The D & O Diary
Post-Holiday Quick Hits
This mix of items from around the web may be just the thing after a long weekend of leftover turkey --even though we are well aware that nothing can come close to a heaping helping of Turkey Tetrazzini three days after Thanksgiving.
Adding up the Likely Legal Costs from H-P’s Autonomy Accounting Scandal: Last week’s news that H-P is taking an accounting charge of $8.8 billion dollars following the company’s discovery of “serious accounting improprieties” at Autonomy, which H-P acquired last year, is likely to generate more than just headlines in the business pages. As the various parties try to sort out responsibility for this debacle, litigation that could take years to resolve seems likely, according to Ohio State Law School Professor Steven Davidoff and Wayne State Law Professor Wayne Henning in their November 21, 2012 post on the New York Times Deal Professor Blog (here).
H-P’s announcement of the accounting issues and related charges included the company’s statement that it had notified the Serious Fraud Office and the SEC of the supposed accounting improprieties H-P had uncovered at Autonomy. But the likely litigation fall out from the company’s disclosures are likely to include not only regulatory investigations and enforcement actions, but also civil litigation, perhaps involving Autonomy’s former executives and even perhaps officials at H-P itself, as well as H-P’s advisors in connection with the Autonomy transaction.
However, all of these likely investigative and litigation initiatives could be complicated by the fact that Autonomy was a U.K company whose shares did not trade in the U.S and by the fact that H-P’s acquisition of Autonomy took place outside of the U.S. It may difficult for prospective claimants to pursue their claims in the U.S. particularly under the U.S. securities laws, as a result of the U.S. Supreme Court’s decision in Morrison v. National Australia Bank.
Despite these potential complications, litigation nonetheless seems likely. The professors conclude that “while the matter will probably involve tens of thousands of hours and millions of dollars spent on investigation and litigation, none of this is likely to restore the $8.8 billion the company lost.”
Insurance Coverage for Data Breach Claims: One of the growing liability risks that many companies face is the exposure arising from the possibility of a serious breach of the company’s computer systems. The costs associated with a data breach can be enormous, as the companies involved respond to state law notification requirements and possible third-party claims. As the potential costs associated with data breaches mount, a recurring question has been the availability of insurance to protect against these costs.
A November 2012 memorandum from the Kelley, Drye & Warren law firm entitled “Insurance Coverage for Data Breach Claims” (here) takes a look at these recurring insurance coverage questions. The memorandum reviews the considerations affecting the availability for data breach claims under CGL and Property Insurance policies, as well as under specialty insurance policies. The authors conclude that “any time a potential data breach occurs, it is essential for an insured to consider all forms of insurance that it carries and to provide prompt notice to its insurer(s) of any policy that even potentially could apply.”
More About the Plaintiffs’ Lawyers’ Latest Say-on-Pay Litigation Gambit: A recent guest post on this site (here) discussed the plaintiffs’ lawyers latest say-on-paylitigation tactic, which involves a pre-emptive lawsuit filed in advance of the annual say on pay vote that challenges the adequacy of the compensation-related disclosures in the company’s proxy statement.
A November 19, 2012 memorandum from the Pillsbury Winthrop Shaw Pittman law firm entitled “Plaintiff’s Firms Gaining Steam from New Wave of Say-on-Pay Suits?” (here) describes the plaintiffs’ lawyers “new strategy” of trying to “hold companies liable: suits to enjoin the shareholder vote because the proxy statement fails to provide adequate disclosure concerning executive compensation proposals.” According to the memo, plaintiffs’ lawyers have filed at least 18 of these lawsuits in recent months. The memo notes that these new cases “have met with some success – with two court orders enjoining shareholder meetings and five settlements prior to companies’ annual meetings.”
Accompanying the memorandum are two helpful and interesting tables, detailing the outcomes of the various say on pay related lawsuits during the period 2010 through 2012, as well as the disposition of the latest injunctive relief actions that have been filed more recently.
Leftovers Again: Did you know that Turkey Tetrazzini is named in honor of the famous early 20th century Italian opera star, Luisa Tetrazzini? Neither did we. In honor of the patron saint of leftover Thanksgiving turkey, here is an audio tribute to Signora Tetrazzini, La regina del staccato:
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