Deal Diary

The Delaware Court of Chancery recently upheld a provision in a merger agreement that prevented the buyer from using privileged emails between the seller and its attorneys in post-closing litigation. The decision, in Shareholder Representative Services LLC v. RSI Holdco, LLC, C.A. (Del. Ch. May 29, 2019), clarified that sellers who apply strong contractual protections to premerger privileged communications need not segregate such communications from other documents to preclude the buyer from relying on them in future litigation.

On September 30, Governor Jerry Brown (D) signed a new California law requiring female presence on boards of public companies headquartered in California. 

Under SB-826, all public companies listed on a major U.S. stock exchange and headquartered in California must have one woman on their board by the end of 2019 and, by the end of 2021, two women if the board has five directors, and three women if the board has six or more directors.  Companies will be deemed to be in compliance with the law if female directors hold the requisite number of board seats during any portion of the calendar year. Companies that fail to comply could be fined - $100,000 for the first violation and $300,000 for each subsequent violation. 

On May 21, 2018, a closely divided United States Supreme Court held in Epic Systems Corp. v. Lewis that employers may require employees to resolve employment disputes with an employer through individual arbitration even if the arbitration agreements waive the right to proceed by class or collective action.

The U.S. government took the unusual step of pursuing a False Claims Act (FCA) suit against a private equity firm based on an alleged commission scheme at one of its portfolio companies - a pharmaceutical company receiving federal reimbursements. The naming of the private equity fund in the complaint may signal an increased willingness by the government to pursue other investment management firms backing health care companies and other entities receiving federal funding.

On October 11, 2017, the Securities and Exchange Commission (SEC) published for comment a proposal by NASDAQ Stock Market LLC (Nasdaq) to modify its initial and continued listing requirements for special purpose acquisition companies (SPACs).

This week we highlight Professor John Coffee Jr.’s article “Hobson’s CHOICE: The Financial CHOICE Act of 2017 and the Future of SEC Administrative Enforcement”, analyzing the Financial CHOICE Act and in particular its impact on SEC enforcement. This post was published in the Columbia law school’s blog on corporations and the capital markets.

On August 2, 2016, the Internal Revenue Service and the Treasury Department issued proposed regulations intended to substantially limit the use of discounts in valuing intra-family transfers of interests in family-controlled entities. If finalized in their current form, the proposed regulations would disallow certain discounts for lack of control (minority interests) and lack of marketability (illiquid interests) that are commonly applied to lower the value of such transferred interests for gift, estate and generation-skipping transfer tax purposes.

When Mark Zuckerberg recently announced that he was giving away up to 99 percent of his Facebook shares (valued at approximately $45 billion), he was severely criticized for it. Zuckerberg and his wife created the Chan Zuckerberg Initiative, a Delaware-based limited liability company (LLC) dedicated to “advancing human potential and promoting equality.” Zuckerberg’s pledge to donate his Facebook shares to his charitable LLC has been characterized as an empty promise because, critics say, he could “take it back” at any time. These critics are not faulting Zuckerberg for his desire to “do good”; it is the manner by which he is attempting to accomplish this good deed that has raised eyebrows.