As I have noted in prior posts, one of the follow-on effects of the recent racial justice movement has been increased scrutiny of racial diversity within corporate management, and in particular on corporate boards. The boards of several publicly traded companies have been hit with shareholder derivative lawsuits alleging that the directors breached their fiduciary duties by failing to include African-American individuals on the boards, while at the same time the companies were touting their diversity and inclusion efforts.

 

In addition to the recent litigation, efforts to advance board racial diversity have included legislation. Earlier this year, the California legislature passed a bill mandating the inclusion on boards of California headquartered companies of representatives of “underrepresented communities.” On September 30, 2020, California Governor Gavin Newsom signed the bill into law. As discussed below, even though the law has only been in place for a few days, a lawsuit challenging the bill has already been filed. Continue Reading California Board of Directors Diversity Bill Signed Into Law, Challenged by Lawsuit

In the latest COVID-19-related securities class action lawsuit filing, the cruise ship company Royal Caribbean Cruises has been hit with a securities suit alleging that the as the viral disease spread earlier this year the company attempted to soft-pedal its statements about the outbreak’s impact on its operations and bookings, as well as about the safety threat that the outbreak represented for ship crews. As discussed further below, the new lawsuit against Royal Caribbean reflects several of the key trends in the coronavirus-related lawsuits. A copy of the new complaint against Royal Caribbean can be found here. Continue Reading Royal Caribbean Hit with COVID-19-Related Securities Suit

Arati Varma
Ian Roberts

In the following guest post, Arati Varma and Ian Roberts take a look at the evolving risk of securities class actions in South East Asia. Arati Varma is Head of Financial, Professional, and Casualty Lines, Asia, for QBE, based in Singapore. Ian Roberts is the Managing Partner of Clyde & Co’s Singapore office and leads their regional insurance practice. A version of this article previously was published in the Q3 2020 PLUS Journal. I would like to thank Arati and Ian for allowing me to publish their 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 Arati’s and Ian’s article. Continue Reading Guest Post: Securities Class Action Risk in South East Asia

In a recent decision following a bench trial, a California state court judge held that a D&O insurance policy’s “bump up” exclusion applies to preclude coverage for the settlement of claims by shareholders of the acquired company who claimed they had received inadequate consideration for their acquired shares. The judge’s decision, which reflected her reading of the specific exclusionary language involved as well as the testimony of several witnesses about the meaning of the provision, is interesting in that the “bump up” exclusion fights usually involve claims against the acquirer for paying inadequate consideration, not claims that the acquired company’s investors received inadequate consideration.

 

The court’s opinion is detailed but merits a full reading. The Court’s October 1, 2020 decision can be found here. (It should be noted that, under applicable procedural rules, the court’s decision is “tentative,” meaning that the parties have 15 days in which to file objections.) Continue Reading “Bump-Up” Exclusion Blocks Coverage for Inadequate Consideration Paid for Insured Company’s Acquisition

The following guest post takes a look at the role of the Executive Committee of a corporate Board of Directors. This article was written by H. Stephen Grace, President of H.S. Grace & Company, Inc.; Susan Koski-Grafer, Member of the Board of Advisors of Grace & Co.; and S. Lawrence Prendergast, Member of the Board of Advisors of Grace & Co. This article draws on the article authored by these authors in the July 2020 edition of  ABA Business Law Today titled Why a Company Should Consider Using an Executive Committee of Its Board of Directors. I would like to thank the authors for allowing me to publish their 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 the authors’ article. Continue Reading Guest Post: Using an Executive Committee of the Board of Directors

It has been ten years since the U.S. Supreme Court issued its landmark opinion in Morrison v. National Australia Bank, in which the Court clarified that the U.S. securities laws applies only to securities transactions that take place in the United States, either on an exchange or otherwise. While the decision has had a significant impact on a wide range of cases, it has not yet “brought the predictability and consistency it promised” and it has “spawned a number of unintended consequences,” according to a recent memo from the Cleary Gottlieb firm. The September 24, 2020 memo, entitled “Foreign Securities Class Actions 10 Years After Morrison,” which details three specific problem areas that have emerged as the lower courts have interpreted and applied Morrison over the last decade, can be found here. Continue Reading The Impact of the Morrison Decision After Ten Years

In the latest SEC enforcement action relating to alleged misrepresentations pertaining to the coronavirus outbreak, the agency has filed a securities fraud action against the President and Chief Science Officer of a biotechnology company who allegedly made false statements to investors concerning the status of his company’s COVID-19 test. The enforcement action complaint also contains allegations concerning the individual’s statements about the status of his company’s delinquent SEC reporting. The enforcement action underscores the fact that the SEC intends to enforce the securities laws with respect to company statements falsely suggesting the company is in a position to profit from the coronavirus outbreak. A copy of the SEC’s September 25, 2020 complaint can be found here. The SEC’s September 25, 2020 press release regarding the enforcement action can be found here. Continue Reading SEC Files COVID-19-Related Enforcement Action Against Biotech Company Exec

In a derivative lawsuit settlement with one of the highest nominal dollar values ever – and in what is one of the largest #MeToo-related D&O lawsuit settlement ever – Google parent Alphabet has agreed to establish a $310 million diversity, equity, and inclusion fund as part of the settlement of the consolidated derivative litigation relating to the company’s alleged mishandling of sexual harassment allegations against senior executives and the company’s alleged overall culture of sexual discrimination and harassment. The company also agreed to adopt extensive reforms to its employment policies and to implement a number of governance reform measures as part of the settlement. The settlement is subject to court approval. Continue Reading Alphabet Establishes $310 Million Fund in Google Sexual Misconduct Lawsuit Settlement

California-based high technology firm Cisco Systems is the latest company to be hit with a racial diversity lawsuit, based on allegations that its directors breached their fiduciary duties to the company by failing to include an African-American on the company’s board, despite the company’s numerous statements about its commitment to diversity. Though this latest lawsuit is in many respects similar to the previously filed board diversity lawsuits, it does differ in that it was not filed by the plaintiffs’ firm that has filed most of these lawsuits and also because the lawsuit follows a pre-suit demand on Cisco’s board, by contrast to most of the prior suits where the plaintiffs had made no demand and instead argued demand futility. A copy of the complaint in the Cisco Systems action can be found here. Continue Reading Cisco Systems Hit With Board Diversity Lawsuit

In the latest D&O lawsuit based on allegations related to the COVID-19 outbreak, a plaintiff shareholder has filed derivative lawsuit against the board of a vaccine developer, Vaxart, claiming that corporate insiders and the company’s largest investor profited when the company falsely claimed that it was part of the federal government’s accelerated program for the development of a COVID-19 vaccine. The complaint in the lawsuit, which alleges that the defendants violated their fiduciary duties and federal securities laws regarding proxy disclosures, can be found here. Continue Reading Vaccine Company Hit with COVID-19-Related Derivative Lawsuit