The D&O Diary

The D&O Diary

A PERIODIC JOURNAL CONTAINING ITEMS OF INTEREST FROM THE WORLD OF DIRECTORS & OFFICERS LIABILITY, WITH OCCASIONAL COMMENTARY

Category Archives: Director and Officer Liability

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Guest Post: Bylaws and Arbitration

Posted in Director and Officer Liability
For many years, business groups and corporate representatives have tried to reform shareholder litigation through legislation and case law development, with mixed success. However, in more recent years an interesting new initiative has emerged – the attempt to achieve litigation reform through amendments to corporate bylaws. This effort received a significant boost last year when … Continue Reading

On the Frontiers of Corporate Litigation and Liability: Inversion Transactions and a Proposed Duty to Warn

Posted in Director and Officer Liability
Among the developments dominating the business headlines in recent weeks have been two unrelated stories – the rising wave of so-called “inversion” transactions in which U.S. companies acquire foreign firms to avoid U.S. tax laws and the revelation of previously undisclosed problems with the ignition switches in certain GM cars that allegedly resulted in numerous … Continue Reading

India’s Securities Regulator Imposes Massive Penalties on Satyam’s Founder and Other Executives

Posted in Director and Officer Liability
On July 16, 2014, India’s securities regulator, the Securities and Exchange Board of India (SEBI), entered an order (here) against the founder and former executives of Satyam Computer Services to disgorge over $306 million in allegedly ill-gotten gains from their role in the scheme to falsify the company’s financial statements, as well as at least … Continue Reading

Guest Post: Texas Supreme Court Guts Minority Shareholder Oppression Claims

Posted in Director and Officer Liability
On June 20, 2014, the Texas Supreme Court issued its opinion in Ritchie v. Rupe, in which the Court addressed the rights and remedies of minority shareholders of Texas companies. In the following guest post Kara Altenbaumer-Price, Vice President, Management & Professional Liability Counsel for USI Southwest / USI Northwest, takes a look at the … Continue Reading

Georgia Supreme Court Affirms, Elucidates Business Judgment Rule – and Its Limitations

Posted in Director and Officer Liability
A recurring issue in FDIC litigation against the former directors and officers of failed banks has been whether the business judgment rule insulates the defendants  from claims of ordinary negligence. This question has been particularly important in Georgia, where there were more bank failures than any in other state and consequently more failed bank litigation. … Continue Reading

More About Stories We’re Following

Posted in Cyber Liability, Director and Officer Liability
Cybersecurity as a D&O Liability Issue: I have noted in prior posts on this site (refer for example here) that cybersecurity represents, among other things, a D&O liability exposure. The recent lawsuits filed against Target (refer here) and Wyndham Worldwide (refer here) underscore this point. In addition, at least according to a July 7, 2014 Bloomberg … Continue Reading

Is Climate Change a D&O Insurance Issue?

Posted in Director and Officer Liability
In a series of letters sent to individual board members of various major energy companies and to a number of participants in the directors and officers liability insurance industry, three environmental groups contend that climate change denial by energy industry representatives presents a risk of personal liability to the individual energy company board members. The … Continue Reading

Wyndham Worldwide Board Hit with Cyber Breach-Related Derivative Lawsuit

Posted in Cyber Liability, Director and Officer Liability
 In what is the latest example of the potential cybersecurity-related liability of corporate boards, a shareholder for Wyndham Worldwide Corporation has initiated a derivative lawsuit against certain directors and officers of the company, as well as against the company itself as nominal defendant, related to the three data breaches the company the company and its … Continue Reading

JOBS Act: Only Two Years Old and Already Revision Proposals are Circulating

Posted in Director and Officer Liability
The Jumpstart our Business Startups (JOBS) Act is only just two years old but there are already apparently Congressional initiatives to revise one of the centerpieces of the legislation, the much-vaunted crowdfunding provisions that have not yet in fact even gone into effect. According to a May 1, 2014 Wall Street Journal article entitled “Frustration … Continue Reading

Survey: Existing and Potential Bank Directors Unwilling to Serve Due to Fear of Personal Liability

Posted in Director and Officer Liability
Banking industry commentators have long contended that aggressive efforts by the FDIC and others to hold bank developers liable is having a chilling effect on the willingness of existing and potential directors to serve on bank boards. An April 2014 American Association of Bank Directors report of a recent survey of banks and savings institutions … Continue Reading

Liability Exposures of Audit Committee Chairs

Posted in Director and Officer Liability
One frequently asked question is whether members of a corporate board’s audit committee face heightened liability exposures. Two recent SEC enforcement actions seem to underscore that audit committee chairs do face liability exposures. Though both cases involve somewhat unusual circumstances, they seem to suggest that the “gatekeepers” on which SEC has said it will be … Continue Reading

Cornerstone Releases 2013 Study of M&A Lawsuit Settlements

Posted in Director and Officer Liability
Only two percent of M&A lawsuit that settled in 2013 involved a monetary payment to shareholders, according to the latest report on M&A lawsuit settlements from Cornerstone Research. The report, entitled “Settlements in Shareholder Litigation Involving Mergers and Acquisitions: Review of 2013 M&A Litigation” (here), is the second part of a two-part series on M&A … Continue Reading

Antitrust Enforcement and Corporate Risk Exposure

Posted in Director and Officer Liability
As a result of heightened regulatory scrutiny and changing enforcement priorities around the world, “cartel enforcement is a hot topic in boardroom,” according to a March 29, 2014 Economist magazine article entitled “Just One More Fix” (here). According to the article, antitrust enforcement authorities are getting “better at detecting cartels and bolder in punishing them.” … Continue Reading

Guest Post: BSA/AML Enforcement Trends and D&O Liability

Posted in Director and Officer Liability
In the following guest post, Christopher Laursen, Senior Vice President and Chair, Financial Institutions and Bank Practice at NERA Economic Consulting, takes a look at the current enforcement trends involving the Bank Secrecy Act and the Anti-Money Laundering regulations. I welcome guest submissions from responsible persons on topics of interest to readers of this blog. If … Continue Reading

Cornerstone Research Releases 2013 M&A Litigation Study

Posted in Director and Officer Liability
Mergers and acquisition activity continued to attract litigation in connection with virtually every transaction during 2013, and for the first time during 2013 the litigation filing rates for smaller transactions was as great as for larger transactions, according to a study recently released by Cornerstone Research. The study, entitled “Shareholder Litigation Involving Mergers and Acquisitions: … Continue Reading

Thinking About the Dewey & LeBeouf Criminal Indictment and Law Firm Management Liability Insurance

Posted in Director and Officer Liability, Uncategorized
The indictment last week of the top officials from the collapsed Dewey &  LeBouef law firm is merely the latest development in the long-running sequence of events following the law firm’s demise. The indictment (and the accompanying SEC enforcement action) paints a vivid picture of the desperate efforts of the law firm’s top officials to … Continue Reading

Growing Global Threats of Economic Crime

Posted in Director and Officer Liability
More companies – both inside the U.S. and globally – are experiencing economic crimes, and as companies expand their international operations and their reliance on the Internet and mobile technologies, economic crime increasingly has become a “borderless threat,” according to PricewaterhouseCoopers’ recent survey of global companies. The survey report, entitled “Global Economic Crime Survey 2014,” … Continue Reading

Target Directors and Officers Hit with Derivative Suits Based on Data Breach

Posted in Cyber Liability, Director and Officer Liability
  I have frequently noted that among the many exposures a company experiencing a data breach could encounter is the possibility of a shareholder suit alleging that the company’s board breached their fiduciary duties by failing to take sufficient steps to protect the company from a breach and its consequences. This possibility has now been … Continue Reading

Guest Post: The Business Judgment Rule Under Attack

Posted in Director and Officer Liability
In many jurisdictions, corporate officials sued for their actions undertaken in their corporate capacity may be able to defend themselves in reliance on the “business judgment rule.” This rule is designed to prevent courts from second-guessing the decisions of directors and officers. The defense has become particularly important in connection with the extensive litigation the … Continue Reading

Guest Post: Here We Go Again? Financial Institutions Face Heightened Regulatory Scrutiny Over Forex and Other Unregulated Rates

Posted in Director and Officer Liability
The global financial services industry is still reeling from the regulatory investigations surrounding the Libor scandal. Nevertheless, it seems that yet another scandal may be about to envelop the industry. In the following guest blog post Eric C. Scheiner and Jennifer Quinn Broda1]of the Sedgwick law firm take a look at what looks like will … Continue Reading

Top Ten D&O Stories of 2013

Posted in Director and Officer Liability
The world of directors and officers liability has long been characterized by rapid change. But even given these well-established dynamics, 2013 was a particularly eventful year, with several different developments that could impact the D&O arena for years to come. The list of the Top Ten D&O Stories of 2013 is set out below with … Continue Reading