Individuals serving as corporate officers take on significant potential liability exposures in the course of their performance of their duties. As a result, most companies indemnify their officers for liabilities incurred while acting as corporate officers. A recurring issue is the question of who is entitled to indemnification. In particular, a particular issue that courts have grappled with recently is the question of whether an individual with the title of “Vice President” is entitled to indemnification. Continue Reading
As part of its continuing efforts to extend educational and network opportunities to professional liability insurance professionals around the world, the Professional Liability Underwriting Society (PLUS) will hosting professional liability symposia in Singapore and Hong Kong in September. The first of these two events will take place in Hong Kong on September 6, 2016. The second of the two events will take place in Singapore on September 9, 2016. For many reasons, I want to encourage as many industry professionals in these regions as possible to attend these events, as discussed further below. Continue Reading
Investors, analysts, D&O insurance underwriters, and others responsible for identifying risks among public companies may want to pay close attention to the ways that companies report their financial results. According to a recent analysis, companies that make heavy use of non-GAAP reporting – such as tailored figures like “adjusted net income” and “adjusted operating income” – are more likely to encounter some kinds of accounting problems, such a restatements, than companies that stick to standard accounting measures. The research, by consulting firm Audit Analytics, is discussed in an August 3, 2016 Wall Street Journal article (here), and in an August 4, 2016 post on the Cooley law firm’s PubCo blog (here). Continue Reading
Most companies’ corporate bylaws or articles of incorporation contain indemnification and advancement provisions. While these provisions provide important protection for corporate executives if the individuals become the target of claims relating to their action undertaken in their corporate capacities, these provisions alone may not be provide sufficient protection. The provisions in the corporate documents may not address all of the issues that can arise and may not provide sufficient protection for the individuals when there are indemnification or advancement disputes and may not protect individuals from changes to corporate bylaws after the individuals have left the company. For these and many other reasons, well-advised corporate executives will want to have their rights memorialized in a separate, written indemnification and advancement agreement with the company, as discussed further below. Continue Reading
One of the most distinctive recent developments in the litigation environment has been the rise of merger objection litigation, in which nearly every merger attracted at least one lawsuit challenging the transaction. Many of these cases settled quickly based on the defendants’ agreement to make additional transaction-related disclosures and to pay the plaintiffs’ attorneys’ fees. However, in a series of rulings culminating in the January 2016 ruling in the Trulia case, the Delaware Court of Chancery has shown its disapproval of the disclosure-only settlement model. It now appears that as a result of the Chancery Court developments that fewer mergers are attracting lawsuits and fewer lawsuits overall are being filed.
As detailed in an August 2, 2016 report from Cornerstone Research entitled “Shareholder Litigation Involving Acquisition of Public Companies: Review of 2015 and 1H 2016 M&A Litigation” (here), the percentage of merger transactions attracting litigation began to fall to the lowest levels in years during the second half of 2015, and the litigation dropped even further in the first half of 2016, as detailed further below. Cornerstone Research’s August 2, 2016 press release about the report can be found here. Continue Reading
One of the recurring issues that has arisen as claimants and regulators have pursued cybersecurity-related claims against companies that have experienced a data breach is the question of what type or quantum of claimed injury is sufficient to sustain a claim. This issue has recurred in consumer cybersecurity-related damages actions and it has also arisen in regulatory enforcement actions as well. These issues were presented in a very interesting July 29, 2016 Opinion from the Federal Trade Commission (here). The Commission overturned a prior ruling by one of its own Administrative Law Judges, and held, contrary to the ALJ, that the release of private and sensitive information in and of itself was sufficient – even in the absence of alleged economic or physical injury — to support a claim against LabMD that its failure to prevent the information’s release constitutes an “unfair” practice. The FTC’s July 29, 2016 press release about the agency’s ruling can be found here. As the WSJ Law Blog noted in a July 29, 2016 post (here), the FTC’s ruling sets the stage for a “high stakes federal court battle” on the issue of what kind of alleged injury is sufficient to support cybersecurity-related unfair practices claim. Continue Reading
Regular readers know that one of my recurring private company D&O insurance coverage concerns has to do with the professional services exclusion and the way many carriers seek to phrase, interpret, and apply the exclusion, particularly with respect to insured companies engaged in service businesses. My concern is that all too often the exclusion is written over-broadly and applied over-broadly in a way that threatens to entirely swallow up coverage under the policy. A July 28, 2016 coverage decision by District of Maryland Judge J. Frederick Motz expressly addresses several of my recurring concerns about the professional services exclusion, as I discuss further below. A copy of the July 28, 2016 opinion can be found here. Continue Reading
The collectors’ edition D&O Diary Frisbees we have sent to interested readers have proven to be both ornamental and functional, as reflected in the latest round of readers’ pictures. And the Frisbees have once again proven to be well-travelled, to say the least. 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 two rounds of Frisbee Photos (here and here), and now it is time for the third round. Continue Reading
One of the important and recurring issues under the federal securities laws is the question of whether or not American Pipe tolling applies to the statute of repose in the securities laws’ liability provisions. Specifically, the question is whether or not the three-year limitations period in Section 13 of the ’33 Act may be tolled (under a legal theory known as the American Pipe tolling doctrine) by the filing of a putative securities class action, or rather that the three-year provision cannot be tolled. As discussed here, the U.S. Supreme Court recently dismissed the cert petition in the Indy Mac case, leaving standing a Second Circuit ruling in that case that the filing of a securities class action lawsuit does not toll the ’33 Act’s statute of repose.
In the following guest post, the attorneys from the Paul Weiss law firm take a look at two recent Second Circuit decisions that raised these questions of tolling under the ’33 Act’s statute of repose. As discussed below, the authors conclude that the Second Circuit’s most recent decisions suggest that statutes of repose generally—and not simply statutes of repose established under the federal securities laws—are immune to tolling.
I would like to thank the attorneys at the Paul Weiss firm for allowing me to publish their 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 the Paul Weiss attorneys’ guest post. Continue Reading
In 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