Mr. Talarides, a managing associate in the San Francisco office, is a member of the Securities Litigation and Regulatory Enforcement Group. His practice focuses on:
- disputes involving mergers and acquisitions, proxy contests, directors and officers liability, indemnification and advancement, and stockholder access to books and records;
- counseling directors, officers, special committees and stockholders on issues of corporation and alternative entity law; and
- disputes involving complex agreements such as merger agreements, asset purchase agreements, limited liability company and partnership agreements.
In addition, Mr. Talarides has handled a broad array of securities, financial, accounting and other business disputes in federal and state courts throughout the country. He has also assisted boards of directors in connection with stockholder derivative actions and has assisted boards, officers and others in SEC investigations.
The following is a sample of Mr. Talarides' recent engagements:
- Cheseldine v. McClendon, No. CJ-2013-800 (Oklahoma County District Ct. 2013). Obtained dismissal at the pleading stage of a putative stockholder derivative action asserting claims for breach of fiduciary duties against Chesapeake Energy Corp.'s board of directors.
- Weinstein v. Chesapeake Energy Corp., 2013 U.S. Dist. LEXIS 51380, 2013 WL 1457718 (W.D. Okla. 2013). Obtained dismissal at the pleading stage of a putative securities class action asserting claims under the Securities Exchange Act of 1934 against the company and its top officers.
- United Food and Commercial Workers Union v. Chesapeake Energy Corp., 2013 U.S. Dist. LEXIS 45434, 2013 WL 1336123 (W.D. Okla. 2013). Obtained summary judgment and dismissal of a securities class action asserting claims under the Securities Act of 1933 against the company, its top officers, and board of directors.
- In re Deckers Outdoor Corp. Derivative Litigation, No. 1402853 (Santa Barbara County Superior Ct. 2013). Obtained dismissal at the pleading stage of a putative stockholder derivative action asserting claims for breach of fiduciary duties against the company's top officers and board of directors.
- Egleston v. McClendon, No. CJ-2012-7108 (Oklahoma County District Ct. 2013). Obtained dismissal at the pleading stage of a putative stockholder derivative action asserting claims for breach of fiduciary duties against Chesapeake Energy Corp.'s board of directors.
- Bracht v. Deckers Outdoor Corp., No. 12-4768 (C.D. Cal. 2012). Obtained dismissal at the pleading stage of a putative securities class action asserting claims under the Securities Exchange Act of 1934 against the company and its top officers.
- Deborah G. Mallow IRA SEP Investment Plan v. McClendon, 2012 U.S. Dist. LEXIS 78479, 2012 WL 2036748 (W.D. Okla. 2012). Defeated stockholders' attempt to enjoin Chesapeake Energy Corp.'s annual stockholder meeting based on allegations that the company failed to disclose material information in its proxy statement in violation of state corporate law and federal securities laws.
- Norris v. McClendon, No. CJ-2012-2751 (Oklahoma County District Ct. 2012). Obtained dismissal at the pleading stage of a putative stockholder derivative action asserting claims for breach of fiduciary duties against Chesapeake Energy Corp.'s board of directors.
- Town of Davie Police Officers Retirement System v. RightNow Technologies, Inc., No. DV-11-1032C (Gallatin County District Ct. 2012). Obtained dismissal at the pleading stage of a putative stockholder class action challenging Oracle Corp.'s acquisition of RightNow Technologies, Inc. based on allegations that RightNow's board of directors breached its fiduciary duties in approving the merger and failed to disclose material information in its proxy statement concerning the merger.
- In re NVIDIA Corp. Securities Litigation, 2011 U.S. Dist. LEXIS 117807, 2011 WL 4831192 (N.D. Cal. 2011). Obtained dismissal at the pleading stage of a putative securities class action asserting claims under the Securities Exchange Act of 1934 against the company and its top officers.
- Asbestos Workers Philadelphia Pension Fund v. McCormick, No. 0910-14399 (Multnomah County Circuit Ct. 2010). Defeated stockholders' attempt to enjoin Viasystem Group, Inc.'s acquisition of Merix Corporation based on allegations that Merix's board of directors breached its fiduciary duties in approving the merger and failed to disclose material information in its proxy statement concerning the merger.
Delaware law gives shareholders the right to request corporate books and records in order to investigate issues that are of interest to them. For several decades now, Delaware courts have encouraged shareholders to take advantage of this right as a matter of first course, to use the “tools at hand” and seek company records before filing litigation or making a litigation demand. In recent years, more shareholders (and their attorneys) have been following that advice, and the so-called “Section 220 books and records demand” is more common than ever.
Delaware courts have acknowledged, however, that the shareholder’s right to obtain corporate records must be balanced against the board’s right to manage the company’s business without undue interference. Accordingly, where a shareholder requests mundane company materials like stock ledgers or shareholder lists, the company generally must produce. But where the shareholder seeks more sensitive company records, the law puts the burden on the shareholder to show why the production is necessary. Read More
In any change-of-control business transaction, the decision by the target company’s board of directors to approve the deal is subject to heightened scrutiny by the courts. These days, virtually every M&A deal is sure to attract at least one strike suit challenging the board’s decision, so it is essential that the board’s decision-making process be robust and untainted by any conflicts of interest.
One way in which a board can insulate its decision-making process is to employ a special committee of independent, outside directors to evaluate and negotiate any potential sale. Although boards are not required by law to use special committees when brokering change of control transactions, Delaware courts have repeatedly held that the use of a special committee can be powerful evidence of a fair and adequate process. That is especially true where (i) the contemplated transaction is with a controlling stockholder or (ii) a majority of the directors are conflicted, two situations where courts will employ the even-more exacting “entire fairness” standard of review. As the Delaware Supreme Court recently noted, “the effective use of a properly functioning special committee of independent directors” is an “integral” part “of the best practices that are used to establish a fair dealing process.” Read More
What makes a director “independent”? That question is important, not only to investors who want to ensure that boards of directors exercise objective judgment on corporate affairs, but also to companies, who need assurance that their boards will not run afoul of exchange listing requirements, and to directors themselves, for protection against shareholder lawsuits challenging board decisions.
Listing requirements for both the New York Stock Exchange and NASDAQ provide basic checklists for directors independence, and state generally that directors cannot be employed by the company, cannot have family members who are employed by the company and cannot have a controlling interest in the company’s substantial business partners. But the exchanges’ listing requirements also contemplate that the question of independence is far broader than any checklist. The NYSE’s listing requirements further note that directors should have “no material relationship” with the Company; NASDAQ’S requirements state directors should have no relationship which “would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.” Read More
Four derivative lawsuits against Facebook’s directors relating to alleged disclosure issues surrounding the company’s initial public offering have a new status: Dismissed. Last month, Judge Robert Sweet of the Southern District of New York dismissed the suits on standing and ripeness grounds, finding that IPO purchasers have no standing to pursue claims related to alleged misconduct that took place before the IPO. The dismissed derivative suits were “tag-along” actions that largely parroted allegations made by investors in a parallel securities class action also pending before Judge Sweet, and had sought to hold Facebook’s directors liable for damages the company might incur as a result of the securities class action.
In dismissing the suits, Judge Sweet held that plaintiffs who buy stock in an IPO lack standing to pursue derivative claims based on alleged misstatements in an IPO registration statement. As Judge Sweet explained, in order to have standing to sue derivatively on behalf of a company, a plaintiff must have owned stock in the company at the time of the alleged misconduct. The registration statement that the plaintiffs allege to have been misleading, however, was finalized and filed with the SEC two days before the IPO. Judge Sweet rejected plaintiffs’ attempts to create standing by arguing that the wrong continued through the date of the IPO because the directors did not correct the allegedly misleading statements by that date. Read More
When a shareholder makes a demand on a company to pursue litigation, the company’s board can look to generally well-developed law to determine how to evaluate the demand. Though there is no one particular procedure a board must employ, there are numerous cases that explain how the board must inform itself about the demand in order to reach a good faith, “rational business decision” about whether to accept or refuse.
The rules for considering a shareholder demand are pragmatic, and afford corporate boards a dependable road map for responding to shareholder requests.
One open question (at least in Delaware, where it matters most) has been whether a board’s informed, good faith decision to defer action on a demand constitutes a “rational business decision” that is protected by the business judgment rule. Delaware courts have long held that while an informed board can refuse a demand, the one thing a board cannot do is nothing. At the same time, however, corporations often face the circumstance where there are follow-on shareholder litigation demands entirely duplicative of existing litigations or investigations. In those circumstances, a board could have any number of business justifications for wanting to defer action on the demand until the ongoing proceedings are resolved, but that would seem to violate the rule against doing nothing.
Genius rock lyricist Geddy Lee of RUSH once wrote “If you choose not to decide, you have still made a choice.”
Accordingly, the Ninth Circuit and certain federal district courts have recognized that a board’s informed, good faith decision to defer action on a demand during pending litigation or investigations is itself a decision that can be shielded by the business judgment rule. For example, in 2009, the Ninth Circuit found there was a “compelling” business justification for deferring action on a demand where the company’s pursuit of the demand’s allegations could be cast as an admission of wrongdoing in ongoing litigation. Read More
Last Friday, Judge Kleinberg of the California Superior Court, County of Santa Clara, dismissed two shareholder class actions against the former directors of Actel Corporation and Applied Signal Technology, Inc. for breach of fiduciary duties arising out of the sales of Actel and Applied Signal to third-party buyers. In doing so, Judge Kleinberg stated that, under California law, damages claims brought by shareholders of California corporations against directors for breach of fiduciary duties in connection with the approval of a merger are derivative, not direct. Thus, because a plaintiff in a shareholder’s derivative suit must maintain continuous stock ownership throughout the pendency of the litigation, and the plaintiffs ceased to be stockholders of Actel and Applied Signal by reason of a merger, Judge Kleinberg held that they lacked standing to continue the litigation.
In holding that post-merger claims against directors of California acquired corporations are derivative, Judge Kleinberg relied on the pre-Tooley rationale (which is no longer controlling in Delaware and has been questioned in California) that a harm suffered equally by all shareholders in proportion to their pro rata ownership of the company is a derivative harm. Judge Kleinberg rejected the plaintiffs’ argument that Delaware’s Tooley standard for determining whether a claim was direct or derivative was adopted by the California Court of Appeal in Bader v. Andersen, 179 Cal. App. 4th 775 (2009). According to Judge Kleinberg, in stating that California and Delaware law were “not inconsistent,” the Bader court was merely observing that the results of applying California versus Delaware law in that case were not inconsistent; it was not saying that California and Delaware law are the same on the direct versus derivative issue.
Judge Kleinberg’s holding is a victory for the defense bar, as it means that merger litigation involving California incorporated targets will be susceptible to dismissal by demurrer or summary judgment following the preliminary injunction stage.
The U.S. Court of Appeals for the Second Circuit has revived a federal securities class action against Grant Thornton LLP regarding its unqualified 1999 audit opinion indicating that Winstar Communications Inc.’s 1999 financial statements was in conformity with generally accepted accounting principles. The Second Circuit’s opinion is notable because it finds that, despite an apparently thorough audit (in terms of hours spent and documents reviewed) a fact finder could still find enough evidence of a conscious disregard of signs of fraud to support an inference of recklessness. In other words, even where an auditor does a significant amount of work on an audit, such work will not necessarily immunize the auditor from securities claims. Read More