One of the most watched and commented on corporate and securities litigation trends over the last several years has been the rise of management liability related lawsuits arising from cybersecurity-related incidents. While there has never been the volume of cases that some commentators expected, there have been a number of cases filed. The latest of these lawsuits is the securities class action lawsuit filed this week against FedEx, in which the plaintiff shareholder alleges the company did not fully disclose the extent of the disruption at its European operation after it was hit with the NotPetya malware virus in June 2017. A number of the allegations in the new FedEx complaint are similar to those raised in prior cybersecurity-related securities suit, suggesting some of the factors that might lead to this type of cybersecurity follow-on lawsuit. A copy of the complaint, filed in the Southern District of New York on June 26, 2019, can be found here. Continue Reading FedEx Hit with Cyber Attack-Related Securities Suit

In a recent post, I detailed the latest variant in the merger objection litigation game, in which the plaintiffs’ agree to dismiss their lawsuit in exchange for the defendants’ agreement to make additional disclosures and pay the plaintiffs’ counsel a mootness fee. The absence of any court involvement in this process makes this an appealing business model for the plaintiffs’ counsel. It also makes it difficult for anyone to challenge the procedure, reducing the likelihood of unwanted judicial scrutiny.

 

However, Northern District of Illinois Judge Thomas M. Durkin, exercising his “inherent authority” and acting at the urging of an objecting shareholder, has “abrogated” the settlement of the litigation arising out of the acquisition of Akorn , Inc. by Frensenius Kabi AG, and ordered the plaintiffs’ lawyers to return to Akorn their $322,000  mootness fee, ruling that the additional disclosures to which the company agreed were “worthless to shareholders” and that the underlying lawsuits should have been “dismissed out of hand.” This welcome development could possibly be the first step into driving a stake in the heart of the merger objection litigation “racket.” Judge Durkin’s June 24, 2019 order can be found here. Continue Reading Is This the Beginning of the End of the Merger Objection Lawsuit Mootness Fee Racket?

As I noted in a recent post, the securities class action lawsuit pending against Toshiba raises the question of whether or not the U.S. securities laws apply to transactions in unsponsored American Depository Receipts (ADRs). The company’s petition to the U.S. Supreme Court posed the larger question of whether there are exceptions to the second-prong of the Morrison standard holding that the U.S. securities laws apply to domestic transactions in securities. A number of organizations and even governments filed amicus briefs urging the Court to take up the case. However, in a June 24, 2019, the Court denied the company’s petition, sending the case back to the lower courts and, as discussed below, leaving behind several unanswered questions. Continue Reading U.S. Supreme Court Denies Cert in Toshiba Unsponsored ADRs Securities Suit

Nessim Mezrahi

In the following guest post, Nessim Mezrahi, cofounder and CEO of SAR, a securities class action data analytics and software company, takes a look at possible defenses to securities class action lawsuits that corporate defendants may have based on analysis of the claimed stock price declines involved. A version of this article previously appeared on Law 360. I would like to thank Nessim for allowing 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 Nessim’s article. Continue Reading Guest Post: An Analytical Approach To Defending Securities Class Claims

In a noteworthy decision that raises a number of interesting issues, District of Minnesota Judge Ann D. Montgomery, applying Minnesota law, held that a company’s excess D&O insurance policy’s prior acts exclusion precludes coverage for the entirety of claims asserted against the company, even with respect to wrongful acts alleged to have taken place after the prior acts date. This case involves a number of twists and turns, while raising some important questions. Judge Montgomery’s June 4, 2019 opinion in the case can be found here. The Wiley Rein law firm’s June 20, 2019 post about the ruling on its Executive Summary Blog can be found here. Continue Reading D&O Insurance: Prior Acts Exclusion Precludes Coverage for Post-Past Acts Date Conduct

As the number of Telephone Consumer Protection Act (TCPA) class actions has risen in recent years, one recurring question has been whether or not there is coverage under the defendant companies’ D&O insurance policies for these claims.  The specific issue is whether or not D&O policy’s “invasion of privacy” exclusion precludes coverage for TCPA claims. In the latest ruling to address these issues, Southern District of Florida Judge Robin L. Rosenberg, applying Florida law, held that, in light of the specific allegations in the underlying TCPA action, coverage for the claim was precluded by the exclusion. Judge Rosenberg’s ruling is consistent with other rulings, but does also raise some interesting issues. Judge Rosenberg’s May 30, 2019 order can be found here. A June 7, 2019 post on the Wiley Rein law firm’s Executive Summary Blog can be found here. Continue Reading D&O Insurance: Thinking About the Invasion of Privacy Exclusion

Priya Cherian Huskins

In a recent post, I took a look at the rise in the number of state court securities class action lawsuits that have been filed in the wake of the U.S. Supreme Court’s decision in the Cyan case. In the following guest post, Priya Cherian Huskins of Woodruff Sawyer & Co. takes a deeper look at the state court securities class action data to assess the extent of the threat of state court securities class action litigation relating to follow-on offerings. A version of this article was previously published in Woodruff-Sawyer’s D&O Notebook.  I would like to thank Priya for her willingness to allow 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 Priya’s article. Continue Reading Guest Post: Is it Really that Bad? Follow-On Offerings and Section 11 Suits in State Court

In an interesting opinion, the Fifth Circuit has set aside a settlement and related bar order that had been approved by the district court in litigation arising out of the Stanford Financial Ponzi scheme scandal. The appellate court said that the district court lacked authority to approve the settlement in light of several of its features, including its provisions cutting off the claims of several former Stanford Financial employees and managers to the defunct firm’s insurance policies’ proceeds. As discussed below, the circumstances surrounding the settlement raise serious questions about the intended purpose of D&O insurance. The Fifth Circuit’s June 17, 2019 opinion in the case can be found here. Continue Reading Who is D&O Insurance For?

As I have noted in prior posts, there has been in recent years a slowly developing E.U. initiative for the introduction of a rights of collective redress on a Union-wide basis. As discussed here, in April 2018, the European Commission introduced a proposal – as part of what it called a “New Deal for Consumers” – that would introduce a European collective redress right for consumers. More recently, on March 26, 2019, the EU Parliament, in plenary session, adopted the Commission’s proposal. The next step is that the Council of Europe will now take up the proposal, moving the E.U. one step closer toward the adoption of a pan-European collective redress mechanism for consumers that would be available in all of the member states.  The March 26, 2019 application on which the EU Parliament acted can be found here. Continue Reading Proposal for E.U. Collective Redress Mechanism Advances

I have been fortunate in recent years to be able to travel around the world and to speak to D&O insurance professionals in a wide variety of different countries. One recurring question I get in these meetings has to do with non-U.S. companies that have Level I American Depository Receipts (ADRs) trading in the U.S. The question is usually something along the lines of – “these Level 1 ADR companies don’t have U.S. securities litigation exposure, right?” This question always puzzles me, given the several high profile cases in recent years (discussed below) demonstrating that —  while there may be  an interesting question between sponsored and unsponsored ADRs — transactions in Level 1 ADRs certainly can be subject to the U.S. securities litigation.   Continue Reading The U.S. Securities Litigation Exposure of Non-U.S. Companies with Level I ADRs