Photo of Ann Lipton

Ann Lipton

Subscribe to Ann Lipton's Posts

Ann M. Lipton is a Professor of Law and Laurence W. DeMuth Chair of Business Law at the University of Colorado Law School.  An experienced securities and corporate litigator who has handled class actions involving some of the world’s largest companies, she joined the Tulane Law faculty in 2015 after two years as a visiting assistant professor at Duke University School of Law.

As a scholar, Lipton explores corporate governance, the relationships between corporations and investors, and the role of corporations in society.  Read more.

On our podcast, Mike Levin and I previously discussed Exxon’s new retail shareholder voting program.  In sum, Exxon got SEC permission to allow its retail shareholders to adopt standing voting instructions to automatically cast their proxy votes in accordance with Exxon’s management.

I’ve heard a lot of shareholder-rights advocates speak favorably of the program, but I disagree.  I’m all for making it easier for retail shareholders to vote – including allowing them to adopt standing voting instructions (Jill Fisch had a whole thing on this) – but Exxon’s program only allows retail to vote for Exxon’s board.  Exxon is almost certainly expecting that, just as retail tend not to vote much at all, those who opt in to the program will likely never bother to revisit their instructions, leaving Exxon with a banked set of votes to oppose any activist interventions (including, of course, what I call “little a” activism, i.e., shareholder proposals).  The way the program is currently constructed, it’s a board entrenchment device.

Which is why I was happy to see that the New York City Comptroller’s Office, on behalf of the New York City Police Pension Fund, has submitted a shareholder proposal for…

From this Law360 article, I learned that Clearway Energy proposes to simplify a complex capital structure. It has two classes of stock that trade on the NYSE: A and C. The A’s have 1 vote per share; the C’s have 1/100th of a vote per share.

It also has B and D shares, held exclusively by CEG, who as a result controls 55% of the company’s voting power.

Clearview proposes a charter amendment to convert the A shares into C shares and, recognizing that this would cause CEG’s own voting power to increase, proposes to fix that problem by putting a bunch of CEG’s shares into a Voting Trust in a mirror voting arrangement that ensures CEG’s voting power does not rise above 55% as a result of the reclassification.

Here is the proxy explaining the proposed changes. As required under Delaware law, for the amendment to take effect, the Class A shareholders must vote in favor.

Anyway, the Law360 article is about a lawsuit filed by the New England Teamsters Pension Fund challenging the scheme as a conflict transaction, because the scheme will allow CEG to sell down its stake while maintaining its voting power. That’s…

I am intrigued by this opinion in Walker v. Chidambaran, 2026 WL 787964 (D. Md. March 20, 2026), dismissing a securities fraud complaint against various former officers and directors of an artificial intelligence company called iLearnEngines (“iLE”).

iLE went public in a SPAC merger in 2024, and its SEC filings stated that a significant portion of its revenues and sales came from an unnamed “Technology Partner.”  The Technology Partner and iLE had a complicated web of relationships, buying and selling services from each other, the revenues of which may – or may not – have been netted out against each other (the registration statement appears to have been inconsistent on this point).  Prior to the SPAC merger, the SEC inquired whether the Technology Partner was a related party, and iLE answered no.

(Guess where this is going).

Anyhoo, things started to go south when short seller Hindenburg issued a report on August 29, 2024, identifying the technology partner as Experion Technologies. iLE’s founder and CEO was listed as Experion’s American contact in 2020, and his personal residence was the official residence of Experion Americas in 2022.  Experion India and Experion Middle East and Africa were 35%  and 45% owned…

Southwest is (and has long been) a Texas-incorporated company.

After Texas reformed its governance laws, Southwest adopted a bylaw requiring that derivative actions only be brought by shareholders with a minimum 3% stake.

Subsequently, an investor holding only 100 shares filed a derivative action in federal court, alleging that Southwest’s directors breached their fiduciary duties to the company when they abandoned Southwest’s “Bags Fly Free” policy in the wake of an activist intervention by Elliott Investment Management. (It’s a silly lawsuit, whatever). Southwest invoked the bylaw in its motion to dismiss.

The plaintiff offered a number of challenges to the Texas law, including that it was inapplicable to him because he served a demand before the law passed, and that the law was impermissibly retroactive as applied to his claim. In Gusinsky v. Reynolds, 3:25-cv-01816, the court rejected these.

The plaintiff also, however, alleged that Southwest’s directors breached their fiduciary obligations by adopting such a limit on derivative lawsuits in the first place, a claim that the court rejected because … the plaintiff did not have the 3% stake necessary to advance it.

More seriously, it’s worth noting that when plaintiffs in Delaware brought a facial challenge to…

I’ve previously blogged a couple of times about SPVs as a vehicle for investing in private companies. They not only skirt the law regarding the number of investors a company can have before it is required to make public disclosures, but they also may layer on high fees and suspect valuations – and that’s if they aren’t outright fraudulent.

Anyway, I post because Bloomberg had a nice feature on this yesterday, pointing out both the risk of fraud, and simply the risk of losing one’s shirt.  (It references two lawsuits that have been filed in Delaware over these vehicles; if I’m right, one I blogged about before, and the other is this one, where a fund put $10 million into an SPV that was supposed to acquire SpaceX shares, and doesn’t seem to be able to get any financial reports.)

But even aside from actual fraud cases, the SPV may only have shares in another SPV that somewhere down the line has shares, and leaving aside valuation and fee questions, when the company does go public, those shares might be locked up and nontradeable for some period of time, leaving the SPVs holding illiquid investments that could…

Sorry, Ben, I’m jumping on this one.

Exxon is proposing to move its domicile to Texas.

It’s an obvious move for Exxon; their headquarters are there so they’re not exposing themselves to lawsuits in a different venue, and they also perhaps expect, shall we say, a friendlier judicial reception in Texas.

But Exxon isn’t a Delaware company. It’s a New Jersey one, old school from when it was Standard Oil and New Jersey dominated the market for corporate charters. Right now, they’re the subject of a couple of lawsuits in New Jersey over their retail shareholding program, and they’re fighting to transfer those to Texas.

But Exxon doesn’t have a controlling shareholder; its shareholders are normie institutions like BlackRock and State Street.

Perhaps to placate them over the move, it’s explicitly not going to opt in to the Texas provisions that would allow ownership thresholds on shareholder proposals and derivative lawsuits – provisions that did not exist when, say, Tesla asked them to vote on a move.

But, it’s also not committing in the charter not to adopt those provisions in a unilateral director-passed bylaw in the future (compare, for example, ArcBest, which promised in the charter…

I begin with illegality. Under Delaware law, contracts “purport[ing] to require a board to act or not act in such a fashion as to limit the exercise of fiduciary duties” are “invalid and unenforceable.” In the merger context, a board may not “disable[] itself from exercising its own fiduciary obligations at a time when the board’s own judgment is most important, i.e., receipt of a subsequent superior offer.” For example, “[d]irectors cannot be precluded by the terms of an overly restrictive ‘no-shop’ provision from all consideration of possible better transactions.”64 Boards are required to bargain for effective fiduciary out clauses permitting them to discharge their managerial authority in fidelity to stockholders. When managerial authority is preserved, the Court will

…

Back when the SEC announced it was functionally no longer going to weigh in on whether companies may legally exclude shareholder proposals, I made a prediction in a number of spaces – except embarrassingly, I can’t remember which ones. Possibly podcasts, webinars, conferences, I’m sure someone remembers.

Which was: Companies now are in a heads-I-win, tails-you-lose position. They can exclude proposals, regardless of their legal basis for doing so. They can be confident that the SEC – which is now hostile to proposals – will not sue to force their inclusion. Very few shareholders will have the resources to sue over an improperly excluded proposal, and if any shareholder bothers, the company can simply moot the action by voluntarily agreeing to include the proposal even before filing an answer to a complaint. There is no risk to the company in simply excluding proposals, and waiting to see who sues.

And – behold!

AT&T said it would exclude a proposal offered by a variety of NYC pension funds asking for the company to disclose its EEOC-1, i.e., a form AT&T is required to submit to the federal government regarding the racial and gender makeup of its workforce. AT&T claimed…