Insurer’s Coverage Denial Relieves Policyholder’s Obligation to Obtain Consent to Settlement

nystate1In the latest development in the long-running battle of J.P. Morgan Chase, as successor in interest to Bear Stearns, to try to obtain insurance coverage for amounts Bear Stearns paid to resolve an SEC investigation of alleged deceptive market timing and late trading activities, a New York state court judge has held that because its D&O insurers had “effectively disclaimed coverage,” Bear Stearns was excused from its policy obligation to obtain the insurers’ consent prior to its settlement with the SEC. However, the court declined to resolve the question of whether or not the settlements were “reasonable.” The now years-long insurance coverage battle will continue to go forward on the remaining issues. A copy of July 7, 2016 of New York (New York County) Supreme Court Charles E. Ramos can be found here. Continue Reading

Cornerstone Research: First Half Securities Suit Filings at Highest Level in Years

cornerstone reserach pdfSecurities class action lawsuit filings in the first half of 2016 leapt to their highest level in years, according to a recent report from Cornerstone Research. According to the report, which is entitled “Securities Class Action Filings: 2016 Midyear Assessment,” both the number of lawsuit filings and the rate of litigation were well above long-term historical semiannual averages in the first six months of 2016. The increases are attributable in part to the increase in federal court M&A-related securities litigation, as discussed below. The report can be found here. Cornerstone Research’s July 26, 2016 press release about the report can be found here. Cornerstone Research’s analysis is largely consistent with my own review of the first half securities suit filings, which can be found here. Continue Reading

D&O Insurance: Prior and Pending Litigation Provisions Do Not Undercut Interrelated Claims Provision

floridaIn a June 6, 2016 opinion (here), Middle District of Florida Judge Sheri Polster Chappell, applying Florida law, held that subsequent claims filed in 2011 and 2012 were interrelated with claims first made in 2008, and therefore deemed made at the time of the initial claim. Because the initial claim was filed before the relevant policy incepted, there is, Judge Chappell concluded, no coverage for the claims under the relevant policy.


In reaching these conclusions, Judge Chappell rejected the policyholder’s argument that the policy’s related claim provision conflicted with the policy’s prior and pending litigation provision (which had a May 2003 date), and therefore should be construed against the insurer and disregarded in light of the prior and pending litigation date. Judge Chappell’s opinion quite sensibly and correctly rejects arguments that other courts (applying different jurisdiction’s law) have accepted, as discussed below. A July 22, 2016 post on the Wiley Rein law firm’s Executive Summary Blog about Judge Chappell’s opinion can be found here. Continue Reading

Securities Regulators Around the World Adopt Whistleblower Reporting Programs

globe blueOne of the Dodd-Frank Act’s signature features was its creation of potentially massive bounties for whistleblowers that reported financial fraud to the SEC. During the time that the Dodd-Frank whistleblower program has been in place, the agency has made a number of significant bounty awards. Mary Jo White, the SEC chairwoman, has said that the program “has rapidly become a tremendously effective force-multiplier, generating high quality tips and, in some cases, virtual blueprints laying out an entire enterprise, directing us to the heart of an alleged fraud.” The SEC’s whistleblower program has also attracted the attention of other countries’ securities regulators, with the various countries reaching a variety of conclusions about the program, particularly its bounty award feature. In the past several days, securities regulators in Ontario and in Germany have each adopted their own whistleblower programs. The different approach the regulators have taken is interesting, as discussed below. Continue Reading

A Local Perspective on the Republican National Convention


Cleveland, Ohio

As most of you undoubtedly are aware, the Republican Party held its National Convention last week in Cleveland, Ohio, The D&O Diary’s home town. In light of this special event right in our own backyard, we deputized a special events reporter to attend and report back for the benefit of this blog’s readers. Our special events reporter’s account follows below. Our reporter, Rob LaCroix, a May 2016 graduate of Middlebury College, will be attending Columbia Law School in the Fall. I should add that the Convention took place in Cleveland at a particularly good time in the life of the city. We just brought home the NBA championship a few weeks ago, and the Indians are in first place in the American League Central Division. The fact that the Convention went smoothly and without incident (at least outside of the convention hall) is a point of great pride for the city. Here is our special reporter’s account. Continue Reading

July in Germany and Austria

2016-07-16 05.04.51aThe D&O Diary was on assignment in Europe this past week for meetings in Germany, with a brief stopover in Austria before returning home. The picture to the left was taken during our short visit to Salzburg, Austria, which is described below. The trip’s main event was a series of meetings in Munich with industry colleagues at Munich Re. The company’s beautiful Munich headquarters building on Königinstraße, opposite the main entrance of the Englischer Garten, is pictured below. Continue Reading

Second Round of Frisbee Photos

Tfrisbeehe D&O Diary’s readers cover a lot of ground and have an incredible diversity of interests, if the latest round of Frisbee photos is any indication. Readers may 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 one round of Frisbee photos, and now it is time for the second round. Continue Reading

Eighth Circuit Split Spotlights Tensions with the Responsible Corporate Officer Doctrine

eighth circuitOne of the bedrock principles of our legal system is that criminal liability attaches only to those who act with intent or knowledge – that is, as the legal scholars say, with mens rea (or a guilty mind). The “responsible corporate officer doctrine” sits uneasily with these notions, imposing liability as it does on corporate officers not for their involvement in or even awareness of wrongdoing, but simply for their status as persons responsible for the company involved. A recent decision from the Eighth Circuit, in which each judge on the three-judge panel that heard the case wrote a separate opinion, underscores the tensions the responsible corporate officer doctrine presents within our system of justice, and potentially sets the stage for further consideration of these issues. The Eighth Circuit’s July 6, 2016 opinion in U.S. v. DeCoster can be found here. Continue Reading

Global Litigation Trend Lines Converge in Massive U.K. Collective Action Competition Claim Against MasterCard

MasterCardThere have been few more powerful forces acting recently on the litigation environment around the world than third-party litigation financing. The recent rise of litigation funding, often accompanied by the active involvement of U.S. law firms, is changing the face of litigation in numerous countries. The collective action to be filed against MasterCard later this summer in the U.K. by U.S. law firm Quinn Emanuel, in an initiative being financed by Chicago-based litigation funding firm Gerchen Keller Capital LLC, is the latest and highest profile example of this trends. Indeed, the anticipated MasterCard action in some ways reflects the coming together of many of the important global litigation trends, as discussed below. The Quinn Emanuel law firm’s July 2016 press release about the planned lawsuit can be found here. Julie Triedman’s July 6, 2016 American Lawyer article entitled “Quinn Emanuel, Litigation Funder Team Up for Landmark $25B MasterCard Fight” can be found here. Continue Reading

Target Corporation Cybersecurity-Related Derivative Litigation Dismissed

targetFor some time now, many commentators, including me, have been predicting that cybersecurity-related litigation could become an important part of the D&O litigation environment. And that may yet happen. For now, however, the results in the recent cybersecurity-related cases have been, from the plaintiffs’ perspective, not particularly promising. On July 7, 2016, in the latest of these cases to hit the skids, District of Minnesota Judge Paul Magnuson, in reliance on the report of the special litigation committee appointed to investigate the claims and in the absence of opposition from the plaintiff, granted the motions of the special litigation committee and of the defendants and dismissed the consolidated cybersecurity-related derivative litigation that had been filed against Target Corporation’s board. As discussed below, the plaintiffs’ track record in this type of litigation has been poor, which does raise the question whether this type of litigation will become a significant phenomenon. A copy of Judge Magnuson’s order in the Target Corp. case can be found here. Continue Reading