In a ruling that turned on the interpretation of a technical financial term, a federal district court concluded that the Options Trading exclusion in an investment firm’s E&O policy precluded coverage for investor claims arising out of a financial transaction gone bad. In concluding that the exclusion precluded coverage, the court applied a standard financial industry definition to interpret the meaning of a specific policy term. The court’s opinion makes for interesting reading and provides food for thought about the policy placement process generally and about the process of policy interpretation. District of Utah Judge Dale Kimball’s March 1, 2019 opinion in the case can be found here. Continue Reading E&O Coverage Barred for Options Trading Losses

Paul A. Ferrillo
Christophe Veltsos

The threats to data security are substantial. Every organization faces some level of cyber risk. So how do we get better at cybersecurity? That is the question that Paul Ferrillo and Christophe Veltsos ask in the following guest post. Paul is a shareholder in the Greenberg Traurig law firm’s Cybersecurity, Privacy, and Crisis Management Practice. Chris is 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. I would like to thank Paul and Chris for their willingness to allow me to publish their article as a guest post. 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. Paul and Chris’s article is set out below. Please be sure to also see the item at the end of the post about International Women’s Day. Continue Reading Guest Post: The Missing Link of Cybersecurity — Time for a Cyber Risk Check-Up

Stanford Law School

On Tuesday, March 5, 2019, it was my distinct honor and pleasure to be one of the invited speakers at Professor Joseph Grundfest’s corporate and securities litigation class at Stanford Law School in Palo Alto, California. Along with Priya Cherian Huskins of the Woodruff Sawyer firm, I was invited to address the students on the topic of the role of D&O insurance in securities and derivative litigation. Continue Reading Corporate and Securities Litigation at Stanford Law School

Regular readers know that I frequently write about insurance coverage disputes in which insurers contend that coverage is precluded due to the policyholders’ alleged late provision of notice. All too often, the policyholders end up without coverage as a result of the late notice allegations. In an interesting (albeit confusingly written) decision, a Michigan intermediate appellate court upheld a trial court’s rejection of a professional liability insurer’s late notice argument, finding that in fact the policyholder had provided timely notice of the claim ultimately in dispute, and therefore that the insurer was not entitled to recoup amounts the insurer incurred in defending and settling an arbitration that had been filed against the policyholder. The ruling highlights the fact that notice timeliness disputes often are factually complicated and that careful consideration of the applicable facts can sometimes confirm that a policyholder did in fact comply with the notice requirements. The Michigan Court of Appeals (Oakland Circuit)’s February 26, 2019 opinion can be found here. Continue Reading Michigan Appellate Court Rejects Insurer’s Late Notice Defenses

In one of the largest shareholder derivative lawsuit settlements ever, the parties to the consolidated Wells Fargo derivative suit arising out of the bank’s phony customer account scandal have agreed to settle the case for a variety of cash and non-cash benefits with a stated value to the company of $320 million, inclusive of a cash payment of $240 million. The $240 million cash portion of the settlement is to be paid by the bank’s D&O insurers, in what is, according to the plaintiffs’ counsel, “the largest insurer-funded cash component of any shareholder derivative settlement in history.” This settlement represents the latest in a series of derivative suit settlements with a significant cash component, a case resolution pattern in high-profile derivative suits that arguably represents the new normal in the world of D&O liability exposures. Continue Reading Massive Settlement in Wells Fargo Bogus Account Scandal Derivative Suit

When Congress enacted the PSLRA in 1995, one of the goals was to try to deter frivolous litigation. As time has passed, it has also become clear that many of the PSLRA’s procedural reforms also created a structure of incentives for plaintiffs’ lawyers. For example, the PSLRA’s most adequate plaintiff requirement created an incentive for plaintiffs’ lawyers to seek to represent institutional investors. However, according to a recent academic study, with the passage of time, some of the incentives have had a distorted impact, as the incentives motivate plaintiffs’ lawyers to try to get hold of a mega-case “lottery ticket” that will produce a jackpot outcome – for the lawyers. These distortions in turn are creating many of the ills we are now seeing the securities class action litigation arena, justifying, according to the academic authors, another round of securities litigation reform. Continue Reading Securities Litigation Reform: Addressing the Class Action Lottery

Although it is not always appreciated or taken into account, the fact is that executives of private companies can be held liable for statements or other actions made in violation of the federal securities laws. One very recent and high-profile example where this happened involved the SEC enforcement action (and subsequent criminal proceedings) involving the high-profile medical testing company Theranos. Recent SEC and Department of Justice actions involving an Indiana-based company underscores the fact that private companies can draw the attention of federal securities regulator, and that it is not just high profile Silicon Valley firms that are potentially at risk. Continue Reading Just a Reminder: Private Company Executives Can Be Held Liable Under the Federal Securities Laws

Because the lawsuits are so expensive to litigate and to resolve, securities class action litigation has long been the subject of both scrutiny and criticism. However, while the history of concern about securities litigation is long, the case can be made that there has rarely been a time when securities litigation in the U.S. deserves a critical look more than it does now. As has been well-documented on this site and elsewhere, securities class action lawsuit filing activity has been a record levels for the past two years. Signs are so far this year that these heightened levels of activity, which can only be described as alarming, are continuing. Given these circumstances, it is hardly surprising that business groups and others are now raising calls for another round of securities class action litigation reform. Continue Reading Securities Class Action Reform Discussed at Washington Event

Last fall, the U.S. Chamber Institute for Legal Reform issued a paper detailing the ways in which the U.S. securities class action litigation system is “spinning out of control,” and calling for a renewed wave of securities litigation reform. In a new paper, entitled “Containing the Contagion: Proposals to Reform the Broken Securities Class Action System,” the Institute renews the call for reform and sets out a series of specific proposals intended address the “abuses” the paper identifies. The current securities class action litigation system, according to the paper, is “plainly broken, harming investors and our capital markets.” The Institute’s February 25, 2019 paper can be found here. Continue Reading U.S. Securities Class Action Litigation: Alarm Bells and Reform Proposals

Every year, investors from Wall Street to Main Street await Berkshire Hathaway Chairman and CEO Warren Buffett’s annual letter to the company’s shareholders, for his commentary on the current business and economic environment, for his investment insights, and for his occasional folksy and humorous observations. In the run-up to the release of this year’s letter, which took place this past Saturday morning, there was hope that this year’s letter might do a little more – say, explain how Buffett intends to deploy the company’s growing mountain of cash, or comment on recent negative developments at Kraft Heinz. Although this year’s letter contains the usual ration of Buffett’s brand of investment wisdom, those who were looking for more undoubtedly were disappointed.  Buffett’s February 23, 2019 letter can be found here. (Full disclosure: I own BRK.B shares, although not nearly as many as I wish I did.) Continue Reading A Closer Look at Buffett’s Annual Letter to Berkshire Shareholders