April 17, 2024

Ron DeSantis’ Legal Threats Against Bud Light’s Parent Company Are Dumb and Bad for Florida

The occasional threats of Florida Gov. Ron DeSantis to investigate Bud Light’s parent company and possibly sue him on behalf of the confused and worthless Florida pension fund.

In a recent Fox News appearance, he claimed that his investigation could lead to a “derivative lawsuit filed on behalf of Florida pension fund shareholders” to penalize Bud Light for serving it. transgender influence can custom beer.

Because most Americans are not corporate lawyers, the average person may not immediately smell the bull in DeSantis’ blog. After all, Gov. DeSantis graduated from Harvard Law and knows enough to use the words “trusted” and “derivative”. Fortunately, corporate law has solved the problem of value-destroying shareholder litigation as Gov. DeSantis was largely resolved.

Any large publicly traded corporation will have many shareholders with differing opinions. Some of them, like the Gov. DeSantis, in their armchair quarters who wanted to attack corporate leaders for making a different decision than they would have. If shareholders could litigate every business decision that turned out to be unprofitable, large corporations could not function. Corporate leaders would be afraid and afraid to take business risks for fear of being sued by a certain shareholder.

To solve this problem, corporate law limits the ability of shareholders to litigate a corporation’s business decisions. The right to sue for damages to the corporation usually belongs to the corporation, not to shareholders. A corporation’s board of directors decides how to manage a corporation’s affairs—including whether or not to file a lawsuit.

For perspective, if Florida had won or settled the case for $50 million, which it won’t, Florida’s pension fund would recover about 15 grand.

An exception to this general rule is shareholder derivative lawsuits. These lawsuits allow shareholders to assert claims that the current board of directors should not manage alone. Derivative shareholder lawsuits typically involve claims against directors for breaching their duties to the corporation in some way. For example, a shareholder derivative lawsuit would be appropriate if a board of directors stole money from the corporation. Because they are unlikely to sue themselves, courts may allow shareholders to bring these claims against directors on behalf of the corporation to recover the stolen funds.

American corporate law generally protects directors from second-guessing their business decisions through the business judgment rule. Although states apply it in different ways, it generally means that courts will refrain from reviewing the business decisions of a corporation and assuming that officers or directors of a corporation acted in good faith unless there is some evidence that the board had some disability conflict in making the decision.

Gov. DeSantis’ proposed litigation against AB InBev, Bud Light’s parent company, appears to be completely frivolous. It could expose Florida pension funds to sanctions and monetary penalties for bringing unfounded litigation.

First, a plaintiff filing a shareholder derivative lawsuit must name several defendants. Here, that is probably AB InBev’s board of directors. There is no evidence that AB InBev’s board approves every marketing decision for every brand within the corporation’s vast portfolio. For the claim to work, Florida would have to argue that AB InBev’s board should have created some policy to ensure that brand managers discriminated against transgender people when making marketing decisions.

If AB InBev had implemented this type of policy, it could have generated its own liability for discrimination on the basis of gender identity.

But the lawsuit is also dumb.

Functionally, Florida can only litigate shareholder derivative litigation “on behalf of Florida pension fund shareholders.” In the unlikely event that Florida would make any recovery, it would be shared among all the shareholders as it would settle a claim related to the corporation. According to recent news reports, the Florida pension fund ownership approximately 682,000 out of a total of approx 2,019,241,973 AB InBev shares.

This means that the Florida pension would receive about .03 percent of any recovery. For perspective, if Florida had won or settled the case for $50 million, which it won’t, Florida’s pension fund would recover about 15 grand.

But there are many other reasons why this law has no merit. AB InBev is a Belgian corporation. This means that shareholder disputes are governed by Belgian law. Although I am not an expert on Belgian corporate law, I fully understand that a different process exists to initiate shareholder derivative claims under Belgian law. Belgian law even imposes costs and damages on shareholders for filing frivolous derivative actions.

Operationally, this means that Florida has a very likely upside for this type of litigation of about 0.03 percent of any recovery. Filing frivolous litigation is likely to cost him millions in court costs, fees and penalties.

If DeSantis files this derivative lawsuit, Bud Light’s parent company will open a can on him.

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