Last year, the California legislature enacted two bills, SB 253 and SB 261 that purport to impose burdensome disclosure mandates on businesses.  The legislature did so in spite of obvious constitutional infirmities.  It was no surprise that the laws were promptly challenged  by the U.S. Chamber of Commerce and others.  See As Foretold, California's New Forced Speech Laws Are Being Challenged.  The state responded by seeking dismissal of the lawsuit on the basis of standing.  This was a disingenuous move on the part of the state, since it would only delay the ..read more

The Delaware dam may not be bursting but there are signs that it is leaking.  In an earlier post, I observed that despite all of the talk, I had not found many recent examples of publicly traded companies reincorporating in Nevada.  Recently, I happened upon another public Delaware corporation with plans to leave the Blue Hen State for the Silver State.   In late April, P.A.M. Transportation Services, Inc. filed a Form 8-K disclosing that its board of directors had approved a proposed plan of conversion pursuant to which it would convert into a Nevada corporation.  The ..read more

Last summer, bankers and the lawyers who advise them breathed a collective sigh of relief when the Second Circuit Court of Appeals  upheld a U.S. District Court's opinion that notes in a bank syndicated loan were not securities.   Kirschner v. JP Morgan Chase Bank, N.A., 79 F.4th 290 (2d Cir. 2023), cert. denied sub nom. Kirschner v. JPMorgan Chase Bank, N.A., 144 S. Ct. 818 (2024).   Because the Court of Appeals applied the  “family resemblance” test established by the Supreme Court in Reves v. Ernst & Young, 494 U.S. 56, 110 S.Ct. 945, 108 L.E ..read more

Section 3(a)(5) of the Securities Exchange Act of 1934 defines the term “dealer” to mean “any person engaged in the business of buying and selling securities . . . for such person’s own account through a broker or otherwise,” but excludes “a person that buys or sells securities . . . for such person’s own account, either individually or in a fiduciary capacity, but not as a part of a regular business.”  In February of this year, the Securities and Exchange Commission adopted a new rule, Rule 3a5-4, to define the phrase "as a part of a regular business" for purposes of Section 3(a)(5)(B ..read more

In this post from 14 years ago, I speculated as to whether California Financial Code Section 1327 was constitutional.  Two years later, the California Court of Appeal declared the statute unconstitutional.   Summit Bank v. Rogers, 206 Cal. App. 4th 669 (2012).  See  Court Declares Bank Trash Talk Statute Facially Unconstitutional.   In a recently published article, Adjunct Professor of Law Eric J. Spitler discusses the Summit Bank opinion at some length and posits: Perhaps reflecting agreement that the “modern constitutional requirements” described ..read more

Last week the California Department of Financial Protection & Innovation issued a report of its activities under the California Consumer Financial Protection Law.   The California legislature enacted the CCFPL in 2020 for the ostensible purpose "to improve accountability and transparency in the California financial system, provide consumer financial education, and protect consumers from abusive financial practices, while prioritizing the prevention of unethical businesses from harming the most vulnerable populations including military service members, seniors, students, low- and ..read more

The California Revised Uniform Limited Liability Company Act (RULLCA) provides that when a member who is an individual dies, the member dissociates from the limited liability company.  Cal. Corp. Code § 17706.02(f).  Dissociation results in the following consequences: The member’s right to vote or participate as a member in the management and conduct of the LLC’s activities terminates. If the limited liability company is member-managed, the member’ s fiduciary duties as a member end with regard to matters arising and events occurring after the person’s dissociation. Subject to Secti ..read more

Laura Graham was injured when she tripped over a sprinkler box located on property owned by a single member limited liability company.  She sued the LLC and asserted that its member was the alter ego of the LLC and the case was appealed to the Nevada Supreme Court, Ene v. Graham, 140 Nev. Adv. 26 (Apr. 18, 2024).   The Supreme Court reversed finding that substantial evidence did not support the trial court's alter ego determination.  The opinion makes several important points regarding the analysis of alter ego liability for LLCs: The alter ego analysis for for an LLC ..read more

A recent ruling by U.S. District Court Judge Anthony J. Battaglia addresses whether demand futility is an affirmative defense that must be asserted in an answer or raised in a motion to dismiss.   In re Franklin Wireless, 2024 WL 1163178 (March 18, 2024) involved a derivative suit against officers and directors of a Nevada corporation.   Because the suit was brought in federal court, Rule 23.1 of the Federal Rules of Civil Procedure required that the plaintiffs either demand action from the corporation's directors before filing suit or plead with particularity the reasons w ..read more

The California General Corporation Law is part of the California Corporations Code, but not every corporation incorporated in California is formed or governed by the General Corporation Law.   In fact, the Corporations Code includes separate law governing a wide variety of corporations that are formed pursuant to laws other than the GCL, including: Social purpose corporations; Nonprofit corporations (nonprofit public benefit, mutual benefit and religious); Corporations sole; Cooperative corporations; Fish marketing corporations; and Benefit corporations Just as many courts conflate ..read more