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Ann Lipton

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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.

I previously posted about disputes over bump up exclusions in D&O insurance contracts, which exclude from insurance coverage claims that shareholders of a merger target should have received more consideration for their shares. As I argued, the purpose of the exclusion is to ensure that the cost of the acquisition isn’t offloaded on to the insurer. 

One of the cases I mentioned in that post, Harman Int’l Indus. Inc. v. Ill. Nat’l Ins. Co., was just affirmed by the Delaware Supreme Court, and the reasoning interests me.

In this case, Harman International was acquired by Samsung Electronics, and shareholders sued under Section 14(a), which prohibits false proxy statements, and Section 20(a), which adds joint and several liability to control persons – the substantive claim was Section 14(a).  Shareholders argued that, due to false statements in the proxy, they were induced to vote in favor of a merger at a lowball price.

Eventually, the case settled for $28 million, and when the defendants sought insurance coverage, the insurer claimed the settlement was subject to the bump up exclusion.  On appeal, the Delaware Court disagreed.

According to the court, the insurance contract had two clauses, both of which had to…

Tulane Law School invites applications for its Forrester Fellowship position, which is designed for promising scholars who plan to apply for tenure-track law school positions. The Forrester Fellow is full-time faculty in the law school and is encouraged to participate in all aspects of the intellectual life of the school. The law school provides significant support and mentorship, a professional travel budget, and opportunities to present works-in-progress in faculty workshops. 

Tulane’s Forrester Fellow will teach legal writing in the first-year curriculum to first-year law students in a program coordinated by the Director of Legal Writing. The Fellow is appointed to a one-year term with the possibility of a single one-year renewal. Applicants must have a JD from an ABA-accredited law school, outstanding academic credentials, and significant law-related practice and/or clerkship experience. Applications may be submitted here: Apply – Interfolio. If you have any questions about this position, please contact Erin Donelon at edonelon@tulane.edu.

So, the Delaware Supreme Court came out with its long-awaited decision in Moelis & Co. v. West Palm Beach Firefighters’ Pension Fund and as far as I can tell, it holds that a contract is a charter if you wait long enough.

So, the issue here is, Moelis went public with this overweening shareholder agreement in place in 2014 granting Ken Moelis various governance rights. A shareholder bought stock shortly after the IPO, but waited nine years to sue claiming that the agreement was categorically illegal under Delaware law (which, you may have heard, has since been amended). I genuinely, honestly, get the idea that this long after the IPO there might be reliance interests in this governance arrangement, but the Delaware Supreme Court’s manner of expressing such an idea is … weird.

Doctrinally, the legal issue is whether a contract that usurps board authority is (was) “void” or “voidable.” What is the difference? A voidable contract is one that a party has the option of rejecting, but also the option of accepting. A void contract simply cannot be enforced, at all – it is legally impermissible. So, for example, a voidable contract might be one that corporate…

In November, I was privileged to deliver the inaugural Tamar Frankel Lecture at Boston University Law School. Professor Frankel is a trailblazer in corporate governance and fiduciary law, and it was wonderful to see that this lecture series has been established in her name.

Below is the text of my remarks on November 24:

Edit: Now there’s video – this is the Youtube link.

So, I want to begin by adding my voice to the chorus of praise for Professor Frankel’s work.  She is a legend in this field, and I cannot tell you how honored I am to have been invited to kick off this series.

You know, the school advertised this lecture on LinkedIn, and her former students flooded the comments section with praise, a lot of which was words to the effect of, she somehow made securitization interesting!

Which is funny but for real, for those of us in the business space, it’s very much what we aspire to.  What I will aspire to in this talk!

Which is called Corporate Governance Authoritarianism, and I’ll kick it off by pointing to this slide.

I’ve only got like two slides, by the way, so you’re…

Where we last left off, a couple of companies had adopted forum selection bylaws purporting to shunt all derivative actions to the Delaware Court of Chancery – intending, I will swear with my last breath – to capture state law fiduciary claims.  When they got hit with the relatively-uncommon federal law Exchange Act derivative claims (under Section 14(a)), they celebrated their fortune and sought to enforce the bylaws against those, as well, even though Chancery has no jurisdiction over Exchange Act claims, which would, of course, mean just immediate dismissal.

They lost in the Seventh Circuit, but prevailed in the Ninth, which ultimately resulted in Delaware passing a new statute prohibiting forum selection bylaws from denying access to any court in the state of Delaware with jurisdiction to hear the claim at all – a law that is currently working mischief on the SEC’s attempt to encourage the use of arbitration in order to break securities class actions.

Anyhoo, the latest on this concerns a pair of securities actions filed in the Northern District of California against Block, alleging that the board failed to ensure compliance with various anti-money laundering statutes and things of that nature.  (Neither…

A couple of months ago, I posted about the case of Cannon v. Romeo Systems, where the CEO and sole director of a startup failed to notice an edit in a stock warrant that ultimately guaranteed the holder far more shares in his company than he had expected, with disastrous consequences. Mostly, it’s a tale of sloppiness; he signed a contract without reviewing it for changes, and then – when warned by KPMG of discrepancies between his own cap table and the terms of the warrant – ignored it. Negligent, perhaps, but understandable.

Unfortunately, as the case continues, our CEO seems to have … learned very little.

The CEO is appealing the decision, and under Delaware law, if he wants to stay the judgment, he has to post security for the full amount awarded to the plaintiff, which is over $27 million. He petitioned to be permitted to post not in cash, but in private company stock – a completely different private company than the one in the original dispute, and one for which he also serves as Chair and CEO. But, of course, in order to use private company stock, he had to provide evidence of its value. …

Recently, Walmart shifted its listing from the New York Stock Exchange to the NASDAQ.  The move, apparently, had nothing to do with the formal policies of the exchanges, and everything to do with the fact that the NASDAQ is associated with tech stocks.  Walmart is trying to sell itself as a tech company, and part of that effort involves actually shifting exchanges.

To some extent, the benefits of this move rely on an assumption of market inefficiency, i.e., the well known phenomenon where stocks trade differently depending on index inclusion; Walmart is betting that if it’s added to the NASDAQ 100, it will trade like the rest of the index.

But it’s also an exercise in branding.  Walmart, I gather, hopes for an image revitalization; it’s signaling a business model, and a commitment to a digital business strategy, and it hopes investors will share that vision.

I’ve been thinking that, in the wake of the chartering wars, state of incorporation may serve a similar function.  I’ve previously posted that Texas has adopted an anti-woke approach to corporate governance, and I think for most firms, that’s not a particularly desirable stance; they’d much rather, at least, choose Nevada…

Well, restoring Elon Musk’s 2018 pay package and awarding $1 in nominal damages instead is, I suppose, one way of distracting from the Epstein files.

No one needs a recap of where we were on Elon Musk’s 2018 pay package, but just in case: in 2024, Chancellor McCormick concluded after a trial that Elon Musk was a controlling shareholder of Tesla, and that the pay package was a conflicted transaction that was not entirely fair to the stockholders. In particular, she found that Musk himself controlled the process by which the compensation committee set his pay, and largely made up his own contract with the comp committee serving as a rubber stamp. As a remedy, she ordered that the pay package be rescinded.

Today, the Delaware Supreme Court did not question any of Chancellor McCormick’s actual findings regarding how Musk’s 2018 pay package was negotiated, the control and interference that Musk exercised over the process, or even the unfairness of the award itself. Instead, the sole basis for the holding is a kind of Rumpelstiltskin argument: the plaintiffs used the word “rescission” when requesting a remedy, but this case does not meet the technical requirements for rescission…

The White House Executive Order is out, and it largely tracks what I previously expected based on prior reporting. It isn’t self executing, but it directs the FTC, the SEC, and the DoL to review rules pertaining to proxy advisors and revise them, and/or take enforcement action.

The FTC is ordered to investigate potential antitrust violations.

The Department of Labor is ordered to consider revising rules pertaining to ERISA funds’ reliance on proxy voting advice (i.e., impose paperwork burdens that will inhibit funds’ ability to rely on proxy advisors).

The SEC is directed to ensure that proxy advisors register as investment advisors (too late!), and then use that status to incapacitate them with paperwork (I’m reading between the lines), and to somehow treat voting recommendations as the equivalent of coordinating a 13d group. It’s also directed to ascertain whether the recommendations themselves are misleading (the Business Roundtable has previously argued that it is proxy fraud for a proxy advisor to characterize a director as not independent when the company designates them as independent for exchange listing purposes).

Also included is a direction to the SEC to revise and rescind guidance surrounding Rule 14a-8.

Anyway, these…

Obviously, the big business news today is the Netflix/Warner merger agreement, coupled with party-crasher Paramount.

This is not, of course, the first time that Paramount has interrupted a Warner merger deal. As probably everyone reading this post already knows, back in the late 80s, Time signed a merger agreement with Warner, and Paramount parachuted in with an offer to take over Time instead. When Time locked up the merger agreement too tightly for Paramount to get a foothold, it sued in Delaware, and lost before the Delaware Supreme Court in Paramount v. Time.

A lot of the mainstream news reporting is presenting Paramount’s topping bid for Netflix as a “hostile” tender offer, echoing Paramount’s claim that it is taking its bid directly to the shareholders. That is … not exactly accurate.

No one does hostile tender offers anymore, in the sense of an actual for-real offer to buy shares without approval of the target board. That’s because, after cases like Paramount v. Time, boards have fairly broad powers to prevent unapproved acquisitions – like, poison pills, and DGCL 203. So, this Paramount offer is actually a proposal for a friendly 251(h) merger, conditioned explicitly on the approval…