As I have detailed in a series of post on this blog (most recently here), over the last year plaintiffs’ lawyers have filed nearly 30 COVID-19-related securities class action lawsuits. While the plaintiffs’ lawyers’ have been quick to file these cases, it remains to be seen how the claims will fare. Indeed, in January, in the first case to reach initial pleading hurdles, the Court granted the defendants’ motion to dismiss (as discussed here). However, in a more recent ruling one of the first of the COVID-19-related securities suits to be filed, the Court has denied the defendants’ motion to dismiss in significant part. The February 16, 2021 opinion of Eastern District of Pennsylvania Judge Gerald J. Pappert in the securities lawsuit pending against Inovio Pharmaceuticals can be found here.
Continue Reading Dismissal Motion Largely Denied in COVID-19-Related Securities Suit Against Vaccine Company
Guest Post: 2020 Year in Review – Securities Litigation
2020 was an eventful year in the world of corporate and securities litigation. In the following guest post, attorneys from the Haynes and Boone LLP law firm take a look at the most important corporate securities litigation developments from 2020. A version of this article previously was published as a Haynes and Boone client alert. I would like to thank the authors 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 site’s readers. Please contact me directly if you would like to submit a guest post. Here is the authors’ article.
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Court Sustains Opioid-Related Duty of Oversight Breach Claims Against Cardinal Health Board
One issue I have been monitoring on this site recently is the apparent revival of claims against corporate directors and officers for breach of the duty of oversight. Up until now, my focus has been on developments in Delaware’s courts. However, a recent Ohio federal district court decision in an opioid-related derivative suit against the board of the pharmaceutical distribution firm Cardinal Health examined issues addressed sufficiency of breach the duty of oversight allegations under Ohio law.
In an interesting February 8, 2021 decision (here) highlighting the fact these issues are relevant under other states’ laws, Southern District of Ohio Judge Sarah D. Morrison denied the defendants’ motion to dismiss the plaintiff’s breach of the duty of oversight claims against the Cardinal Health board, although she granted the defendants’ motion to dismiss the plaintiffs’ claim for waste of corporate assets.
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Biotech Firm Hit With COVID-19-Related Securities Suit
It has been nearly a year since the coronavirus outbreak in the U.S. first led to widespread closures and disruptions. Throughout that time, plaintiffs’ lawyers have continued to file securities class actions and other claims against companies affected by the pandemic. On February 12, 2021, in the latest of these COVID-19-related securities lawsuits, a plaintiff shareholder filed a securities class action lawsuit against the biotechnology firm bluebird bio alleging that the company misrepresented the pandemic’s foreseeable impact on the company’s FDA application plans. A copy of the complaint can be found here.
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D&O Insurance Coverage Barred for Execs Not Acting in an Insured Capacity
Commercial enterprises sometimes are organized in complex structures consisting of multiple, legally separate legal entities. The legal separation between the various entities can be significant in a variety of ways. One particular context within which these separate legal identities can be very important is in the D&O insurance context, as the insurance may be structured to apply to specified entities (and therefore not to others).
In the D&O insurance context, the availability of coverage for individual directors or officers may depend on the entity within the structure on whose behalf the individuals were acting – that is, the coverage question will depend on the “capacity” in which the individuals were acting. A recent decision by the New York (New York County) Supreme Court Commercial Division highlights the importance of these capacity issues and underscores that the capacity in which an individual was acting can be coverage determinative. The court’s February 2, 2021 opinion can be found here.
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Micron Technology Hit with Board Diversity Law Suit
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.
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Securities Suit Alleges Failure to Disclose DOJ Investigation Before De-SPAC Transaction
Barely six weeks into the new year, there have already been (according to the SPACInsider website) 127 Special Purpose Acquisition Company (SPAC) IPOs so far this year — that is, in less than a month and a half, there have already been more than 50% of the number of SPAC IPOs as there were in all 52 weeks of the record-setting 2020 SPAC offering year. The SPAC IPO extravaganza has many implications, but unquestionably among the many related consequences is that following-on to the wave of SPAC offerings is the possibility that we are about to see an increase in SPAC-related litigation.
Anyone interested in seeing what this coming litigation might look like will want to take review the securities class action complaint filed last week in the Middle District of Tennessee against Clover Health Investments, a health services firm became a publicly traded company in January 2021 through reverse merger with a SPAC from the SPAC IPO class of 2020. The February 5, 2021 complaint, a copy of which can be found here, alleges that the de-SPAC transaction-related documents and disclosures failed to disclose, among other things, that the acquisition target company was the subject of a DOJ investigation.
Continue Reading Securities Suit Alleges Failure to Disclose DOJ Investigation Before De-SPAC Transaction
FedEx “NotPetya” Cyberattack Securities Suit Dismissed
In my recent annual round-up of the top stories in the world of D&O liability, I noted that among the key D&O issues is the possibility of claims against corporate directors and officers arising out of cybersecurity incidents. One of the more interesting cybersecurity-related D&O claims in recent years is the securities class action lawsuit a plaintiff shareholder filed against FedEx in connection with the company’s disclosures concerning the “NotPetya” virus cyberattack on its European operations. What made the lawsuit interesting is that it involved not the company’s disclosures at the time of the cyber incident but rather concerned the company’s subsequent statements about the company’s recovery from the attack and the attack’s longer-term impact on its finances, operations, and business strategy. In a February 4, 2021 opinion (here), Southern District of New York Judge Ronnie Abrams granted the defendants’ motion to dismiss the FedEx NotPetya securities lawsuit, with prejudice. As I discuss below, the opinion has some interesting lessons on the importance of precautionary disclosure.
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Delaware Court Addresses “Sprawling” Northrup Grumman D&O Insurance Coverage Dispute
It is not uncommon for coverage disputes to arise in connection with D&O insurance claims, but every now and then there is a coverage dispute so broad that it constitutes a veritable D&O insurance coverage curriculum. That was certainly the case in what a Delaware Superior Court judge called the “sprawling insurance coverage dispute” between a unit of Northrup Grumman and its predecessors-in-interest’s D&O insurers. The coverage dispute arose out of underlying claims relating to the 2015 merger of Alliant Techsystems, Inc and Orbital Sciences Corporation to form Orbital ATK, Inc. The court’s lengthy opinion on the parties’ cross-motions for summary judgment and for judgment on the pleadings covers a wide variety of recurring D&O insurance coverage issues and makes for interesting reading for anyone involved with D&O insurance. The Delaware Superior Court’s February 2, 2021 opinion in the Northrup Grumman case can be found here.
Continue Reading Delaware Court Addresses “Sprawling” Northrup Grumman D&O Insurance Coverage Dispute
Del. Chancery Court: Caremark Claims Against MoneyGram Board Not Sustained
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.
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