One of the features of the Coronavirus Aid, Relief and Economic Security Act (CARES Act) is the Paycheck Protection Program (PPP), which is intended to make governmental funds available in the form forgivable loans so that small businesses can keep employees on their payroll. The CARES Act was passed in a rush and the PPP funds were dispersed in a hurry, so it is hardly a surprise that some problems might emerge. The U.S. Department of Justice has already said that as a result of a preliminary inquiry, the agency has already found possible fraud among the businesses seeking PPP funds. As discussed below, the possibility of further PPP investigative, regulatory, and enforcement actions raises a number of questions.
Continue Reading Next Up: PPP Investigations, Enforcement Actions, and Criminal Proceedings?
Another Delaware Breach of the Duty of Oversight Case Survives Dismissal Motion
Although Delaware’s courts recognized a cause of action for directors’ breach of the duty of oversight in the 1996 Caremark decision, claims against directors based on alleged oversight duty breaches have long been seen as difficult to plead and prove. However, in two 2019 rulings – the Marchand v. Barnhill decision (discussed here) and the Clovis Oncology decision (discussed here) – Delaware courts allowed breach of the duty of oversight claims to proceed. Now in a more recent ruling, the Delaware Court of Chancery has allowed yet another duty of oversight claim to proceed.
As noted in a May 1, 2020 post on the Duane Morris Delaware Business Law Blog (here), the most recent Delaware duty of oversight ruling reinforces the view that “directors and officers who neglect their oversight responsibilities may be personally liable for resulting harm to the company and its stockholders.” The Delaware Court of Chancery’s April 27, 2020 decision in Hughes v. Hu can be found here.
Continue Reading Another Delaware Breach of the Duty of Oversight Case Survives Dismissal Motion
LabCorp Board Hit with Derivative Suit Over Third-Party Service Provider’s Data Breach
With coronavirus-related developments consuming all of the attention these days, it might be easy to forget other unrelated claims trends are continuing to develop and unfold. One important pre-pandemic trend that has continued to develop is the rise of D&O claims arising out of cybersecurity incidents. In the latest sign that this claims trend remains important, a plaintiff shareholder has filed a derivative lawsuit against certain directors and officers of Laboratory Corporation of America, in connection with two cybersecurity incidents involving the company. As detailed below, the first of these two incidents involved a data breach that took place at one of LabCorp’s third-party service providers. A copy of the complaint, filed in Delaware Chancery Court on April 28, 2020, can be found here.
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Healthcare Software Services Company Hit with COVID-19 Related Securities Suit
In what is the fifth coronavirus outbreak-related securities class action lawsuit to date, a plaintiff shareholder has filed a securities class action lawsuit against a healthcare information software services company. The lawsuit is based on alleged misrepresentations the company allegedly made with respect to a contract the company had entered for the sale of COVID-19 test kits. The company’s share price rose on news of the agreement, but later fell following an online report raising questions about the agreement. The plaintiff’s April 29, 2020 complaint can be found here.
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Guest Post: Beware the Unexpected Consequences of “Standard” D&O Exclusions
In the following guest post, Francis Kean takes a look at the potential impact on COVID 19-related claims of standard D&O insurance policy exclusions. Francis is a Partner, Financial Lines, at McGill and Partners. A version of this article previously was published as a McGill client alert. I would like to thank Francis for allowing me to publish his article 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 Francis’s article.
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SEC Files First COVID-19 Related Enforcement Action
The SEC has made it clear that it will be monitoring market activity related to the coronavirus outbreak. The agency’s Chairman and others have declared that they expect companies to be forthcoming about the impact of the pandemic on company operations and finances, and underscored the fact that the agency will be watching. On April 24, 2020, the agency announced that it had formed a COVID-19 market monitoring group. And on April 28, 2020, the agency brought what as far as I know is its first coronavirus outbreak-related enforcement action, when it filed an action against a penny stock company Praxsyn Corporation and its CEO for public claims about the company’s claims about its ability to acquire and distribute N95 face masks. A copy of the SEC’s complaint can be found here. The SEC’s April 28, 2020 press release about the enforcement action can be found here.
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Guest Post: Eighth Circuit on Target on Appeal
In the following guest post, Tim Hoeffner and Paul Ferrillo of the McDermott Will & Emery law firm take a look at the Eighth Circuit’s April 10, 2020 decision in the Target Corporation securities class action lawsuit, in which the appellate court affirmed the lower court’s dismissal of the case. I would like to thank Tim and Paul for allowing me the opportunity 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 Tim and Paul’s article.
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In Lieu of D&O Insurance, Musk Agrees to Provide Tesla with “Coverage”
Readers know that I have been following the SEC enforcement action and the securities class action litigation arising from Tesla CEO Elon Musk’s infamous “take private” tweets. I recently noted that the court in the securities suit about the tweets ruled that the case can go forward. I am sure I am not the only one who has wondered while thinking about these events what kind of D&O insurance Tesla carries. While the question of what kind and amount of D&O insurance might be applicable to the pending claims is interesting, what may be even more interesting is that, according to a recent SEC filing, Tesla recently decided to forego D&O insurance for the current period based on an undertaking by Musk to provide the company and its board with equivalent “coverage,” as discussed below.
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Coronavirus-Related Suits Hit Higher Ed Institutions
In the early stages of the coronavirus-related close-down, most colleges and universities terminated live classes, switched to online lessons, and sent their students home. In some cases, affected students have filed lawsuits against their schools, seeking to recover tuition and fees paid for classes, housing, and food. The following posts discuss the extent of the exposure that these kinds of claims represent for these institutions’ boards of directors or boards of trustees.
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A Closer Look at Securities Suits Against Cannabis Companies
As I have detailed in prior post on this site (most recently here), in recent months plaintiffs’ lawyers have filed a number of securities class action lawsuits against companies in cannabis-related businesses. According to an April 22, 20202 report from the Goodwin Procter law firm entitled “Update on Securities Litigation Against Cannabis Companies” (here), the number of securities suits against cannabis companies jumped significantly in 2019 compared to 2018. As discussed further below, these litigation trends have continued in 2020.
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