Commercial Law

This edition of the Quarterly State Compliance Review looks at some legislation of interest to corporate lawyers that went into effect during the last three months. It also looks at some recent decisions of interest, including two decisions from the Delaware Supreme Court involving challenged stock options.

In two recent decisions, the Delaware Court of Chancery found advance notice bylaws to be ineffective in preventing stockholders from nominating alternative director candidates without providing the requisite advance notice, indicating that any ambiguities in these bylaws will be construed against the corporation and in favor of activist stockholders.

In February 2007 the Illinois Supreme Court in a unanimous decision held as a matter of first impression that a parent corporation could be directly liable for its negligence to the estates of two employees of its subsidiary corporation. Forsythe v. Clark USA. The Illinois Court relied extensively on the unanimous 1998 opinion of the U.S. Supreme Court in U S v. Bestfoods. Both courts limited the reach of their opinions by making explicit the common law principle that corporate shareholders are not generally liable for the acts and omissions of their subsidiaries in the absence of active involvement of the parent in those acts or omissions.

Analysis of recent rulings.

Commentary on the latest cases.

An actress who played a leading role in the film 'Hairspray' may owe her former managers commission fees for landing her the role, a Long Island, NY judge has ruled.

The federal 'Orphan Works' legislation (S2913 and HR5889) creates an entirely new law favoring the 'opt in' fundamentalists who prefer as many copyright formalities as possible, thereby increasing the likelihood that works will fall ' intentionally or unintentionally ' into the public domain. Some have characterized the import of the Orphan Works legislation as creating a new rateless compulsory license, or at a minimum a 'safe harbor' for libraries (such as the Library of Congress), museums, public broadcasters and universities, as well as commercial entities.

In its June 3, 2008, decision in Pultz v. Economakis, the New York State Court of Appeals unanimously ruled that there is no limit on the number of rent-stabilized units an owner can attempt to recover for owner occupancy. The ruling was a major victory for rent stabilized landlords, and a sharp rebuke to tenant advocates who claimed that multiple recovery for owner occupancy violated the letter and spirit of the Rent Stabilization Law. Indeed, the case continues a recent trend of favorable Court of Appeals decisions for landlords.