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The Tulane Corporate Law Institute this year was unusually contentious, and that’s because a lot of corporate practitioners – defense side – were unhappy with a number of recent Delaware decisions.

Tornetta v. Musk made headlines because of the colorful personalities involved, but it actually rested on fairly commonplace, well-established Delaware standards of review.  More unsettling, I think, from the corporate bar’s perspective, were decisions like  Sjunde AP-Fonden v. Activision Blizzard (which I blogged about here), Crispo v. Musk (which I blogged about here), and West Palm Beach Firefighters’ Pension Fund v. Moelis & Co. (which I blogged about here), because those cases upset settled expectations of practitioners.  (VC Laster obliquely referred to some of the complaints in his decision denying interlocutory review in TripAdvisor: “Rule 42 does not invite a trial court to consider the level of media attention that a decision has received. That does not mean that the Delaware Supreme Court could not consider it. The justices might conclude that given the media attention and practitioner-driven stormlets over Delaware’s place in the corporate universe, Delaware’s highest court should weigh in. But that is not a consideration that Rule 42 instructs a…

Dear BLPB Readers:

On April 4, 2024, at 11:30am EST, the American Bar Association’s Banking Law Committee’s New Members Subcommittee will host “A 30-minute in-person and zoom meeting of the Banking Law Committee’s New Members Subcommittee” to discuss the business of banking and careers in banking law.  It’s a free program for ABA members and ABA membership is free for law students!  Here is a flyer with complete details: Download Promo for April 4 ABA session on banking law and careers 

A recent decision from Judge Andrew S. Hanen of the Southern District of Texas found that a pump and dump scheme could not be prosecuted as wire fraud.

I’m trying to wrap my head around it and struggling.  It seems to find that the government could not prosecute a pump and dump scheme because the defendants only wanted to make money and did not want to deprive any specific people of money or property.  The mere fact that the pump and dump scheme occurred through a market and not in direct personal transactions seems to have driven the decision.

Bloomberg’s Matt Levine has covered it.  It also made CNN.  

Notably, the indictment even includes statements that the Defendants said things like “we’re robbing … idiots of their money.”

I have literally no idea if this is correct, I’m putting it forward as a set of facts that I think demonstrates the very complicated era we’re in from a corpgov perspective.

Ike Perlmutter was fired from Disney.  It’s very well known that he generally opposed attempts to diversify the MCU.

Nelson Peltz has teamed with Ike Perlmutter in his Disney proxy contest.  Nelson Peltz is a Trump supporter.  He’s also friends with Elon Musk, who has increasingly become a right wing culture warrior.

Disney has long been in the crosshairs of the right.  We all know about the fight with DeSantis and Don’t Say Gay; we also know that a Disney shareholder accused the company of abandoning shareholder value in order to promote a political agenda.

Elon Musk is furious about Disney pulling ads from ex-Twitter, and has openly criticized Disney’s diversity priorities.  He’s even bankrolling a suit by Gina Carano, alleging that Disney discriminated against her due to her conservative politics.

Bill Ackman has also criticized Disney for pulling ads from Twitter, specifically connecting that decision to the proxy fight with Peltz, and arguing that Peltz can right the…

On March 12, Chancellor McCormick issued a revised appraisal opinion in HBK Master Fund v. Pivotal Software, amending her calculations to award the petitioners 44 cents above deal price, rather than 17 cents below, as she had originally.  

But I somehow missed the original opinion, so my first read was the amended one.  Forgive me if this is old hat by now, but it was new to me, so.

The case involved a buyout of Pivotal by its sister company, VMWare, both controlled by Dell Technologies.  That raised the question whether the use of MFW procedures required deference to the deal price, in the same way it does in other kinds of appraisal actions.  Chancellor McCormick held no, because, critically, with a controlling shareholder, there can be no real market test – there are no other potential bidders, and even the shares themselves may trade at a discount to reflect the controller’s ability to extract rents.  Thus, the underpinning of cases like Dell v. Magnetar, 177 A.3d 1 (2017), is absent.

But that’s actually not what stood out to me. 

As is the usual course with these things, Chancellor McCormick began with a standard discussion of the…

For a long time, compensated non-attorney representatives (NARs) have been a blight on FINRA’s securities arbitration forum.  PIABA released a report highlighting problems with these groups in 2017.  After considering the issue, FINRA moved to largely ban non-attorneys from representing investors in securities arbitration.  The proposed rule change expressly permits law school clinics or their equivalent to continue to appear on behalf of investors.  The proposal was even approved by the SEC’s Division of Trading and Markets on January 18, 2024 pursuant to its delegated authority. 

Despite the lack of any opposition in the comment file, an unknown SEC Commissioner blocked the rule from going into effect under “Rule 431 of the Commission’s Rules of Practice” on January 19, 2024.  That rule provides that:

An action made pursuant to delegated authority shall have immediate effect and be deemed the action of the Commission. Upon filing with the Commission of a notice of intention to petition for review, or upon notice to the Secretary of the vote of a Commissioner that a matter be reviewed, an action made pursuant to delegated authority shall be stayed until the Commission orders otherwise. . . .

As it stands, the change has been indefinitely…

Dear BLPB Readers,

I wanted to share that the Journal of Financial Market Infrastructures (where I’m an Associate Editor), in addition to the Bank for International Settlements Innovation Hub, and Quinan & Associates will host a seminar, The Evolution of Financial Markets: Digital Money and Atomic Settlement, on March 19th.  It will be on the early side for those in the U.S., but it looks really interesting!  A pdf flyer of the event is below.  

Download Joint-Seminar-Agenda-Flyer

Last week, Chancellor McCormick decided Sjunde AP-Fonden v. Activision Blizzard, which held that former shareholders of Activision had stated a claim that Activision’s board failed to comply with DGCL 251(b) when it approved the merger agreement with Microsoft.  The draft agreement that the board reviewed was missing key details, such as consideration, the disclosure letter, and a plan to handle dividend payments between signing and closing.  Those details were obviously filled in later, but the full board never formally approved the revised merger agreement – dividends, for example, were handled by committee.  McCormick held that while a board need not review a formal, final version of the agreement, Section 251(b) requires that they at least review a version that includes essential terms, and plaintiffs had for pleading purposes alleged that the Activision board failed to do so.  Due to the statutory violations, McCormick ultimately concluded, the plaintiffs had stated a claim for unlawful conversion of their shares.

So, here’s the thing.  Of course boards should formally review the essential terms of a merger agreement before declaring the deal’s advisability for statutory purposes.  How could it be otherwise?  But at the same time, it seems, you know, likely, that the…

Vice Chancellor Laster recently requested information from litigants in Seavitt v. N-able, Inc. with this letter.  According to the complaint:

Plaintiff brings this action because N-able is presently flouting this foundational principle of Delaware law through a contractual arrangement designed to entrench and perpetuate certain favored stockholders’ control over N-able’s business and affairs. Specifically, in violation of DGCL Section 141(a), N-able has provided certain favored stockholders—affiliates of the private equity firms Silver Lake Group, LLC (“Silver Lake”) and Thoma Bravo, LLC (“Thoma Bravo,” and together with Silver Lake, the “PE Investors”)—with a contractual power to control the most important decisions and functions properly entrusted to the Company’s Board under our corporate system.  

. . . 

Third, in violation of DGCL Section 141(k) and in further derogation of the stockholder franchise, N-able has adopted an invalid provision in its operative Amended and Restated Certificate of Incorporation (the “Certificate”), purporting to provide that as long as the PE Investors own in the aggregate 30% of the voting power of the Company’s outstanding shares, “directors may be removed with or without cause upon the affirmative vote of the [PE Investors]. . .” This provision violates DGCL Section 141(k), which

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