Update on Bankruptcy Court Subject Matter Jurisdiction
January 26, 2006
Last month, we reported on two recent Delaware cases that came to opposite conclusions as to whether a bankruptcy court has subject matter jurisdiction over state law claims asserted by a post-confirmation litigation trust: <i>IT Litigation Trust v. D'Aniello, et al.</i> (<i>In re: IT Group, Inc., et al.</i> held that the court had subject matter jurisdiction over such claims, while <i>Shandler v. DLJ Merchant Banking, Inc., et al.</i> (<i>In re Insilco Technologies, Inc.</i>)(<i>Insilco</i>) held that it did not. After the article went to press, the Delaware courts weighed in on the subject for the third time in only 3 months. This article provides the update.
Advising a Private Equity Fund
January 26, 2006
As anyone who has advised a private equity fund in connection with the potential insolvency of one of its portfolio companies knows, reconciling the duty of the fund's designated directors sitting on the portfolio company's board with the fund's duties to its investors can feel like a high wire act at times. As fiduciaries for its investors, the fund's managers must act in a manner consistent with maximizing the return on invested funds. Yet, these same managers are often directors of the fund's portfolio companies. While a portfolio company is thriving, the duties to the fund's investors and the fund manager's duties as a director of the portfolio company are typically in harmony. However, when the portfolio company's business turns sour, and it approaches insolvency or is insolvent, the shifting of the directors' fiduciary duties to the company's creditors can cause irreconcilable conflicts of interest along with consternation on how to fund ongoing operations. This article discusses possible structural mechanisms to address and potentially avoid these irreconcilable conflicts while still maintaining the ability to manage the fund's investment and fund the portfolio company's ongoing business.
After the Gulf Coast Hurricanes
January 26, 2006
In the 2005 Special Issue of <i>Employment Law Strategist</i>, we summarized key issues affecting employers following the Hurricane Katrina disaster, including the federal government's legislative and regulatory responses to the catastrophe. The following is an updated summary of relevant legislative and regulatory actions.
Employers and Employees
January 26, 2006
When I entered law practice in 1971, it was common in corporate criminal investigations for a single law firm to represent the target corporation and all its relevant employees. They hung together lest they hang separately. Over time, practice changed, and such joint-representation arrangements mostly disappeared. The old paradigm was succeeded by a new one, which recognized the separate interests of the corporation and each of its relevant employees, but also provided a large measure of mutual support and good will on the defense side. This paradigm, too, has been attacked by prosecutors and now has largely disappeared in major federal and some state investigations. It has been succeeded by a new, far harsher paradigm.
Freedom to Contract?
January 26, 2006
How much freedom does a party have to tell its service provider not to use a given employee to provide the services? Although the freedom to contract (or not contract) might suggest that this liberty is unfettered, a recent decision by the Second District Appellate Court of Illinois suggests that the answer is not so clear.
Of Mice and Men: The Business Judgment Rule After The <i>Disney </i>Decision
January 26, 2006
Last month, we discussed the Delaware Court of Chancery decision in <i>In re The Walt Disney Co. Derivative Litigation</i>, 2005 WL 2056651 (Del. Ch. Aug. 9, 2005), a case that had drawn intense media attention (The case currently is on appeal to the Delaware Supreme Court.) We noted that the severance package given Disney president Michael Ovitz amounted to approximately $140 million in cash and vested stock options, which was paid to Ovitz upon the termination of his employment under a "no-fault" termination provision in his employment agreement. The court found that no Disney board member was liable for violating his or her fiduciary duties with respect to the hiring, and then the firing after a little more than 1 year, of Michael Ovitz. Now the question is: What has been learned? We continue the article with a discussion of fiduciary conduct.
How Does Your Company Compare?
January 26, 2006
Since the Sarbanes-Oxley Act (SOX) was signed into law in 2002 and the revised NYSE and Nasdaq listing standards were implemented, certain trends have developed among the corporate governance practices of the 100 largest publicly listed U.S. companies as ranked by revenue in FORTUNE magazine's FORTUNE 500' list (the "Top 100"). For the past 3 years, Shearman & Sterling has analyzed the corporate governance practices of the Top 100. What follows is a summary of our most significant findings with respect to director independence, board leadership, director time commitments and compensation, and shareholder proposals.
Compliance Hotline
January 26, 2006
Recent rulings of importance to you and your practice.
