The changes and disruptions caused by the COVID-19 pandemic continue to roil companies’ business operations and financial results. The pandemic’s effects, and the ensuing shifts in business operations and strategic decision-making, are also in some instances continuing to result in securities class action litigation. In the latest example of these phenomena, a plaintiff shareholder has filed a securities suit against the mental health care service provider LifeStance Health Group, Inc. and certain of its executives. The complaint alleges that the Registration Statement prepared in connection with the company’s June 2021 IPO did not adequately disclose the impact on the company’s operations and finances from the lifting of the government stay-at-home orders and did not disclose the pandemic’s impact on the company’s physician workforce. A copy of the August 8, 2022 complaint against the company can be found here. Continue Reading Mental Health Services Company Hit with Post-IPO COVID-Related Securities Suit
One of the perennial D&O insurance coverage issues is the question of whether or not two or more claims are or are not interrelated. Under the operation of provisions typically found in most D&O insurance policies, if two or more claims are interrelated within the meaning of the policy, they are deemed to be a single claim that was first made when the first of the claims was filed. This seemingly technical determination can have important implications because it controls whether only one or whether multiple insurance towers apply to the claims. A recent ruling in a coverage dispute in the Western District of Washington provides interesting insight into the kinds of problems relatedness disputes can present. It is also an interesting example of a case in which even though there undoubtedly were overlaps between two claims, the court ultimately determined that the claims were unrelated for D&O insurance coverage purposes. The court’s August 8, 2022 opinion in the case can be found here. Continue Reading D&O Insurance: Two Claims Involving Pre-IPO Transactions Found Not Related
The hot topic in the financial press, the corporate world, and the legal arena these days is “ESG.” This portmanteau expression – ESG — is meant to encompass a plethora of diverse and unrelated concepts, ideas, and concerns. The reality is that it is hard to say simply what “ESG” means; and not just “ESG,” but each of the three pillars, E, S, and G, are subject to the same definitional imprecision. Yet everyone continues to act as if “ESG” is a known, specific, and identifiable thing, that can be measured and assessed. The result is a false sense of precision, and a great deal of very sloppy thinking.
These issues are well-discussed in Cydney Posner’s August 8, 2022 post on the Cooley law firm’s Pubco blog, entitled “What’s Wrong with ESG Measures?” (here). Posner’s article discusses in the detail the recent research paper issued by the Rock Center for Corporate Governance at Stanford University entitled “ESG Ratings – A Compass Without Direction” (here). Continue Reading Zeroing In On The Problem With “ESG”
Late last month, when Cornerstone Research released its report on securities class action lawsuit filings in the year’s first six months, it noted that an important first half development was the significant number of suits filed against cryptocurrency and other digital asset-related companies. The recent rise in the number of crypto-related securities suits undoubtedly is related at least in part to the turmoil in the marketplace for digital assets. Last week, the cryptocurrency exchange Coinbase became the latest digital asset company to get hit, as a plaintiff shareholder filed a securities class action lawsuit against the company and certain of its directors and officers. A copy of the complaint can be found here. In addition to the securities lawsuit, the same day a separate plaintiff shareholder filed a shareholder derivative lawsuit against the company as well. The derivative lawsuit complaint can be found here. Continue Reading Coinbase Hit with New Securities Suit and Derivative Suit
As I have previously noted (here), even though the parties to the consolidated First Energy derivative litigation pending in the Southern District of Ohio reached an agreement to settle the case for a payment of $180 million and the company’s agreement to adopt governance reforms, Northern District of Ohio Judge John Adams has tried to force the plaintiffs’ lawyers to continue to pursue the separate case pending in his court, notwithstanding the settlement. Now, as Alison Frankel reported in a July 15, 2022 post in her On the Case blog (here), Judge Adams has followed through on his threat to boot the plaintiffs’ lawyers and replace them with lawyers that will pursue the case in his court. At first no prospective replacement lawyers appeared. But now, of all things, the famed litigator David Boies has stepped forward to propose his firm as counsel to take over the case in the Northern District of Ohio. All of this comes just as the settlement proceedings in the Southern District of Ohio are about to come to a head. Continue Reading FirstEnergy Derivative Suit: Cycle of Post-Settlement Weirdness Continues to Unspool
According to the latest statistics from SPACInsider, there are currently over 580 SPACs seeking merger partners. Financial media reports have already speculated that many of the searching SPACs may not find a suitable merger partner within the applicable search period. One concern from this combination of circumstances is that some SPACs may feel pressure to do whatever they have to do to complete a deal, any deal. As I have noted in prior posts, deals completed under these kinds of circumstances can later subject the SPAC managers to scrutiny and perhaps even litigation.
In a Delaware Chancery Court lawsuit brought by former public shareholders of a SPAC against the former directors and officers of the SPAC and others alleging that the SPAC officials, in their push to complete a deal, misrepresented the target company as a U.S.-based manufacturer of electric vehicles, when, the plaintiff shareholders allege, the company was in fact just a vehicle dealer that buys Chinese electric vehicles that the company rebrands as its own. As discussed below, this new lawsuit may illustrate one of the kinds of circumstances in which many of the currently searching SPACs could fall. Continue Reading SPAC Execs Allegedly Misrepresented Target Company’s Business to Complete Deal
The number of securities class action lawsuit filings in the first half of 2022 was up slightly compared to the number of filings in the second half of 2021, according to a new report from Cornerstone Research. The report, which is entitled “Securities Class Action Filings: 2022 Midyear Assessment,” contains extensive analysis of the first half 2022 filings, including in particular some interesting discussion about SPAC-related securities litigation. The report itself can be found here. Cornerstone Research’s July 27, 2022 press release about the report can be found here. Continue Reading Cornerstone Research: First Half Securities Suit Filings Up Slightly Compared to Second Half 2021
In this guest post, Frank Hülsberg and Burkhard Fassbach take a look at a recent Reuters special report about the use of cyber hacking and other espionage techniques in litigation and consider the D&O liability and insurance implications. Frank Hülsberg is a Chartered Accountant and Tax Advisor in Düsseldorf, Partner Advisory and Member of the Executive Board at Grant Thornton AG Wirtschaftsprüfungsgesellschaft in Germany, and Burkhard Fassbach is a D&O-lawyer in private practice in Germany. I would like to thank Frank and Burkhard for allowing me to publish their 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 Frank and Burkhard’s article. Continue Reading Guest Post: Spy Phishing Attacks Against Lawyers and Litigants
In the following guest post, Sarah Abrams, Head of Professional Liability Claims at Bowhead Specialty Underwriters, takes a look at the implications for D&O insurers of the growing investment interest of private equity firms in the healthcare sector. I would like to thank Sarah for allowing 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 Sarah’s article. Continue Reading Guest Post: As Private Equity Healthcare Investments Grow, Will D&O Liability Exposure Increase?
Many D&O insurance programs consist of multiple layers of insurance arranged with a layer of primary insurance and one or more layers of excess insurance. In order to ensure that the insurance in the program operates consistently and uniformly, the excess insurance is usually written on a so-called “follow form” basis, meaning that the excess insurance incorporates the primary’s policy’s terms and conditions, subject to any express provisions in the excess policy to the contrary. A recent case from the Court of Appeal for Ontario considered the meaning and impact of excess follow form coverage in the context of a dispute over whether a policyholder could exercise an option to purchase extended reported period coverage from its excess insurer. The decision, while arguable unremarkable in and of itself, nevertheless may have some important lessons for excess insurers. A copy of the Ontario Appeal Court’s July 13, 2022 decision can be found here. Continue Reading Thinking About Follow-Form Excess Insurance