The Nevada Legislature will consider a constitutional amendment this session to create an appointed business court. This is the language of the resolution as it was introduced by Assembly Members Joe Dalia and Shea Backus. Full disclosure, I strongly support Nevada creating this legal infrastructure and have helped on this issue.

The amendment would authorize the Legislature, at some future date, to create an appointed business court with “exclusive original jurisdiction to hear disputes involving shareholder rights, mergers and acquisitions, fiduciary duties, receiverships involving business entities and other commercial or business disputes in which equitable or declaratory relief is sought.”

It envisions creating a court comprised of at least three judges to be appointed by Nevada’s Governor off of a list of nominations to be provided by an existing Commission on Judicial Selection. In contrast to the short terms for the Texas business court, these appointed judges would serve six year terms.

Amending the Nevada Constitution is no easy feat. For this to succeed, it will need to pass the Legislature twice and then pass a public referendum. Nevada’s Legislature only meets once every two years. If it passes this cycle, it will need to pass again the…

So on Monday I threw up a rather inflammatory post about SB 21, which would dramatically rewrite Delaware law.  (Here’s a post by Eric Talley, Sarath Sanga and Gabriel V. Rauterberg, which takes a more measured tone).

As I’ve talked to people about the law, the first question I get asked is, “Is this a good thing or a bad thing?”  And that’s a really difficult question to answer, because “good” can have many meanings in this context.

Is this good for shareholders?

Well, I find it very difficult to take seriously the notion that the procedures written into the law will have any protective effect for shareholders.  The independence standards of the exchanges are notoriously weak; that’s why ISS and Glass Lewis frequently adopt their own definitions of independence, so much so that the Business Roundtable accused them of proxy fraud. The cleansing standards would insulate transactions by a board that is entirely captured by a counterparty, so long as a single member of that board is independent and votes with the others (a standard that one can easily see being transferred to the demand excusal context).  The definition of controlling shareholder would exclude people…

I suppose it’s gratifying that the proposed changes to Delaware law support the thesis of my new paper, The Legitimation of Shareholder Primacy.  There, I argue, among other things, that Delaware imposes procedural limitations on managerial behavior that function more as a performance to the general public, to grant corporations a social license to operate, than as real constraints.  So, of course, as soon as those limitations started to have even the tiniest bit of actual bite – and in an environment where the prospect of federal preemption is largely nil, and corporate power has reached the point where a social license to operate may no longer be necessary – managers threaten to depart the state, and Delaware proposes of package of statutory changes that undo certainly the last 10 years of Delaware jurisprudence, if not the last 50, in favor of a model of corporate self-policing.

The story actually begins last year, when, in response to the Moelis decision, Delaware rushed to amend its corporate code to add Section 122(18), permitting corporate-governance-by-contract.  At the time, I asked – quite seriously – what is the value of the corporate form? 

This is very much a debate that’s been…

Lately, several media and news organizations have “settled” somewhat frivolous lawsuits filed by President Trump, raising suspicions in at least some minds that the settlements were a rather unsubtle form of bribery, intended to win Trump’s favor with respect to other aspects of their businesses.

I am not particularly knowledgeable about bribery laws but let us assume, for the moment, that if these settlements were, in fact, shams to funnel money to Trump in exchange for regulatory favors, that would be illegal under some law somewhere. And, given that Trump is, you know, president, I also assume that, to the extent those laws are federal, charges are unlikely to be pursued by federal authorities.

But Disney/ABC, and Meta – not X – are incorporated in Delaware. And Delaware makes it a breach of fiduciary duty for corporate managers to intentionally break the law. I’ve blogged about the doctrinal difficulties that Caremark creates for Delaware (and they’re discussed extensively in my new paper, The Legitimation of Shareholder Primacy, now forthcoming in the Journal of Corporation Law), but whatever the doctrine’s flaws, there remains the intriguing possibility that an enterprising shareholder might bring a lawsuit – or even…

Maxine Eichner of UNC has organized a petition, available at this link, for law professors to communicate the urgency of the constitutional crisis that is facing the country. More than 400 law professors have signed as of this posting. If you would like to add your name, you can do so by emailing maxine.eichner@gmail.com. You are invited to share the link with others who may be interested in signing.

Lotta news lately about companies seeking to leave Delaware, so it’s amusing to see a company fighting to get in. 

Daktronics is incorporated in South Dakota of all places (is it lonely there?).  South Dakota mandates cumulative voting, which makes it much, much easier for a minority blockholder to gain board representation, as Matt Levine explains here.

And such a blockholder has emerged, in the form of Alta Fox.  Alta Fox is both a shareholder and a holder of Daktronics notes, but the notes are convertible into shares, so on a fully diluted basis, Alta Fox owns over 11% of Daktronics’ voting power.  Given that, at least some of Alta Fox’s director nominees would likely have been seated in a proxy contest but – plot twist! – Daktronics called a special meeting of its shareholders to vote on reincorporation to Delaware, where cumulative voting is not the default.

And, as I understand it, Daktronics is calling for that vote before Alta Fox’s shares convert, so that Alta Fox will be heading into the meeting with less than its full voting power. In response, Alta Fox filed a lawsuit (in federal court, presumably because it just likes the judges…

Taken together, these cases suggest that the hypothetical and contingent impact of Nevada law on unspecified corporate actions that may or may not occur in the future is too speculative to constitute a material, non-ratable benefit triggering entire fairness review. Given that Plaintiffs have not alleged any past conduct that would lead to litigation, this case aligns with our case law that applies the business judgment rule. 

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