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Kevin LaCroix

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Kevin M. LaCroix is an attorney and Executive Vice President, RT ProExec, a division of RT Specialty. RT ProExec is an insurance intermediary focused exclusively on management liability issues.

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paul weiss largeThe U.S. government’s petition for writ of certiorari in the case of United States v. Newman had been very closely watched. The government hoped to have the Supreme Court set aside the Second Circuit’s 2014 decision in the case (here), which had overturned the convictions of two hedge fund managers accused of insider trading. In an unexpected development, on the first day of the Supreme Court’s 2015-16 term, the Court declined take up the case.

The following guest post from the Paul Weiss law firm takes a look at this development and analyzes the implications. I would like to that the authors for their willingness to publish their article on this blog. 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 Paul Weiss firm’s guest post.

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Yesterday, the United States Supreme Court declined to hear the petition for a writ of certiorari (the “Petition”)  filed by the United States Department of Justice (“DOJ”) in United States v. Newman, 773 F.3d 438 (2d Cir. 2014), a landmark decision that dismissed indictments against two insider trading defendants.  By declining to hear the Petition, the Supreme Court ensured that the Second Circuit’s decision in Newman will remain binding in the Second Circuit and influential across the country.

As we explain below, two of Newman’s holdings are particularly important: first, that the government must prove that a remote tippee knew or should have known of the personal benefit received by a tipper in exchange for disclosing nonpublic information; and second, that the benefits alleged by the government in United States v. Newman were not sufficient to support a conviction, as they were not sufficiently “consequential.”
Continue Reading Guest Post: Supreme Court Declines To Consider Second Circuit’s Landmark Insider Trading Ruling

tescoIt has been over five years since the U.S. Supreme Court’s June 2010 decision in Morrison v. National Australia Bank restricted the ability of shareholders of non-U.S. companies who purchased their shares outside the U.S. to file securities fraud lawsuit in U.S. courts under the U.S. securities laws. During that five year period, the lower courts have sorted out many of the issues the Morrison decision raises. But one issue continues to percolate – that is, the question of Morrison’s effect on securities suits brought in U.S. court under U.S. law against non-U.S. companies by investors who purchased the companies’ unlisted ADRs over- the-counter in the U.S. The investor lawsuits filed in U.S. court just in the last few days by holders of unlisted Volkswagen ADRs raise this very issue.

The action filed in Southern District of New York in October 2014 by holders of unlisted ADRs of Tesco raise these same issues as well. The parties’ briefing in connection with the defendants’ motion to dismiss in the Tesco case present a detailed examination of the issues involved in the question of the applicability of Morrison to transactions in unlisted ADRs, as discussed below.
Continue Reading Tesco Securities Suit: Applicability of U.S. Securities Laws to Unlisted ADRs?

vwThe recent revelation that Volkswagen had been using a sophisticated software “defeat device” to rig the emissions performance of some of its diesel-engine base vehicles devastated the price of the company’s shares, leading to the filing of a securities class action lawsuit in the U.S. on behalf of purchasers of the company’s ADRs, as well the initiation of efforts to launch procedures in the Netherlands on behalf of VW shareholders who purchased the company’s shares through a Dutch bank or broker.

In my recent post discussing these VW-related securities litigation developments, I raised the question whether investors might also try to file a separate action against VW in Germany, under German law, on behalf of shareholders who purchased their VW shares in Germany. It now appears that a litigation funding firm’s effort to organize a German shareholder action is already underway.
Continue Reading Litigation Funding Firm Announces German Securities Action on Behalf of Volkswagen’s German Shareholders

caliIn an interesting September 30, 2015 opinion, Southern District of California Cynthia Bashant, applying California law, held that a series of HIPAA-related subpoenas that the U.S. Department of Justice served on Millennium Laboratories were not interrelated with prior qui tam lawsuits that had been filed against the company, and held further that coverage under Millennium’s D&O insurance policy for the company’s costs of responding to the subpoenas was not limited by the policy’s $100,000 sublimit for Regulatory Claims. A copy of Judge Bashant’s opinion can be found here.
Continue Reading D&O Insurance: HIPAA Supoenas, Interrelatedness, and Regulatory Claim Sublimits

uk flagIs collective action litigation in the U.K. about to get a significant boost? That is the question many are asking as the new collective action regime introduced by the Consumer Rights Act of 2015 goes into effect on October 1, 2015. The Act’s provisions facilitate collective proceedings for competition law breaches before the Competition Appeal Tribunal (the CAT), by granting the CAT the power to grant collective proceedings orders and to grant collective settlement orders. As discussed in a September 30, 2015 memo from the Allen & Overy law firm (here), these changes have raised concerns that the new regime will “lead to a surge of U.S.-style class actions in the U.K.”
Continue Reading A New U.K. Class Action Litigation Wave?

board-of-directorsWhen the U.S. Department of Justice recently announced a renewed emphasis on the prosecution of individual directors and officers in instances of corporate misconduct, it raised the possibility that in the future we could see increased numbers of corporate officials prosecuted and convicted for actions they took as representatives of their company. There are times when popular sentiment rallies in favor of the prosecution of corporate officials – as, for example, was the case during and after the recent global financial crisis. And while there have been instances in the U.S. where corporate officials have in fact been convicted for criminal misconduct, it has been rare. I suspect that even under the new guidelines it will be only the unusual or egregious cases that will involve criminal prosecutions of individuals.

Of course, it is not preordained that criminal prosecutions of corporate individuals should be rare. In fact, there are places now where criminal prosecutions of corporate officials are more common. One of those places is China, as discussed in Steve Dickinson’s  September 26, 2015 China Law Blog post entitled “China Company Directors and China Criminal Liability” (here). Dickinson’s discussion of these issues raises some interesting questions about the role of criminal law in policing director misconduct.
Continue Reading Thinking About Directors’ Duties and Directors’ Liabilities

weilOn September 22, 2015, in what has been described as the SEC’s first cybersecurity-related enforcement action, the SEC announced that it had entered a settlement St. Louis-based investment advisor R.T. Jones Capital Equities Management, Inc., based on charges that the company had failed to establish the required cybersecurity policies and procedures in advance of a breach that compromised the personally identifiable information (PII) of approximately 100,000 individuals, including thousands of the firm’s clients.  A copy of the SEC’s order related to the settlement can be found here.

In the following guest post, David Wohl and Paul Ferrillo of the Weil Gotshal law firm take a look at the SEC’s settlement with R.T. Jones and examine the implications of the settlement, and of the recent guidance from SEC’s Office of Investor Education and Advocacy, for future regulatory action, from the SEC and other agencies. A version of the guest post previously was published as a Weil client alert.

I would like to thank David and Paul for their willingness to publish their article on this blog. 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 David and Paul’s guest post.

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Just days after the SEC’s Office of Compliance Inspections and Examinations (“OCIE”) issued its second round of cybersecurity guidance for its upcoming examinations of registered investment advisers and broker-dealers,[i] the SEC settled an administrative proceeding on cybersecurity issues arising out of a breach at a registered investment adviser, R.T. Jones Capital Equities Management, Inc.  (“R.T. Jones”).[ii]  As a result of the settlement, R.T. Jones was censured and fined $75,000.  On the heels of the recent OCIE guidance and following a year of major cybersecurity breaches (especially at financial institutions),[iii] this proceeding is instructive on a number of points, especially on the question “What happens when you don’t adopt policies and procedures to safeguard client data?”
Continue Reading Guest Post: SEC’s Regulatory Action Against R.T. Jones: Did the Other Cybersecurity Shoe Just Drop?

vwThe news that Volkswagen employed sophisticated software-based “defeat devices” in order to permit a number of its diesel-engine models to appear to meet U.S. emissions standards has dominated the headlines in the business pages over the last few days. The news has already led to the resignation of its embattled CEO, Martin Winterkorn. In addition to regulatory enforcement proceedings, the company faces possible criminal action as well as a host of consumer lawsuits. In addition, on September 25, 2015, plaintiff’s lawyers filed a securities class lawsuit in the Eastern District of Virginia against VW, its U.S. operating divisions, and certain of its directors and officers, on behalf of investors who purchased VW’s American Depositary Receipts (ADRs) in the United States.  As discussed below, there are a number of interesting features to this new securities lawsuit. In addition, as also discussed below, a Dutch investors’ association has separately initiated an effort under Dutch collective action statutory provisions to pursue claims against VW, as well. 
Continue Reading Volkswagen Vehicle Emissions Scandal Triggers U.S. Securities Suit, Dutch Collective Action Initiative

cyber risksWe live in a world in which rapidly shifting technologies and communications modalities have changed the way we interact and conduct business. These new media and means of interaction have introduced innumerable benefits and efficiencies. Unfortunately, these new alternatives have down sides; among other things, they mean new risks and even liability exposures for both individuals and companies that use them. We are all well aware of what can happen to a company that experiences a major data breach. But the new technologies and communications approaches also introduce a host of other potential business liability risks and exposures.

In the new 2015 edition of their interesting and readable book Cyber Risks, Social Media and Insurance: A Guide to Risk Assessment and Management (here), Carrie Cope, Dirk E. Ehlers and Keith W. Mandell take a comprehensive look at the new technologies and communications approaches, review the changed liability environment that these new alternatives present, analyze the current state of the insurance marketplace for these various exposures, and make some projections about what may lie ahead.
Continue Reading Book Review: Cyber Risks, Social Media and Insurance

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John E. Clabby
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Joseph W. Swanson

As I noted in a September 9, 2015 post (here), a Home Depot shareholder has filed a data breach-related derivative lawsuit against certain of the company’s directors and officers, in which the plaintiff contends that the defendants breached their fiduciary duties by failing to ensure that customer credit card information was secure and protected. A copy of the complaint can be found here.

In the following guest post, John E. Clabby and Joseph W. Swanson of the Carlton Fields Jorden Burt law firm take a look at the Home Depot data breach D&O lawsuit and provide their views on what the lawsuit may foreshadow for future D&O litigation. Jack and Joe also  review what they think are the lessons for corporate boards and managers from the lawsuit’s allegations, as well as the implications of the lawsuit for companies that experience a data breach in the future.

I would like to thank Jack and Joe for their willingness to publish their guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to readers of this blog. Please contact me directly if you would like to submit a guest post. Here is Jack and Joe’s guest post.

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Ending months of speculation, a shareholder has finally filed a derivative lawsuit against the directors and management of The Home Depot, Inc., in connection with the massive data breach the company suffered in 2014. The complaint, which alleges breach of fiduciary duty and corporate waste, fits the emerging template of shareholder derivative lawsuits after breaches at public companies. As such, it is worth a closer analysis for those whose jobs include protection of public companies and their boards from and during data breaches, both directly through more robust cybersecurity measures and indirectly through director and officer insurance and cyber-risk policies.
Continue Reading Guest Post: Preparing for a Cyber Caremark Lawsuit: Lessons from the Home Depot Derivative Complaint