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Choice Of Law And Holding Companies
Monday, March 20, 2023

Tulane Law School Professor Ann M. Lipton at Tulane Law School begins her forthcoming, Inside Out (or, One State to Rule them All): New Challenges to the Internal Affairs Doctrineby quoting Delaware Vice Chancellor J. Travis Laster:

Delaware should not be determining employment law for the country and for the world.

Transcript, Strategic Funding Source Holdings LLC v. Kirincic, C.A. No. 2021-0107-JTL (Del. Ch. Oct. 12, 2021), at 43.

It occurs to me that some holding company structures may present a unique choice of law issue.  In some cases, the officers of the holding company may be employees and officers of the operating subsidiary.  That subsidiary may be incorporated in a state other than the holding company.  For example, the recently shuttered Silicon Valley Bank is a California corporation and a subsidiary of SVB Financial Group.  The bank was incorporated in California and the parent holding company was incorporated in Delaware.  It appears that the same individuals, Messrs. Becker and Beck, served as Chief Executive Officer and Chief Financial Officer, respectively, of both corporations.  Based on the preliminary proxy filed by SVB Financial Group, it appears that neither had a written employment agreement.  I expect that many will assume that their conduct and responsibility, if any, should be judged by Delaware law by reason of the internal affairs doctrine.  However, if the alleged misconduct was undertaken in their capacities as officers of the bank, then the question arises why California law does not govern their conduct. 

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