Ex-Member Lacks Standing to Sue for LLC

Sirott v. Superior Court, No. A164037 (D1d1 May 5, 2020)

Under Corporations Code § 800, to have standing to bring a derivative claim, the plaintiff needs to hold an interest in a corporation throughout the litigation. Here, the Court holds that same rule applies to a member of an LLC bringing a case decoratively under Corporations Code § 17709.02.

Writ granted.

Waive Appeal? No Appeal.

PG&E “San Bruno Fire” Cases, No. A152330 (D1d3 Dec. 18, 2019)

Various groups of stockholder plaintiffs sued members of PG&E management derivatively on behalf of the company for alleged misconduct in connection with  the San Bruno pipeline explosion. Plaintiffs collectively agreed to settle for $90 million and $25 million in attorneys’ fees. The trial court trial later adopted the recommendation of a three-member panel of special masters as to the allocation of the fee award between the various counsel involved. One plaintiff, however, filed a notice of appeal, challenging the award to his counsel.

But the settlement agreement, to which this plaintiff was a signatory, provided that the trial court’s determination on fee allocation would be “final and nonappealable.” California law generally recognizes that parties can waive the right to appeal, provided the waiver is express, sufficiently clear, and not coerced. Which the settlement agreement in this case was. 

Appeal dismissed.

Have at It, Court of Chancery . . .

Bushansky v. Soon-Shiong, No. D072213 (D4d1 May 25, 2018)

Over the past decade, it has become increasingly prevalent for corporations to enact what are called forum-selection bylaws. These require stockholders who sue the company or its directors in stockholder litigation to bring their claims only in the state of incorporation, usually Delaware. Because bylaws are, more or less, a contractual arrangement between the company and its stockholders, the theory is that the bylaws are an enforcible forum selection contract. The Delaware Supreme Court agrees, and has held that they are enforceable. I’m not aware of a reported California appellate decision that’s given a thumbs-up, but the parties in this case seem to agree that the bylaw here is valid and enforceable. They just disagree that it applies.

Board Rollover Precludes Demand Futility for New Claims

Apple Inc. v. Superior Court, No. H044133 (D6 Dec. 11, 2017)

This case addresses an interesting question about demand futility in stockholder derivative actions.

Trouble with Clients, Present and Past

Ontiveros v. Constable, No. D066412 (D4d1 Mar. 14, 2016)

and

Costello v. Buckley, No. D068536 (D4d1 Mar. 16, 2016)

These are a pair of attorney disqualification appeals decided by Division One of the Fourth District in a three-day period last month.

Conflicts and the Dissolving Partnership

Coldren v. Hart, King & Coldren, Inc., No. G050202 (D4d3 Aug. 5, 2015)

Departing Partner in a 50/50 two-partner law firm sued his Firm and his Remaining Partner over the terms of his retirement. Firm and Remaining Partner sued back. Remaining Partner and Firm were represented in the litigation by the same Attorney, who had never previously represented Firm or Departing Attorney. Departing Partner brought a DQ motion, claiming that Attorney couldn’t represent both Remaining Partner and the Firm—in which Departing Partner continued to claim his 50 percent stake. After waffling on the tentative, the trial court granted the motion. 

But the court of appeal reverses. The decision rests on two grounds.