Bloomberg BNA’s Corporate Law & Accountability Report is available on the Corporate Law Resource Center. This news service keeps corporate practitioners informed of legal developments of...
Sept. 11 — Emergent Capital Inc. Sept. 11 announced that a lawsuit challenging its unique consent-to-sue bylaw has been dismissed.
In an order, Judge Kenneth L. Ryskamp of the U.S. District Court for the Southern District of Florida granted investor Harry Rothenberg's unopposed motion to dismiss derivative and class action claims against the company.
The unique bylaw adopted by Emergent Capital, formerly known as Imperial Holdings Inc., requires shareholders to obtain the written consent of holders of at least 3 percent of the company's stock before bringing a class action or derivative claim.
The plaintiff had sought a declaration that the bylaw was invalid, as well as injunctive relief barring its enforcement.
Litigation over the bylaw began in January, when Rothenberg filed a complaint in Florida state court arguing that the provision was adopted to insulate directors of the speciality financing company from “shareholder redress”.
In April, Rothenberg voluntarily dismissed his state court lawsuit, opting to pursue his claims in federal court. In addition to challenging the bylaw, the federal class action complaint added allegations that Imperial Holdings directors violated Securities and Exchange Commission rules.
The parties had exchanged filings disputing, among other things, whether the plaintiff's challenge to the bylaw's validity was ripe for court review.
However, Rothenberg last month decided to drop his lawsuit, stating in an Aug. 27 filing that upon “further investigation and Plaintiff’s opportunity to meet with representatives of Imperial Holdings, Inc.'s board of directors, Plaintiff now believes that Defendants acted in good faith and did not engage in any improper behavior, in adopting the bylaw at issue or otherwise”.
Bylaws that restrict the litigation rights of shareholders have been the subject of much debate, with attorneys, academics, institutional investors and business groups weighing in.
Phillip Goldstein, chair of Emergent Capital's board, told Bloomberg BNA Aug. 28 that he believes such bylaws are a “fair and appropriate” way to address frivolous shareholder litigation.
“I think anybody who would say that there is no problem with frivolous lawsuits is not being realistic,” he said at the time. “It’s a drag on the economy” and “this is a way to deal with it.”
To contact the reporter on this story: Michael Greene in Washington at email@example.com
To contact the editor responsible for this story: Yin Wilczek at firstname.lastname@example.org
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)