Few principles of law are as universally respected by U.S. courts—state and federal—as the “internal affairs rule,” which mandates that the law of the state of incorporation governs disputes relating to the corporation’s “internal affairs”—namely the relationships among, and the powers and liabilities of, its officers, directors and shareholders. All state jurisdictions at least formally subscribe to this rule, and the Supreme Court has hinted that it may be constitutionally required.

Nonetheless, the New York Court of Appeals has agreed to hear a case asking the court to replace the traditional rule with an “interest-balancing” test. After the New York Court of Appeals granted plaintiffs appeal in Eccles v. Shamrock Capital Advisors, LLC, 176 N.Y.S. 3d 35; 209 A.D. 3d 486 (2022), a flurry of activity broke out. The plaintiffs had challenged a merger of Fan Duel Ltd., “a sports fantasy company,” with the world’s largest sports gambling company, Paddy Power Betfair Plc., alleging that the board unfairly approved a transaction that distributed the merger proceeds (i.e., shares in the newly merged company) “entirely to themselves.”