New York – March 28, 2024 – Cooley has filed an amicus brief in the New York Court of Appeals on behalf of 47 corporate law professors in support of the continued application of the internal affairs doctrine. Lawyers Kathleen Hartnett, Patrick Hayden, Samantha Kirby, Alex Kasner, Amie Simmons and Madeleine McNally led the Cooley effort.
The amicus brief was filed in Eccles v. Shamrock Capital Advisors, a case in which the parties dispute whether the directors of FanDuel, a company incorporated in Scotland, owed fiduciary duties to FanDuel’s shareholders in approving a merger. Informing that analysis is whether New York or Scottish law applies.
New York has long followed the “internal affairs doctrine” – a bedrock choice-of-law principle that the law of the state of an entity’s incorporation governs disputes concerning relationships between the corporation and its shareholders, directors, officers or agents. Appellants in Eccles argue that the court should not apply the internal affairs doctrine, but instead should adopt an interest-balancing approach to choice of law regarding internal affairs issues.
On behalf of nearly four dozen corporate law professors – including lead amicus, professor Charles Whitehead of Cornell Law School – the amicus brief urges New York’s highest court to continue to apply the long-settled internal affairs doctrine. The amicus brief explains the important role of the internal affairs doctrine in protecting corporate stability, including promoting uniform and predictable expectations for corporate conduct and consistent outcomes for intracorporate disputes. The brief shows how discarding the internal affairs doctrine in favor of a multifactor balancing test would defeat these values and destabilize the settled expectations of directors, managers and shareholders alike.
The brief further argues that failing to apply the internal affairs doctrine would have negative practical consequences in New York, calling into question the settled expectations of investors and company managers, disadvantaging corporations with strong ties to New York, and disincentivizing experienced executives from serving on the boards of companies with close connections to New York. Adopting a balancing test also would needlessly flood New York courts with burdensome conflict-of-laws cases. This disruption to free commerce and settled expectations would not only create practical problems for corporations, but also raise serious constitutional concerns.
The case is Nigel John Eccles et al. v. Shamrock Capital Advisors, LLC, et al. (APL-2023-0087) filed in the New York Court of Appeals.
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