One of the many issues under discussion when the question of litigation financing regulation comes up is whether parties’ use of litigation financing must be disclosed. One federal district court has implemented provisions requiring the disclosure of litigation financing, and the state of Wisconsin recently adopted measures requiring litigation financing disclosure. The federal Advisory Committee on the Rules of Civil Procedure is separately studying measures that would require disclosure. In the meantime, other courts continue to struggle with the disclosure issue. The federal district court judge in Ohio presiding over the multidistrict opioid litigation has fashioned his own litigation financing disclosure approach; Northern District of Ohio Judge Dan Aaron Polster has ordered the litigants in the opioid litigation to provide litigation funding disclosure to the court itself, rather than to the parties. Interestingly, this approach has drawn praise from a leading third-party litigation funder, as discussed below. Judge Polster’s May 7, 2018 order can be found here. Continue Reading Federal Judge Orders Litigation Funding Disclosure to the Court, Rather than to Opposing Parties
D&O Insurance Coverage for Competitor Hire Claims
A frequently recurring claim that many companies face is a lawsuit brought by a competitor after the company hires the competitor’s former employee. Depending on how the competitor’s lawsuit is framed, these kinds of claims can be an awkward fit with the defendant company’s D&O insurance policy. A recent insurance coverage dispute in Delaware state court illustrates the kinds of coverage issues that can sometimes arise in connection with these claims. As discussed below, there are ways that D&O insurance policies can be revised to try to address at least some of the coverage issues. Delaware Superior Court Judge Eric Davis’s May 2, 2018 in the insurance coverage litigation can be found here. Continue Reading D&O Insurance Coverage for Competitor Hire Claims
Wells Fargo Settles Phony Account Securities Suit for $480 Million
Wells Fargo has agreed to pay $480 million to settle the securities class action lawsuit arising from the company’s fake customer account scandal. The lawsuit followed in the wake of allegations that the bank had opened millions of accounts on behalf of customers frequently without the customers’ knowledge or consent, and in some instances based on fictitious customer information. As discussed below, the massive securities suit settlement, which is subject to court approval, is among the largest ever. The company’s May 4, 2018 press release about the settlement can be found here. The settlement was also disclosed in the company’s May 4, 2018 filing on Form 10-Q, here. A May 4, 2018 press release about the settlement by Union Investment, the lead plaintiff in the action, can be found here. Continue Reading Wells Fargo Settles Phony Account Securities Suit for $480 Million
Guest Post: Another Court Applies New York’s “Sufficient Factual Nexus” Test to Related Claims
As I have frequently noted on this blog (for example, here), problems involving relatedness between claims present recurring coverage issues under D&O insurance policies. In the following guest post, Maurice Pesso and Greg M. Steinberg of the White and Williams LLP law firm take a look at a recent decision out of the Northern District of Illinois applying New York law to a D&O insurance dispute involving related claims issues. I would like to thank Maurice and Greg for their willingness to allow me to publish their article on this site. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is Maurice and Greg’s guest post. Continue Reading Guest Post: Another Court Applies New York’s “Sufficient Factual Nexus” Test to Related Claims
Ninth Circuit: No Crime Policy Coverage for Social Engineering Fraud Losses
Along with all of the other risks arising from companies’ increasing dependence on electronics communications and data storage technology has come not only the risks of a data breach caused by a hacker, but also the risk of a company’s transfer of funds by one of its employees who has been duped into believing the transfer was legitimate and authorized. These kinds of losses, which have been called “payment instruction fraud” or “social engineering fraud,” raise of a host of potential issues under traditional insurance policies, owing to the voluntary nature of the funds transfer made by a person authorized to access the company’s computer system. A recent decision by the Ninth Circuit illustrates the kinds of coverage problems that can arise from these circumstances. The Ninth Circuit’s unpublished April 17, 2018 opinion in Aqua Star (USA) Corp. v. Travelers Casualty & Surety Company of America can be found here. The Wiley Rein’s law firm’s April 19, 2018 post about the Ninth Circuit decision can be found here. Continue Reading Ninth Circuit: No Crime Policy Coverage for Social Engineering Fraud Losses
Scenes of Madrid
The final stop on The D&O Diary’s European assignment last week was a brief sojourn in Madrid, Spain’s capital city. More than 3 million people live in the sprawling city, but the city’s elegant central district is quite compact. Under any conditions, the city’s many boulevards and neighborhoods invite exploration on foot. But with the summer-like sunshine and warmth that prevailed throughout our visit, we were happy to ramble around the city, taking in the sights and enjoying the city’s many charms. Continue Reading Scenes of Madrid
Mandatory Arbitration of Shareholder Claims: What’s the Latest?
One of the trendy concepts in certain circles in recent years has been the idea of litigation management bylaws – that is, the adoption by company of bylaw provisions that help manage the company’s litigation risks. For example, one bylaw provision that has been widely adopted by publicly traded companies is a forum selection provision specifying a particular jurisdiction as the preferred forum for litigating shareholder disputes.
Another one of the proposed litigation management bylaws that has proven more controversial is the idea of a mandatory arbitration clause, requiring shareholder claimants to submit claims – including even claims under the federal securities laws – to arbitration. This idea, which has been percolating for years, received a significant boost in a statement from SEC Commissioner Michael Piwowar. In a recent letter to a member of Congress, SEC Chair Jay Clayton weighed in with his views on the topic, suggesting that the idea is not a particular priority for him. But aspects of his communication and of the current state of debate on the issue suggest that the idea is probably not going to just go away. Continue Reading Mandatory Arbitration of Shareholder Claims: What’s the Latest?
A Visit to Lisbon
The D&O Diary’s European assignment continued last week with a stopover in Lisbon, Portugal’s hilly capital city, known to the locals as Lisboa. It is located on the north side of the Rio Tejo (known as the Tagus River in English). The city itself has about 550,000 residents, but the city’s sprawling metropolitan area has about 2.7 million residents. Lisbon may not have the allure of some other European capitals, but it has an abundance of history and charm; a diversity of interesting neighborhoods to explore; and an abundance of great food, as reflected in the pictures below. Continue Reading A Visit to Lisbon
Guest Post: Plaintiffs Can Keep Their D&O Claims But They Cannot Touch The Insurance Proceeds
D&O insurance issues can be particularly difficult in the bankruptcy context. A number of issues can arise in the bankruptcy context that are not usually involved in ordinary claims circumstances. In the following guest post, Trinitee Green of the Bryan Cave Leighton Paisner law firm reviews and analyzes a particularly complicated set of circumstances that occurred post-confirmation in a bankruptcy proceeding. I would like to thank Trinitee for allowing 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 Trinitee’s article. Continue Reading Guest Post: Plaintiffs Can Keep Their D&O Claims But They Cannot Touch The Insurance Proceeds
First-Ever SEC Data Breach Disclosure Enforcement Penalty Imposed
In a development in an enforcement action that is the first of its kind, the SEC has levied a $35 million penalty against Altaba, Inc. as successor in interest to Yahoo, for Yahoo’s two-year delay in reporting the massive data breach the company experienced in December 2014. Altaba, which neither admitted nor denied any wrongdoing, agreed to pay the penalty as part of the settled resolution of SEC cease-and-desist proceedings. The penalty follows the SEC’s recent release of cybersecurity disclosure guidance for reporting companies and clearly indicates that the agency is increasingly focused on companies’ cybersecurity disclosure practices. The SEC’s April 24, 2018 press release about the penalty can be found here. The SEC’s April 24, 2018 order in the cease-and-desist proceedings can be found here. Continue Reading First-Ever SEC Data Breach Disclosure Enforcement Penalty Imposed