By Professor Christine Sgarlata Chung

With the press of the last semester, I find myself in catch up mode.  (I suspect I am not alone!)  This post — which discusses a recent Delaware Chancery Court case involving Rule 23.1 and shareholder derivative actions — is the first a series of posts designed to bring us up to date on recent developments in corporate governance litigation and financial market regulation.  For faculty using Business Organizations in Focus, this post supplements the discussion of derivative actions and Rule 23.1 in Chapter 9 — particularly pp. 481-484.

Summary:  In Andersen v. Mattel, Inc., C.A. No. 11816-VCMR (Del. Ch. Jan. 19, 2017), a shareholder alleged that Mattel’s board improperly investigated and wrongfully refused to bring suit to recover up to $11.5 million paid to the former chairman and CEO of the company as part of a severance package and consulting agreement.  On January 19th, the Delaware Chancery Court granted the director defendants’ motion to dismiss under Delaware Chancery Court Rule 23.1.

The Demand Requirement/ Rule 23.1:  As the caption reflects, this case was filed as a derivative action — i.e., a lawsuit brought by one or more shareholders to enforce a right or cause of action owned by the corporation, but one that the corporation will not enforce.  Because derivative actions, by their very nature, impinge on the board’s authority to decide whether and when to institute litigation, derivative actions are subject to procedural and substantive requirements not applicable to direct actions, including the so-called demand requirement.  For actions in the Delaware Chancery Court, the demand requirement is set forth in Chancery Court Rule 23.1.

Read the full article at the Forum on Financial Market Regulation blog.

By Professor Stephen Gottlieb

This commentary originally aired on WAMC’s Northeast Report and was posted to the Constitutionalism & Democracy blog.

Let’s discuss voting issues today.  Well more than a century of experience has gone into the way we vote. That century should be a source of confidence and concern because none of us is old enough to remember why all the rules are in the statutes.

If you’ve seen the 19th century election day paintings, people came to the polls with pieces of paper and dropped them in the ballot box. That made voting very public. Some states required an open, public ballot. That can be a protection but it also made voters vulnerable. Employers and landowners could and did retaliate economically. As political machines took root, they bribed, threatened and attacked voters to get what they wanted. Parties produced colored ballots that voters carried to the polls. They held their ballots up on their way so everyone could see and then dropped their colored ballots into the box. That satisfied the local machines. And it meant that elections were widely corrupted. Can you imagine a local gang, party operative or factory boss telling you whom you had to vote for and backing that up with beatings and bribes? Unfortunately that’s well-documented, both in big cities and small towns.

The secret ballot was developed around the turn of the 20th century to help solve that problem. It put the names of all the candidates on a single piece of paper so it wasn’t obvious who the voters supported. The idea was imported and known as the Australian ballot. Coupled with it was the development of election machinery, hardware like the lever machines we used in New York for quite a long time. But the election statutes reflect lengthy experience with attempts to defeat the secrecy and the security of the machines. So rules required inspecting, securing and sealing the machines, and identifying the voters at the polls based on permanent books of signatures. We had moved quite far from the chaotic march to the polls with random pieces of paper.

Some lessons from that history: It is easier to control the polling place itself than what happens at home or at work, where people might confront orders backed with threats or bribes on how to vote. But that doesn’t work without a way to verify what you did, and enforcing the secret ballot makes it hard to tell how you voted. Thank heavens most of us now have secure polling places. The secrecy and security of the ballot are essential.

The problem of imposters at the polls has largely been solved. But absentee ballots remain a security concern because of the opportunity for others to see, bribe, trick or intimidate the voter. Obviously there are some people who need absentee ballots, but early voting is a safer procedure for those who can get to the polls.

Now in the age of computers we seem to be trying to reinvent the wheel because we have forgotten what the problems were. But programmers, computer engineers and indeed their professional association, the IEEE, has made clear that touch-screen and internet voting cannot be secured given what we know now. Therefore, given current technology, New York’s choice of scanners with paper ballots is the safest available choice IF we do sample post-election checks of the machines against the paper ballots. We should not shift to a new system given the existing state of knowledge and tools. But sample checks should be universally required to keep the system honest, and Jill Stein is right to demand recounts to check the integrity of the system.

Selfies, on the other hand, are a problem. They create the ability to verify who one voted for. That, of course, is why people take them. But it makes it possible for nefarious groups to bribe or intimidate voters. We developed the secret ballot to protect voters and keep elections clean and honest. We need to stick to it.