Director and Officer Liability

A recent judicial ruling out of the U.K. provides an interesting perspective on directors’ duties under applicable law when a bankrupt company is in liquidation. As discussed below, the Court held that a director’s duties continue in relevant respects even if the director’s powers cease as of the date of the bankruptcy filing. The circumstances of the case provide an interesting example of a claim that arose against a former director post-liquidation. As discussed below, the circumstances also provide an illustration of why the purchase of post-liquidation run-off coverage is advisable. Though the circumstances arose under U.K. law, the situation bears enough similarities to what might arise under equivalent U.S. law that the liability and insurance lessons are instructive even in the U.S. context.
Continue Reading Directors’ Duties in Insolvency and the D&O Insurance Implications

Eric C. Scheiner
Jennifer Quinn Broda

The long-standing and traditional view is that corporations’ objectives should be to maximize shareholder value. More recently, a variety of commentators and observers have argued that corporations have larger social responsibilities. However, as discussed in the following guest post from Eric C. Scheiner and Jennifer Quinn Broda, efforts by companies to fulfil corporate social responsibilities may involve their own risks and even result in D&O claims. By the same token, failing to take action could result in claims as well. These trends have important implications for insurers and for policyholders alike. Eric is a Partner and Jennifer is Of Counsel in the Chicago office of Kennedys. I would like to thank Eric and Jennifer 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 Eric’s and Jennifer’s article.
Continue Reading Guest Post: Potential D&O Risks Arising from Corporate Social Responsibility

On my beat here at The D&O Diary, I cover the liabilities of corporate directors and officers. One objection I frequently hear is that I focus too much public companies and not enough on private companies. The reason I write about public company issues more than private company concerns is that the public company world usually is more eventful. However, every now and then, something comes up involving a privately-held company that reminds all of us that plenty happens in the private company D&O world, too. The most recent example is the shareholder derivative and class action lawsuit filed last week against executives of the electronic cigarette company, Juul Labs. As discussed below, this new lawsuit highlights the exposures that private company directors and officers can face and underscores the fact that even private companies can get hit with shareholder class action lawsuits.
Continue Reading Private Company Directors and Officers Hit with Shareholder Class Action Lawsuit

The liability environment for directors and officers is always in a state of change, but 2019 was a particularly eventful year in the D&O liability arena, with important consequences for the D&O insurance marketplace. The past year’s many developments have significant implications for what may lie ahead in 2020 – and possibly for years to come, as well.  I have set out below the Top Ten D&O Stories of 2019, with a focus on the future implications.
Continue Reading The Top Ten D&O Stories of 2019

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