In several recent conversations, I have been asked whether I thought that the whole #MeToo movement might have more or less played out, and that we might not be seeing as many, or even any, more D&O claims based on underlying allegations of sexual misconduct. In response, I said that I didn’t think the phenomenon had played out but I did suggest that I thought that the phenomenon might be shifting and that the kinds of underlying allegations would change. Although it does not represent exactly the kind of thing I had in mind, a new securities class action lawsuit filed against Teladoc Health and based on alleged misconduct of one of its senior executives does at least represent a variant on the kinds of D&O claims following in the wake of allegations of sexual misconduct. Continue Reading
Nissan Chairman’s Arrest and Pay Disclosure Leads to U.S. Securities Suit
The high-profile November 18, 2018 arrest in Japan of Carlos Ghosn, the Chairman and former CEO of Nissan (and of several other car companies) on charges of misleading the Japanese government and investors about his compensation made the front pages of the world’s papers. Continuing revelations, including the recent indictment of Ghosn and other company executive, continue to roil the company. On December 11, 2018, an institutional investor and holder of U.S.-traded Nissan ADR’s initiated a securities class action lawsuit against the company. The lawsuit is interesting in and of itself but also with respect to how it reflects several recent securities litigation filing trends. Continue Reading
Dismissal Motion Denied in Sexual Misconduct-Related Securities Suit
One of the things that has happened in the wake of revelations of high-profile sexual misconduct as part of the #MeToo movement has been the rise of D&O litigation following after the revelations. However, this type of sexual misconduct follow-on litigation didn’t start with the rise of the #MeToo movement. Even before the #MeToo movement there were D&O lawsuits arising from sexual misconduct allegations. One of these earlier cases involved the retail jewelry chain Signet Jewelers. On November 26, 2018, Southern District of New York Judge Colleen McMahaon denied the defendants’ motion to dismiss in the case, in a ruling that may provide an interesting perspective on the many subsequent #MeToo follow on lawsuits. The November 26, 2018 opinion in the case can be found here. Continue Reading
SEC Enforcement Activity Against Public Companies Surges in FY 2018’s Second Half
In November, when the SEC released its annual enforcement activity report, the report showed that during the fiscal year that ended on September 30, 2018 both the volume of the agency’s enforcement activity and the level of financial recoveries increased compared to the prior fiscal year. The agency’s report did not separate out its enforcement activity involving public companies. However, a new report from the NYU Pollack Center for Law & Business and Cornerstone Research breaks out the enforcement numbers for public companies. The new report show that SEC enforcement actions against public companies and subsidiaries “jumped substantially” in the second half of FY 2018, reversing a decline in filings that began in the second half of 2017 and continued through the first half of 2018. Continue Reading
Guest Post: Ohio Now Accepts Bitcoin for Tax Payments; No Problem, Right?
John Reed Stark
Lost amidst all of the turmoil surrounding the dramatic swings in the value of digital currencies is that the original idea for these digital assets is that they might actually be used as exchange media, in place of traditional currencies. Whether or not someone might use cryptocurrency to, say, buy a cup of coffee at Starbuck’s, Ohio residents, at least, may now use bitcoin to pay their state taxes. In the following guest post, John Reed Stark, President of John Reed Stark Consulting and former Chief of the SEC’s Office of Internet Enforcement, takes a look at Ohio’s recent bitcoin move and reviews what it might mean – for Ohio, and in general. A version of this article previously was published on CybersecurityDocket.com. I would like to thank John for allowing me to publish his guest 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 John’s article. Continue Reading
Second Circuit: Excess D&O Policy’s Warranty Statement Exclusion Precludes Coverage
The Second Circuit recently took up the insurance coverage dispute arising out of the high profile enforcement action the SEC pursued against hedge fund Patriarch Partners and its CEO, Lynn Tilton. The district court had ruled that coverage under the firm’s third level excess D&O insurance policy for the expenses the firm incurred in defending the SEC action was precluded because the agency’s investigation preceded the policy’s “prior and pending” litigation date. The Second Circuit affirmed the district court, but not on the grounds on which the lower court had relied. Rather, the appellate court affirmed the district court ruling based on its conclusion that coverage was precluded under language in the warranty statement the firm submitted for the excess insurance policy. The opinion includes interesting discussion of the issues surrounding the warranty statement. The Second Circuit’s December 6, 2018 Summary Order in the case can be found here. Continue Reading
Guest Post: Private Capital Investment: Getting the Portfolio Company Covered Right
Jonathan Legge
Private Capital Investment is an increasingly important component of the global financial landscape. The increasing importance of Private Capital Investment raises a number of important issues, not the least of which are insurance-related issues. In a series of three posts, Jonathan Legge, a Senior Vice President at RT Pro Exec, will be taking a look at the key insurance issues relating to Private Capital Investment. The first of the three posts is published below. I would like to thank Jon for allowing me to publish his article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is Jon’s article. Continue Reading
D&O Insurance: No Coverage for Alleged Misconduct Not Undertaken in an Insured Capacity
One of the basic requirements in order for coverage to be triggered under a directors’ and officers’ liability insurance policy is that the misconduct alleged must have been undertaken by insured individuals in an “insured capacity” – that is, in their capacities as directors or officers of the insured entity. In a recent insurance coverage ruling, the Delaware Superior Court held that because the allegations against the insured individuals “arose out of” their involvement with entities other than the insured entity, there was no coverage for the individuals under their bankrupt company’s D&O insurance policy. The ruling underscores the importance of capacity issues in determining D&O insurance coverage and highlights the ways in which allegations of misconduct undertaken in multiple capacities can lead to complicated coverage questions. The Delaware Superior Court’s November 30, 2018 decision can be found here. Continue Reading
Guest Post: What Can the First GDPR Fines Tell Us?
Bill Boeck
As most readers undoubtedly are aware, the EU’s General Data Protection Regulation went into effect on May 25, 2018. Even though the regulation has only been in effect for a few months, regulators across Europe have already starting levying fines under the regulation’s provisions. In the following guest post, Bill Boeck takes a look at the fines that have been imposed so far and considers their implications. Bill is currently Senior Vice President and Insurance and Claims Counsel with the Lockton Companies. He is Lockton’s global leader for cyber claims and for the development of proprietary cyber wordings and endorsements. Bill also leads Lockton’s US financial lines claims practice. A version of this article previously was published on the Lockton Cyber Risk Update Blog. I would like to thank Bill for his willingness to allow me to publish his article on this site. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is Bill’s article. Continue Reading
Marriott Hit with Data Breach-Related Securities Lawsuit
When news of the recent massive data breach at Marriott began circulating late last week, a colleague emailed and asked me how long I thought it would take for a D&O lawsuit to be filed. I emailed back that I thought there would be a securities class action lawsuit before the end of business on Monday (December 3). Turns out, I didn’t give the plaintiffs’ lawyers nearly enough credit for haste. The plaintiffs’ lawyers managed to file a securities class action lawsuit against the company on December 1, 2018, just one day after Marriott announced the breach. The lawsuit is the latest example both of a data breach-related D&O lawsuit and an event-driven securities suit, as discussed further below. Continue Reading
