Since it was first instituted nearly 21 years ago, SEC Rule 10b5-1 has provided corporate executives with a way to trade in their company’s securities while avoiding potential liability under the federal securities laws. However, the Rule has been dogged by controversy and questions of potential abuse have been raised for years. Now, in remarks published earlier this week on the Wall Street Journal (here), SEC Chair Gary Gensler has said that the SEC is drafting a proposal to revise the Rule’s requirements to target some of the perceived abuses. The Cooley law firm’s PubCo blog has a detailed account of Gensler’s remarks in a June 8, 2021 post (here). Continue Reading SEC to Revise Rule 10b5-1 Trading Plan Requirements

Last month, the U.S. House of Representatives passed the Insider Trading Prohibition Act, a bill intended to amend the Securities Exchange Act of 1934 to address insider trading issues. In the following guest post, Partners Brooke Cucinella and Michael Osnato, Counsel Anar Rathod Patel, and Associate Rebecca Sussman, all of the Simpson Thacher law firm, analyze the bill and discuss its implications. A version of this article was previously published as a Simpson Thacher client memorandum. 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: Developments in Insider Trading Enforcement: The House Passes the Insider Trading Prohibition Act

A court in the Netherlands has ruled that a collective investor action against Petrobras and related entities pending in the court can go forward, notwithstanding the arbitration clause in Petrobras’s articles of association. The defendants had sought to argue that because of the arbitration clause the foundation that was pursuing the Dutch action on behalf of investors had no standing to pursue the claims. The Dutch court’s May 26, 2021 ruling rejecting the defendants’ argument will now permit the action to go forward. A copy of Petrobras’s May 27, 2021 press release about the court’s ruling can be found here. A June 3, 2021 Law360 article about the Dutch court’s ruling can be found here. Continue Reading Dutch Court Rules Petrobras Collective Investor Action May Proceed

The importance of ESG issues for companies and their executives is nothing new, but in recent days ESG issues seem to have taken center stage. The surprising success of activist investor Engine No. 1 in electing climate change-focused candidates to the board of ExxonMobil and the order by the Dutch court requiring Royal Dutch Shell to reduce carbon dioxide emissions by 50% of 2019 levels by 2030 are just two of the recent examples of the ways in which ESG issues increasingly have come to predominate corporate agendas. As discussed below, challenges related to ESG issues seem likely to continue. Among other things, these developments present new risks for potential D&O liability exposures as well. Continue Reading The Predominance of ESG-Related Issues and the Implications for Corporate Boards

Among the industries hit hardest at the outset of the coronavirus outbreak last year was the cruise ship business. As these companies were forced to cease operations, revenues plunged. Several of the companies were hit with securities class action lawsuits as well, though, as discussed below, these lawsuits have not fared well. On May 28, 2021, in the latest ruling in a COVID-19-related securities suit against a cruise ship line, the federal judge in the securities suit pending against Carnival Corp. granted the defendants motion to dismiss. The court’s ruling evinces a great deal of skepticism of the plaintiffs’ case. Continue Reading Another COVID-19-Securities Suit Against Cruise Line Dismissed

Commercial insurance policies often are contractually complex. Many insurance policies include multiple endorsements modifying provisions of the base insurance policy form. Interpreting the way that the various parts of the policy work together is an important part of determining insurance coverage. When it is unclear how the parts relate uncertainty results. In a recent decision, the Eighth Circuit found that where multiple policy endorsements modified the same policy exclusion, the net effect of the endorsements was ambiguity, resulting in the conclusion that the exclusion did not apply at all. The appellate court’s decision is a cautionary tale for anyone involved in the insurance placement process. Continue Reading Multiple Endorsements Modifying Same Exclusion Render Policy Ambiguous, Negating Exclusion’s Applicability

When senior SEC staff issued a statement in April saying that most warrants issued by SPACs should be treated as liabilities rather than as equity, it triggered a huge slowdown in the previously hot SPAC IPO market. It also forced many existing SPACs to review the way they had previously accounted for warrants; in some instances, individual SPAC companies concluded that they needed to restate their prior financial statements. Now, in a development that highlights the risks that these seemingly obscure accounting issues present, a plaintiff shareholder has filed a securities class action lawsuit against  Virgin Galactic Holdings, a post-SPAC-merger company that restated its financials based on the warrant accounting issue. The May 28, 2021 complaint, a copy of which can be found here, alleges that the company had previously improperly accounted for its warrants, and that the prior accounting treatment violated the securities laws. Continue Reading Virgin Galactic Hit with Securities Suit Over SPAC Warrant Accounting Issue

Regular readers will recall that last year and earlier this year, plaintiffs’ lawyers filed a series of shareholder derivative lawsuits against the directors of several companies alleging that the lack of diversity on the companies’ boards breached the directors’ fiduciary duties. In the latest ruling to address preliminary motions in these various cases, the court in the board diversity lawsuit filed against directors and officers of Oracle has granted the defendants’ motion to dismiss. As discussed in greater detail below, the plaintiffs’ track record on the board diversity lawsuits is not good so far; the ruling in the Oracle suit represents the third successive dismissal granted in these suits. Continue Reading Dismissal Motion Granted in Oracle Board Diversity Lawsuit

An important recent litigation phenomenon that I have been monitoring on this site is the recent revival of the duty of oversight as a legal theory on which plaintiffs can try to assert claims against corporate boards. Delaware’s court have recently sustained several of these kinds of claims – often referred to as “Caremark” claims in reference to the 1986 Delaware Court of Chancery decision that first recognized the legal theory behind these claims – and indeed on recent federal court decision sustained a breach of the duty of oversight claim under Ohio law. In light of these developments, boards will need to anticipate the possibility that these kinds of claims can arise, which possibility in turn raises the question of what boards can do to protect themselves from these kinds of claims. Continue Reading The Duty of Oversight and the Need for Regular Board Review of Corporate Risk

Paul R. Bessette
Chris Crawford

As I have documented on this site, along with the rapid rise of SPAC-related transaction activity has come a surge in SPAC-related litigation. In the following guest post, Paul R. Bessette and Chris Crawford consider the likelihood for even further litigation relating to SPAC transactions and review the steps that well advised companies involved in SPAC transactions can take to try to reduce their litigation risks. Paul is co-chair of the King & Spalding law firm’s Corporate & Securities Litigation Practice and Chris is a Senior Vice President and Client Executive with Marsh in Los Angeles. A version of this article was previously published in Westlaw Today, 2021 WL 1990398. I would like to thank Paul and Chris for allowing me to publish their article 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 Paul and Chris’s article. Continue Reading Guest Post: SPACs and SPAC-Related Litigation: A Primer on Reducing Litigation and Enforcement Risk