Coinbase’s Texas move gets a shareholder suit dismissed over Delaware-era claims

Coinbase’s move to Texas changed the rule a shareholder had to satisfy before suing its directors over alleged conduct from the company’s Delaware years. In an October 2 ruling, the Texas Business Court dismissed Gary Guillaume’s derivative action because he had not first demanded that Coinbase take action on the claims.The dismissal was without prejudice, and the court did not decide whether the alleged misconduct occurred. Its consequential finding concerned who could pursue claims belonging to Coinbase: Texas’s demand requirement applied to the shareholder’s authority to sue, even though the court assumed without deciding that Delaware law governed the underlying claims.On October 9, Coinbase CEO Brian Armstrong praised the precedent as encouraging more companies to incorporate in Texas and thanked Greg Abbott. That endorsement came a week after Judge Andrea K. Bouressa signed the order. The immediate lesson for public shareholders is that the law governing a company’s past conduct and the law governing their ability to challenge it can diverge after reincorporation.Why older claims faced Texas’s demand ruleA derivative action lets a shareholder pursue a claim on the corporation...