any kind. Prior results do not guarantee a similar outcome.You should contact a licensed attorney in your jurisdiction to obtain advice with respect to any particular issue or problem. Your use of this site does not create a lawyer-client relationship between you and White and Williams LLP nor will any information you submit to us via this site or by email be considered a lawyer-client communication or otherwise be treated as privileged in the absence of a pre-existing express agreement by White and Williams to the contrary. The opinions expressed at or through this site are the opinions of the individual author and may not reflect the opinions of the firm. The content of this site may be considered advertising under applicable laws and ethical rules. © White and Williams LLP,