The IPO market in the U.S. is off to a slow start in 2016; according to Renaissance Capital, only eight offerings have priced so far this year, through March 29, 2016. The IPO slowdown actually began in the second half of 2015, when market volatility and stock price declines encouraged some prospective IPO companies to stay on the sidelines rather than complete their planned offering. But while the number of IPOs in 2015 declined compared to the immediately preceding years, there still were a number of interesting IPO trends during 2015, as detailed in a March 24, 2016 report from the Wilmer Hale law firm entitled “2016 IPO Report” (here). As discussed below, the report describes a number of the important characteristics of the 2015 IPOs. The report also contains some interesting discussion of the attributes of successful IPOs and an overview of the potential liabilities of directors of IPO companies.
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Cornerstone Research: Aggregate and Average Securities Suit Settlements Surged in 2015
Aggregate and average securities class action lawsuit settlements increased significantly in 2015 compared to the year before, according to the latest annual report from Cornerstone Research. Among reasons for the increase in aggregate settlement amounts is the increase in the absolute number of settlements during the year. The increase in the average settlement amount is largely attributable to an increase in the number of “mega” settlements. While overall and average settlement amounts increased during the year, the number of smaller settlements also increased, and median settlement amounts held steady. The Cornerstone Research report, entitled “Securities Class Action Settlements: 2015 Review and Analysis,” can be found here. Cornerstone Research’s March 29, 2016 press release about the report can be found here.
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Guest Post: Developments Under Indian Anti-Corruption and Securities Laws
I am always pleased to be able to publish updates on important developments in other jurisdictions. In following guest post, I reproduce two articles about important developments in India. The first article discusses the widening scope of India’s Prevention of Corruption Act. The second article discusses a recent decision of the Supreme Court of India with respect to the imposition of penalties under the Indian securities laws. The two articles were submitted by Rohan Negandhi, who is a Financial Lines Underwriter with Tata AIG General Insurance Company Limited, which is an Indian General insurance Company, and a joint venture between the Tata Group and American International Group (AIG). I would like to thank Rohan for submitting his articles. 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 are Rohan’s articles.
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D&O Insurance: Regulator’s Previous Threat to File Action Triggers Prior Litigation Exclusion
Many D&O insurance policies contain specific prior litigation exclusions precluding coverage for claims made during the policy year related to proceedings commenced prior to the policy inception. A question that can arise is the issue of what type of prior proceedings or actions triggers this exclusion. The Second Circuit recently considered whether a Maryland attorney general’s office’s letter threatening that it “may” bring an enforcement action triggered an exclusion precluding coverage for a claim “involving” any prior “demand, suit or other proceeding.” In a March 7, 2016 summary order (here), the appellate court, applying New York law, affirmed the district court’s ruling that the AG’s prior letter was a “demand,” and therefore that the policy unambiguously precluded coverage for the insured’s defense fees incurred in a later U.S. Department of Justice action.
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The Yates Memo and the Potential Liabilities of Corporate Directors
Last September, amidst considerable fanfare, the U.S. Department of Justice released a new directive – now universally known as the Yates Memo – in which it restated and reinforced the agency’s commitment to targeting corporate executives in cases of corporate wrongdoing. The cornerstone of the agency’s new policies is the specification that in order for a company to qualify for any cooperation credit in connection with a DoJ investigation, the company must provide the agency with all relevant facts about the individuals involved in the misconduct. This same focus on individuals has been echoed by top SEC officials, including the SEC’s current chair. With several months’ of experience now under the new directive, it seems worth asking how the SEC renewed focus on individuals has translated into practice and what the implications are for corporate directors.
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Delaware Court Rejects Challenge to Litigation Funding Arrangement
Both inside and outside the United States, litigation financing has become an increasingly important part of the litigation environment. But litigation financing remains controversial, at least in certain quarters, and questions continue to be asked about whether or not it is proper or even appropriate. In a recent decision in a Delaware lawsuit between Charge Injection Technologies and DuPont, DuPont challenged CIT’s arrangement for financing its participation in the litigation, arguing that the financing agreement violated Delaware’s prohibition against “champerty and maintenance.” In a March 9, 2016 decision (here), Delaware Superior Court Judge Jan R. Jurden rejected the challenge. Judge Jurden’s opinion supports the view that, at least under Delaware, an appropriately structured litigation funding agreement will not be found improper.
While parties and observers undoubtedly will still seek to challenge litigation funding in general and in the context of specific cases, this ruling and related developments suggest that Delaware’s courts will where appropriate condone litigation funding.
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Guest Post: Next-Level Cybersecurity Incident Response Trends 2016
In the following guest post, Paul A. Ferrillo and Christophe Veltsos take a look at the next-level concepts companies should adopt to improve their data breach detection and response time, perhaps allowing them to kick attackers off their networks before bad things happen. Paul Ferrillo is a member of the Cybersecurity, Data Privacy & Information Management practice at Weil, Gotshal & Manges LLP, and a featured speaker at the upcoming Incident Response Forum on March 31, 2016, in Washington, D.C. Christophe Veltsos, PhD, CISSP, CISA, CIPP, GCFA, regularly teaches Information Security and Information Warfare classes at Minnesota State University. I would like to thank Paul and Christophe for their willingness to publish their article 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 Paul and Christophe’s guest post.
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D&O Insurance: Regulatory Exclusion Listed on Binder but Omitted From Policy Does Not Bar FDIC Claim Coverage
Suppose a troubled bank went to renew its D&O insurance in the throes of the financial crisis. Suppose further that the bank’s D&O insurer refused to renew its primary policy without a regulatory exclusion. Suppose that the primary insurer’s renewal binder specified that the renewal was subject to a regulatory exclusion. However, suppose further that when the insurer issued the policy, the insurer omitted the regulatory exclusion. Suppose the insurer noticed the omission of the exclusion a month later – coincidentally, the same day regulators closed the bank and the FDIC was appointed the bank’s receiver – and sent the bank’s insurance agency an endorsement intended to add the omitted exclusion to the policy.
As you might well imagine given these circumstances, when the D&O insurer later denied coverage for the FDIC’s claims against the failed bank’s former directors and officers based on the regulatory exclusion, coverage litigation ensued.
On March 18, 2016, in an interesting opinion that is both very fact-intense and highly dependent on a federal statute specifying what kinds of agreements can be enforced against the FDIC as receiver of a failed bank, Northern District of Georgia Judge Thomas W. Thrash, Jr. denied the insurers’ motions for summary judgment and granted the summary judgment motions of the FDIC, holding that the regulatory exclusion could not be enforced. A copy of Judge Thrash’s March 18, 2016 opinion and order granting the FDIC’s motion can be found here. His separate March 18, 2016 opinion and order granting the individual directors’ and officers’ motion for partial summary judgment can be found here.
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Guest Post: Seven Lessons Learned from D&O Litigation During the Financial Crisis
The financial crisis generated a great deal of litigation, much involving the directors and officers of companies affected by the crisis. As the crisis recedes further into the past and as the litigation it generated winds down, it is worth taking a look at what happened to determine what can be learned from the litigation. In the following guest post, Dennis Klein of the Hughes Hubbard & Reed law firm provides an overview of what he views as the takeaways for corporate directors and officers from the financial crisis D&O litigation. A longer version of this article will appear in the April 2016 issue of The Review of Banking and Financial Services. I would like to thank Dennis for his willingness to publish his article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to readers of this site. Please contact me directly if you would like to submit a guest post. Here is Dennis’s guest post.
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D&O Insurance: Late Notice and Excess Coverage
Everyone involved with D&O insurance knows that it is important to keep up with case law developments, in order to appreciate how courts are interpreting and applying various policy terms and conditions. But sometimes there is an additional reason why it is a good to keep up with court decisions – sometimes the cases provide practical lessons in the form of cautionary tales. That was certainly the case in a recent decision in which the Sixth Circuit, applying Kentucky law, affirmed a lower court ruling that late notice of claim precluded coverage under an excess D&O insurance policy. The policyholder had provided timely notice of claim to the primary carrier, but failed to provide notice to the excess carrier until six months after the policy had expired. The court’s conclusion that the late notice precluded coverage under the excess policy may not be surprising, but nevertheless the practical lesson – that is, that notice of claim should be provided to all of the carriers in the D&O insurance program – is an important one, as discussed further below. A copy of the Sixth Circuit’s February 29, 2016 opinion can be found here.
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