During the period 2014-2015, several companies –including Home Depot — that had experienced high-profile data breaches were hit with cybersecurity-related D&O lawsuits. All of these lawsuits, including the one against Home Depot, were dismissed. The plaintiffs in the Home Depot case filed an appeal of the dismissal. Now it appears that while the appeal was pending the parties to the Home Depot data breach-related derivative lawsuit have reached a settlement. The settlement could have interesting implications for the plaintiffs’ bar’s ongoing efforts to pursue data breach related D&O litigation. Continue Reading Home Depot Settles Data Breach-Related Derivative Lawsuit
Late Notice Defense Rejected Where Insurer’s Response Undercuts Prejudice Claim
A recurring professional liability insurance coverage issue is whether or not the notice prejudice rule applies to claims made policies. In a recent decision, District of Colorado Judge Richard P. Matsch, applying Colorado law, held that the notice prejudice rule did apply to claims made professional liability insurance policy with an “as soon as practicable” notice requirement, and he also rejected the carrier’s late notice defense on the grounds that the insurer’s failure to involve itself in or even inquire about the underlying claim undermined its assertion that it had been prejudiced by the late provision of notice. Continue Reading Late Notice Defense Rejected Where Insurer’s Response Undercuts Prejudice Claim
London Update
The D&O Diary finished up its European stint with a brief stop in London earlier this week before heading home. Because it was only a brief visit with numerous commitments, I had only a little bit of a chance to look around while in London. Just the same, it was still a pleasure to be there. London is such a great place. Continue Reading London Update
April in Paris
The D&O Diary is on assignment in Europe this week, with a first stop in Paris, for meetings. I have been to Paris many times before, but almost always in the fall or winter. Before this trip, I hadn’t really had the pleasure of seeing Paris in the spring. What I found was that — though warmer temperatures do seem to bring out the crowds — Paris in the spring is delightful. Continue Reading April in Paris
PwC Annual Study Reports Record Number of Securities Suits
Largely driven by a “dramatic” increase in the number of federal court merger objection lawsuits, securities class action litigation filings rose to the highest level ever in 2016, according to PwC’s most recent annual securities litigation report. The report also noted that for the first time securities litigation rose though the stock market performance during the year did not, contrary to prior patterns. The April 2017 report, entitled “A Rising Tide or a Rogue Wave? 2016 Securities Litigation Study,” can be found here. Continue Reading PwC Annual Study Reports Record Number of Securities Suits
The Steep Rise of Collective Actions in Europe
In prior posts (for example, here), I have described the rise of collective investor actions outside of the U.S. as one of the most important current developments in the world of directors and officers liability. The rise of these collective investor suits is not happening in a vacuum; the growth in the number and size of these kinds of lawsuits is part of a larger upsurge in collective actions generally. According to a recent Report, collective redress actions represent a “growing business” in Europe, and the “volume and value of the cases being filed is on a steep upward curve.”
The Report, a detailed and interesting March 2017 publication by the U.S. Chamber of Commerce Institute of Legal Reform entitled “The Growth of Collective Redress in the EU: A Survey of Developments in 10 Member States” (here) takes an anxious and uneasy look at the changes in the collective action environment in Europe, and proposes several recommendations as ways for countries to avoid abuses that the report contends have arisen elsewhere. The Institute’s March 21, 2017 press release about the report can be found here. Continue Reading The Steep Rise of Collective Actions in Europe
Late Notice and Claims Made Date Issues
A recurring circumstance fraught with peril for policyholders is one in which the policyholder receives a demand letter in one policy period and then receives a related lawsuit in a subsequent policy period. The fact that these events straddle two policy periods creates potential for possible coverage preclusive issues having to do with Notice of Claim and Claims Made Date issues. In an April 13, 2017 order (here), Judge James Robart, applying the law of Washington State, held that because Zillow failed to give timely notice of a demand letter it received in the prior policy period, there was no coverage for the later lawsuit filed against Zillow in the subsequent policy period, because the claim had first been made at the time of the demand. As discussed below, this case and Judge Robart’s analysis raises some interesting issues. Continue Reading Late Notice and Claims Made Date Issues
U.S. Securities Enforcement Authorities’ Extraterritorial Reach Under Morrison, Dodd-Frank Act
Prior to the U.S. Supreme Court’s June 2010 decision in Morrison v. National Australia Bank, U.S. courts held that the U.S. securities laws could be applied extraterritorially if there was sufficient fraudulent conduct or were sufficient effects from that conduct in the U.S. In Morrison the Supreme Court rejected this “conduct or effects” test, ruling that the U.S. securities laws apply to allegedly fraudulent transactions, not to alleged fraudulent conduct or its effects, and further that the securities laws apply only to domestic transactions. However, within days after the Morrison decision, the U.S. Congress, as part of its enactment of the Dodd-Frank Act, purported to provide the SEC and the U.S. DOJ “jurisdiction” to pursue enforcement actions based not on transactions in the U.S., but rather based on conduct or its effects in the U.S.
Despite the passage of time, no court reached the question of how to interpret and apply this Dodd-Frank provision in light of the Morrison decision – until now. In a detailed March 28, 2017 decision (here), District of Utah Judge Jill N. Parrish held, notwithstanding Morrison and in reliance on the Dodd-Frank Act provision, that the SEC may bring an enforcement action based on transactions outside the U.S. and involving non-U.S. residents if there was sufficient conduct in the U.S. The ruling potentially has important implications for U.S. regulatory authorities’ reach for securities enforcement actions involving foreign actors or non-U.S. transactions. Continue Reading U.S. Securities Enforcement Authorities’ Extraterritorial Reach Under Morrison, Dodd-Frank Act
Thinking About the Wells Fargo Executive Compensation Clawbacks
Wells Fargo’s bogus customer account scandal is back in the news again, most recently because of the bank’s release on Monday of the report of its independent directors’ investigation of the bank’s improper sales practices. The April 10, 2017 report, which the bank posted on its website, makes for some interesting reading. Of particular interest, the report discloses that as result of the independent directors’ investigative findings, the bank has imposed compensation clawbacks on former bank officials in excess of $180 million. The clawbacks, which the bank said in its April 10, 2017 press release are “among the largest in corporate history,” raise a number of interesting issues, as discussed below. Continue Reading Thinking About the Wells Fargo Executive Compensation Clawbacks
Are We Witnessing the Sunset of the U.S. Public Company?
There is a long and venerable tradition of predicting the demise of the American public corporation. For example, back in 1989, Harvard Business School Professor Michael Jensen famously questioned whether we were seeing the “eclipse of the public corporation.” In a February 2017 paper entitled “Is the American Public Corporation in Trouble?” (here) University of Arizona finance professor Kathleen Kahle and Ohio State University finance professor René M. Stulz reexamine the question and suggest that in the years since Jensen’s landmark article, there have been “striking changes” in the landscape for American corporations. The relatively few remaining public companies are, in effect, “survivors,” and few “want to join their club,” as new enterprises prefer private equity and other non-public finance sources to the public securities markets. A March 24, 2017 summary of the authors’ paper on the Harvard Law School Forum on Corporate Governance and Financial Regulation can be found here. Continue Reading Are We Witnessing the Sunset of the U.S. Public Company?