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On the one hand:

Tech Startups Feel an IPO Chill

Dropbox Inc. had no trouble boosting its valuation to $10 billion from $4 billion early last year, turning the online storage provider’s chief executive into one of Silicon Valley’s newest paper billionaires.

But the euphoria has begun to fade. Investment bankers caution that the San Francisco company might be unable to go public at $10 billion, much less deliver a big pop to recent investors and employees who hoped to strike it rich, according to people familiar with the matter.

BlackRock Inc., which led the $350 million deal that more than doubled Dropbox’s valuation, has cut its estimate of the company’s per-share value by 24%, securities filings show.

Dropbox responds that it is continuing to increase its business, added 500 employees in the past year, including senior executives, and has no need for additional capital from private or public investors.

Still, the company is a portent of wider trouble for startups that found it easy to attract money at sky’s-the-limit valuations in the continuing technology boom.  The market for initial public offerings has turned chilly and inhospitable, largely because technology companies have sought valuations above what public investors are willing to pay….

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Just as I was in the middle of preparing for my class on shareholder proposals – for which I have assigned the opinion in Trinity Wall Street v. Wal-Mart Stores, Inc. – I got an email notification that the Division of Corporate Finance Staff had issued a new legal bulletin announcing that it disagrees with the majority opinion in Trinity, and instead agrees with the concurring opinion.

I discussed the Trinity opinion here, but basically, the issue was whether Walmart could exclude a shareholder proposal, submitted by Trinity Wall Street, requesting that Walmart develop a policy for oversight of sales of guns with high capacity magazines (the proposal was framed to encompass harmful products broadly, but the narrative made clear it was aimed toward gun sales).  In the Third Circuit opinion, the majority and the concurrence disagreed regarding the proper interpretation ordinary business exclusion for social-responsibility proposals.  The majority held that to determine whether a proposal is excludable, the court must first analyze whether it concerns ordinary business, next determine whether it involves a significant issue of social policy, and finally determine whether – despite involving ordinary business – the social policy issue is so important as to “transcend”…

Jessica Erickson has just published a fascinating article on the structure of lead plaintiffs’ counsel arrangements in corporate cases. 

Erickson documents how Delaware courts have formally identified “factors” that will be used to select lead counsel, but have informally sent the message that the parties must work out the leadership structure amongst themselves.  This means that multiple law firms have an incentive to file claims with no intention of performing serious legal work, solely to negotiate a position in the leadership structure so that they can collect a portion of the fees.

This practice not only results in duplicative lawsuits, but allows lawyers to engage in rent-seeking – extracting fees without performing serious legal work – that can damage incentives for the “real” lawyers, and harm the class.

At this point, I just have to interject with an account of my experiences.  I was at Milberg Weiss for a few years (though I was more involved in securities cases under the PSLRA than corporate cases).   Milberg frequently worked with co-counsel, and most of the time – no matter which firm was formally appointed lead – Milberg was functionally in charge of the litigation.  Co-counsel generally was added to the case…

The SEC has released an interesting statistical report on hedge funds and other private investment funds. The data is compiled from Form ADVs and Form PFs filed by the funds’ advisers. Definitely worth looking at if you’re interested in private funds. It’s available here.

There’s been something of a debate recently about whether there’s a bubble in tech startups.  It is believed that 140 have reached “unicorn” status, i.e., valuations of $1 billion or more, and numerous voices have been raised questioning the legitimacy of those valuations.  Venture capitalists insist the valuations are legitimate, but I think Buzzfeed’s story about recently-foaled unicorn JustFab is a rather powerful demonstration that something has gone awry.

JustFab offers discount clothing and shoes on a subscription basis; shoppers pay a monthly fee to have access to the products.  The problem is, according to Buzzfeed, JustFab has received thousands of complaints from consumers who claim that they were unaware they would be charged monthly subscription fees, and found themselves unable to cancel the service.   JustFab recently settled a lawsuit brought by district attorneys in Santa Clara and Santa Cruz alleging that it deceived customers.  Even more troubling are the allegations that JustFab’s founders have a long history of forming similar companies, on a similar subscription model, that also generated considerable consumer ire – as well as complaints by credit card companies because of all the chargebacks, and an FTC complaint that settled for $50 million.  At…

The authors of the business associations casebook I use have, in their latest edition, reprinted some of the relevant statutes in the casebook. One section of the Revised Uniform Partnership Act even appears twice within a span of only eight pages. (I don’t mean citations to statutes; I mean the full language of the statute.)

The authors of the book I use (which shall remain nameless) are not alone. I’ve also seen this practice in other casebooks.

I just don’t get it.

I can understand putting a few statutes or regulations in a casebook if the students are only going to look at a couple of sections in the course. It eliminates the need for students to purchase a separate statutory supplement.

But it makes no sense in courses like Business Associations or Securities Regulation, where students will be looking at dozens, even hundreds, of pages of statutory and regulatory material. The students in those courses will still have to buy a statute book; including some of the same statutory material in the casebook just increases the size (and cost) of the casebook.

Including statutory material can also accelerate the casebook’s obsolescence. Some of the sections included come from uniform…

Yesterday, the Delaware Supreme Court held that plaintiffs had pled demand excusal under Aronson v. Lewis due in part to a director’s “close friendship of over half a century with the interested party,” in combination with that director’s business relationship with the interested party.

Del. County Emples. Ret. Fund v. Sanchez involves a public company that is 16% owned by the Sanchez family.  The plaintiffs challenged a transaction in which the company paid $78 million to a privately-held entity owned by the Sanchezes, ostensibly to purchase certain properties and fund a joint venture.  The question, then, was whether plaintiffs could show that a majority of the Board was not independent, and because the Sanchezes themselves occupied 2 of the 5 seats, all eyes were on one additional Board member, Alan Jackson.

Alan Jackson, it turned out, had been close friends with the Senior Sanchez for “more than five decades,” and the Delaware Supreme Court deemed this fact worthy of of judicial notice.  Thus, in a heartwarming passage, the Court noted that though it had previously held in Beam v. Stewart, 845 A.2d 1040 (Del. 2004), that a “thin social-circle friendship” is not sufficient to excuse demand, “we did not…