As previously discussed in our
Wong v. Restoration Robotics, Inc., Case No. 18-CIV-02609 (Cal. Super. Ct. Sept. 1, 2020), the Superior Court of California for the County of San Mateo dismissed claims against an issuer and its directors and officers, asserted under the Securities Act of 1933 (Securities Act), in favor of a federal forum-selection provision (FFP) in the issuer-defendant’s certificate of incorporation. This was the first state court case to opine on the enforceability of FFPs in the wake of the Delaware Supreme Court’s decision in
Salzberg v. Sciabacucci (
Cyan, Inc. v. Beaver Cty. Emps. Ret. Fund, 138 S. Ct. 1061, 1069 (2018).
Since the
Seventh Circuit Vacates and Remands Class Certification in Securities Fraud Action
Carpenters Pension Tr. Fund for N. Cal. v. Allstate Co., No. 19-1830 (7th Cir. July 16, 2020)
In a securities fraud case against Allstate Corporation, the Seventh Circuit vacated certification of a plaintiff class for legal error and remanded the case for further consideration.
In early 2013, Allstate announced it would be “softening” underwriting standards for its auto insurance business in an effort to attract new customers and increase profitability, but it acknowledged the softer standards held the risk of increasing auto claims frequency. The company’s CEO said the company would monitor claims frequency and adjust business practices as necessary. Two years later, Allstate announced that the growth strategy had indeed increased claims frequency and that it would be retightening underwriting standards. Its stock immediately dropped by more than 10 percent.
In March, the Delaware Supreme Court held in
Salzberg v. Sciabacucchi, 227 A.3d 102 (Del. 2020) that Federal Forum Selection Provisions, corporate bylaw or charter provisions that require claims under the Securities Act of 1933 (the Securities Act ) to be brought in federal court, are facially valid under Delaware s General Corporation Law. Wilson Sonsini represented Stitch Fix, Inc. and Roku, Inc. and their respective directors in the
Sciabacucchi case, and previously issued an alert describing the
Sciabacucchi opinion. The Delaware Supreme Court, however, expressly left open the question of whether Federal Forum Provisions were enforceable, leaving that decision to the various state courts in which Securities Act claims were filed. Three recent decisions in California have considered the enforceability of Federal Forum Provisions adopted by Restoration Robotics, Inc., Uber, Inc., and Dropbox, Inc., as a matter of first impression, and each found the provisions enfor