From the outset, it has been clear that certain issues are going to be top-of-the-agenda items for the Biden Administration, including, for example, climate change, diversity and inclusion, and cybersecurity. In a July 9, 2021 Executive Order (here), the White House made it clear that competition is also going to be a priority as well. The President’s Executive Order sets out a broad range of initiatives that will impact a wide array of industries across the American economy. As discussed below, the new Executive Order has important implications for companies and their executives; among other things, the initiatives proposed in the order could lead to heightened D&O claims risk and exposure. Continue Reading New Executive Order Means Increased Regulatory Action and Increased Follow-on D&O Claims Risk

As I noted in a prior post, last week the SEC filed an enforcement action against Stable Road Acquisition Corp., a special purpose acquisition company (SPAC), and its intended merger target, Momentus, relating to Momentus’s alleged misrepresentations, as well as Stable Road’s alleged lack of due diligence. Perhaps inevitably, a plaintiff shareholder has filed a securities class action lawsuit against Stable Road; Momentus; and other defendants, adding to the growing number of SPAC-related securities suits that have been filed this year. A copy of the July 15, 2021 complaint in the new securities lawsuit can be found here. Continue Reading SPAC Subject to SEC Enforcement Action Hit with Follow-On Securities Suit

In its June 21, 2021 decision in Goldman Sachs Group, Inc. v. Arkansas Teacher Retirement System (discussed here), the U.S. Supreme Court provided important guidance regarding price impact evidence at the class certification stage of securities class action litigation. In the following guest post, Nessim Mezrahi, Stephen Sigrist, and Carolina Doherty discuss class certification implications of price impact in securities class actions pursuant to the Goldman Sachs decision. Mezrahi is cofounder and CEO, Sigrist is VP of data science, and Doherty is VP of business development at SAR. A version of this article previously was published in Law360. 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 Guest Post: Q2 Stock Drop Stats Buoy High Court’s Goldman Ruling

In a series of statements, comments, and staff actions, the SEC has in recent months evinced a growing concern with SPAC-related activities in the financial marketplace. The agency has now brought its first SPAC-related enforcement action (at least during the current era) against Momentus, Inc., a SPAC-merger target; Stable Road Acquisition Corp., the SPAC itself; and several other participants involved in the SPAC transaction, including the SPAC sponsor. This proceeding may be the first of many. The SEC’s July 13, 2021 press release about the proceedings can be found here. The SEC’s administrative order instituting cease-and-desist proceedings can be found here. The SEC’s separate civil action complaint against the CEO of the merger target can be found here. Continue Reading SEC Charges SPAC, Merger Target, and Others with Securities Law Violations

In recent posts (here and here), I have noted the securities class action lawsuits that have been filed against U.S.-listed Chinese companies following a crackdown by the Chinese cybersecurity regulator. Now yet another U.S.-listed Chinese company has been hit with a securities suit following the cybersecurity regulator’s actions. On July 13, 2021, a plaintiff shareholder filed a securities class action lawsuit against 360 DigiTech, a Chinese company with securities listed on NASDAQ, following news that the company’s app had been removed from major app stores following Chinese investigations of a number of companies’ data security practices. The July 13, 2021 complaint can be found here. Continue Reading Another U.S.-Listed Chinese Company Hit with Securities Suit Following Cybersecurity Regulator Crackdown

After the news emerged last week that Chinese cybersecurity regulators had cracked down on the ride-sharing firm DiDi Global shortly after the company completed its U.S. IPO, the company was hit with a U.S. securities class action lawsuit. However, DiDi was not the only Chinese company that recently completed a U.S. IPO that was targeted by the Chinese regulator. Two other Chinese companies that completed U.S. IPOs in June – Full Truck Alliance Co. Ltd. and Kanshun Limited – were both also notified that their companies were under review by the cybersecurity regulator. And now both of these companies have also been hit with U.S. securities class action lawsuits, as discussed below. Continue Reading Two More Chinese Companies Hit with U.S. Securities Suits Following Post-IPO Crackdown by Chinese Regulator

In  a prior post in which I discussed the “basic value proposition” of D&O insurance, I noted that among the five indispensable elements required in order for coverage under a D&O insurance policy to exist is the requirement that the individual seeking coverage must have been acting in an Insured Capacity. The prerequisite that the Insured Person must have been acting in an Insured Capacity at the time of the alleged Wrongful Act arises from the fact that individuals act in a number of different capacities; it is only conduct undertaken in their capacity as an officer or director of the insured company for which the insurance policy provides coverage.

 

A July 3, 2021 decision by Southern District of New York Judge Gregory H. Woods, applying New York law, provides a good illustration of how individuals may be acting in multiple capacities, and underscores the fact that while the insurance under a D&O policy is only available when the insured is acting in his or her capacity as a director or officer of the insured company, coverage is not entirely precluded if the individual is acting in dual or multiple capacities. A copy of the Judge Woods’s opinion can be found here. Continue Reading Individuals Acting in Multiple Capacities Entitled to Defense for Acts Undertaken in Insured Capacity

One of the most distinct securities litigation phenomena so far this year has been the increase in securities litigation involving post-SPAC-merger operating companies. In the latest example of this type of litigation, a plaintiff shareholder has filed a securities class action lawsuit against used vehicle consignment re-seller CarLotz, which became a public company through a January 2021 merger with a Special Purpose Acquisition Company (SPAC). As discussed below, CarLotz’s first financial reports as a public company disappointed investors and litigation has now ensued. A copy of the July 8, 2021 complaint against the company can be found here. Continue Reading Used Vehicle Re-Seller Hit with SPAC-Related Securities Suit

Even though the worst of the pandemic crisis in the U.S. appears, at least for now, to be past, the threat of COVID-19-related claims continues. In the latest example of the continuing COVID-19-related claim threat, the SEC has initiated a COVID-19-related enforcement action against a California-based digital health care company that had made claims early in the coronavirus outbreak about the company’s ability to profit from the outbreak. The SEC’s new action is a reminder that the threat of new COVID-19-related claims is ongoing. A copy of the SEC’s July 7, 2021 complaint against Parallax Health Sciences, Inc. can be found here. The SEC’s July 7, 2021 press release about the enforcement action can be found here. Continue Reading SEC Files COVID-19-Related Enforcement Action Against Digital Health Firm

On July 6, 2021, after the Wall Street Journal reported that prior to DiDi’s June 30, 2021 U.S. IPO,  government authorities had urged the Chinese ride-hailing firm to postpone the offering, but that the company, under pressure from investors, had gone ahead with the IPO anyway, it seemed that it would only be a matter of time before DiDi would be hit with a U.S. securities lawsuit. Indeed, as it turned out, the same day the Journal article appeared, an investor filed a U.S. securities class action lawsuit against the company. As discussed below, the lawsuit is based on cybersecurity and privacy concerns relating to the company’s ride-hailing app. A copy of the investor’s July 6, 2021 complaint can be found here. Continue Reading Chinese Ride-Hailing Firm DiDi Hit With Securities Suit Related to Its Recent IPO