Director and Officer Liability

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It is an idea that suddenly is all the rage – that companies should shake the Delaware dust off their feet and reincorporate elsewhere. Elon Musk has famously said, in the wake of the Delaware Chancery Court’s decision voiding his $55.8 billion pay package, that he will seek to reincorporate Tesla in Texas. (SpaceX, also a Musk company, has in fact already reincorporated in Texas.) The former Attorney General William Barr and another GOP official published a Wall Street Journal column arguing that Delaware’s courts are driving corporations away (as discussed here), and suggesting that companies increasingly will find it more attractive to be incorporated in Nevada or another state. Some companies have indeed left Delaware and reincorporated elsewhere – including not just SpaceX, but also TripAdvisor, for example. Why would a company change its state of incorporation from Delaware to another state? And with reference to the focus of  this blog, does a company’s redomestication from Delaware to another state have implications for the potential liability exposures of the company’s directors and officers?Continue Reading Does a Del. Corp.’s Reincorporation in Another State Reduce D&O Liability Exposure?

As reflected in my recent post, last week I attended the PLUS D&O Symposium in New York. The sessions were great, but based on some comments of various panelists, there are some items for follow-up – for example, references that panelists made that need to be checked out, items that panelists suggested we should pursue, and so on. I have run down these various items, and I link to them below. I emphasize that these items will be of interest even if you didn’t attend the Symposium. I have also included below several other items from around the Internet as well.Continue Reading PLUS D&O Symposium Follow-Up and Other Notes

Readers undoubtedly are aware that late last week the judge presiding over the New York civil fraud trial against Donald Trump, the Trump Organization and related entities, and various Organization’s executives (including two of Trump’s sons) entered a post-trial verdict against the defendants that, together with pre-judgment interest, exceeds $450 million in value. In making the award, the judge concluded that Trump and the other defendants had fraudulently misrepresented the Organization’s and Trump’s financial condition to banks, insurance companies, and public officials. Of interest to readers of this blog, among the allegedly fraudulent acts was the procurement of D&O insurance, as well as surety insurance, through alleged misrepresentations. As discussed below, there are several interesting things about the insurance part of the court’s verdict. A copy of the February 16, 2024, Decision and Order of New York (New York County) Supreme Court Justice Arthur F. Engoron can be found here.Continue Reading The Insurance Part of the Massive Trump Civil Fraud Verdict

Francis Kean

Portions of the U.K. Economic Crime and Corporate Transparency Act 2023 went into effect just after Christmas 2023. Who are the senior manager that the Act affects and how worried should they be? These are the questions Francis Kean, Partner in Financial Lines Team at McGill and Partners, asks in the following guest…

The directors’ and officers’ liability environment is always changing, but 2023 was a particularly eventful year, with important consequences for the D&O insurance marketplace. The past year’s many developments also have significant implications for what may lie ahead in 2024 – and possibly for years to come.  I have set out below the Top Ten D&O Stories of 2023, with a focus on future implications. Please note that on Thursday, January 11, 2024 at 11:00 AM EST, my colleagues Marissa Streckfus, Chris Bertola, and I will be conducting a free, hour-long webinar in which we will discuss The Top Ten D&O Stories of 2023. Registration for the webinar can be found here. I hope you can join us for the webinar.Continue Reading The Top Ten Stories in D&O of 2023

Mark Sutton
Leah Barratt

In the following guest post, the authors examine two specific provisions of the new U.K. Economic Crime and Corporate Transparency Act 2023. The two provisions the authors examine are the Act’s new corporate offense of “failure to prevent fraud” and the reformed “identification principle.” The authors of this guest post…

In a January 25, 2023, opinion in the McDonald’s case that has become known as McDonald’s I, Delaware Vice Chancellor Travis Laster held, as discussed in detail here, that liability for breach of the duty of oversight can extend to corporate officers as well as to directors. While there have been subsequent cases that have raised breach of the duty of oversight claims against officers, there have been no published decisions analyzing the duty of oversight as pertains to officers — that is, until now.

In a short December 14, 2023, opinion that emphasizes the high bar for oversight claims against officers, Vice Chancellor Lori Will dismissed claims that the personal transportation device company Segway brought against its former President. VC Will expressly rejected any suggestion that the standard to plead an oversight breach claim against a corporate officer is any lower than the high standards applicable to oversight claims against directors. A copy of VC Will’s opinion can be found here.Continue Reading Delaware Court: High Barrier for Oversight Claims Against Officers

On November 16, 2023, a jury convicted two executives of an appliance sales and distribution company for conspiracy and for failing to report a consumer product defect under the Consumer Product Safety Act (CPSA). According to the U.S. Department of Justice, the case represents the first-ever prosecution of corporate executives under the act. The DOJ’s November 17, 2023, press release about the prosecution can be found here. The Hyman, Phelps, & McNamara law firm’s November 28, 2023 memo about the prosecution can be found here.Continue Reading Execs Convicted in First-Ever Consumer Product Safety Reporting Prosecution

Here at The D&O Diary, we cover the liabilities of corporate directors and officers. Geopolitical concerns are not typically part of our beat. But as we all finish up the year and get ready to start 2024, geopolitical concerns are necessarily part of what we are worried about in the current climate. That is true as a general matter and within the specific context of this blog; as the evidence has shown this year, geopolitical concerns have translated into corporate and securities lawsuits, and there is plenty to worry about for next year as well.Continue Reading Geopolitical Issues and D&O Risk Exposure

By now, readers are well aware that ESG has become a politically divisive issue. In a series of variations on this theme, two conservative legal commentators, writing in a Wall Street Journal op-ed column, argue that ESG is a trojan horse for progressive political objectives that, if Delaware’s courts continue their current course, could cost the state its privileged position as the preferred jurisdiction for corporate organization. The November 25, 2023 Journal op-ed, which was written by former U.S. Attorney General William Barr and Washington Attorney and former Department of Labor official Jonathan Berry, and is entitled “Delaware is Trying Hard to Drive Away Corporations,” can be found here.Continue Reading Will Delaware’s Embrace of an “ESG Agenda” Cause Corporations to Flee?