In a noteworthy decision that raises a number of interesting issues, District of Minnesota Judge Ann D. Montgomery, applying Minnesota law, held that a company’s excess D&O insurance policy’s prior acts exclusion precludes coverage for the entirety of claims asserted against the company, even with respect to wrongful acts alleged to have taken place after the prior acts date. This case involves a number of twists and turns, while raising some important questions. Judge Montgomery’s June 4, 2019 opinion in the case can be found here. The Wiley Rein law firm’s June 20, 2019 post about the ruling on its Executive Summary Blog can be found here. Continue Reading
D&O Insurance: Thinking About the Invasion of Privacy Exclusion
As the number of Telephone Consumer Protection Act (TCPA) class actions has risen in recent years, one recurring question has been whether or not there is coverage under the defendant companies’ D&O insurance policies for these claims. The specific issue is whether or not D&O policy’s “invasion of privacy” exclusion precludes coverage for TCPA claims. In the latest ruling to address these issues, Southern District of Florida Judge Robin L. Rosenberg, applying Florida law, held that, in light of the specific allegations in the underlying TCPA action, coverage for the claim was precluded by the exclusion. Judge Rosenberg’s ruling is consistent with other rulings, but does also raise some interesting issues. Judge Rosenberg’s May 30, 2019 order can be found here. A June 7, 2019 post on the Wiley Rein law firm’s Executive Summary Blog can be found here. Continue Reading
Guest Post: Is it Really that Bad? Follow-On Offerings and Section 11 Suits in State Court
Priya Cherian Huskins
In a recent post, I took a look at the rise in the number of state court securities class action lawsuits that have been filed in the wake of the U.S. Supreme Court’s decision in the Cyan case. In the following guest post, Priya Cherian Huskins of Woodruff Sawyer & Co. takes a deeper look at the state court securities class action data to assess the extent of the threat of state court securities class action litigation relating to follow-on offerings. A version of this article was previously published in Woodruff-Sawyer’s D&O Notebook. I would like to thank Priya for her willingness to allow me to publish her article as a 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 Priya’s article. Continue Reading
Who is D&O Insurance For?
In an interesting opinion, the Fifth Circuit has set aside a settlement and related bar order that had been approved by the district court in litigation arising out of the Stanford Financial Ponzi scheme scandal. The appellate court said that the district court lacked authority to approve the settlement in light of several of its features, including its provisions cutting off the claims of several former Stanford Financial employees and managers to the defunct firm’s insurance policies’ proceeds. As discussed below, the circumstances surrounding the settlement raise serious questions about the intended purpose of D&O insurance. The Fifth Circuit’s June 17, 2019 opinion in the case can be found here. Continue Reading
Proposal for E.U. Collective Redress Mechanism Advances
As I have noted in prior posts, there has been in recent years a slowly developing E.U. initiative for the introduction of a rights of collective redress on a Union-wide basis. As discussed here, in April 2018, the European Commission introduced a proposal – as part of what it called a “New Deal for Consumers” – that would introduce a European collective redress right for consumers. More recently, on March 26, 2019, the EU Parliament, in plenary session, adopted the Commission’s proposal. The next step is that the Council of Europe will now take up the proposal, moving the E.U. one step closer toward the adoption of a pan-European collective redress mechanism for consumers that would be available in all of the member states. The March 26, 2019 application on which the EU Parliament acted can be found here. Continue Reading
The U.S. Securities Litigation Exposure of Non-U.S. Companies with Level I ADRs
I have been fortunate in recent years to be able to travel around the world and to speak to D&O insurance professionals in a wide variety of different countries. One recurring question I get in these meetings has to do with non-U.S. companies that have Level I American Depository Receipts (ADRs) trading in the U.S. The question is usually something along the lines of – “these Level 1 ADR companies don’t have U.S. securities litigation exposure, right?” This question always puzzles me, given the several high profile cases in recent years (discussed below) demonstrating that — while there may be an interesting question between sponsored and unsponsored ADRs — transactions in Level 1 ADRs certainly can be subject to the U.S. securities litigation. Continue Reading
Tribune Execs Must Contribute Personal Assets to $200 Million Settlement
Billionaire Sam Zell and other former executives of the bankrupt Tribune Company have reached a $200 million deal to settle the bankruptcy trustee’s adversarial claims against them arising out of the disastrous 2007 leveraged buyout (LBO) of the company. According to press reports about the settlement, the $200 million settlement amount will “significantly” exceed the company’s remaining D&O insurance; the settlement amount in excess of the remaining insurance is to be split among the various individual defendants. The settlement is subject to bankruptcy court approval. The trustee’s May 31, 2019 motion for court approval of the settlement can be found here. Jonathan Stempel’s June 12, 2019 Reuters article about the settlement can be found here. Continue Reading
D&O Insurance: Continuity of Coverage as a Counter to Late Notice
As anyone involved in the world of D&O insurance knows, a frequently recurring coverage issue is the question of whether or not the insured has provided timely notice of claim as required by the policy. These kinds of disputes takes a variety of forms, but one particular recurring variation involves the question whether or not the policyholder has satisfied the policy’s notice requirements when a claim is made against the policyholder during the policy period of one policy but the policyholder does not provide notice until the policy period of a subsequent renewal policy. That was the issue in a case recently decided by the Sixth Circuit Court of Appeals, in which the appellate court affirmed the district court’s holding that the policyholder’s provision of notice during the renewal policy of a claim made during a prior policy period did not satisfy the applicable notice requirements. Because this is a recurring claims issue, I have some thoughts and suggestions about this situation, below. The Sixth Circuit’s May 31, 2019 opinion in the case can be found here. Continue Reading
Chubb Sounds Securities Litigation Alarm, Calls for Reform
Regular readers of this blog know that the statistics surrounding U.S. securities litigation in recent years are nothing short of alarming, including, for example, both record numbers of lawsuits and record percentages of listed companies sued. Severity trends are concerning as well. All of these trends are exacerbated by the impact of the U.S. Supreme Court’s 2018 Cyan decision, which opens companies conducting securities offerings to multiple, conflicting lawsuits in state and federal court. Given these trends, it is hardly surprising that there have been renewed calls from business groups for securities class action litigation reform. Now, Chubb, a leading global insurer, has added its voice to the calls for reform. In an interesting June 11, 2019 paper entitled “From Nuisance to Menace: The Rising Tide of Securities Class Action Litigation” (here), the company details the extent of the current securities litigation mess and sets forth a number of proposals for securities litigation reform. Continue Reading
Mootness Fees: The Latest in the Merger Objection Litigation Phenomenon
One of the most significant phenomena in the world of corporate and securities litigation has been the rise of merger objection litigation. As has been well-documented, merger objection litigation reached the point in recent years that virtually every public company merger transaction drew at least one lawsuit. The circumstances surrounding merger objection litigation began to change after the Delaware courts evinced their displeasure with this kind of litigation in a series of rulings that culminated in the 2016 decision in Trulia, in which the court rejected the kind of disclosure only settlement that had characterized the resolution of these kinds of cases. Since then, the merger objection lawsuits have shifted to federal courts. Moreover, these cases, now in federal court, increasingly are not settled; rather, they are dismissed in exchange for the defendants’ willingness to pay the plaintiffs’ counsel a so-called “mootness fee.”
In a May 29, 2019 paper entitled “Mootness Fees” (here), Matthew Cain and Steven Davidoff Solomon of UC Berkley Law School, Jill Fisch of Penn Law School, and Randall Thomas of Vanderbilt Law School take a look at the recent rise of mootness fee dismissals in merger objection litigation. Their paper documents that the rise of mootness fee settlements has turned merger objection litigation into a process for a small number of lower tier plaintiffs’ firms to in effect extract a toll from companies involved in M&A transactions, largely without court scrutiny or even minimal disclosure requirements. The authors suggest a number of procedural mechanisms to try to provide some scrutiny and transparency over these kinds of settlements. Continue Reading
