Director and Officer Liability

Last summer and early fall there was a rash of shareholder derivative lawsuits – mostly filed in California, mostly filed against tech companies – based on allegations that the target companies’ boards had breached their duties by failing to include African American board members. The filings of these kinds of lawsuits trickled off after the California legislature adopted a bill requiring companies based in California to meet specified board diversity requirements. However, if a recent lawsuit filied is any indication, the board diversity lawsuit filing trend may not have entirely played out after all.

On February 9, 2021, a plaintiff shareholder launched a new board diversity lawsuit, this time against the board of Micron Technology. As discussed below, this most recent lawsuit is different than the earlier lawsuits in certain key ways. A copy of the complaint against the Micron Technology board can be found here.
Continue Reading Micron Technology Hit with Board Diversity Law Suit

As I have noted in prior posts, there has been a recent renewed focus among observers of Delaware corporate case law development on breach of the duty of oversight claims (sometimes called Caremark claims in reference to the initial Court of Chancery decision elaborating on the duty of oversight). Indeed, at least one academic commentator has suggested, based on a series of Delaware court rulings during 2019-2020, that we have entered a “new era” of Caremark claims.

But though there have been a number of high profile cases in which breach of the duty of oversight claims have been sustained, a recent Delaware Court of Chancery decision underscores the fact that the pleading hurdles for these types of claims are still substantial, and, indeed, as discussed below, at least one set of commentators has suggested that this most recent decision raises the question whether the pleading bar for these types of claims has changed at all. The Delaware Court of Chancery’s December 31, 2020 decision in Richardson v. Clark can be found here.
Continue Reading Del. Chancery Court: Caremark Claims Against MoneyGram Board Not Sustained

In a recently recorded PLUS podcast, Willis Tower Watson’s Rob Yellen and I examine the potential impact of the new Presidential administration on the world of corporate directors’ and officers’ liability. Rob and I are joined in the podcast by John Fielding, who is Chubb’s Senior Vice President and General Counsel, Global Government and Industry

One of the more noteworthy recent developments in corporate and securities litigation has been the resurgence of Delaware law “duty of oversight” claims, as I noted in my recent annual round-up of D&O liability issues. Delaware courts have sustained several of these kinds of “Caremark duty” claims, which until recently were distinctly disfavored – which raises the questions of why these claims are now proving viable, and whether the renewed risk of duty of oversight claims is here to stay? In a December 2020 paper entitled “A New Caremark Era: Causes and Consequences” (here), Professor Roy Shapira of IDC Herzliya Radzyner Law School identifies what he believes to be the causes of the recent revival of duty of oversights, and presents his view that the changes are here to stay. Professor Shapira’s views are summarized in a January 18, 2021 post (here) on the Harvard Law School Forum on Corporate Governance.
Continue Reading A “New Era” of Caremark Claims?

The directors’ and officers’ liability environment is always changing, but 2020 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 2021 – and possibly for years to come.  I have set out below the Top Ten D&O Stories of 2020, with a focus on the future implications. Please note that on Wednesday, January 13, 2021 at 11:00 AM EST, my colleague Marissa Streckfus and I will be conducting a free, hour-long webinar in which we will discuss The Top Ten D&O Stories of 2020. Registration for the webinar can be found here. I hope you will please join us for the webinar.
Continue Reading The Top Ten D&O Stories of 2020

The board of directors and several executives of Pinterest have been hit with a shareholder derivative lawsuit brought by an institutional investor alleging that the defendants breached their fiduciary duties by causing or permitting the company to engage in a pattern of race and gender discrimination and retaliation, harming the company’s reputation and workforce. As discussed below, the Pinterest lawsuit is the latest in a series of lawsuits alleging that companies’ boards have violated their duties to their companies or the companies’ shareholders with respect to their oversight of diversity, equity and inclusion issues.
Continue Reading Pinterest Board Hit with Derivative Suit Based on Race and Gender Discrimination Allegations

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