Judges must perforce pick and choose from the record what facts to include in their written opinions. As a result, opinions don't necessarily tell the whole story and may omit important details. Recently, for example, I read a blog post by Kevin M. LaCroix entitled "Blog Post Statements Held Actionable Under the Federal Securities Laws". When I read the court's order, however, I saw no mention of blog posts. I contacted Kevin and he explained that he had learned from counsel in the case that the statements at issue had appeared in a post on a blog hosted on the company's website.
It seems to me that a key fact didn't make it into an opinion ordered published yesterday by the California Court of Appeal, Speirs v. Bluefire Ethanol Fuels, Inc. (Cal. Ct. Appeal Case No. G048698, Jan. 12, 2016). The plaintiffs in that case hold warrants issued by BlueFire Renewables, Inc. (fka BlueFire Ethanol Fuels, Inc.). The dispute centered around whether BlueFire should have applied the warrants' anti-dilution provision to a subsequent equity line of credit transaction. The plaintiffs sued BlueFire for breach of contract and declaratory relief and two officers for breach of fiduciary duty. According to the plaintiffs, the individual defendants breached their fiduciary duty by wrongfully refusing to apply the anti-dilution provision of the warrants to the equity credit line transaction.
In an opinion penned by Justice Raymond J. Ikola, the Court of Appeal unequivocally concluded that the officers owed no fiduciary duty to the warrant holders. In support, the Court cited cases from California, Delaware and New York. What I find interesting is that the Court never identifies BlueFire's state of incorporation. Nor does the Court address which state law should govern the breach of fiduciary duty claim. The Court does note "The warrants chose New York law as applicable (though the parties freely cite California cases and make no contention that the resolution of the issues on appeal turns on the choice of law provision) . . .". After doing a little sleuthing, it appears that BlueFire is a Nevada corporation (see this Form 8-K disclosing the Court of Appeal's holding). So why is there no mention of Nevada law? Perhaps the Court concluded that California law applies. Perhaps the parties never raised the question with the Court. Perhaps the Court didn't mention Nevada because it believed the same result obtains under Nevada law. We can only guess.
Corporations Committee Submits Rule 147 Comment Letter
The comment period for the SEC's proposed amendment (actually replacement) of Rule 147 closed yesterday. The Corporations Committee of the Business Law Section of the California State Bar, for which I am an advisor, submitted this comment. I previously submitted my personal comments.
