A Trio of Delaware Decisions Reaffirms Corporate Director Protections

del1Because the vast majority of U.S. publicly traded companies are incorporated in Delaware, legal developments in Delaware have a particularly important impact on legal standards governing corporate conduct in the U.S. Delaware law is particularly influential with respect to the responsibilities and potential liability exposures of corporate directors. In a series of recent opinions written by Chief Justice Leo E. Strine Jr., the Delaware Supreme Court has, according to an October 22, 2015 memo from the Skadden law firm (here) “reaffirmed Delaware’s deference to the business judgment of disinterested corporate decision-makers and restored important protections for directors that had been weakened by prior court decisions.” Continue Reading

Book Review: A Cybersecurity Guide for Corporate Directors and Officers

paul-cyber-book-250x324We are long past the point where cybersecurity can be treated like an emerging, obscure or peripheral issue. The fact is that cybersecurity is now an important concern for every organization and enterprise. For that reason, cybersecurity is also now an important concern for everyone responsible for protecting and guiding those organizations and enterprises, including in particular corporate directors and officers. In the current environment, there is no shortage of advice available for these corporate officials as they seek to understand and fulfill their responsibilities to their organizations. Indeed the sheer volume of information available can be confusing or even overwhelming. Fortunately, there is now a single volume guide available to help corporate directors address their organization’s cybersecurity exposures and needs. The new book by Paul Ferrillo of the Weil Gotshal law firm entitled “Navigating the Cybersecurity Storm: A Guide for Directors and Officers” (here) is a readable, well-organized, and helpful guide for any corporate official seeking to address their cybersecurity responsibilities. Continue Reading

Up Next?: Climate Change Disclosure and Corporate Liability Exposures

exxonThe question whether concerns about climate change-related disclosures might lead to regulatory enforcement actions or even liability claims has been around for some time, but though the concerns have remained, the regulatory actions and liability claims have not really materialized.  However, in the past week, the service of a subpoena on Exxon Mobil Corp. by New York Attorney General Eric T. Schneiderman has raised the possibility that an enforcement action against the energy giant relating to its climate change-related disclosures may be in the works. The Attorney General’s action also raises the question whether other companies and industries could also be targeted. These possibilities highlight possible corporate climate change-related enforcement and liability exposures. Continue Reading

Guest Post: Ten Mistakes Companies Make When Buying D&O Insurance –A Securities Litigator’s Perspective


Michael J. Biles

Just about every publicly traded company and most private companies carry D&O insurance. It is just common sense in the current litigious environment. But while most companies recognize the need for D&O insurance, not every company maximizes its investment when purchasing the insurance. In the following guest post, Michael J. Biles, a partner in the Securities Litigation Group at King & Spalding LLP, takes a look based on his perspective as a securities litigator at ten common mistakes many companies make when buying their D&O insurance. In addition to the points Mike makes in his guest post, I would add that companies are likely to avoid these and other common mistakes if they take the time to ensure that the have enlisted the assistance of a knowledgeable and experienced broker in connection with their purchase of D&O insurance. 

I would like to thank Mike for his willingness to publish his article on this site. I welcome guest post submissions from responsible authors on topics of interest to readers of the blog. Please contact me directly if you would like to submit a guest post. Here is Mike’s guest post.


D&O insurance is a must-have for every public company.  The risks and costs of private lawsuits or government investigations are too great for any rational person to serve as an officer or director of a company without a solid D&O insurance policy.  After nearly twenty years of defending officers and directors in securities litigation, I have experienced firsthand the hardship caused by inadequate or inappropriate D&O insurance.  Contrary to public perception, most officers and directors of public companies are not extraordinarily wealthy – the cost of financing the defense of a securities class action, derivative lawsuit or government litigation (much less of funding a settlement) is too great to bear for most individuals without D&O insurance.

The following are the top ten mistakes that I’ve seen companies make in selecting D&O insurance.  Although some of these mistakes concern complex insurance coverage issues, I’ve prepared this article for the non-lawyer, stripped of legalese, so that officers and directors can discuss these issues with their insurance brokers to avoid these mistakes.  D&O insurance is a competitive industry.  While the core language of a standard D&O policy is generally fixed, companies can, and often do, negotiate better terms in endorsements to the policy.  Continue Reading

Does the Omnicare’s Holding Regarding Opinion Apply to Securities Fraud Claims?

supct2014In its March 2015 decision in the Omnicare v. Laborers District Council Construction Industry Pension Fund (here), the U.S. Supreme Court held that an issuer may be liable for opinions set forth in a registration statement if the issuer did not genuinely hold the stated opinion, or if the issuer failed to disclose material facts relating to the foundation for the opinion, as discussed here. Because the Omnicare decision was made with respect to claims under the liability provisions of the Securities Act of 1933, one of the questions that arose following the Court’s decision was whether and to what extent the principles the Court enunciated are applicable to securities fraud actions under the Securities Exchange Act of 1934. In an interesting article entitled “False Statements of Belief as Securities Fraud” (here), University of Idaho Law Professor Wendy Gerwick Couture takes a look at these questions and argues that the Omnicare’s holding with respect to statements of opinion analytically should apply equally to securities fraud claims under Section 10 of the ’34 Act as to prospectus liability claims under Section 11 of the ’33 Act. A summary version of Professor Couture’s article appeared on October 28, 2015 on the CLS Blue Sky Blog (here).   Continue Reading

D&O Insurance: Contractual Liability Exclusion Applied to Preclude Coverage for Negligence Claim

eleventh cuircuit sealIn an unpublished October 5, 2015 opinion (here), the Eleventh Circuit, applying Florida law, held that a D&O insurance policy’s contractual liability exclusion precluded coverage for negligence claims asserted against persons insured under the policy. The contract exclusion was written with a broad “based upon, arising out of” preamble wording. As discussed below, the decision highlights concerns about the use of the broad preamble in D&O insurance policies’ contractual liability exclusion. An October 28, 2015 post on the Wiley Rein law firm’s Executive Summary Blog about the Eleventh Circuit’s ruling can be found here. Continue Reading

The Next Step in Litigation Financing?

german flagIn recent years, litigation financing has become an increasingly important –albeit controversial – part of the litigation landscape. The ongoing evolution of litigation financing now appears to have taken a significant next step, in the form of a formal, public partnership between the litigation funding firm and a plaintiffs’ law firm. On October 28, 2015, the litigation funding firm Burford Capital and the plaintiffs’ competition law firm Hausfield issued a joint press release (here) in which the two firms announced their entry into a €30 million agreement to fund claims in Germany and to allow the law firm to open a Berlin office. Continue Reading

SEC Adopts Final Crowdfunding Rules

seclogoOn October 30, 2015, by a 3-1 vote, the SEC adopted final rules to permitting small companies to raise funds by selling shares to the investing public through crowdfunding offerings conducted on Internet fundraising portals. In this long-awaited vote, which represented the last remaining significant rulemaking procedure required by the Jumpstart our Business Startups (JOBS) Act of 2012, the agency finally authorized, in slightly modified form, the rules it had first proposed in October 2013. The agency’s October 30, 2015 press release announcing its action and describing the final rules can be found here. The 686-page adopting release can be found hereContinue Reading

Class Action Litigation, Professor Coffee, and Judge Rakoff

daumierOne of the legal issues that attracts continuous  vigorous debate is the question of whether or not class actions in general, and securities class actions in particular, produce a social benefit sufficient to justify their sometimes enormous costs. This question receives an interesting and readable analysis in an article in the November 19, 2015 issue of The New York Review of Books entitled “The Cure for Corporate Wrongdoing: Class Actions vs. Individual Prosecutions” (here) in which Southern District of New York Judge Jed Rakoff reviews Columbia Law Professor John Coffee’s new book, Entrepreneurial Litigation: Its Rise, Fall, and Future (here).  While Judge Rakoff provides his (quite positive) assessment of Professor Coffee’s book, he also  delivers his own analysis of the issues Professor Coffee raises, as well as of the prescriptions Professor Coffee proposes for the class action defects he has identified, as discussed below. Continue Reading

Uptick in Securities Suits Against U.S.-Listed Chinese Companies

cflagLong-time readers of this blog will recall that in 2011, there was a rash of U.S. securities class action lawsuits filed against U.S.-listed Chinese companies. Many of these companies had obtained their U.S.-listings by way of a reverse merger with a U.S.-listed public shell. The 39 securities suits filed in 2011 against U.S.-listed Chinese companies represented 18% of all securities class action lawsuits filed in the U.S. that year. While the number of lawsuit filed against Chinese reverse-merger companies has abated since the peak in 2011, U.S. securities lawsuits continue to be filed against Chinese companies at a significant rate. Continue Reading