Fifteen years ago this month, the once high-flying energy company Enron completed its massive collapse when it filed a petition for bankruptcy protection. In his interesting December 2, 2016 post on the Harvard Law School Forum on Corporate Governance and Financial Regulation (here), Michael Peregrine of the McDermott, Will & Emery law firm takes a retrospective look at Enron’s downfall and suggests a number of different ways that those events have continuing relevance. As I discuss further below, there are, in addition to the considerations Peregrine notes, a number of other continuing legacies of Enron. Continue Reading Enron’s Legacies, a Decade and a Half Later
Home Depot Data Breach Derivative Lawsuit Dismissed
For some time now, many commentators (including me) have been predicting that as a result of rising numbers of companies experiencing date breaches that there would be a resulting wave of D&O lawsuits. Indeed, there have been a small number of high profile data security-related D&O lawsuits filed. However, several of those cases – including, for example, the derivative lawsuits filed against Target (about which refer here) and Wyndham Worldwide (here) – have been dismissed. Following these dismissals, the sole remaining recent high-profile data breach-related derivative lawsuit was the one filed against the directors and officers of Home Depot. However, the Home Depot lawsuit has now also been dismissed as well. The spate of dismissals certainly raises a question about what we may expect with respect to future cybersecurity-related D&O lawsuits. A copy of Northern District of Georgia Judge Thomas Thrash’s November 30, 2016 opinion in the Home Depot derivative lawsuit can be found here. Continue Reading Home Depot Data Breach Derivative Lawsuit Dismissed
Football Player’s Concussion Claims Test D&O Policy Exclusion
As I have previously noted (for example, here), several of the standard D&O policy exclusions are designed to keep claims in the their proper lanes – that is, to make sure that the D&O policy doesn’t wind up picking up losses more appropriately addressed by another policy in a policyholder’s insurance program. One of these standard exclusions is the bodily injury and property damage exclusion – or, as it is more commonly known, the BI/PD exclusion – which precludes coverage for claims of bodily injury or property damage that are more appropriately addressed by a CGL policy.
A recent federal court decision considered a D&O insurance policy’s BI/PD exclusion in the context of a kind of claim that is becoming increasingly common – a professional athlete’s liability claims for head injuries sustained in competition. In his November 17, 2016 opinion in the case, Eastern District of Louisiana Judge Eldon Fallon concluded that former Arena Football League’s D&O insurance policy’s BI/PD exclusion precluded coverage for Lorenzo Breland’s claims against the league related to head injuries he sustained as a player. However, the specifics of Breland’s claims raise some interesting issues that Judge Fallon’s opinion does not address. These issues in turn raise questions about the exclusion’s appropriate reach. A copy of Judge Fallon’s opinion can be found here. Continue Reading Football Player’s Concussion Claims Test D&O Policy Exclusion
U.K. Court Sends Cautionary Note to Fledgling Litigation Funders
A recent U.K. appellate court sends a strong cautionary note to litigation funders about the need for vigorous and independent pre-litigation due diligence and of the risks that can follow their support of an unmeritorious claim. In a November 2016 Judgment, the U.K. Court of Appeal ruled that the litigation funders that supported a claimant’s unsuccessful claim to oil field production rights are jointly and severally liable for the successful parties’ fees and costs. The Court’s ruling acknowledges litigation funding’s role in the system of civil justice, but the Court’s decision also highlights an expectation that the funders must evaluate the claims they support – and, because they have a substantial stake in a claim’s outcome , must accept the consequences if their evaluation is deficient. The U.K. Court of Appeals’ November 18, 2016 decision in Excalibur Ventures LLC v. Texas Keystone, Inc. et al. can be found here. Continue Reading U.K. Court Sends Cautionary Note to Fledgling Litigation Funders
The Securities Litigation Storm is Already Here
In an interesting post on his D&O Discourse blog earlier this fall (here), Doug Greene of the Lane Powell law firm raised the question whether there is a securities litigation storm brewing. Citing a number of different factors ranging from the SEC whistleblower program to changes in the plaintiffs’ bar, Greene suggested that we could be headed toward a significantly increased number of securities class action lawsuits. I agree with most of what Greene said, except for one thing. The securities litigation storm isn’t on the horizon – it is already here. Continue Reading The Securities Litigation Storm is Already Here
Guest Post: The 101 of Litigation Funding in the German D&O-Claims Arena
One of the most significant recent developments in the litigation environment has been the rise of third-party litigation funding. However, as I noted in a recent post, the impact of litigation funding has varied from jurisdiction to jurisdiction based on differences in the local law. In the following guest post, Burkhard Fassbach, a German attorney and D&O Advisor to the Frankfurt-based MRH TROWE Brokerage Group, and Carsten Wettich, a founding partner of Berner Fleck Wettich, a Dusseldorf-based corporate law firm, take a look at litigation funding environment in German and its impact on the D&O claims arena there. I would like to thank Burkhard and Carsten 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 blog’s readers. Please contact me directly if you would like to submit a guest post. Here is Burkhard and Carsten’s guest post. Continue Reading Guest Post: The 101 of Litigation Funding in the German D&O-Claims Arena
SEC’s Annual Report Highlights Whistleblower Awards
When Congress created the SEC Whistleblower program in the Dodd-Frank Act, one of the requirements was that the SEC’s Office of the Whistlblower would provide an annual report to Congress. On November 15, 2016, the SEC released its annual whistleblower report for the 2016 fiscal year (which ended September 30, 2016). The report shows that the agency continues to make substantial awards to whistleblowers, with six of the ten largest awards being made in FY 2016. The report also shows that the volume of whistleblower tips to the agency continues to increase as well. A copy of the agency’s FY 2016 report can be found here. Continue Reading SEC’s Annual Report Highlights Whistleblower Awards
EPL Wage and Hour Exclusion Does Not Bar Coverage for Expense Reimbursement Claim
The typical employment practices liability insurance policy will contain an exclusion precluding coverage for loss arising from claims brought under wage and hour laws. The question that arises from time to time is whether a particular claim was in brought under the laws for which coverage is precluded. A recent federal court case in California examined whether the wage and hour exclusion in an employer’s EPL policy precluded coverage for the claimants’ claims alleging the employer had failed to reimburse reasonable business expenses, in violation of a California statutory provision. In a November 14, 2016 decision, Southern District of California Judge Ted Moskowitz, applying California law, held that the policy’s wage and hour exclusion did not preclude coverage for the claimants’ unreimbursed business expenses claims, even though the exclusion did bar coverage for the claimants’ other claims. A copy of Judge Moskowitz’s exclusion can be found here. Continue Reading EPL Wage and Hour Exclusion Does Not Bar Coverage for Expense Reimbursement Claim
Carrot and Stick: Incentive Compensation and Compensation Clawbacks
One of the recurrent governance proposals to remedy corporate excesses has been the idea of clawing back the compensation paid to company officials who presided over corporate scandals. Both the Sarbanes Oxley Act and the Dodd-Frank Act included provisions mandating compensation clawbacks for corporate executives at companies that restate their financial statements. As Columbia Law School Professor John Coffee details in his November 21, 2016 CLS Blue Sky Blog article entitled “Clawbacks in the Age of Trump” (here), despite these statutory revisions, the use of “extreme incentive compensation” continues to motivate corporate behavior. In order to counter-balance the impact of incentive compensation, Coffee suggests that companies should adopt their own compensation clawback requirements that apply more broadly than the statutory clawback provisions. Continue Reading Carrot and Stick: Incentive Compensation and Compensation Clawbacks
Class Action Litigation Developments in France
On October 1, 2014, new statutory provisions went into effect in France allowing consumers the means to seek and obtain relief on a class–wide basis. Though these provisions have been in force for over two years now, the use of the class action mechanism has not really caught on. Because the class action procedures have not yet been widely taken up, there have already been at least two revisions of the original provisions adopted that expanded the scope of the original class action model, and further revisions seem likely. In a November 17, 2016 memo entitled “The Implications of the Expanded Scope of the French Class Action System on Potential Liability and Insurance Coverage for Companies Domiciled in and Doing Business in France” (here), Kevin Dreher and Laura Ferry of the Reed Smith law firm take a look at the modified French class action mechanism and examine the mechanism’s implications for companies doing business in France. Continue Reading Class Action Litigation Developments in France