There is no private right of action under the Foreign Corrupt Practices Act. However, a company’s announcement of an FCPA investigation or enforcement action frequently will draw a follow-on civil lawsuit in the form of a shareholders’ derivative lawsuit, in which a shareholder plaintiff alleges that the company’s board failed to prevent the company from committing these violations. But while these kinds of lawsuits arise frequently, they are less frequently successful, as illustrated most recently in a Delaware Chancery Court shareholders’ derivative lawsuit involving the telecommunications equipment company Qualcomm. Continue Reading FCPA Follow-On Civil Actions: Frequently Filed, Less Frequently Successful
Though Fraudulent Transfers Took Place During the Policy Period, Past Acts Exclusion Still Precludes Coverage
A prior acts exclusion in a bank holding company’s D&O insurance policy precludes coverage for claims based on allegedly fraudulent transfers made to a banking subsidiary during the policy period, because the transfers arose out of wrongful acts that occurred prior to the policy’s past acts date, according to a recent decision by the Eleventh Circuit, applying Florida law. The appellate court reasoned that, though the transfers occurred during the policy period, what made the transfers fraudulent was the company’s insolvency, which arose from officer misconduct that took place prior to the policy’s past acts date. The case provides an interesting example to consider past acts coverage in claims made policies. Continue Reading Though Fraudulent Transfers Took Place During the Policy Period, Past Acts Exclusion Still Precludes Coverage
Record Number of Settlements Added to Top 100 Securities Suits Settlement List in 2016
Thirteen of the 100 all-time largest securities class action lawsuit settlements were finalized in 2016, the highest number of settlements during any one year period, according to a recent report from Institutional Shareholder Services (ISS). Two of the 2016 settlements among the top 100 were among the eleven largest of all times. The report, which also ranks the plaintiffs’ law firms by the number of top 100 settlements in which they were involve, entitled “The Top 100 U.S. Settlements of All Time,” can be found here. Continue Reading Record Number of Settlements Added to Top 100 Securities Suits Settlement List in 2016
Financial Restatements Continue to Decline for U.S. Reporting Companies
Financial restatements among U.S public companies hit their lowest level in years in 2016, according to the updated annual report of Audit Analytics. As a result of heightened standards as well as the decreased numbers of listed companies, the share U.S. companies restating their prior financial statements hit their lowest level since 2010 and the number of companies restating their financials is at its lowest level since at least 2002. The findings are summarized in a June 12, 2017 Audit Analytics blog post (here). The full report can be found here (subscription or purchase required). Continue Reading Financial Restatements Continue to Decline for U.S. Reporting Companies
Climate Change Disclosure Remains an Issue Despite U.S. Withdrawal from Paris Accord
On June 1, 2017, President Donald Trump announced the withdrawal of the United States from the Paris Climate Accord. Under the terms of the Paris pact, withdrawal could take up to four years, but the President’s recent action signals his administration’s intent to step away from the agreements and commitments detailed in agreement. The President’s action has already set in motion a host of political reactions, including a variety of pronouncements at the state and local level in the U.S. in response to the President’s move.
Amidst these actions on the political stage, a host of other actors, including shareholders, activists, and non-governmental organizations (NGOs) have continued to press climate change-related disclosure issues. These developments ensure that notwithstanding the President’s actions on the Paris accord, climate change will remain a high profile issue for many corporate boards, and potentially could be a source of future corporate claim activity. Continue Reading Climate Change Disclosure Remains an Issue Despite U.S. Withdrawal from Paris Accord
Guest Post: Playing the Blame Game: Fiduciary Duty Litigation in Bankruptcy Proceedings
An unfortunately frequent part of bankruptcy proceedings is the assertion of claims against the directors and officers of the failed company. In the following guest post, Joseph W. Swanson and Donald R. Kirk of the Carlton Fields law firm take a look at the kinds of claims these officials face, as well as the steps these individuals can take to try to avoid the claims in the first place. I would like to thank Joe and Donald for their willingness to publish their article as a guest post on my 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 Joe and Donald’s article. Continue Reading Guest Post: Playing the Blame Game: Fiduciary Duty Litigation in Bankruptcy Proceedings
Eighth Circuit: Notice Provided During the Policy Period But After Seven Month Delay Not “As Soon as Practicable”
If an insured give notice of claim to its insurer during the policy period but seven months after a lawsuit is filed, has it provided notice “as soon as practicable” as required under the policy? Not according to a May 25, 2017 decision by the Eighth Circuit. The appellate court, applying Minnesota law, affirmed the district court’s holding that the provision of notice during the policy period but seven months after the lawsuit was filed against the insured did not satisfy the policy’s “as soon as practicable” notice requirement. While the Eighth Circuit’s ruling is consistent with the rulings of other courts on this issue, I still have concerns, as noted below. The Eighth Circuit’s opinion in the case can be found here. Continue Reading Eighth Circuit: Notice Provided During the Policy Period But After Seven Month Delay Not “As Soon as Practicable”
U.S. Securities Laws Apply to OTC Transactions in Daimler’s Sponsored ADRs
Following the U.S. Supreme Court’s June 2010 decision in Morrison v. National Australia Bank (here), the lower federal courts have set about implementing the Morrison decision’s holding that the U.S. securities laws do not apply extraterritorially. One issue that the courts have wrestled with is whether or not the U.S. securities laws apply to over-the-counter (OTC) transactions in the U.S. of a foreign company’s American Depositary Receipts (ADRs). A series of recent cases suggest the courts are closer to having these issues sorted out. Most recently, a May 31, 2017 decision by Central District of California Judge James Otero held, consistently with other recent federal district court decisions, that the U.S. securities laws do apply to OTC transactions in Daimler, A.G.’s sponsored level 1 ADRs. A copy of Judge Otero’s decision can be found here. Continue Reading U.S. Securities Laws Apply to OTC Transactions in Daimler’s Sponsored ADRs
Supreme Court Holds Disgorgement Claims Subject to Five-Year Statute of Limitations
On June 5, 2017, in an opinion written by Justice Sonia Sotomayor for a unanimous court, the U.S. Supreme Court held that the five-year statute of limitations applies to claims for disgorgement imposed as a sanction for violation the federal securities laws. The Court rejected the SEC’s argument that the statute of limitations was not applicable to claims for disgorgement. The decision provides greater certainty about the scope of potential liability for parties facing SEC liability. The decision is also important in light of the other securities law statute of limitations case that remains pending on the Court’s docket. The U.S. Supreme Court’s June 5, 2017 opinion can be found here. Continue Reading Supreme Court Holds Disgorgement Claims Subject to Five-Year Statute of Limitations
Tallinn, Estonia
The D&O Diary completed its European assignment with a final stop late last week in Tallinn, Estonia’s capital city. With a population of around 440,000, Tallinn is relatively compact. In fact, the population of the entire country of Estonia (with a total land area roughly equal to that of the states of Vermont and New Hampshire, combined) is only about 1.2 million, making it one of the smaller countries in the EU. Though Tallinn is relatively small, it is full of charm and history. Continue Reading Tallinn, Estonia