- Popular hiring strategy copied, but effectiveness unclear.
- Diverse hiring remains a problem in NFL, other companies.
The architect of the National Football League’s “Rooney” Rule says the hiring policy has failed to diversify the league’s top positions because of shortcomings in how it’s implemented, despite being widely adopted by U.S. banks, tech companies, and law firms.
The rule, adopted by the NFL in 2003 and named after the late Pittsburgh Steelers owner Dan Rooney, requires teams to interview at least two candidates of color for head coaching positions. It was criticized in former Miami Dolphins head coach Brian Flores’s discrimination lawsuit, which accuses the league of disingenuous efforts to increase racial representation in top jobs. Nearly two decades after adoption, the league has only one Black head coach, the suit noted.
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Corporate Adoption
Since the NFL created the rule, it has been adopted in some form by companies like JPMorgan Chase & Co., Bank of America Corp., and Facebook, as well as some states and cities, to include requirements to interview women and people of color for leadership positions. Some implement the rule for company-wide hiring.
It’s also been incorporated into settlements of shareholder lawsuits that push companies to take a more active role in increasing diversity and inclusion.
“Any time we have such rules in place, they can be manipulated,” said Julie Goldsmith Reiser, a partner at Cohen Milstein Sellers & Toll PLLC, who has included the “Rooney” Rule and other diversity efforts in shareholder settlements, including a $310 million pact with Alphabet Inc.’s Google in 2020. “What we’re talking about here is checking-the-box compliance.”
There has been little empirical evidence that the rule, alone, has led to significant increases in representation either on or off the field. For professional football, specifically, a 2010 study from Indiana University determined that the rule had little impact on hiring more head coaches. However, it said the league should focus on recruiting more African-Americans and Latinos into the pipeline through lower-level coaching positions.
In the corporate world, a 2016 study from the University of Colorado found that when a pool of job candidates contained only one woman or person of color, the chances that person would be hired were essentially zero.
Without accountability, simply changing the composition of a hiring pool won’t make a difference, but there is evidence that broader pressure and ambitious diversity goals have led to some success in recent years, said Stefanie Johnson, a professor at the University of Colorado, who authored the study.
“There is buy-in across corporate America to increase diversity,” Johnson said. “There is cognitive bias and an unconscious bias toward the default candidate. If everyone you interview is a White coach who isn’t Black, it implies that the default must actually be the correct choice.”
Six North Carolina environmental and social justice organizations are resuming a previously filed lawsuit over the ongoing GenX crisis in the Cape Fear River.
But the defendants in this lawsuit aren’t Chemours or DuPont — it’s the federal government, specifically the Environmental Protection Agency.
These six groups (Center for Environmental Health, Cape Fear River Watch, Clean Cape Fear, Democracy Green, the NC Black Alliance and Toxic Free NC) are resuming their lawsuit against the EPA after the federal agency granted the groups’ petition requiring there be more health studies done on the effects of per-and polyfluoroalkyl substances, or more commonly known as PFAS, according to a joint press release from the groups.
Just before the end of 2021, the EPA announced it was granting a petition by the six North Carolina groups that would compel companies to conduct testing on certain PFAS compounds, as part of a larger commitment by the Biden-Harris administration to improve society’s understanding of PFAS and the risk they present.
The U.S. Department of Justice has thrown its weight behind 48 attorneys general trying to revive their lawsuit accusing Facebook of illegally monopolizing personal social networking services, telling the D.C. Circuit that a district judge wrongly broke the suit down without looking at the allegations cumulatively.
The DOJ Antitrust Division was one of several parties to file amicus briefs Friday backing the coalition of enforcers from 46 states, the District of Columbia and Guam trying to upend a district court’s conclusion that they waited too long to challenge conduct that included the acquisitions of Instagram and WhatsApp by the company now known as Meta.
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Filed in December 2020, alongside a parallel enforcement action by the Federal Trade Commission, the coalition of states accused Facebook of violating the Sherman Act and the Clayton Act, which bars anti-competitive mergers. The FTC case is moving forward after a rejiggered version survived dismissal earlier this month.
Enforcers allege that the social networking giant maintained monopolies and engaged in anti-competitive mergers, including with its purchases of Instagram and WhatsApp, as well as through restrictions on third-party developers that access its networks.
. . .
In the Facebook appeal, the attorneys general also received backing Friday from a group of former state antitrust enforcement officials and antitrust professors, a group of economists, and antitrust advocacy groups the American Antitrust Institute and the Committee to Support the Antitrust Laws.
The former state antitrust officials targeted their brief to support the idea of state enforcers generally, without touching on the merits of the allegations against Facebook. They argued that the district court wrongly deemed the state’s case as filed too late by equating enforcers with “private persons,” suggesting “that state enforcement was less important than federal enforcement.”
. . .
AAI argued in its own amicus brief that the district court never considered the claims against Facebook “as a whole scheme.”
“Properly viewed as a coordinated scheme, all the scheme’s elements are designed with the common purpose of thwarting nascent and future competitors, not inducing the exit of current competitors. The alleged scheme’s common purpose cannot be ignored; it is what makes the scheme a scheme,” the group said.
AAI’s vice president of legal advocacy, Randy M. Stutz, further said in an email that the court was “clearly misguided” in relying on “restrictive unilateral-refusal-to-deal law.”
. . .
Also arguing for a holistic perspective were the economists, who argued in their brief that the pieces of Facebook’s “buy or bury” strategy scooping up or cutting off would-be rivals must be looked as reinforcing one another.
“The district court erred in analyzing and dismissing the ‘buy’ and ‘bury’ components of Facebook’s conduct separately, thereby disregarding both the temporal progression of Facebook’s conduct and the cumulative anti-competitive effects of the conduct,” they said. “The effects of Facebook’s acquisitions and the limitations it placed on interoperability between itself and other applications — including targets that declined Facebook’s buyout offers — should not, and indeed, cannot be decomposed.”
In breaking down those components, “the district court minimized the states’ allegations,” an attorney for the economists, Jessica B. Weiner of Cohen Milstein Sellers & Toll PLLC, said in an email.
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The economists are represented by Sharon Robertson and Jessica Weiner of Cohen Milstein Sellers & Toll PLLC.
The case is New York et al. v. Facebook Inc., case number 21-7078, in the U.S. Court of Appeals for the District of Columbia Circuit.
The complete article can be viewed here.
The chemical company has connected six Cumberland County homes contaminated with forever chemicals to public water lines and says it has identified 104 more that could benefit.
Representatives of the Chemours chemical company are expected to show up at Laura Adams’ Cumberland County home next week to walk her through the policies, procedures and potential cost of connecting to public water under a new pilot program.
Adams found out in June that the well water at her home on Anniston Street – in the Black Bridge subdivision between Hope Mills and Parkton in Cumberland County – is polluted with per-and polyfluoroalkyl substances known as PFAS, or forever chemicals.
Since then, the Chemours Fayetteville Works plant has been supplying Adams and thousands of other people in Cumberland, Robeson and Bladen counties with either bottled water, under-the-sink reverse osmosis filtration systems or whole-house granular activated carbon systems to keep them from drinking their potentially cancer-causing well water.
Now, as part of the pilot program, Chemours has been reaching out to some homeowners to determine whether they qualify to have their homes connected to public water lines owned by the Fayetteville Public Works Commission. So far, six homes have been connected, Chemours spokeswoman Lisa Randall said.
- $5m Kiisi Fund opens development scheme with focus on human capital.
- BB Fakae, other highly trusted citizens put in charge.
Oniland is witnessing quiet revolution outside the ever-controversial schemes such as the Niger Delta Development Commission (NDDC) or the clean up exercise, but from the activities of its sons that died as martyrs led by Ken Saro-Wiwa.
The then late head of state, Sanni Abacha, may have hanged Saro-Wiwa and other Ogoni-9 in 1994 but the worldwide troubles from it did not allow the king to sleep. At the end, the martyrs have won huge enablement that have made them to launch a development fund that is now creating a silent revolution especially in human capital development and other physical infrastructure projects.
The $5m or N2bn seed capital came from $15.5m which families of Saro-Wiwa and the others won in New York in 2009. They used the fund to create a Foundation that is strictly managed along international standards in order to keep delivering value in the area to all Ogoni.
The scheme is managed by an environmentalist, lawyer, former lawmaker, and recently the secretary to Imo State government, Uche Onyeagucha, who hails from Obinze, Owerri West. A true Port Harcourt boy, he worked with Oronto Douglas and Ken Saro-Wiwa to bring justice to Ogoniland on the vast environmental devastation and injustice done to the area. He suffered several detentions in his career of fighting against military dictatorship. He served as legal adviser to the Ijaw Youth Council and founder-member of Environmental Rights Action/Friends of the Earth Nigeria, as well as founder, Right to Know, among others. He is chairman of the Foundation.
Now, the Foundation has a Governance/Programme Subcommittee overseen by one of Africa’s most celebrated and trusted education transformers and an international researcher of repute, BB Fakae, who revived the Bori Polytechnic and was later drafted for eight years to rescue the then traumatised and degenerated Rivers State University of Science and Technology, now Rivers State University.
Fakae hails from Kbangha in Nyokhana district of Khana LGA, Rivers State. He was a Commonwealth Academic Staff Scholar and lecturer at the University of Nigeria Nsukka (UNN), before transferring his service to his home state starting at the RSUST. He is on record to have transformed the Bori Poly to a strong institution in Rivers State before taking the RSUST to the best state-owned university in Nigeria with earth-shaking legacies such as 1000 computer centre, online examinations, total automation of admission, results, payments, and hostel allocations and student identification.
Other board members include tested men and women such as Chet Tchozewski (President of the RTC Impact Fund), Deezia Hannah Karikpo, Lebatam B. Ndegwe (PhD), a public health sector/toxic exposure expert who is now the project director. It looks like who are put in charge of the foundation is as crucial as the fund itself because of the high propensity for fraud, waste and mismanagement in Nigeria’s national life.
Now, Kiisi has been sponsoring development projects in Ogoni made up of four local council areas of Khana, Gokana, Tai and Eleme through some accredited civil society organisations (CSOs). They later changed their model and rather created a foundation to directly execute various programmes and projects especially in human capital development and health.
Background of the fund
Ogoni land is now known globally for struggle over environmental disasters. Studies show that in 15 years from 1976 to 1991, there were reportedly 2, 976 oil spills of about 2.1 million barrels of oil in Ogoniland, accounting for about 40 percent of the total oil spills in Shell worldwide.
The struggle of Saro-Wiwa and other Ogoni activists eventually led to the cessation of oil production activities in the area in 1993, but widespread environmental damage was already done.
According to a handbook, one of the first philanthropic actions of the plaintiffs of the 2009 Wiwa vs. Shell lawsuit was the creation of the Kiisi Trust Fund with $5 million out of the $15.5 million out-of-court settlement in the U.S. District Court for the Southern District of New York.
At the time of the settlement, the Ogoni plaintiffs stated that the Kiisi Trust “should stand as one legacy of the labours of our heroes past.” This incredibly generous and selfless act by the plaintiffs was intended to be used by the Kiisi Trust Fund to support programmes in education, health, community development, and other benefits for the Ogoni people and their communities, including educational endowments, skills development, agricultural development, women’s programs, small enterprise support, and adult literacy.
In 2016, according to records made available to BusinessDay-Sunday, the Trustees of the Kiisi Trust, in a competitive bidding process, hired TrustAfrica to oversee the management of the fund as a donor-advised-fund manager on behalf of the Trustees of the Kiisi Trust in Nigeria. The funds of the Kiisi Trust are kept in separate bank accounts from TrustAfrica’s bank accounts, with most of the funds held in an investment portfolio with a reputable international investment firm, where it is generating additional income for the Kiisi Trust.
The Trust operates as a community foundation that advances the original aims and intentions of the plaintiffs of the Wiwa vs. Shell lawsuit.
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Ogoni future under Kiisi
If this pace of human capital transformation and other physical infrastructure development projects continue undisturbed, the future of Ogoniland would look different, according to some board members.
The management of the Fund was also made stronger by bringing in the likes of Fakae and Ndgwe. The board said a more aggressive fundraising strategy will also be implemented with the aim to at least double the initial endowment to the Trust, allowing it to deepen its support to institutions in the Ogoni area. Perhaps, in the near future, mega organisations such as the HYPREP, NDDC, oil majors, Ecological fund, may find Kiisi worthy for donations to ensure credible application and project execution. That is what a good name and strong brand may do to the Trust if the managers keep building up the reputation capital. “This is coupled with an investment strategy that is low risk, investing in US bonds and conservative markets globally. “Success to the Trust is an empowered Ogoniland with strong institutions mandated to provide different values. “An underlying thread amongst all the components and aspirations is the need to change mindsets from an entitled one to an empowered and accountable one.”
Conclusion
In life and in death, Saro-Wiwa and his co-martyrs have lived on and have continued to make positive impacts on the Ogoni landscape and on the people the playwright so loved. If other development agencies copy the Kiisi formula, Ogoni may become a national model and pacesetter.
A federal judge on Friday denied an Illinois casino company’s motion to dismiss a proposed class action from former employees who allege they were cheated out of tens of millions of dollars in a series of multimillion-dollar transactions involving their retirement plan that violated the Employee Retirement Income Security Act.
U.S. District Judge David W. Dugan wrote in a memorandum and order that the proposed class, led by former Casino Queen employees and employee stock ownership plan participants Tom Hensiek and Jason Gill, had adequately pled their case against Casino Queen’s holding company board of directors and the Casino Queen ESOP’s administrative committee.
The riverboat casino company, Casino Queen, moved on land in 2007 and suffered a series of financial difficulties as the company’s investors tried and failed to sell the company. Eventually, the company created a parent called CQ Holding Co. Inc. to structure an ESOP deal subject to the ERISA lawsuit.
The ruling means Casino Queen executives will have to face claims from the former employees, first alleged in a complaint filed in April 2020, that they mismanaged the ESOP in breach of their fiduciary duty under ERISA, including by structuring a deal in which the ESOP severely overpaid for the casino holding company’s stock in a $170 million purchase in 2012.
Hensiek and Gill are represented by Mary Bortscheller and Michelle Yau of Cohen Milstein Sellers & Toll PLLC.
For several weeks now Chemours, a chemical maker that owns a manufacturing plant outside Fayetteville, has been running a 30-second commercial throughout Southeastern North Carolina touting itself as a good neighbor.
The ad, titled “Good Neighbors Care,” exudes the idea of being neighborly and caring for one another. The commercial starts by stating “good neighbors care and at Chemours we care,” because as the narrator states North Carolina is Chemours’ home (despite Chemours being headquartered in Wilmington, Delaware).
Images of nature and employees hard at work paint this picturesque scene as the narrator explains that Chemours cares about its neighbors and the environment, which is why the company has invested $100 million in new technology and set a goal to reduce PFAS emissions by 99%.
But the commercial has “infuriated” residents, environmental groups, local public utilities and state officials because they say Chemours is anything but a good neighbor, and the commercial is completely inaccurate, they say.
The commercial omits the fact that Chemours, and before it DuPont, dumped toxic chemicals into the Cape Fear River for nearly 40 years, contaminating the drinking water of more than 300,000 of their supposed neighbors.
…
The entire commercial is an attempt by Chemours to create a new, misleading narrative around what’s happened to the Cape Fear River, said Ted Leopold, an attorney representing property owners in Fayetteville, Wilmington and throughout Southeastern North Carolina in a class-action lawsuit against Chemours and DuPont.
“The commercial talks about Chemours being a good corporate citizen, but the evidence is just the opposite,” Leopold said. “Both they and DuPont have for years and years been silently contaminating the Cape Fear River with highly toxic chemicals, and instead of stepping up and taking responsibility, they’re trying to cover it up.”
Chemours can claim it’s one of many contributors to the Cape Fear River, and that it cares about the environment, but where was that belief 40 years ago when it and its predecessor DuPont began dumping toxic chemicals into the Cape Fear River, Leopold said.
Chemours itself had to research what PFAS chemicals are present in the Cape Fear River due to the court order, Leopold said. It found more than 250 substances present in the river water, but it couldn’t identify many of them, despite the chemicals coming from its Fayetteville Works plant.
If a bank, landlord or employer illegally discriminates against a person based on an automated decision by a computer algorithm, who is guilty of discrimination — the algorithm, or the individual or organization that denies the job, apartment or service? A US District Court trial in early 2022 may decide whether there is any crack of daylight between the responsibility of the algorithm and the landlord, based on allegations by a Connecticut housing advocate that sued a tenant-screening service over its use of an algorithm to deny housing based on an applicant’s criminal record.
If a bank, landlord or employer illegally discriminates against a person based on an automated decision by a computer algorithm, who is guilty of discrimination — the algorithm, or the individual or organization that denies the job, apartment or service?
A US District Court trial in early 2022 may decide whether there’s any crack of daylight between the responsibility of the algorithm and the landlord, based on allegations by a Connecticut housing advocate that sued a tenant-screening service over allegations its “CrimSAFE” algorithm violated fair housing and financial privacy laws in denying housing to a disabled Latino man.
That bench trial slated to begin March 14 in New Haven, Connecticut, is to pit defendant CoreLogic Rental Property Solutions against the Connecticut Fair Housing Center, which said in a 2018 complaint that CoreLogic’s algorithm violated the Fair Housing Act (see here) by disqualifying “African-American and Latino applicants from securing housing based on discriminatory use of criminal records as rental criteria.”
— Denied housing —
The case involves Carmen Arroyo, who attempted to move her adult son, Mikhail, into the Willimantic, Connecticut, apartment complex where she lived, following a 2015 accident that left Mikhail unable to walk, speak, or care for himself. Mikhail Arroyo was denied housing based on a “disqualifying record” returned by the CrimSAFE algorithm that did not provide any more detail on what the offense was alleged to be, the suit says. CrimSAFE pulls in data from a national database of criminal arrest and incarceration records to screen applicants for rental housing.
“Typically, people talk about whether the algorithm can be liable. This will, I believe, be one of the first cases to show that the vendor providing these algorithmic reports is responsible,” said Christine Webber, a lawyer who represents the Arroyos in the case.
“You can always litigate over whether an individual landlord relied on criminal history improperly, but here it’s getting at the underlying system that allows this to happen, not just to the Arroyos, but to thousands of people across [Connecticut] and many more nationwide,” Webber said.
— RPS View —
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The CrimSAFE algorithm is too simple to truly be labeled artificial intelligence, Webber said, though it was an example of automated decision-making. Webber said the goal of the trial is to win injunctive relief that would block use of the algorithm in the way it was used with Arroyo.
“That is the heart of what the trial is going to be about,” she said. “It’s hard for anybody to deny there is adverse impact, and so it’s really a question of ‘can the defendant justify the adverse impact as a business necessity, and if so, can we show there are less discriminatory alternatives to the current system?’.”
There are alternatives, she said. “This is so much about the injunctive relief and getting the system to change. They don’t want to change the way they do business,” she said.
Claims under both the US Fair Housing Act and Fair Credit Reporting Act — that law protects the privacy of information collected by consumer reporting agencies — will be at issue in the trial, which is due to end March 31. Data cited by Bryan in her 2020 summary judgement ruling found that Blacks comprised nearly 30 percent of the people arrested in Connecticut in 2016, but they were only about 11 percent of the population.
That disparity is the key reason why an algorithm used to screen tenants based on criminal arrest records alone will discriminate against racial minorities, Webber said.
“When you decide to automatically exclude people from housing opportunities based on the simple existence of a criminal record, that is an across-the-board policy that is going to have disparate impacts on African-Americans; it’s going to have a disparate impact on Latinos,” she said.
A shareholder of battery-electric truck manufacturer Nikola Corp. sued 10 of its officers and directors in Delaware’s Court of Chancery for allegedly allowing the company’s founder to carry out a criminal fraud leading up to and following its $3.3 billion merger with VectoIQ Acquisition Corp. In a 140-page derivative complaint filed late Wednesday, shareholder Barbara Rhodes alleged that insiders of the Phoenix-based company stood by while its founder and former CEO and Executive Chairman Trevor Milton intentionally misled investors and overstated the company’s worth, artificially inflating the valuation of the company to as high as $28.77 billion post-merger.
Milton was indicted on charges of securities fraud and wire fraud about a year after the merger.
“Milton’s actions were nothing more than an old fashioned ‘pump and dump’ scheme designed to enrich Milton and Nikola’s insiders,” the complaint alleged. “The Nikola insiders, including its board members, knowingly went along for the ride.”
The pre- and post-merger boards breached their fiduciary duties by allowing Milton and Nikola to engage in illegal conduct, aiding and abetting Milton’s materially false and misleading statements to stockholders, failing to control Milton from making false statements after the merger, and repeatedly ignoring signs of illegal conduct, the complaint says.
The complaint alleges that the company insiders also profited from Milton’s scheme, and seeks damages for breaches of fiduciary duty, aiding and abetting, and unjust enrichment, among other claims.
Nikola’s board members allowed Milton to resign “with virtually no financial consequences” after his conduct came under investigation by the Department of Justice, the U.S. Securities Exchange Commission and other authorities, the complaint says.
In December, Nikola reached a settlement with the U.S. Securities and Exchange Commission, agreeing to pay a $125 million penalty to settle allegations that Milton deceived investors about the company’s ability to build electric- and hydrogen-powered trucks.
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Barbara Rhodes is represented by Julie Goldsmith Reiser, Richard A. Speirs and Benjamin F. Jackson of Cohen Milstein Sellers & Toll PLLC and Peter B. Andrews, Craig J. Springer, Andrew J. Peach and David M. Sborz of Andrews & Springer LLC.
Boeing shareholders still have an uphill fight ahead after winning a Seventh Circuit ruling that ran right through the crossroads of corporate law and a Catch-22 company bylaw restricting federal derivative claims to Delaware’s Chancery Court, which is barred from hearing them.
Experts said the decision last week in Seafarers Pension Plan v. Robert Bradway, if upheld, closes a loophole in securities law seen as limiting stockholder rights, potentially reducing the risk federal regulators or Congress will see the state’s corporation law as tilted too far in favor of big corporations.
Boeing can still appeal the split decision by a three-judge circuit panel that sent the case back to the U.S. District Court for the Northern District of Illinois. It is already pushing for the dismissal of a shareholder suit in Chancery Court seeking a state law declaration that the same forum-selection bylaw is invalid.
Stakes are enormous for both sides.
The suits all focus on the company’s multiyear record of alleged safety failures and regulatory violations while managing the rollout of the new 737 Max jetliner. Those problems were tied to two deadly crashes and were alleged to have cost the company billions, including costs stockholders are seeking to recover from directors and officers through derivative actions pursued on behalf of the corporation.
Minor Myers, a University of Connecticut School of Law professor, described the federal court reversal as an important development in the “ongoing struggle” at the intersection of Delaware corporate law and stockholder rights under federal securities laws.
“There’s a tangle of confusion lurking in much federal securities law — but Delaware bylaws aren’t a vehicle for opting out of the Exchange Act, as Boeing tried to do,” Myers told Law360.
“The lower court had flubbed the initial decision, allowing Boeing to use Delaware corporate law to generate an outcome that’s straightforwardly inconsistent with common understandings of the federal securities laws,” he added.
Myers said the Seventh Circuit potentially “saved the day” while also potentially averting the need for the Chancery Court to weigh in. He added: “The odd thing is that Boeing tried to use its bylaw to achieve something that both the Delaware General Assembly and courts have clearly telegraphed is out of bounds.”
At issue is a Boeing forum-selection bylaw that requires filing all stockholder derivative claims under Section 14(a) of the Securities Exchange Act of 1934 — which prohibits material misrepresentations and omissions in proxy statements — in Delaware’s Chancery Court.
Federal law, however, gives the federal government exclusive jurisdiction for 1934 Exchange Act claims, potentially snuffing out avenues for suits against Boeing in Delaware courts and dead-ending federal cases like the one in Illinois because of Boeing’s state-preference bylaw.
Targeted in recent shareholder cases are Boeing’s actions before and after catastrophic crashes of the new 737 Max jetliners in late 2018 and early 2019 that killed 346 people, as well as alleged negligence and fraud in issuing false proxies and public statements from 2017 to 2019 on the program, the crashes, and subsequent investigations and costs.
The episode and scandals cost the company some $9 billion, with the federal suit in Illinois seeking damages on the company’s behalf for oversight and disclosure failures, fiduciary duty breaches, and unjust enrichment.
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U.S. District Judge Harry D. Leinenweber, while expressing sympathy for the stockholders’ effort to litigate federal law in a federal court, ruled in 2020 that “the weight of authority backs Boeing’s position” that the company’s bylaws required dismissal under Delaware law.
Circuit Judges Diane P. Wood and David F. Hamilton reversed the lower court, pointing to exclusive federal jurisdiction over Exchange Act matters and the risk that Boeing’s bylaw would lead to dead-end suits under the 1934 Act. The remand remains subject to a full Seventh Circuit review and a potential U.S. Supreme Court appeal, however.
Waiting in the wings, meanwhile, is a Delaware Chancery Court case, stayed pending the Seventh Circuit decision, filed by the same plaintiff in the federal action, seeking a state court rejection of the same Boeing forum-selection bylaw at issue in the federal court dispute.
Boeing in both cases defended its bylaw as permissible and accused the stockholders of using the Chancery Court suit to relitigate the dismissal in Illinois. The stockholders in turn accused Boeing of using its bylaw to improperly protect directors and officers from personal liability for derivative claims.
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Jill Fisch, a law professor at the University of Pennsylvania’s Carey Law School, said the federal courts could have posed the shareholder standing issue to Delaware’s Supreme Court as a formal question, avoiding speculation about Delaware’s position.
But Fisch also said she was sympathetic to the idea that forum-selection bylaws should not trump federal statutes providing for exclusive federal jurisdiction.
“Most forum-selection bylaws are written in a way that expressly preserves access to the federal courts, although typically it’s the district court in Delaware,” Fisch said. “That’s the norm.”
Fisch also said the current dispute continues one that emerged in the Delaware Supreme Court’s Salzburg v. Sciabacucchi ruling in 2020. That decision reversed the Chancery Court’s rejection of federal-court-only charter mandates for certain Securities Act cases.
Salzburg covered challenges to claims that three Delaware-chartered companies — Blue Apron Inc., Roku Inc. and Stitch Fix Inc. — wrongly adopted charter provisions barring stockholders from filing state court complaints for violations of Section 11 of the federal Securities Act of 1933.
Justice Karen L. Valihura, writing for the state Supreme Court, rejected Vice Chancellor J. Travis Laster’s finding that a corporate charter cannot mandate an exclusive federal forum for some Securities Act suits if the claim doesn’t involve an internal matter of the company. Instead, the justices unanimously concluded some “intra-corporate” matters can be kept away from state courts if companies choose.
The issue was vexing enough at the time that Delaware’s justices took an unusual “let me draw you a picture” posture in its Salzburg ruling and included a Venn diagram in the opinion illustrating the internal, external and “intra” overlaps.
Seafarers “kind of goes back to this question Justice Valihura was struggling with in Salzburg, that these cases aren’t clearly external affairs and aren’t clearly internal,” Fisch said.
The complete article can be viewed here.