Director and Officer Liability

2020 has been called “the year of the SPAC.” (2020 has been called a lot of other things as well, but for purposes of this blog post, I am going to focus on the SPAC-related issues.) The reason for the fanfare about Special Purpose Acquisition Companies (SPACs) is that there has been a wave of SPAC offerings this year, raising tens of billions of dollars of capital. While the rush to conduct SPAC offerings has at times started to feel like a stampede, there are in fact questions being raised about at least some SPAC transactions. As discussed below, there has been a series of recent lawsuits involving SPACs, and regulators have made it clear that they are concerned about some features of some SPAC transactions. These recent developments suggest that some trouble could be brewing in SPAC-Land.
Continue Reading Rain on the SPAC Parade?

California-based high technology firm Cisco Systems is the latest company to be hit with a racial diversity lawsuit, based on allegations that its directors breached their fiduciary duties to the company by failing to include an African-American on the company’s board, despite the company’s numerous statements about its commitment to diversity. Though this latest lawsuit is in many respects similar to the previously filed board diversity lawsuits, it does differ in that it was not filed by the plaintiffs’ firm that has filed most of these lawsuits and also because the lawsuit follows a pre-suit demand on Cisco’s board, by contrast to most of the prior suits where the plaintiffs had made no demand and instead argued demand futility. A copy of the complaint in the Cisco Systems action can be found here.
Continue Reading Cisco Systems Hit With Board Diversity Lawsuit

As readers know, directors and officers of both public and private companies face a number of sources of potential liability exposure that can in turn learn to claims against them. One area of potential D&O claims exposure that may not always be considered is the possibility that the individuals could face claims brought against them by their own company, as happened, for example, in the lawsuit that McDonald’s recently filed against its former CEO. The latest example of a case where a company has sued one of its former senior officials is the lawsuit filed earlier last week by General Motors against one of its former directors, based on allegations that the director leaked confidential information to a rival company and to the UAW, which, the company alleges, added billions to the company’s labor costs. The lawsuit, which is interesting in and of itself, also raises a number of interesting issues, as discussed below. A copy of GM’s complaint in the lawsuit can be found here.
Continue Reading GM Files Lawsuit Against One of Its Own Former Directors

Karen Boto
Mark Sutton

In the following guest post, Karen Boto and Mark Sutton of the Clyde & Co law firm take a look at the recent stories circulating in the press about the latest data leak concerning the FinCEN files and discuss the implications of these developments. I would like to thank Karen and Mark for allowing me to publish their 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 Karen and Mark’s article.
Continue Reading Guest Post: The FinCEN Files – No Hiding from Suspicious Activities

One of the focal points in the scrutiny that has followed in the wake of the current social justice movement has been the question of diversity at America’s companies, including the lack of diversity on corporate boards. Among other things, a number of boards of public companies lacking Black directors have been sued in a series of shareholders derivative lawsuits alleging that the board members violated their fiduciary duties by failing to live up to state diversity objectives, as discussed most recently. Now, in the latest example of this type of litigation, a plaintiff shareholder has filed a derivative lawsuit against the board of Monster Beverage Corporation, alleging that the directors breached their fiduciary duties and deceived investors by claiming to have diversity and inclusion programs while have no Black directors on the board. A copy of the complaint can be found here.
Continue Reading Monster Beverage Hit With Latest Board Diversity Lawsuit

In yesterday’s post, I noted that earlier this week, a plaintiff shareholder had filed a board diversity lawsuit against the Gap. Turns out, that the same day yet another company was also hit with a board diversity shareholder derivative lawsuit, this time involving the board of directors and Chief Executive Officer of the medical and industrial product company Danaher Corporation. The Danaher lawsuit is in many ways substantially similar to the prior lawsuits that have been filed against companies that have no African-Americans on their boards of directors; however, the Danaher lawsuit is the first filed against a company outside California (Danaher is based in the District of Columbia), and it was filed by a different law firm than the one that had filed all of the prior board diversity suits. The complaint in the Danaher action can be found here.
Continue Reading Yet Another Board Diversity Derivative Lawsuit, This Time Against Danaher’s Board

In the latest in a series of lawsuits against high-profile companies alleging that the companies’ boards lack African-American directors, a plaintiff shareholder has filed a shareholder derivative lawsuit against the board of directors of the clothing retailer, The Gap. The lawsuit is substantially similar to the lawsuits filed by the same plaintiffs’ law firm against Oracle (here), Facebook (here), Qualcomm (here), and NortonLifeLock (here). A copy of the lawsuit against The Gap’s board can be found here.
Continue Reading The Gap Hit with Board Diversity Derivative Lawsuit

The news that McDonald’s had filed a lawsuit against its former CEO, Stephen Easterbrook, to recoup severance compensation the company had paid Easterbrook, made the front page of the Wall Street Journal. The company contends that Easterbrook had only been terminated last November “without cause” – entitling him to a full severance package – because he had lied to investigators about the nature and extent of his relationship with company employees. The lawsuit contends — based on evidence of three additional sexual relationships Easterbrook had with company employees that only came to light this summer — that Easterbrook should have been terminated for cause. As discussed below, the lawsuit raises a number of interesting issues.  A copy of the company’s August 10, 2020 filing on Form 8-K about the lawsuit can be found here, and a copy of the complaint, which was attached to the 8-K, can be found here.
Continue Reading Thinking About McDonald’s Lawsuit Against its Former CEO

Cybersecurity firm NortonLifeLock became the latest company to be hit with a shareholder derivative lawsuit alleging that, despite company statements about its  commitment to diversity and inclusion, the company’s board and senior management lacks racial diversity. The NortonLifeLock lawsuit follows after substantially similar lawsuits – filed by the same law firm – were previously filed against Oracle (about which refer here), Facebook (here), and Qualcomm (here). A copy of the August 5, 2020 lawsuit against NortonLifeLock’s board can be found here.
Continue Reading NortonLifeLock Hit with Board Diversity Derivative Suit