As I have noted in prior posts (most recently here), many of the SPACs that completed IPOs during the SPAC frenzy in 2020 and 2021 are nearing the end of their two-year search period. Many of these SPACs have not identified suitable merger partners and the SPACs are liquidating. One question I have been asking as these SPACs liquidate is whether there might be litigation. One the one hand, in the liquidation, the investors get their money back. On the other hand, in our litigious society litigation is always possible when plans don’t work out. In the latest example of how litigation might arise in the SPAC liquidation context, investors in SPAC which has announced its plan to liquidate have brought an action against the SPAC, its directors and officers, and the SPAC sponsor, in a fight about how assets the SPAC holds beyond the IPO trust funds are to be distributed.Continue Reading Liquidating SPAC Hit With Investor Suit Over Planned Asset Distribution
Cornerstone Research: Securities Suit Settlements at High Levels in 2022
The total number of securities class action lawsuit settlements reached the highest level in 15 years in 2022, and median, average, and aggregate settlement amounts also rose significantly in 2022 compared to the year prior, according a recently published annual report from Cornerstone Research. The report, entitled “Securities Class Action Settlements: 2022 Review and Analysis,” analyzes the 105 securities class action lawsuit settlements finalized in 2022 and compares them statistically with prior years’ settlements. The report can be found here. Cornerstone Research’s March 8, 2023, press release about the report can be found here.Continue Reading Cornerstone Research: Securities Suit Settlements at High Levels in 2022
Breach of Duty of Oversight Claims Against McDonald’s Directors Dismissed
In the latest development in the Delaware courts’ evolving elucidation of the standards surrounding claims for breach of the duty of oversight – sometimes referred to as Caremark claims — a Delaware Court has held that the board of McDonald’s cannot be held liable for an alleged oversight duty breach in connection with the alleged scandals at the company involving sexual harassment allegations. This ruling in the directors’ favor follows closely after the same court’s recent ruling in the same case that the plaintiffs had stated a claim against an officer defendant for breach of the duty of oversight. The court’s recent rulings in the case provide extensive additional insights with respect to what must be alleged to establish a Caremark claim. Vice Chancellor Laster’s March 1, 2023, opinion in the case, dismissing the claims against the McDonald’s directors, can be found here.Continue Reading Breach of Duty of Oversight Claims Against McDonald’s Directors Dismissed
Guest Post: Baby Boomers’ Impact on Financial Lines Insurers of Investment Advisers
All of us in advisory roles in the professional liability insurance space are constantly trying to identify emerging risks and trends that could affect the liability environment. Among the many forces and factors that could affect the risk landscape is demographic change. In the following guest post, Sarah Abrams, Head of Professional Liability Claims at Bowhead Specialty, takes a look at the demographic changes that lie ahead and discusses what the changes could mean for the risk environment for investment advisors. A version of this article previously was published on the PLUS Blog. I would like to thank Sarah 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 site’s readers. Please contact me directly if you would like to submit a guest post. Here is Sarah’s article.Continue Reading Guest Post: Baby Boomers’ Impact on Financial Lines Insurers of Investment Advisers
Are We All About to be Replaced by AI Chat Bots?
You can hardly turn on any of your various devices these days without encountering yet another hyperventilating article or program about ChatGPT or, more generally, about artificial intelligence (AI) chat bots. Time magazine recently ran a cover story about ChatGPT and the AI chat bot race. As if that were not enough to signal that ChatGPT has arrived as the social phenomenon du jour, the Wall Street Journal recently ran a long self-consciously serious op-ed column in which Henry Kissinger and two other public intellectuals called ChatGPT “a new technology [that] bids to transform the human cognitive process.” Wow! OK, then.
Despite these and many other recent signs and signals of impending doom, I was fully prepared to ignore ChatGPT and carry on with my life – that is, until one of my colleagues recently asked me whether, given that advent of ChatGPT, my days as a blogger are about to come to an end? The question, in its simplest form, is whether I am about to be replaced by a machine. If you listen to the current ChatGPT hype, it may be a question that all of us need to be asking ourselves.Continue Reading Are We All About to be Replaced by AI Chat Bots?
First-Ever Criminal Action Charges Exec with Misuse of Rule10b5-1 Trading Plans
In what the agency says is the first prosecution of its type, the U.S. Department of Justice has brought criminal charges against Terren Peizer, the Executive Chairman of the healthcare company Ontrak, alleging that the executive improperly used Rule 10b5-1 trading plans to sell shares in the company ahead of the company’s disclosure of bad news. The SEC has separately brought a civil enforcement action against Peizer based on the same allegations. The government alleges that Peizer set up the plans while aware of the undisclosed bad news and that his stock sales allowed him to avoid more than $12.7 million in losses.
A copy of the U.S. Department of Justice’s March 1, 2023 press release about Peizer’s prosecution can be found here, and the February 24, 2023 grand jury indictment of Peizer can be found here. The SEC’s March 1, 2023, press release can be found here, and its complaint against Peizer can be found here.Continue Reading First-Ever Criminal Action Charges Exec with Misuse of Rule10b5-1 Trading Plans
Inflation Undercuts Company’s Financial Results, Leads to Securities Suit
In my year-end wrap up of the top D&O stories of 2022, I noted the possibilities that various macroeconomic factors could contribute to securities class action lawsuit filings in the months ahead. One of the specific factors I identified was economic inflation. In subsequent conversations, I have been asked how an economy-wide phenomenon such as inflation could lead to a securities suit against any one individual company. A lawsuit filed earlier this week provides an illustration of how the inflationary impacts can translate into securities litigation. A copy of the March 1, 2023 complaint in the lawsuit, filed against coffee retailer and franchisor Dutch Bros Inc., can be found here.Continue Reading Inflation Undercuts Company’s Financial Results, Leads to Securities Suit
Life Sciences Companies Remained Frequent Securities Suit Targets in 2022
The number of securities class action lawsuits filed against life sciences companies in 2022 declined compared to 2021 but remained relatively steady as a proportion of the total number of securities class action lawsuits filed during the year, according to a new report from the Dechert law firm. The report, entitled “Dechert Survey 2022 Edition: Developments in Securities Fraud Class Actions Against U.S. Life Sciences Companies,” states that there were a total of 43 securities suits filed against life sciences companies in 2022, compared to 59 in 2021. The Dechert law firm’s February 23, 2023 press release about the report, which links to the full report, can be found here.Continue Reading Life Sciences Companies Remained Frequent Securities Suit Targets in 2022
Report Ranks Top 50 Plaintiffs’ Firms by 2022 Securities Suit Settlement Values
In its latest annual report, ISS Securities Class Action Services reports that in 2022, for the third year in a row, the Robbins Geller law firm secured the highest dollar value in securities class action lawsuit settlements during the year and was also involved in the highest number of separate settlements. The report, which includes both U.S. and Canadian settlements, ranks the top 50 plaintiffs law firms by total dollar value recoveries, and the Top Ten plaintiffs law firms ranked by number of settlements achieved. The February 28, 2023, report, which is entitled “The Top 50 of 2022” and was written by Jeff Lubitz, Managing Director, ISS Securities Class Action Services, can be found here.Continue Reading Report Ranks Top 50 Plaintiffs’ Firms by 2022 Securities Suit Settlement Values
Guest Post: Client Earth Claim Against the Board of Shell: A Sign of Things to Come in the UK?
In a recent post, I discussed the lawsuit filed in a UK court by the environmental advocacy group ClientEarth against the board of Shell. In the following guest post, Francis Kean, Partner in Financial Lines Team at McGill and Partners, dives deeper into the legal context of the lawsuit and its insurance implications. I would like to thank Francis for allowing me to publish his article as a guest post on this site. I welcome guest post submissions from responsible authors of 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: Client Earth Claim Against the Board of Shell: A Sign of Things to Come in the UK?