The D&O Diary is on assignment overseas this week with a lengthy itinerary including multiple stops. The first stop on my schedule was in Israel, where I had business meetings in Tel Aviv. My timetable while I was in Israel also allowed an opportunity for a first-time ever visit to Jerusalem. As reflected in the pictures below, the Jerusalem stopover was a truly extraordinary experience. Continue Reading Jerusalem and Tel Aviv
As discussed in prior posts, after the Delaware courts evinced their distaste for the type of disclosure-only settlements that had until then typically resolved merger objection lawsuits, the plaintiffs’ lawyers changed their game. They began filing their merger objection lawsuits in federal court rather than in state court, and then rather than settling the cases, agreed to dismiss their cases in exchange for supplemental proxy disclosures, after which the plaintiffs would seek to recover a so-called “mootness fee.” At least one federal judge recently questioned this “racket,” but the question remained whether more courts would take steps to scrutinize this process and discourage what has become nothing more than the plaintiffs’ lawyers’ extraction of a “go away” payment.
In a positive sign suggesting that court may indeed become more involved in policing this process, a District of Delaware judge recently rejected merger objection lawsuit plaintiffs’ mootness fee petition on the ground that the plaintiffs failed to carry their burden of showing that the supplemental disclosures produced a substantial benefit for the acquired company’s shareholders. Continue Reading Delaware Federal Court Rejects Merger Objection Plaintiffs’ Mootness Fee Request
As I discussed in a recent post, in July 2019, a Delaware Superior Court judge held that an appraisal action is a Securities Claim within the meaning of the applicable D&O insurance policy. While this part of the court’s ruling was noteworthy, there was another part of the court’s ruling that was also important. In addition to the Securities Claim issue, the court also determined that policy provided coverage for pre-judgment interest on the fair value payment in the appraisal action, even though the policy did not provide coverage for the payment itself.
In the following guest post, Dan Wolf, an associate at the Gilbert law firm, takes a look at the pre-judgment interest aspect of the recent Delaware opinion. Among other things, Dan suggests that this aspect of the court’s decision changes defendants’ analysis of whether or not to prepay appraisal claimants. A version of this article first appeared on his firm’s blog, here. I would like to thank Dan for his willingness to allow me to publish his 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 Dan’s article. Continue Reading Guest Post: Delaware Court Ruling Creates New Wrinkle for Defendants Evaluating Appraisal Claims
As this blog’s readers know, there have been a number of management liability claims that have been raised against companies that have experienced cybersecurity incidents. In the following guest post by Paul Ferrillo and Chris Veltsos, the authors argue that cyber risk is in fact D&O risk and that the risk is growing. The authors also suggest a 10-step plan to grapple with the risk. Paul is a shareholder in the Greenberg Traurig law firm’s Cybersecurity, Privacy, and Crisis Management Practice. Chris is a professor in the Department of Computer Information Science at Minnesota State University, Mankato where he regularly teaches Information Security and Information Warfare classes. My thanks to thank Paul and Chris for allowing me to publish this 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 Paul and Chris’s article. Continue Reading Guest Post: Time to Face the Music – Cyber Risk is D&O Risk – And Things Are Getting Worse!
Every year after Labor Day, I take a step back and review the most important current trends and developments in the world of Directors’ and Officers’ liability and D&O insurance. This year’s review is set out below. Once again, there are a multitude of things worth watching in the world of D&O. Continue Reading What to Watch in the World of D&O
One way or the other, I have been doing D&O for more than 35 years. One of the reasons I love what I do is that there is always something new and so I am always learning. This week’s new thing is a recent ruling by a federal district court ruling that a debtor’s insurer could not rely on a bankruptcy exclusion in the debtor’s D&O policy to deny coverage for an underlying claim because the exclusion violates the bankruptcy code’s probation against ipso facto provisions in executory contracts. In all my years, I don’t believe I have ever run across the bankruptcy code’s ipso facto provision prohibition, so the district court’s ruling in this case was a learning opportunity for me – and I suspect it will be for most readers as well. Continue Reading D&O Policy’s Bankruptcy Exclusion is a Prohibited Ipso Facto Provision and Unenforceable
In July, the Seventh Circuit issued a unanimous opinion in the case of Emmis Communications Corp. v. Illinois National Insurance Company, in which the court ruled that the policyholder’s provision of notice to the previous carrier precluded coverage for an underlying claim under the later of two D&O insurance policies. The court’s ruling was widely criticized (including also on this site). The policyholder, Emmis, filed a motion for panel rehearing or rehearing en banc. And then on August 21, 2019, the appeals court panel did something very unusual — the court withdrew its July opinion, in which it had reversed the district court, and substituted an order affirming the district court’s ruling. As discussed below, this odd and inexplicable sequence of events raises some serious questions. The Seventh Circuit panel’s August 21, 2019 order can be found here. Continue Reading In Odd Twist, Seventh Circuit Panel Reverses Itself on Prior Notice Ruling
In a development that some may find more than a little bit ironic, U.K.-based litigation finance firm Burford Capital has been hit with a securities class action lawsuit following a drop in its share price after a short seller published a report questioning the company’s financial reporting. Burford has denied the short seller’s allegations and has also raised interesting questions about trading in its securities at the time of the research report’s release. A copy of the August 21, 2019 complaint filed against the company and certain of its executives can be found here. Continue Reading Isn’t It Ironic? Litigation Funding Firm Hit With Securities Suit
In an interesting development in a long-running legal battle in which for-profit education company Apollo Education Group is seeking D&O insurance coverage for its $13.125 million settlement of an options backdating-related securities class action lawsuit, the Ninth Circuit has certified to the Arizona Supreme Court the question of the standard of law to be applied to the insurance policy’s consent to settlement provisions. The Arizona Court’s response to the certified question potentially could have important implications for the meaning and application of similar provisions in other D&O insurance policies. The Ninth Circuit’s August 15, 2019 opinion certifying the question to the Arizona court can be found here. Continue Reading Ninth Circuit Certifies Consent to Settlement Question to Arizona Supreme Court
It is not uncommon for corporate boards facing shareholder derivative litigation to appoint a special litigation committee to investigate the allegations that the plaintiff shareholder raised in the suit. However, in an unusual development in the shareholder derivative lawsuit pending in Delaware against directors and officers of Oracle, the company’s board’s special litigation committee (SLC) has advised the court that the committee of three independent directors believes it is in the company’s best interest to allow the lead plaintiff (rather than the committee itself) to proceed with the claims on behalf of Oracle. Alison Frankel’s August 19, 2019 post on her On the Case blog discussing the Oracle derivative lawsuit and the SLC’s letter to the court can be found here. Continue Reading Oracle Board Special Litigation Committee Recommends Shareholder’s Derivative Claims Proceed