One of the important questions about U.S. Department of Justice’s approach following the change of Presidential Administration two years ago was whether DOJ would continue emphasizing its policy of individual accountability in the agency’s 2015 statement known as the Yates Memo. In a recent speech, Deputy Attorney General Rod J. Rosenstein announced changes to the policy. The changes, which are more in the form of an adjustment rather than a wholesale change, makes it clear that companies seeking cooperation credit no longer need to identify “all” individuals involved in the wrongdoing, so long as the companies identify those who were “substantially involved” in the misconduct. The text of Rosenstein’s November 29, 2018 speech to the American Conference Institute’s International Conference on the Foreign Corrupt Practices Act, at which he announced the changes, can be found here.
Continue Reading Department of Justice Eases “Yates Memo” Requirements for Cooperation Credit
First The Plane Crash, Then The Securities Lawsuit
Late last month, Lion Air Flight 610 crashed into the Java Sea shortly after its takeoff in Jakarta, killing all 189 passengers and crew members on board. As details about the doomed flight have emerged, investigators have raised questions about the possible malfunction of new flight control features on the Boeing 737 MAX 8 jet involved in the crash, as well as about Boeing’s documentation and training relating to the flight control features. Under these circumstances, the possibility that there might be litigation is hardly surprising. What might be less obvious is that the litigation against Boeing relating to the crash might involve a securities class action lawsuit.
Continue Reading First The Plane Crash, Then The Securities Lawsuit
Delaware Law and Mandatory Shareholder Claim Arbitration Provisions
One idea that resurfaces from time to time is the suggestion that companies ought to adopt bylaw or charter provisions mandating the arbitration of shareholder claims, including claims under the federal securities laws. The current SEC Chair, Jay Clayton, has said that he does not consider the issue to be a top priority, seemingly shelving the idea for the time being. But various contending parties have continued to agitate on the issue.
In a recent white paper issued by a consumer advocacy group and signed by a number of prominent securities law professors, the professors state their view that Delaware law does not permit federal securities law claims to be resolved in arbitration or in any specific forum. The white paper is sure to stir the pot. As discussed below, it could also have an impact on a case currently pending in Delaware state court that could dictate whether or not Delaware companies may designate a federal court forum for the resolution of claims under the federal securities laws.
Continue Reading Delaware Law and Mandatory Shareholder Claim Arbitration Provisions
Brexit Uncertainty, Disclosure Concerns, and Potential Liability
If the uncertainty creates risk, then the current state of play on the United Kingdom’s efforts to withdraw from the European Union represents risk in a highly concentrated form. On November 25, 2018, the 27 EU members approved the divorce pact that the U.K. negotiated with its EU counterparts, but the pact must now face a Parliamentary vote, on December 11, 2018. In the meantime, the March 29, 2019 withdrawal date looms. These upcoming events present uncertainties at both the economic and enterprise levels. The uncertainties in turn create challenges for potentially affected companies, including among other things the challenge of communicating about these issues to investors. As discussed below, SEC Chair Jay Clayton recently emphasized that the agency is “sharpening its focus” on Brexit-related disclosures, highlighting the significance of the disclosure-related concerns.
Continue Reading Brexit Uncertainty, Disclosure Concerns, and Potential Liability
Further Wildfire-Related Management Liability Litigation: Harbinger of Things to Come?
The Northern California wildfire known as the Camp Fire – reportedly the deadliest and most destructive wildfire in California history – has finally been fully contained. But while the fire has been doused, the fight about the fire has only just begun. Investigators will now undertake to determine the fire’s cause. And the inevitable lawsuits will now get rolling as well.
As I noted last week, investors already filed a wildfire-related securities class action lawsuit while the fires were still burning. And now a shareholder has filed a shareholder derivative lawsuit in federal court against the board and certain officers of PG&E Corp., and its regulated utility operating company, Pacific Gas and Electric Company, relating to the companies’ alleged role in causing the Camp Fire. As discussed below, this recent lawsuits may represent examples of the kinds of lawsuits we may expect to see in increasing numbers as a result of climate change-related effects. The derivative lawsuit complaint, filed in the Northern District of California on November 21, 2018, can be found in two parts here and here.
Continue Reading Further Wildfire-Related Management Liability Litigation: Harbinger of Things to Come?
Unless Checked, Climate Change Could Decimate U.S. Economy
Unless dramatic counter-measures are taken, annual losses to the U.S. economy from climate change could reach billions of dollars by the end of the century, according to a comprehensive interagency report from the U.S. federal government released last week. Even though the report’s subject arguably is outside this blog’s bailiwick, I am highlighting the report here out of a concern that due to the report’s publication late in the afternoon on the Friday of a holiday weekend many may have missed the report and its message. The report is sober, detailed, and serious, and should be read and studied by anyone concerned about important risks facing our national economy and business environment. The bottom line is that climate change clearly represents a significant risk for all enterprises, regardless of sector and of geographic location.
Continue Reading Unless Checked, Climate Change Could Decimate U.S. Economy
SEC Whistleblower Program Has Record-Breaking Year
The SEC Whistleblower Program had a “record-breaking year” during the 2018 fiscal year that ended on September 30, 2018, according the latest annual report from the agency’s Office of the Whistleblower. During the fiscal year, the agency not only made total awards exceeding the aggregate amount awarded in the entire prior history of the program, but it also made the largest separate awards in the program’s existence. The number of whistleblower reports during the fiscal year also increased over 20 percent, the largest annual increase in the number of reports in the program’s history. The SEC’s Office of the Whistleblower’s 2018 Annual Report can be found here.
Continue Reading SEC Whistleblower Program Has Record-Breaking Year
November in London and Paris
The D&O Diary was on assignment in Europe last week, with a first stop for a short visit in London for meetings there. It isn’t always sunny in London in November. But when the sun does shine, it can be pretty special. The sun shone brightly in London while I was there and I was fortunate that I had a little bit of time in the mornings before my meetings to walk around and enjoy the scene, before moving on to my next stop on the travel itinerary.
Continue Reading November in London and Paris
First, Wildfires. Then What? Securities Litigation, Of Course
The recent massive wildfires in California have caused the loss of dozens of lives, and many more people are missing. Thousands have been displaced and many millions more have been affected. The property damage has been devastating. The Camp Fire in Northern California alone has destroyed tens of thousands of 10,000 homes and businesses. Even as the fires raged, questions surrounding the fires’ causes were raised. Media stories have circulated raising the possibility that the electric utilities may be to blame for starting the fires. There undoubtedly will be substantial inquiries and perhaps even liability proceedings. Now it appears that the accountability process may not only include efforts by property owners and survivor and loved ones to recoup their losses, but it may also include securities lawsuits by utility company investors who claim they were misled about the company’s fire safety readiness and potential liability exposure.
Continue Reading First, Wildfires. Then What? Securities Litigation, Of Course
Guest Post: A New Twist in M&A Litigation: Section 11 Cases in State Court
As I noted in prior posts, in March 2018, the U.S. Supreme Court held in the Cyan case that state courts retain concurrent jurisdiction for liability actions under the Securities Act of 1933. This development has been regarded as primarily a concern for IPO companies. However, as discussed in the attached guest from Priya Cherian Huskins of Woodruff Sawyer, the Supreme Court’s affirmation of concurrent state court jurisdiction for ’33 Act claims may also be a concern for M&A companies as well. A version of this article was previously published in Woodruff Sawyer’s D&O Notebook. I would like to thank Priya for her willingness to allow 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 Priya’s article.Continue Reading Guest Post: A New Twist in M&A Litigation: Section 11 Cases in State Court