Director and Officer Liability

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Samantha Wu

In prior posts, I have noted the series of U.S. securities class action lawsuits that have been filed recently against publicly traded companies in the cannabis business, including several Canadian companies. In the following guest post, Samantha Wu of the Bersenas Jacobsen Chouest Thomson Blackburn law firm in Toronto provides an overview of the unique exposures that directors and officers of Canadian cannabis companies face. A version of this article previously was published on the law firm’s website (here). I would like to thank Sam 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 Sam’s article.
Continue Reading Guest Post: Canadian Cannabis Companies’ Directors and Officers Face Unique Exposures

Liam Fitzpatrick

It is no secret that the current political environment is complicated – in the U.S., in the U.K., and around the world. The fraught political climate has important implications for companies and their directors and officers. In the following guest post, Liam Fitzpatrick takes a look at the repercussions for U.K. companies arising out of the present political circumstances there. Liam is Client Services Director at Mactavish. A version of this article  was published prior to the recent U.K. elections on the MacTavish website (here). I would like to thank Liam 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 blog’s readers. Please contact me directly if you would like to submit a guest post. Here is Liam’s article.
Continue Reading Guest Post: Keeping Your Company Safe in the Age of Populism

Earlier this year, in Marchand v. Barnhill, the Delaware Supreme Court underscored that boards that fail to establish oversight procedures for their company’s mission critical functions can be held liable for breach of their Caremark duties. In an October 1, 2019 decision in the Clovis Oncology Derivative Litigation, the Delaware Chancery Court provided further perspective on directors’ potential liability for breaches of the duty of oversight. The Chancery court held, citing Marchand,  that boards not only must be able to show that they have made good faith efforts to implement an oversight system, but that also that they monitor the system – particularly when a company operates in a highly regulated industry.  The Chancery Court’s October 1, 2019 decision in the Clovis Oncology Derivative Litigation can be found here.
Continue Reading Caremark Duties Include Duty Not Only to Establish Oversight Processes but Also to Monitor Them

Under the Delaware Chancery Court decision in the Caremark case, directors can be liable for failures in their oversight duties – that is, their duties to monitor the company and its functions. Lawsuits alleging a violation of the duty of oversight are notoriously challenging for plaintiffs. However, in the recent Marchand v. Barnhill case, the Delaware Supreme Court reversed the Chancery Court’s dismissal of a Caremark liability case and allowed the case to proceed against the board of an ice cream manufacturer that experienced a deadly listeria outbreak. Caremark liability cases remain difficult to plead and prove, but the Marchand decision nevertheless has important implications for director liability for breaches of their duty of oversight.
Continue Reading Recent Delaware Caremark Duty Decision Underscores Board Cyber and Privacy Liability Risks

The directors of companies have roles, responsibilities and potential liabilities. But who can be held liable as a director? That was the question that the Third Circuit recently answered in an interesting ruling in which the appellate court determined that board observers could not be held liable as directors or director equivalents under Section 11 for alleged registration misstatement misrepresentations. The decision raises some interesting considerations when it comes to directors and their roles. The Third Circuit’s July 23, 2019 decision can be found here.
Continue Reading Board Observers Not Subject to Section 11 Director Liability

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 Tribune Execs Must Contribute Personal Assets to $200 Million Settlement

One of the now-standard storylines about the global financial crisis is that despite all the chaos very few corporate executives were prosecuted and even fewer went to jail. However, rather than interpreting these circumstances to suggest that there was insufficient evidence to convict corporate executives beyond a reasonable doubt, some observers have decided that the problem was that there is something wrong with our criminal justice system.

One observer who has made a hobby horse out of these issues is the U.S. Senator and Presidential Candidate, Elizabeth Warren. Senator Warren has now introduced new legislation that would lower the standard of criminal liability for corporate executive. Among other things, the new legislation would make corporate executives criminally liable for mere negligence in certain circumstances, even in the absence of the degree of intent that has for centuries been viewed in our legal system as the indispensable basis for a criminal conviction. As discussed below, this legislation is not only a bad idea in terms of our country’s corporate competitiveness, it also threatens one of our legal system’s bedrock principles.
Continue Reading Senator Warren’s Proposed Executive Liability Legislation is Contrary to Legal Traditions