More and More Frisbee Photos

frisbeeSummer has given way fall, and that means that it is time for another round of readers’ Frisbee photos, this time including a harvest of great pictures taken overseas. Readers will recall that in connection with The D&O Diary’s recent tenth anniversary, I offered to send out a D&O Diary Tenth Anniversary Frisbee to anyone who requested one – for free — but only if the Frisbee recipient agreed to send me back a picture of the Frisbee and a description of the circumstances in which the picture was taken. I have already published several rounds of Frisbee Photos (all of which can be found here), and now it is time for the next round. Continue Reading

Guest Post: ERISA-Regulated Benefit Plans Not “Affiliates” for Securities Class Settlement Purposes

paul-weiss-large-300x53In the settlement documents prepared in connection with securities class action settlements, the documents typically specify that certain groups are excluded from the settlement class. Among the groups typically excluded are “affiliates” of the class action defendant company. In a recent decision (here), the Second Circuit examined the question whether an ERISA-regulated benefit plan that the defendant company sponsors is an “affiliate” of the company and therefore precluded from sharing in the settlement proceeds. In the following guest post, members of the Paul Weiss law firm take a look at the Second Circuit’s decision and discuss its implications. I would like to thank the Paul Weiss attorneys for their willingness to publish their article on my site. I welcome guest post submissions from responsible parties on topics of interest to this blog’s readers. Please contact me directly if would like to submit a guest post. Here is the Paul Weiss attorney’s guest post. Continue Reading

Six Things to Know Now About the SEC Whistleblower Program

wb-100-millionOne of the signature features of the Dodd-Frank Act was its creation of an SEC Whistleblower program. Under the program, the SEC can award whistleblowers a bounty of between ten percent and thirty percent of any recoveries the SEC makes in excess of $1 million as result of the information whistleblower provided. The program went into effect in 2011, and the agency immediately began receiving a huge volume of whistleblower reports. Over time the agency has made a number of awards, including the September 2014 award of $30 million, which is still the largest award under the whistleblower program.

 

While the program has been in operation now for several years, it recently kicked into high gear and the program has passed a number of important milestones. The trend lines suggest that the SEC whistleblower program is going to be an increasingly important part of the corporate liability landscape, and for that reason there are a number of important things to keep in mind. Continue Reading

Thinking About Exceptions and Alterations to the Insured vs. Insured Exclusion

ndcalAmong the terms and conditions typically found in a D&O insurance policy is the so-called “Insured vs. Insured” exclusion, which precludes coverage for claims brought by one insured against another insured. The exclusion often figures in D&O insurance coverage disputes, as I have frequently noted on this blog. While the exclusion broadly precludes coverage for an entire category of claims, the exclusion often also has exceptions that preserve coverage for certain types of claims that would otherwise be excluded.

 

In a recent case in the Northern District of California, a D&O insurance policyholder tried to argue that the underlying claim came within one of the standard coverage carve-backs typically found in this type of exclusion, a provision preserving coverage for derivative claims. In a September 26, 2016 order (here), Northern District of California Judge Haywood S. Gilliam, Jr., applying California law, held that the Insured vs. Insured Exclusion applied to preclude coverage and that the underlying lawsuit did not come within the coverage carve-back. The parties’ dispute and the court’s ruling provide a useful backdrop to think about the exclusion and alternative wordings that are sometimes available in the marketplace. Continue Reading

The Continuing Question of Morrison’s Applicability to ADR Transactions

gavelOne of the practical effects of the U.S. Supreme Court’s 2010 decision in Morrison v. National Australia Bank is that, as a result of the decision, it is more difficult to bring a class action in a U.S. court under the U.S. securities laws against a company based outside the U.S. The Court rejected earlier standards allowing U.S. courts to consider securities suits against non-U.S. companies if conduct relating to or effects of an alleged fraud took place in the U.S. Instead, the Court said that U.S. securities laws apply only to “transactions in securities listed on domestic exchanges, and domestic transactions in other securities.”

 

At the time of the Morrison decision, the expectation was that the number of U.S. securities class action lawsuits filed against non-U.S. companies would decline. As it has turned out however, the number of securities lawsuits filed against non-U.S. companies in each of the years since Morrison has been greater than the number filed in the years prior to the decision. Indeed, for the past several years, non-U.S. companies have been likelier to get hit with a securities class action lawsuit than domestic companies. Continue Reading

D&O Insurance: Consent Judgment Including Covenant Not to Execute Constitutes “Loss”

ednyIn order to try to resolve litigation pending against them, policyholders sometimes enter a settlement in which they agree to the entry of a consent judgment against them and to the assignment to the claimants of their rights under their insurance policy, subject to the claimants’ agreement not to execute the judgment against them. The question that often arises is whether, in light of the covenant not to execute, the policyholders have suffered a “Loss” as required to trigger policy coverage.

 

In a September 16, 2016 ruling in connection with a coverage dispute involving one of these types of settlement arrangements, Eastern District of New York Judge Arthur D. Spatt, applying New York law, rejected a D&O insurer’s argument that because of the assignees’ agreement not to execute on the consent judgment, the insured persons had suffered no “Loss.” The court’s determination of these questions raises some interesting issues. Judge Spratt’s September 16, 2016 opinion can be found here. Continue Reading

Guest Post: Ninth Circuit Clarifies What Might Trigger SOX 304 Disgorgement

bruce ericson

Bruce Ericson

Among the many issues arising under the Sarbanes-Oxley Act are questions surrounding disgorgement under Section 304, particularly questions concerning what actions and whose actions might trigger disgorgement. In the following guest post, Bruce Ericson of the Pillsbury Winthrop Shaw Pittman law firm takes a look at the Ninth Circuit’s August 31, 2016 decision in U.S. Securities & Exchange Commission v. Jensen in which the appellate court held that the SEC can seek disgorgement from a company’s CEO or CFO even if the triggering restatement did not result from those corporate officers’ misconduct. I would like to thank Bruce for his willingness to publish his article as a 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. Here is Bruce’s guest post. Continue Reading

Cybersecurity Disclosure Practices: What’s Up With That?

SEC logoCybersecurity has been and remains one of the hot topics in corporate governance. Several federal regulatory agencies, including the SEC, have made it clear that cybersecurity is a high priority item and at the top of their agenda. The SEC’s particular cybersecurity focus has been on consumer privacy and on corporate disclosure. But though the SEC has made cybersecurity issues, including disclosure, a top priority, it appears to be the case that very few public companies are actually disclosing cybersecurity and data breach incidents in their SEC filings. The current disclosure practices could be a concern for investors – and for D&O underwriters. Continue Reading

The Global Rise in Collective Investor Actions

globeAs I noted in my recent round up of current trends in the world of D&O, one of the most important recent developments in the D&O claims arena has been the rise of collective investor actions outside of the U.S.  I amplified on this theme in a Q&A that I also recently published on this site.  In a recent blog post, Columbia Law Professor John Coffee underscored the recent significant rise in collective investor actions in Europe and Asia. In a September 19, 2016 post on the CLS Blue Sky Blog entitled “The Globalization of Securities Litigation” (here), Professor Coffee details how entrepreneurial U.S.-based plaintiffs’ law firms have managed to circumvent apparent local obstacles and succeed in pursuing collective investor actions even in otherwise inhospitable legal environments. As I have previously noted and as I discuss further below, the rise of collective investor actions outside the U.S. is one of the most significant recent developments in the global D&O claims arena. Continue Reading

Sixth Circuit: Data Breach Victims’ Heightened Risk of Future Harm Establishes Article III Standing

sixth circuit sealOne of defendants’ most significant arguments in opposing data breach victims’ negligence and breach of privacy claims has been that the claimants that have not suffered actual fraud or identity theft can show no cognizable injury and therefore lack Article III standing to assert their claims. Appellate decisions in the Seventh and Ninth Circuit have previously taken a bite out of this defense, in rulings holding that the victims’ fear of future harm is sufficient to establish standing. Now the Sixth Circuit in a case involving alleged victims of a data breach at Nationwide Mutual Insurance Company has joined these other circuits, holding that the  claimants’ heightened risk for fraud and mitigation costs were sufficient to establish Article III standing. The Sixth Circuit’s September 12, 2016 opinion, which can be found here, represents the latest in a series of developments evincing courts’ increasing willingness to recognize fear of potential future harm as sufficient to establish standing, which in turn may make it easier for the plaintiffs’ claims in these kinds of data breach cases to go forward. Continue Reading

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