Richa Shukla
Nilam Sharma
Joel Pridmore
Joel Pridmore

As readers of this blog know well, liability claims against corporate directors and officers is an increasingly global phenomenon. A number of different factors are contributing to the globalization of D&O liability, including legislative changes, changes in regulatory enforcement activity, and the rise of litigation financing. In the following guest post, Richa Shukla of Khaitan Legal Associates, Nilam Sharma of Nilam Sharma Ltd., and Joel Pridmore from Munich Re, Australia, examine the changing environment for D&O liability in India. I would like to thank Richa, Nilam, and Joel for allowing me to publish their article 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 Richa, Nilam, and Joel’s guest post. Continue Reading Guest Post: A Focus on Directors’ and Officers’ Risks in India

Supreme court1The U.S. Supreme Court has agreed to take up a case arising out of the credit crisis-era collapse of the Lehman Brothers investment bank, in order to decide whether or not, under principles known as the “American Pipe doctrine,” the filing of a securities class action lawsuit tolls the Securities Act’s statute of repose. In its 1974 American Pipe decision, the Court held that the filing of a class action suit tolls the applicable statute of limitations; in this latest case, the Court must resolve a split between the federal circuit courts and decide whether a class action lawsuit filing also tolls the applicable statute of repose. Though the case involves seemingly arcane issue, it could have very important practical implications, particularly with respect with respect to the timing of class members’ decisions whether or not to opt-out of the class. The U.S. Supreme Court’s January 13, 2017 order granting the petition of the plaintiff for a writ of certiorari in California Public Employees’ Retirement System v. ANZ Securitites Inc. can be found here. Continue Reading Supreme Court Agrees to Hear Securities Act Statute of Repose Tolling Question

eighth circuitYou know that the Insured vs. Insured Exclusion is a frequent source of D&O insurance coverage disputes when on consecutive days two federal appellate courts issue opinions interpreting and applying the provision. As I noted yesterday, on January 10, 2017, it was the Ninth Circuit’s turn; the next day, it was the Eighth Circuit’s turn. On January 11, 2017, the Eighth Circuit affirmed a district court’s holding that the Insured vs. Insured exclusion in a grocery store chain’s D&O insurance policy precluded coverage for claims brought by the chain’s founder’s daughter, who had served briefly as a director of the company. The appellate court also affirmed the district court’s holding that the exclusion precluded coverage not just for the daughter’s claims, but also for the claims of her two children, who were shareholders but not directors of the company. The court, applying Minnesota law, held that the exclusion precluded coverage for both the claims of the daughter (who was an insured person) and those of the children (who were not). The Eighth Circuit’s opinion can be found here. Continue Reading Eighth Circuit: Insured vs. Insured Exclusion Precludes Coverage for Claims Brought by Both Insured and Non-Insured Persons

Ninth CircuitDuring the bank failure wave that followed the global financial crisis, one of the recurring questions was whether or not the failed banks’ D&O insurance policies’ insured vs. insured exclusion precluded coverage for the FDIC’s liability claims as receiver for the failed bank against the banks’ former directors and officers . As I noted in a post late last year, the general consensus among the federal appellate courts is that the exclusion’s applicability to FDIC-R claims is ambiguous and therefore that the exclusion does not preclude coverage. As I also noted, however, there was an exception to this consensus, reflecting important wording differences sometimes found in the exclusion.

 

Consistent with this exception to the consensus, on January 10, 2017, the Ninth Circuit, applying California law, held in an unpublished opinion that the applicable D&O policy’s insured vs. insured exclusion was not ambiguous and precluded coverage for the FDIC’s claims against the former directors and officers of the failed Security Pacific bank. Unlike the exclusion found in many D&O insurance policies, the policy at issue in the Ninth Circuit’s case specifically precluded coverage for claims brought by any “successor” or “receiver.”  The Ninth Circuit’s opinion can be found here. Continue Reading Ninth Circuit: Insured vs. Insured Exclusion Unambiguously Excludes FDIC’s Failed Bank Claims

scales of justiceAmong the important parts of any securities class action lawsuit settlement agreement are the so-called “blow provisions,” which provide settling defendants with an option to terminate the settlement agreement if a specified threshold of investors elect to opt out of the settlement. Among other key consideration with respect to blow provisions is that the threshold specified must be carefully structured to allow defendants to terminate or renegotiate the class settlement when opt-outs reach an unacceptable level. In a December 8, 2016 research paper entitled “Considerations for Blow Provisions in Securities Class Action Settlements” (here), Cornerstone Research takes a look at the various ways that blow provisions can be structured, and identifies the pitfalls with the various alternatives. Continue Reading Setting the “Blow Provisions” in Securities Class Action Settlement Agreements

life sciencesIn the Bard’s timeless words, what’s past is prologue. And in that same vein, many of the last year’s most pronounced securities class action lawsuit filing trends are already showing signs of strong continuity in the early days of the New Year. As shown in my recent annual securities class action lawsuit filings analysis, by year-end, a record number of securities suits had been filed during 2016, with life sciences companies among the most frequent lawsuit targets. We are only just a few days into 2017, but these securities suit filings trends already appear to be continuing in the New Year, as so far this year both the continued strong filing pace and the heightened levels of securities suit activity involving life sciences companies are already appear to be well-established. Continue Reading Early 2017 Securities Suit Filings Show Continued Active Pace, Life Sciences Focus

delawareMany readers will recall that just a short time ago companies were actively experimenting to try to incorporate litigation management measures into their corporate bylaws. These efforts led to decisions by Delaware courts upholding both forum selection bylaws (about which refer here) and fee-shifting bylaws (refer here). Delaware’s legislature ultimately addressed these bylaw experimentation efforts by adopting statutory provisions allowing forum selection bylaws but prohibiting fee-shifting bylaws.

 

Following the enactment of this legislation, the payroll software services firm Paylocity adopted a bylaw provision designating Delaware as the forum for any shareholder disputes and holding any shareholder who filed an action outside Delaware and who did not prevail on the merits liable for the company’s attorneys’ fees. A Paylocity shareholder filed an action in Delaware Chancery Court challenging the bylaw’s fee-shifting provision. In an interesting December 27, 2016 opinion (here), Chancellor Andre Bouchard held that the Paylocity bylaw’s penalty provisions violated the Delaware statutory fee-shifting bylaw prohibitions, but dismissed the claims that company’s board had violated its fiduciary duties in enacting the bylaw. Continue Reading Del. Court Pans Fee-Shifting Portion of Forum Selection Bylaw

sarah good
Sarah A. Good
laura hurtado
Laura C. Hurtado

One of the recurring questions in the securities regulatory enforcement arena has been the question of whether or not the Securities and Exchange Commission’s use of administrative law judges violates the U.S. Constitution. As discussed in the following guest post from Sarah A. Good and Laura C. Hurtado of the Pillsbury law firm, the Tenth Circuit, in direct conflict with a prior decision from the D.C. Circuit, recently held that the SEC’s appointment of administrative law judge’s violates the constitution. The circuit split suggests that this issue may be on its way to the U.S. Supreme Court.

 

I would like to thank Sarah and Laura for their willingness to allow me to publish their article as a guest post. 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 and Laura’s guest post. Continue Reading Guest Post: Constitutionality of SEC’s ALJs Headed to Supreme Court?

vwDuring the more than six years since the U.S. Supreme Court issued its opinion in Morrison v National Australia Bank, the lower courts have worked out a host of issues about how Morrison applies in a variety of circumstances. One issue that has continued to percolate is the question of how the Morrison decision applies to non-U.S. companies that have American Depository Receipts (ADRs) trading over- the-counter (OTC) in the U.S.

 

These issues arose again the U.S. securities class action lawsuit that Volkswagen ADR investors filed against the company and related defendants based on allegations involving the company’s recent high-profile vehicle emissions scandal. The Volkswagen defendants argued in reliance on Morrison that the U.S. securities laws do not apply to the OTC transactions in the company’s ADRs. In an interesting January 4, 2017 opinion (here), Northern District of California Judge Charles R. Breyer held that the U.S. securities laws do indeed apply to over-the-counter transactions in the U.S. of Volkswagen’s sponsored Level 1 ADRs. Continue Reading Court Holds U.S. Securities Laws Apply to OTC Transactions in Volkswagen’s Sponsored ADRs

delawareIn an August 27, 2015 post-trial opinion (discussed here), Delaware Vice-Chancellor Travis Laster found that Dole Foods CEO David Murdock, and the company’s General Counsel and Chief Operating Officer, C. Michael Carter, had committed “fraud” in connection with a November 2013 “going private” transaction. However, according to a December 21, 2016 Delaware Superior Court decision in the subsequent insurance coverage litigation, because Laster’s findings of fraud were not part of the subsequent post-settlement final judgment in the case, the fraud exclusion in Dole’s D&O insurance program did not preclude coverage for the settlement. Anyone interested in understanding how the fraud exclusion in a D&O policy operates will want to read this opinion. A copy of the Delaware Superior Court opinion can be found here.
Continue Reading D&O Insurance: Despite Trial Court “Fraud” Determination, Fraud Exclusion Not Triggered