Tim Hoeffner
Paul Ferrillo

In the following guest post, Tim Hoeffner and Paul Ferrillo of the McDermott Will & Emery law firm take a look at Southern District of New York Judge Ronnie Abrams’s April 2, 2020 order granting the defendants’ motion to dismiss in the Adient PLC Securities Litigation. I would like to thank Tim and Paul for allowing me the opportunity 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 Tim and Paul’s article. Continue Reading Guest Post: Scienter “Takes a Seat” Front Row Center in New SDNY Case

As part of a continuing series, I have been participating in sessions that the Professional Liability Underwriting Society (PLUS) has organized addressing the potential D&O liability and insurance issues arising out of the COVID-19 outbreak. I have been joined in these recorded sessions by my good friends Carl Metzger of the Goodwin Procter law firm and Rob Yellen of Willis Towers Watson. We recorded the first of these sessions in March, and we recorded a second session in April. Because so much has happened since our last session, we recorded an updated session last week. The latest session is short (less than 30 minutes), informal, and conversational. In the recording, we discuss what we are currently seeing in the D&O insurance marketplace and what we are telling our clients about it, and also project ahead for what might may see as businesses re-open and the economy tries to get back to normal. The recording can be found in a May 11, 2020 post on the PLUS Blog, here.

In early March, when I first wrote about the possibility of coronavirus-related D&O claims, there were then a total of 43 confirmed cases of COVID-19 in the U.S. and six deaths. In early April, when I published my first interim update to my initial post, the number of confirmed COVID-19 cases in the U.S. had grown to 267,436 and the number of deaths was over 10,400. Now, a month later, the number of confirmed cases in the U.S. has exceeded 1.2 million and the number of deaths is over 78,000. By now it is apparent that the coronavirus-outbreak represents the most significant public health crisis in the U.S. in more than a century. The disease has also had a massive impact on the economy, both within the U.S. and globally, in ways that are only now starting to be fully appreciated. Continue Reading Coronavirus and D&O Insurance: The Latest Interim Update

As local coronavirus pandemic-related stay-at-home orders expire or are withdrawn over the coming weeks, employees will be returning to the workplace. According to a recent blog post, a “wave of workplace class actions” could follow in connection with the return to work. In an April 26, 2020 blog post on the Workplace Class Action Blog entitled “The Coming Surge of Workplace Class Actions in the Wake of COVID-19” (here), Gerald Maatman and Jennifer Riley of the Seyfarth Shaw law firm predict a surge of workplace lawsuits “in several key areas such as discrimination and workplace bias, wage & hour, as well as on the health & safety front.” Continue Reading Will a Wave of Workplace Lawsuits Follow the Return to Work?

One of the features of the Coronavirus Aid, Relief and Economic Security Act (CARES Act) is the Paycheck Protection Program (PPP), which is intended to make governmental funds available in the form forgivable loans so that small businesses can keep employees on their payroll. The CARES Act was passed in a rush and the PPP funds were dispersed in a hurry, so it is hardly a surprise that some problems might emerge. The U.S. Department of Justice has already said that as a result of a preliminary inquiry, the agency has already found possible fraud among the businesses seeking PPP funds. As discussed below, the possibility of further PPP investigative, regulatory, and enforcement actions raises a number of questions. Continue Reading Next Up: PPP Investigations, Enforcement Actions, and Criminal Proceedings?

Although Delaware’s courts recognized a cause of action for directors’ breach of the duty of oversight in the 1996 Caremark decision, claims against directors based on alleged oversight duty breaches have long been seen as difficult to plead and prove. However, in two 2019 rulings – the Marchand v. Barnhill decision (discussed here) and the Clovis Oncology decision (discussed here) – Delaware courts allowed breach of the duty of oversight claims to proceed. Now in a more recent ruling, the Delaware Court of Chancery has allowed yet another duty of oversight claim to proceed.

 

As noted in a May 1, 2020 post on the Duane Morris Delaware Business Law Blog (here), the most recent Delaware duty of oversight ruling reinforces the view that “directors and officers who neglect their oversight responsibilities may be personally liable for resulting harm to the company and its stockholders.” The Delaware Court of Chancery’s April 27, 2020 decision in Hughes v. Hu can be found here. Continue Reading Another Delaware Breach of the Duty of Oversight Case Survives Dismissal Motion

With coronavirus-related developments consuming all of the attention these days, it might be easy to forget other unrelated claims trends are continuing to develop and unfold. One important pre-pandemic trend that has continued to develop is the rise of D&O claims arising out of cybersecurity incidents. In the latest sign that this claims trend remains important, a plaintiff shareholder has filed a derivative lawsuit against certain directors and officers of Laboratory Corporation of America, in connection with two cybersecurity incidents involving the company. As detailed below, the first of these two incidents involved a data breach that took place at one of LabCorp’s third-party service providers. A copy of the complaint, filed in Delaware Chancery Court on April 28, 2020, can be found here. Continue Reading LabCorp Board Hit with Derivative Suit Over Third-Party Service Provider’s Data Breach

In what is the fifth coronavirus outbreak-related securities class action lawsuit to date, a plaintiff shareholder has filed a securities class action lawsuit against a healthcare information software services company. The lawsuit is based on alleged misrepresentations the company allegedly made with respect to a contract the company had entered for the sale of COVID-19 test kits. The company’s share price rose on news of the agreement, but later fell following an online report raising questions about the agreement. The plaintiff’s April 29, 2020 complaint can be found here. Continue Reading Healthcare Software Services Company Hit with COVID-19 Related Securities Suit

Francis Kean

In the following guest post, Francis Kean takes a look at the potential impact on COVID 19-related claims of standard D&O insurance policy exclusions. Francis is a Partner, Financial Lines, at McGill and Partners. A version of this article previously was published as a McGill client alert. I would like to thank Francis for allowing me to publish his 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 Francis’s article.

 

 

Continue Reading Guest Post: Beware the Unexpected Consequences of “Standard” D&O Exclusions

The SEC has made it clear that it will be monitoring market activity related to the coronavirus outbreak. The agency’s Chairman and others have declared that they expect companies to be forthcoming about the impact of the pandemic on company operations and finances, and underscored the fact that the agency will be watching. On April 24, 2020, the agency announced that it had formed a COVID-19 market monitoring group. And on April 28, 2020, the agency brought what as far as I know is its first coronavirus outbreak-related enforcement action, when it filed an action against a penny stock company Praxsyn Corporation and its CEO for public claims about the company’s claims about its ability to acquire and distribute N95 face masks. A copy of the SEC’s complaint can be found here. The SEC’s April 28, 2020 press release about the enforcement action can be found here. Continue Reading SEC Files First COVID-19 Related Enforcement Action