Category Archives: Commentary

Does the Equitable Mootness Doctrine Apply to Appeals from Chapter 7 Liquidations?

In a blog post written for the Delaware Journal of Corporate Law, DJCL Articles Editor Jennifer Penberthy Buckley discusses In re Nica, from the United States Court of Appeals for the Eleventh Circuit, which assessed an equitable mootness claim in the context of an appeal from a Chapter 7 liquidation. Given the traditional use of equitable mootness in the context of an appeal from confirmation of a Chapter 11 plan, the Court acknowledged that the applicability of equitable mootness to Chapter 7 appeals is questionable. This post briefly examines the policy justifications for the equitable mootness doctrine and argues that it could apply to Chapter 7 appeals in some cases.

Read more at http://www.djcl.org/blog.

Section 141(k) Mandatory Prohibition of For-Cause Removal of a Declassified Board

In a blog post written for the Delaware Journal of Corporate Law, DJCL Staff Member Kendra Rodwell discusses the Delaware Court of Chancery ruling that Delaware corporations with provisions in their corporation’s bylaws and charters directly conflicting with Delaware law would be stuck down.  In In re Vaalco Energy Shareholder Litigation, the Court of Chancery was asked to determine whether the Vaalco Energy’s provision that made directors of a non-classified board removable only for cause was valid in light of DJCL section 141(k) that required non-classified boards to be removed without cause.

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One of These Things is Not Like the Other: Student Bar Loan Distinguished from Traditionally Nondischargeable Student Loan Debt

In a blog post written for the Delaware Journal of Corporate Law, DJCL Articles Editor Kaitlin E. Maloney analyzes a recent decision from the U.S. Bankruptcy Court for the Eastern District of New York.  In Campbell v. Citibank, the court distinguished a law school graduate’s bar loan from other nondischargeable student loan debt, and ruled that the bar loan was dischargeable in bankruptcy.  Though some believe that this will discourage lending institutions from extending bar loans to law students, Kaitlin argues that is unlikely due to the relatively low risk these loans present to lenders.

Read more at http://www.djcl.org/blog.

Applying Omnicare and Protecting Investors Under § 11 of the ‘33 Act

In a blog post written for the Delaware Journal of Corporate Law, DJCL Senior Staff Member Nicholas D. Picollelli, Jr. discusses how the Second Circuit’s recent decision in Tongue v. Sanofi is the most recent attempt to apply the U.S. Supreme Court’s Omnicare standard regarding § 11 of the Securities Act of 1933. Under specific circumstances, Omnicare expands § 11 liability to include omissions of fact relating to statements of opinion in a registration statement. The Omnicare standard and the Second Circuit’s application present issuers with a unique choice – costly drafting fees or potentially extravagant litigation.

Read more at http://www.djcl.org/blog.

EZCorp Deems Entire Fairness Standard Appropriate When Controlling Shareholder Receives Non-Ratable Benefits

In In re EZCorp, the Court of Chancery grappled with the appropriate standard of review for business transactions between a company and a controlling shareholder.  In a blog post written for the Delaware Journal of Corporate Law, DJCL Senior Staff member Helene Episcopo explains that the court  determined that the entire fairness standard of review was appropriate, and that it declined to apply Aronson beyond the demand futility context.

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In Re Trulia, Inc. Stockholder Litigation: End to Disclosure Settlements?

In a blog post written for the Delaware Journal of Corporate Law, DJCL Senior Staff Member Erin Rogers discusses the Court of Chancery’s recent decision in In Re Trulia, Inc. Stockholder Litigation, and the effect decision will have on the future quantity of disclosure settlements and merger related litigation.  She argues that while the heightened standard for disclosure settlements set out in Trulia will certainly decrease the number of disclosure settlements and decrease the amount of merger related litigation, the extent of the decrease will depend on a number of factors discussed in the article.

Read more at http://www.djcl.org/blog.

Puerto Rican Debt Crisis: A Proposal to Amend Federal Bankruptcy Law

Puerto Rico owes approximately 72 billion dollars to its creditors. Although the island is a United States territory, it is not considered a state for purposes of filing for Chapter 9 municipal bankruptcy. Although there have been several proposals to try to help Puerto Rico climb out of its debt, without amending the federal bankruptcy law to include Puerto Rico as a state for purposes of Chapter 9, the United States territory will collapse. In a blog written for the Delaware Journal of Corporate Law, DJCL Copy Editor Ashley DiLiberto argues that Puerto Rico deserves equal protection of the laws enjoyed by the several states; to hold otherwise reeks of discrimination and bias to our island brothers and sisters.

Read more at http://www.djcl.org/blog.

Considerations in Implementing Country-by-Country Reporting

The OECD’s final BEPS report proposes country-by-country reporting to increase transparency with transfer pricing.  In a blog post for the Delaware Journal of Corporate Law, DJCL Staff Member John Brady explains that country-by-country reporting leaves some unanswered questions about how these reports will be exchanged with foreign jurisdictions while maintaining adequate protections to safeguard this information.  He argues that the U.S. should implement an objective privacy standard with specific safeguards prior to implementing information exchanges.

Read more at http://www.djcl.org/blog.

The U.S. Government and Corinthian Colleges, Inc.: Picking Winners and Losers

Corinthian Colleges, Inc., a for-profit career-college, closed its doors amid allegations of predatory student loan practices and fraud and misrepresentation surrounding graduation rates and job placement statistics.  In a blog post written for the Delaware Journal of Corporate Law, DJCL staff member Chris Kephart describes the unprecedented decision of the federal government to facilitate the forgiveness of close to $1 billion in public and private student loans, by negotiation with the holder of the private student loans and directly providing debt relief for students who took federal student loans to attend Corinthian.

Read more at http://www.djcl.org/blog.

Peeling Back the Business Judgment Rule: Corporate Responsibility After Chiquita

By Matthew Goeller
Articles Editor, Delaware Journal of Corporate Law

Enacted in the first Judiciary Act of 1798, the Alien Tort Statute (“ATS”) provides federal jurisdiction to aliens alleging violations of international law. What remained a largely unused statute, the ATS reemerged in 1980 as a creative tool to hold violators of international law liable in U.S. courts, even when those violations occurred abroad or the actors were foreign citizens. As ATS jurisprudence unfolded over the last thirty years, the statute’s jurisdictional grant extended first to foreign state actors, then to private citizens, and eventually even to corporations. The Supreme Court’s decision in Kiobel v. Royal Dutch Petroleum Co., however, seemed to narrow the scope to which the ATS applies to corporations. Despite the Supreme Court’s holding, many circuit courts and commentators maintained that ATS liability is nonetheless still possible for corporations.

In Cardona v. Chiquita, Colombian citizens brought suit against Chiquita under the ATS, claiming that Chiquita’s support of known terrorist groups funded a brutal campaign of torture, drug trafficking, and imprisonment. The Eleventh Circuit’s holding that the ATS does not reach corporations highlights the current uncertainty as to whether the statute applies to corporations.

Adding to this uncertainty is an emerging concern that participation in international law violations might perhaps implicate a breach of fiduciary duties. Corporate directors, whose business decisions directly or indirectly involve the corporation with violators of international law, might ordinarily seek the protection of the deferential business judgment rule. However, more nuanced interpretations of fiduciary duties and more probative efforts of understanding the precise nature of those business decisions might well evince a breach of fiduciary duty. This analysis, coupled with the already present uncertainty as to the applicability of the ATS, should encourage directors of corporations to adopt more stringent governance policies that provide structural mechanisms to ensure compliance with internationally recognized legal norms.

Download the full article Peeling Back the Business Judgment Rule – Corporate Responsibility After Chiquita.

Suggested Citation: Matthew B. Goeller, Peeling Back the Business Judgment Rule: Corporate Responsibility After Chiquita, INST. DEL. CORP. & BUS. L. (May 28, 2015), http://blogs.law.widener.edu/delcorp/#sthash.7Nk3jxjd.dpbs