Most informed observers know that IPO companies are more susceptible to securities class action litigation than are more seasoned companies. IPO companies usually have short operating histories and so their post-offering performance can be unpredictable and may include unexpected developments. When IPO companies stumble out of the blocks, they can attract a securities suit just a short time after their debut. An example of this occurred earlier this year when Snap, Inc. was hit with a securities suit two months after its IPO. A more recent example of this sequence involved Blue Apron Holdings, which this past week was hit with a securities suit just seven weeks after its IPO. These cases underscore the securities litigation vulnerability of IPO companies, which in turn has important implications. Continue Reading
As courts have wrestled with standing issues in a variety of kinds of cases, the central question has been whether or not under the standard the U.S. Supreme Court enunciated in the Spokeo case the plaintiff alleged an injury that is sufficiently “concrete.” The Supreme Court remanded the Spokeo case itself to the Ninth Circuit for further proceedings to determine whether the plaintiff’s allegations met the high court’s standard. On August 15, 2017, the Ninth Circuit issued its ruling in the remanded case that the injury the plaintiff alleged was sufficiently concrete to meet the Supreme Court’s test. This ruling could boost plaintiffs as they seek to resist defendants’ efforts for an early dismissal in cases in which plaintiffs are alleging a statutory violation, such as Fair Credit Reporting Act (FCRA) cases, Telephone Consumer Protection Act cases, and Truth in Lending Act cases. The Ninth Circuit’s opinion can be found here. Continue Reading
In the wake of President Donald Trump’s June 1, 2017 announcement that the United States will withdraw from the Paris Climate Accord, one of the things I predicted was that the administration’s action likely would trigger a host of reactions on the state, national and international stage. Among other things, I conjectured that activists facing setbacks on the political stage might try to use judicial processes to advance their agenda. Though it lacks a direct connection to the U.S.’s actions on the Paris Climate Accords, a recent Australian lawsuit confirms my suggestion that activists are increasingly likely to try to use the courts as a way to promote their objectives. Continue Reading
What factors might indicate a likelihood of financial misreporting? There might be markers in companies’ financial statements, for example, with respect to reserving practices or practices with respect to other estimated items. There may be more general indicators as well, as, for example where companies reliably hit their revenue estimates due to a rush of end of reporting period sales. According to a recent academic study, attitudes in the community where businesses are located may also affect companies’ propensity for financial misreporting.
In a May 30, 2017 paper entitled “Gambling Attitudes and Financial Misreporting” (here), Dale Christensen of the University of Oregon, Keith Jones of the University of Kansas, and David Kenchington of Arizona State University, companies headquartered in areas where residents hold gambling-friendly attitudes are more likely to intentionally misreport financial information. The authors findings were summarized in an August 14, 2017 Wall Street Journal article entitled “A Roll of the Dice on Financial Misreporting” (here). Continue Reading
Seventeen years ago this month, the SEC instituted Rule 10b5-1 to permit company insiders – who often hold a significant portion of their wealth in company stock – to sell their shares without incurring liability under the federal securities laws. The Rule permits insiders who have traded in company shares to rebut the inference of scienter by showing that the trades were pre-scheduled and not suspicious. Over time, questions have been raised about the ways that some company executives have tried to use the plans. As discussed in an August 10, 2017 memo by the Simpson Thacher law firm on the CLS Blue Sky Blog entitled “Combatting Securities Fraud with 10b5-1 Trading Plans” (here), “sales made under 10b5-1 plans can substantially assist a company in getting such a claim dismissed by helping to rebut the inference of scienter that normally results when plaintiffs present evidence of insider stock sales during the class period.”
However, as discussed further below, while the plans can provide a substantial defensive boost, there are a number of steps companies should take in order to improve the likelihood that the existence of the plan will provide the intended protection. Continue Reading
Over the last several days, I have published several posts discussing important insurance developments relating to social engineering fraud, sometimes called payment instruction fraud. In the following guest post, Peter S. Selvin of the TroyGould PC law firm takes a detailed look at one of these recent decisions, the July 2017 decision in the Southern District of New York involving Medidata (discussed here), and compares it to the subsequent American Tooling Center decision out of the Eastern District of Michigan (discussed here). A version of this article previously appeared in the San Francisco Daily Journal. I would like to thank Peter for his willingness to publish his article as a guest post on this site. I welcome guest post submissions from responsible authors in topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is Peter’s article. Continue Reading
As many readers are aware, there have been a number of recent case decisions addressing insurance coverage issues arising out of social engineering fraud, sometimes known as payment instruction fraud. The recent round of judicial decisions includes a ruling by a Canadian court. In the following guest post, Jamieson Halfnight and Anne Juntunen of the Lerners law firm in Toronto review the recent Canadian decision and discuss it in the context of several recent rulings in the U.S. I would like to thank Jamie and Anne for their willingness to allow me to publish their guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Jamieson and Anne’s guest post is set out below. Continue Reading
One of the fundamental principles on which our system of securities regulation is based is the importance of disclosure. The system is built on the notion that companies must disclose certain basic information about their operations and performance so that investors can make informed investment decisions. While the disclosures required are a matter of regulation and statute, investors’ and regulators’ expectations about what must be disclosed changes over time. Signs are that disclosure expectations — and as a result disclosure practices — are changing rapidly in two particular areas: cybersecurity and climate change. Continue Reading
In the latest decision in which class action consumer data breach claimants have been successful in establishing the requisite standing to pursue their claims, on August 1, 2017, the D.C. Circuit held that the claimants’ risk of future harm is sufficient to meet Article III standing requirements. This decision is the latest in a growing number of federal circuit decisions finding that data breach claimants have satisfied standing requirements, but it also deepens a circuit split that could mean eventual U.S. Supreme Court review of the issue. The D.C. Circuit’s August 1 opinion in the Attias v. Care First case can be found here. Continue Reading
Much has been written about the explosive growth in merger objection litigation in recent years. A less common but increasingly frequent type of merger-related litigation is appraisal rights litigation. In these types of lawsuits an investor exercises his or her statutory right for a judicial determination of the value of his or her stock. These kinds of cases present their own sets of issues and challenges.
Among the recurring issues is the question of whether or not the costs a company incurs in an appraisal proceeding are covered under a D&O insurance policy; traditionally, D&O carriers have argued that appraisal proceedings are not covered under their policies because the request for an appraisal proceeding does not involve an alleged “Wrongful Act.” However, an August 2, 2017 memo by Peter Gillon and Benjamin Tievsky of the Pillsbury law firm (here) argues that in many cases this coverage analysis is inaccurate and that in fact there should be coverage under the D&O policy for the expenses incurred in an appraisal proceeding. Continue Reading