In the following guest post, Francis Kean, Partner in Financial Lines Team at McGill and Partners, reviews the developments surrounding the proceedings brought against the non-executive directors of Carillion plc and considers their implications. This article was first published online on 16th October 2023 by The Chartered Governance Institute for UK and Ireland.
On September 28, 2023, the SEC announced that it had filed charges against and entered into a settlement agreement with the Illinois electric utility Commonwealth Edison (ComEd) and its corporate parent Exelon Corporation in connection with an alleged scheme to influence the then-speaker of the Illinois House of Representatives, Michael Madigan. The SEC separately filed a complaint against ComEd’s former CEO in connection with the same allegations. In an October 12, 2023 post on the Cooley law firm’s PubCo blog (here) Cydney Posner wrote about the SEC enforcement actions and raised the interesting question of whether Political Corruption is Securities Fraud? It is a question well worth asking. However, as I discuss below, there is a long-standing connection between corruption and bribery allegations and securities class action lawsuits and other types of claims.Continue Reading Can Corrupt Political Activities Support Securities Fraud Allegations?
A host of macroeconomic factors continue to weigh on the U.S. economy, including rising interest rates, economic inflation, and supply chain and labor supply disruption. Geopolitical factors such as the War in Ukraine and now the Gaza war in Israel further complicate the picture. These various factors have serious ramifications for the operations of many businesses and for their financial performance. In some cases, the impact of these factors on companies can also translate into securities litigation. In the latest example of this phenomenon, the auto parts company Advance Auto Parts has been hit with a securities class action following a decline the price of the company’s share price after the company announced that its “strategic pricing initiative” was not sufficient to avert the impact of inflation and other macroeconomic factors on the company’s financial performance. A copy of the October 9, 2023, complaint filed against the company can be found here.Continue Reading Inflation Weighs on Company Performance, Leads to Securities Suit
Dividend recapitalization is a tool that enables private equity firms to extract liquidity from portfolio companies without the need to complete a sale or IPO. In the following guest post, the authors explore this funding technique, which is not without its risks and exposures and which may raise important insurance issues as well. This article is co-authored by Sarah Abrams, Head of Professional Liability Claims, Bowhead Specialty Underwriters, Inc., Elan Kandel, Member, Bailey Cavalieri LLC and James Talbert, Associate, Bailey Cavalieri LLC. 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 blog’s readers. Please contact me directly if you would like to submit a guest post. Here is the authors’ article.Continue Reading Dividend Recaps: Potential Risks for Private Equity Firms and Their Insurers
One phenomenon I have been tracking over the years is the rise in jurisdictions outside of the U.S. of procedural mechanisms for collective redress, particularly in the U.K (as noted, for example, here) and the E.U. (as noted here). While I have always been careful to note the important differences between these collective action mechanisms and the U.S.-style class action approach, it may be the case that as time has passed and as procedures have developed and evolved, the mechanisms many jurisdictions are adopting increasingly are coming to resemble the U.S.-style class actions model.
As an October memo from the Jones Day law firm puts it, class action litigation “is no longer a US-specific phenomenon.” The law firm memo, which is entitled “The Rise of US-Style Class Actions in the UK and Europe,” states that the growth in the UK and EU of group litigation has been “exponential” and the rise of these actions is a “key corporate risk that will only continue to increase.” The law firm’s memo can be found here.Continue Reading The Rise of Group Actions in the U.K and the E.U.
One of the basic exposures that corporate directors and officers face is the risk of a shareholder derivative lawsuit. In the following guest post, Greg Markel, Giovanna Ferrari, and Sarah Fedner, all of the Seyfarth Shaw law firm, take a look at the basic features of shareholder derivative suits and conclude with ten basic takeaways for boards and others. 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.Continue Reading Guest Post: Derivative Litigation: Board Lessons and Takeaways
In the current challenging economic circumstances, corporate directors and officers face a daunting array of potential liability exposures. In the following guest post, Arlene Levitin, Esq., Claims Officer, Complex Management Liability, NAS Financial Lines Claims, Liberty Mutual Insurance;, and Bonnie Hoffman, Esq., Hangley Aronchick Segal Pudlin & Shiller, propose three ways that through careful planning directors and officers can reduce their potential liability risks. I would like to thank Arlene and Bonnie 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 blog’s readers. Please contact me directly if you would like to submit a guest post. Here is Arlene and Bonnie’s article.Continue Reading Guest Post: Planning for D&O Lawsuits: 3 Tips for Reducing Risks for Directors and Officers
One of the most important director and officer litigation risks is the possibility of a shareholder derivative lawsuit. In the following guest post Sam Vardy and Carey Lynn take an overview of derivative suits and discuss some of the important D&O coverage issues the cases present. Sam is a lawyer and Divisional Director, and Carey is a lawyer and Managing Director, in the Financial Lines division of Howden. A version of this article was published previously on the Howden website. I would like to thank Sam and Carey 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 Sam and Carey’s article.Continue Reading Guest Post: The Risks of Shareholder Derivative Suits and D&O Coverage
The U.S. Supreme Court has agreed to take up a case in which the court will be asked to address the recurring question of whether the failure to make disclosure required by Item 303 of Reg. S-K is an actionable omission under Section 10(b) and Rule 10b-5. The Court apparently agreed to take up the case due to a split between the Circuits on the question of whether or not an Item 303 violation can be actionable. Because allegations based on alleged Item 303 violations are a frequent feature of securities class action complaints, the Court’s ruling in the case could potentially be significant. A copy of the Court’s September 29, 2023, order granting the petitioners’ petition for a writ of certiorari in the cases, Macquarie Infrastructure Corporation v. Moab Partners, L.P., can be found here.Continue Reading Supreme Court to Consider Whether Item 303 Violations are Actionable under Section 10(b)
Readers of this blog well know that one of the current hot topics in the world of D&O is ESG – and not just in the United States, but in Europe, and elsewhere as well. In the following guest post, Persia Navidi, Partner in Insurance, Cyber and Climate Risk at Hicksons Lawyers, provides an overview of the state of play with regard to ESG in Australia, and also discusses the related insurance issues. I would like to thank Persia for allowing 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 Persia’s article.Continue Reading Guest Post: ESG and Financial Lines Insurance in Australia