In new Elon Business Law Journal articles Kessler Topaz partner Lee Rudy shares insights on corporate fee-shifting bylaws, and the Journal’s editor-in-chief Timothy Prosky discusses Alibaba’s pending class action lawsuit.
Lee Rudy’s commentary begins as follows:
“Spurred by the Delaware Supreme Court’s ATP decision, dozens of corporate boards have passed so-called ‘fee-shifting’ bylaws. The U.S. Chamber of Commerce has described these bylaws as simply dissuading ‘pirate investors’ who bring ‘abusive shareholder lawsuit[s] and lose in court.’ The truth is that these bylaws are so broadly drafted that they make it economically irrational for even the most sophisticated investors to bring highly meritorious litigation. Moreover, as drafted, these bylaws even threaten crippling financial penalties against stockholders even when they ‘win.’”
Rudy continues by discussing how these fee-shifting bylaws deter shareholder litigation and the impact that the “loser pays” bylaws have on corporate governance. The complete article can be viewed at http://blogs.elon.edu/blj/2015/05/11/new-corporate-bylaws-allow-directors-to-write-the-rules-for-stockholder-litigation/.
Timothy Prosky’s article reflects on an alleged material misstatement made by Alibaba’s executives and directors during its initial public offering (IPO) in 2014, and how the plaintiff class has an uphill battle to recover against the Internet behemoth under its rule 10b-5 claim.
An excerpt of Prosky’s article is as follows:
“At first blush it would appear that Alibaba clearly violated10b-5: investors are told in the registration statement and on other occasions that Alibaba is a reputable corporation, and then five months later it is revealed that Alibaba has been engaging in illegal businesses. However, after a closer examination, it is likely that the plaintiffs will face great difficulties proving that Alibaba misstatement was material and that the corporation acted with scienter.”
To read the articles in their entirety please visit the Elon Business Journal website at http://blogs.elon.edu/blj/.
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