Ninth Circuit Decries Consideration of Extraneous Matter, Reverses Securities Suit Dismissal

The motion to dismiss phase is a critical stage in the life cycle of a securities class action lawsuit. If a case survives the dismissal motion, it likely will move toward settlement, as so few cases actually go to trial. The motion to dismiss in intended to test the sufficiency of the allegations in the plaintiff’s complaint. According to the rules, the court’s inquiry should be limited to the matter within the complaint. However, over time, rules have developed permitting courts to consider matter from outside the complaint, pursuant to the doctrines of judicial notice and incorporation by reference.

 

In a detailed August 13, 2018 opinion in which it largely reversed the dismissal of securities class action lawsuit involving the developmental stage pharmaceutical company Orexigen Therapeutics, the Ninth Circuit noted a “concerning pattern in securities cases” in which “overuse” of the doctrines has resulted in improper dismissal of securities suits at the pleading stage based on extraneous matter. The Ninth Circuit’s analysis of the judicial notice and incorporation by reference doctrines is interesting and could have a significant impact on courts’ consideration of matter outside of the complaint in future cases. The Ninth Circuit’s opinion in the Khoja v. Orexigen Therpeutics case can be found here. Continue Reading

Ontario Court Rejects “Jurisdictional Overreach” for Canadian Securities Suits

Flag of Ontario

There was a time only a few short years ago when the U.S. courts were the preferred forum for the litigation of securities class actions claims, arguably even claims whose relationship to the U.S. and to U.S. laws was slight. The U.S. courts role as preferred forum for securities suits was undermined by the U.S. Supreme Court’s 2010 decision in Morrison v. National Australia Bank, which underscored the fact that the U.S. securities laws apply only to domestic U.S. securities transactions. Since Morrison, a free-ranging inquiry has emerged to determine whether another country’s courts might emerge as the preferred forum for cross-border securities suits.

 

Among other countries, Canada has emerged as a candidate. However, a recent decision by Court of Appeal of Ontario examining the jurisdictional reach of Ontario’s securities laws expressly rejects the possibility that Ontario (where the bulk of Canadian securities suits are filed) “would become the default jurisdiction for issuers around the world.”  The Court of Appeal’s July 11, 2018 decision in Yip v. HSBC Holdings can be found here. An August 9, 2018 memo from the Toronto-based Blake, Cassels & Graydon law firm can be found here. Continue Reading

Tesla Investors File Securities Suits Over Elon Musk’s Take-Private Tweets

I have long thought that it was only a matter of time before somebody filed a securities class action lawsuit based on disclosures made through social media. I knew we were going to see that lawsuit someday or other. Well, the day has arrived. On Friday, August 10, 2018, two Tesla investors each filed separate securities class action lawsuits against Tesla, Inc. and its Chairman, CEO, and largest shareholder, Elon Musk, based on Musk’s tweets last Tuesday that he was considering a take-private deal for which he had “secured” funding and that only shareholder approval was required for completion of the deal. As discussed below, there are a host of interesting things about the lawsuit and about the surrounding circumstances. Continue Reading

Guest Post: Merger Objection Lawsuits Getting Tougher for Plaintiffs’ Attorneys

As I have previously noted on this blog, merger objection litigation imposes significant costs on the defendant companies and their insurers. In the following guest post, Patrick Gallagher of the integrated communications and investor relations firm Dix & Eaton takes a look at recent developments in the merger objection litigation arena. I would like to thank the author for allowing me to publish the article as a guest post on this site. It was originally published on the Dix & Eaton Blog. 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. Pat’s guest post follows below. Continue Reading

Crime Policy Doesn’t Cover Employee Credit Card Overcharge Losses

A recent coverage dispute involving a Nevada club’s losses resulting from its employees’ theft from the club’s customers’ credit cards raises interesting issues with implications for coverage questions for other kinds of losses for which policyholders are seeking crime policy coverage. In the recent Nevada club credit card fraud case, District of Nevada Judge Andrew Gordon held that the club’s crime policy did not cover the club’s losses from the employees’ theft of funds from the customers’ credit card accounts because the losses did not result directly from the employees’ theft. Judge Gordon’s August 6, 2018 opinion can be found here. An August 7, 2018 post on the Wiley Rein law firm’s Executive Summary Blog about Judge Gordon’s opinion can be found here.    Continue Reading

Three U.K. Insurers Hit with Complaints Over Alleged Climate Change-Related Disclosure Omissions

For some time, I have been arguing that climate change-related disclosure is going to be an increasingly hot button issue. Among other things, I have long believed that advocacy groups will attempt to use disclosure-related issues as a way to try to draw attention to climate change policies. On August 2, 2018, in the latest example of advocacy groups focusing on climate change-related disclosures, the non-profit legal group Client Earth filed complaints with the U.K. Financial Conduct Authority (FCA) against three different U.K. insurers. The legal group contends that the insurers’ annual reports failed to meet the requirements of the Disclosure Guidance and Transparency Rules due to the absence in the reports of any climate change-related disclosures. Continue Reading

What to Talk About When You Talk About D&O Insurance

Perhaps because of my many years in the D&O insurance business, I am frequently approached by younger insurance agency and insurance brokerage professionals who are thinking about trying to concentrate on D&O insurance as product specialty. I generally encourage this idea, as I think that D&O insurance is an interesting industry space that still provides a lot of worthwhile opportunities. But the younger professionals who approach me are looking for more than just a few words of encouragement. They are also looking for advice and information. They are not always sure what in particular they are looking for when they approach me, but I know after many of these conversations one thing they usually need – that is, they need to know what to talk about when they talk about D&O. Continue Reading

Insurer Seeks Rehearing of Ruling That Payment Instruction Fraud is Covered

The insurer on the receiving end of the recent Sixth Circuit ruling that the a payment instruction fraud loss is covered under the Computer Fraud section of a Commercial Crime policy has filed a petition for rehearing or rehearing en banc. In its July 27, 2018 petition (here), the insurer contends that in its decision, the Sixth Circuit’s analysis was at odds with its own prior precedent, and as a result the appellate court applied the wrong causation analysis in determining whether or not the fraudulent email “directly” caused the loss of the policyholder, American Tooling Center (ATC). Continue Reading

Del. Supreme Court Holds Settlement Amounts Not Uninsurable Disgorgement

A coverage defense that insurers frequently raise is the assertion that the amount for which the insurance payment is sought represents uninsurable disgorgement. Beyond the more general question of whether or not disgorgements are or are not insurable is the more specific question of whether or not the amount for which coverage sought represents disgorgement. In an interesting July 30, 2018 opinion in a case involving the investment firm TIAA-CREF, the Delaware Supreme Court, applying New York law, rejected the firm’s insurer’s argument that the amount the firm paid in settlement of three underlying class action lawsuits represented uninsurable disgorgement. The Court expressly distinguished a series of three decisions in which New York courts had ruled that settlement amounts paid in settlement of regulatory enforcement actions represented uninsurable disgorgement. The Delaware Supreme Court’s July 30, 2018 order can be found here. Continue Reading

Dutch Court Declares Largest-Ever European Investor Claims Settlement Binding

On July 13, 2018, the Amsterdam Court of Appeals finally approved the €1.3 billion ($1.5 billion) settlement of a series of shareholder claims against Fortis in the wake of the global financial crisis. The settlement, which had first been announced in March 2016 by Ageas, Fortis’s successor in interest, faced a number of judicial objections and concerns, resulting in changes to the settlement as originally proposed. According to a July 27, 2018 Law 360 article by Jonathan Richman of the Proskauer law firm and Ianika Tzankova of Tilburg University (here), the court’s recent approval “again shows” that the Dutch settlement procedure “remains a viable settlement vehicle for companies wishing to resolve transnational problems on a classwide, opt-out basis.” On the other hand, claimants’ attorneys have questioned whether the court’s rulings on class distribution and attorneys’ fees could discourage institutional investors from seeking to use the Dutch settlement procedures. Continue Reading

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