CURRENT MONTH (June 2024)
Business Litigation
2024 Delaware General Corporation Law Amendments
By K. Tyler O’Connell, Morris James LLP
As part of the annual process of reviewing and updating the Delaware General Corporation Law (“DGCL”), Delaware’s state legislature recently approved 2024 amendments. In summary, these include the following changes:
- Amendments to Section 122 to provide that a corporation has the power to contract with stockholders to take or not take certain actions, or to subject certain actions to specific approval requirements. The amendments are to confirm that, under the DGCL, such provisions need not be included in a certificate of incorporation to be validly authorized.
- New Section 147 to facilitate boards of directors’ approval of agreements, documents, or instruments by stating they may be approved in substantially final form. New Section 147 also provides that boards of directors may ratify their approvals after the fact.
- Amendments to Sections 232 to clarify that, for purposes of providing stockholders notices required under the DGCL, documents sent to stockholders with the notice are deemed included therein.
- New Section 261 to confirm that parties to a merger agreement may contract for remedies in the event of a breach, which may include “lost premium” damages. New Section 261 also permits merger agreements to appoint representatives with the exclusive authority to act for stockholders of constituent corporations with respect to enforcing stockholders’ rights thereunder.
- New Section 268 to facilitate the approval of merger agreements by providing that, in the event merger consideration to a constituent corporation’s stockholders does not include shares in the surviving corporation, then the DGCL does not require either the constituent corporation’s board of directors or its stockholders to approve the certificate of incorporation of the surviving corporation. New Section 268 also facilitates the approval of merger agreements by providing that under the DGCL, unless otherwise agreed, directors and stockholders need not approve final or substantially final disclosure schedules, which instead may be completed by officers or agents at the direction of the board.
Here is a link to a redline of the full bill, showing the changes being made, and its explanatory synopsis. If signed into law by Delaware’s governor, the amendments are proposed to become effective as a general matter on August 1, 2024. They will apply to all agreements, documents,or instruments entered into before or after that date, except that the amendments will not affect any pending civil actions.
Tyler O’Connell is a Partner at Morris James LLP in Wilmington, Delaware. Any views expressed herein are not necessarily those of the firm or any of its clients.
Dispute Resolution
Supreme Court Decides Who Determines the Question of Arbitrability When Contracts Conflict
By Leslie A. Berkoff, Partner and Chair of Dispute Resolution Practice Group, Moritt Hock & Hamroff LLP
On May 23, 2024, the Supreme Court issued another decision in the Coinbase matter, Coinbase v. Suski, 144 S. Ct. 1186 (2024). This one addressed who decides the question of arbitrability of a dispute when there are two conflicting agreements—one agreement sending arbitrability disputes to arbitration, and the other either explicitly or implicitly sending arbitrability disputes to the courts. The Supreme Court determined that as a threshold matter, a court must decide which contract governs in order to get to the question of arbitrability.
This case arose from a class action complaint filed in California federal court involving two agreements: one where the user agreement contained an arbitration clause, which delegated the issue of arbitrability to an arbitrator, and a second agreement that provided that any controversies were to be determined by the California courts. The defendant moved to compel arbitration in reliance upon the initial user agreement and its delegation clause. However, the district court denied the motion; it determined that the second contract superseded and the decision over each contract’s validity was one that must be decided by a court before any arbitrability questions could be decided. The Ninth Circuit affirmed the district court’s decision.
In affirming the Ninth Circuit, the Supreme Court recognized that in prior decisions it had covered “three layers of arbitration disputes: (1) merits, (2) arbitrability, and (3) who decides arbitrability,” but it noted that the dispute in the instant matter touched on a fourth layer—who decides arbitrability when multiple contracts conflict over that question. The Supreme Court rendered its determination utilizing simple contract analysis and looking at what the parties had agreed to in the underlying agreements. As such, it found that a decision has to be made by a court as to which contract governs and that to hold otherwise would be to impermissibly “elevate [a delegation provision] over other forms of contract.” The Supreme Court recognized that parties are free to put arbitration provisions in their contracts and contract how they wish, but it is a court that must determine what exactly the parties agreed to and what the contract provides.
