Last June, when Delaware’s General Assembly was contemplating legislation to prohibit fee-shifting provisions that would require shareholders to pay defense costs for failed suits, the U.S. Chamber of Commerce’s Institute for Legal Reform moved fast. The Chamber sent a letter to the bill’s sponsor, Bryan Townsend, arguing that the proposed law be deferred. It also wrote to all of the members of the Assembly to urge them to oppose the legislation. Fee-shifting, according to the Chamber, was a great way to curtail meritless shareholder claims in “deal tax” suits. Why, the Chamber asked, would lawmakers “deprive” shareholders of the “opportunity” to rein in frivolous litigation?
Chancellor Andre Bouchard of Delaware Chancery Court struck a double blow Monday for corporations that want to restrict shareholder litigation to a single jurisdiction. In a decision upholding the validity of a bylaw requiring shareholders of First Citizens Bancshares to sue board members only in North Carolina, Bouchard ruled that Delaware corporations can designate venues other than Delaware as the exclusive forum for shareholder claims – an issue of first impression in Chancery Court. But that wasn’t all. Bouchard also rejected shareholder arguments that First Citizens’ forum selection clause can’t be enforced because it was enacted on the same day that the North Carolina bank announced its $676 million acquisition of a related First Citizens entity in South Carolina.
(Reuters) – On Monday, a Delaware shareholder firm issued a press release urging shareholders of the dental laser company Biolase to get in touch if they’re concerned about allegations that board members leaked corporate financials, among other supposed shenanigans. You know what that means: Class action firms are circling the beleaguered company, looking for a reason to file a shareholder derivative suit accusing Biolase’s board of breaching its duties.
This country’s most important arbiter of corporate law – Chief Justice Leo Strine of the Delaware Supreme Court – believes that shareholder democracy has run amok. In a startling new essay for the Columbia Law Review, “Can We Do Better by Ordinary Investors?” Strine outlines the deleterious long-term effects of subjecting corporate decision-makers to shareholder votes dominated by short-term investors. These ill consequences range, according to Strine, from the outright dollars corporations must spend to educate shareholders about everything they’re entitled to vote on all the way to excessive risk-taking and regulatory corner-cutting by executives and directors worried about delivering quick returns lest they be ousted by shareholders. Strine is deeply worried about a divergence of interests between money managers, who wield the power of shareholder votes, and ordinary investors in their funds, who are typically saving for retirement or their kids’ education. He’s convinced that the entire American economy will suffer unless short-term investors are reined in.
On Wednesday, Delaware Governor Jack Markell nominated Chancellor Leo Strine of Chancery Court to become chief justice of the state’s Supreme Court. Assuming Strine’s nomination is approved, Chancery Court is going to be a much less colorful place. Strine is a legal mastermind – with an unpredictable and outspoken judicial demeanor. Occasionally, his off-tangent courtroom riffs have landed him in trouble. In 2012, for instance, Strine said he regretted comments he made during a hearing involving fashion entrepreneur Tory Burch in which he asked her attorney if Burch is Jewish and compared her dispute with her former husband to a “drunken WASP-fest.” Strine was also gently chided last year by his future colleagues on the Delaware Supreme Court for using judicial opinions to express his “world views.”