Readers of this blog know that one of the litigation risk management steps well-advised companies are taking in the current litigation environment is the adoption of forum selection bylaws, including, in particular, bylaws specifying a particular forum for the consideration of shareholders’ derivative suits. In a series of recent decisions, federal courts have reviewed these bylaws. In the following guest post, Melanie Saponara, Claims Manager – Executive Risk, Beazley, and Sarah Voutyras, Partner, Skarzynski Marick & Black LLP, take a look at recent federal appellate court developments on this issue and consider the implications. I would like to thank Melanie and Sarah 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 the authors’ article.
Continue Reading Guest Post: Can Exclusive Derivative Forum Selection Provisions Survive Ninth Circuit’s En Banc Review?
In the latest development in the long-running FirstEnergy bribery-related derivative lawsuit settlement saga, a federal judge has granted final approval to the proposed settlement in the consolidated action pending in the Southern District of Ohio, albeit while reducing the amount of the plaintiffs’ fee award. The parties will now, with the benefit of the final settlement approval, turn to the Northern District of Ohio, where an unconsolidated parallel action remains pending, and where the presiding judge has recently appointed new counsel to prosecute the separate action. In a rational and orderly world, the separate proceeding in the Northern District of Ohio would be dismissed. However, under the actual conditions, anything could happen.
As I have previously noted (
As I detailed in blog posts at the time, the parties to two separate shareholder derivative lawsuits in recent months announced what were among the largest derivative suit settlements – the massive $300 settlement in the Renren derivative lawsuit and the $180 million settlement in the FirstEnergy derivative lawsuit. Though the settlements in each of these two cases were announced to great fanfare, both settlements, for separate reasons, ran into procedural roadblocks. There have now been further developments in each of these cases – the Renren settlement appears to be back on track, while the federal district judge presiding over one of the unconsolidated FirstEnergy derivative suits continues to throw up roadblocks, as discussed below.
In a series of opinions beginning with the Delaware Supreme Court’s 2019 decision in Marchand v. Barnhill, Delaware courts have sustained a number of so-called “Caremark” claims based on the defendant board members’ breach of their duty of oversight. The courts have denied motions to dismiss in cases where the boards failed to act despite “red flags” alerting them to problems. But what happens if the “red flag” that alerts the board to a problem is a litigation demand letter submitted by a prospective claimant seeking to have the board take up litigation because of problems identified in the letter? In an interesting and troubling May 24, 2022 decision, Vice Chancellor Travis Laster sustained a claim based on these kinds of allegations, accepting what he called a “novel theory” with “admitted trepidation.” Though Laster sought in his opinion to contain some the more “disquieting” implications of this ruling, there is now at least a theoretical basis on which future prospective claimants could argue that a board’s rejection of a litigation demand letter could itself give rise to a separate breach of fiduciary duty claim.
In what is one of the largest ever shareholder derivative settlements, the parties to the Cardinal Health opioid-related shareholder derivative litigation have agreed to settle the suit for $124 million. The Cardinal Health settlement, which is subject to court approval, is the latest massive settlement of opioid-related derivative litigation. It also represents another example of a massive settlement of a breach of the duty of oversight claim. The settlement is to be funded entirely by Cardinal Health’s D&O insurers. A copy of the plaintiffs’ May 25, 2022 unopposed motion for preliminary approval of the settlement can be found 
Last month, when I 
As readers of this blog know, the various board diversity lawsuits that the plaintiffs’ lawyers filed in late 2020 and early 2021 have uniformly fared poorly in the courts. In the latest dismissal motion ruling in one of these suits, the court in the board diversity suit filed against the directors of Cisco Systems has granted the defendants’ motion to dismiss, albeit without prejudice. The court’s ruling in the Cisco Systems board diversity suit is noteworthy because the court addressed the merits of the plaintiff’s Section 14(a) claims. A copy of the court’s March 1, 2022 dismissal order can be found 
In what is one of the largest shareholder derivative lawsuit settlements ever, the parties to the various FirstEnergy bribery-related derivative lawsuits have reached an agreement to settle the actions for a payment of $180 million and the company’s agreement to adopt a number of corporate governance reforms. The settlement amount is to be funded by D&O insurance. The settlement agreement is subject to court approval. First Energy’s February 10, 2022 announcement of the settlement can be found 
In my