Several sources have reported that Acting SEC Chair Michael Piwowar recently issued a directive mandating that only the Acting Director of the Division of Enforcement can authorize the issuance of formal orders of investigation, the means by which the SEC authorizes its investigative staff to issue subpoenas.[1] The change—which reportedly strips approximately 20 Enforcement Division senior officers of the power to authorize formal orders—was not announced publicly and is not reflected in the SEC’s Enforcement Manual.
Continue Reading Acting SEC Chair Michael Piwowar Takes Steps to Centralize the Process of Issuing Formal Orders – Are Commentators Drawing the Right Lessons?
Mark E. McDonald
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Chancery Court Invalidates Bylaw Purporting to Shift Litigation Expenses onto Stockholders Who Violate a Valid Forum-Selection Bylaw
By Meredith E. Kotler & Mark E. McDonald on
In 2015, Section 115 of the Delaware General Corporation Law (“DGCL”) was added to clarify that Delaware corporations may adopt bylaws requiring that any litigation regarding internal corporate claims be filed in Delaware (commonly referred to as “forum-selection bylaws”). At the same time, Section 109(b) of the DGCL was amended to make clear that Delaware corporations (other than non-stock corporations) may not adopt bylaws that would shift litigation expenses onto unsuccessful stockholder-plaintiffs in internal corporate litigation (commonly referred to as “fee-shifting bylaws”). These simultaneous amendments left open the question of whether a limited fee-shifting bylaw, which would only be triggered if the stockholder filed an internal corporate claim outside of Delaware in violation of the corporation’s forum-selection bylaw, would be valid under Delaware law.
Continue Reading Chancery Court Invalidates Bylaw Purporting to Shift Litigation Expenses onto Stockholders Who Violate a Valid Forum-Selection Bylaw
Chancery Court Rejects Disclosure-Only Settlement, Suggests in Future Such Settlements Will Be Approved Only in Narrow Circumstances
By Meredith E. Kotler & Mark E. McDonald on
Joining a rising chorus of criticism of “disclosure settlements” in merger class actions, Chancellor Bouchard (in In re Trulia, Inc. Stockholder Litigation) rejected a proposed settlement of a stockholder class action challenging Zillow, Inc.’s acquisition of Trulia, Inc. in a stock-for-stock merger that closed in February 2015. After defendants agreed to moot plaintiffs’ disclosure claims by supplementing their disclosures before the stockholder vote, the proposed settlement would have resulted in a fee to plaintiffs’ counsel and broad releases for defendants, but no economic benefit to the stockholder class. Although not the first to express distaste for such settlements and the incentives they create, the Chancellor’s Opinion is notable for its comprehensive discussion of their problems and firm proposals to avoid such problems going forward, including a clear message that the Court will no longer hesitate to reject disclosure settlements involving supplemental disclosures of dubious value and overbroad releases, even if unopposed.
Continue Reading Chancery Court Rejects Disclosure-Only Settlement, Suggests in Future Such Settlements Will Be Approved Only in Narrow Circumstances