One of the more interesting story lines in the world of securities class action litigation over the past several years has been the rise of class settlement opt outs, whereby various claimants representing significant shareholder ownership interests select out of the class suit and separately pursue their own claims – and settlements. The class action opt-out litigation emerged as a significant phenomenon in the litigation arising out of the era of corporate scandals a decade ago. In an October 6, 2016 report entitled “Opt-Out Cases in Securities Class Action Settlements” (here), Cornerstone Research and Latham & Watkins LLP take a look what the statistics show about securities class action opt-outs. This recent report updates the findings in their 2013 study, based on updated data reflecting case settlements during the period 2012 to 2014. Cornerstone Research’s October 6, 2016 press release regarding the report can be found here. Continue Reading Securities Class Action Settlement Opt-Outs: Statistics and Trends
Vivendi: A Victory for Plaintiffs on the Price Maintenance Theory and on Loss Causation
In the following guest post, David Topol and Jennifer Williams of the Wiley Rein law firm take a look at the Second Circuit’s September 27, 2016 decision in the Vivendi case and in particular at the appellate court’s analysis of two critical issues affecting damages in securities litigation – the price maintenance theory and loss causation. I would like to thank David and Jen for their willingness 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 David and Jen’s guest post. Continue Reading Vivendi: A Victory for Plaintiffs on the Price Maintenance Theory and on Loss Causation
D&O Insurance: What is a Claim and When Does Late Notice Defeat Coverage?
Among the key parts of a claims-made insurance policy are its definition of the term “claim” and its provisions specifying the policyholder’s notice of claim obligations. A recent Delaware Superior Court decision by Judge Eric Davis examined both of these basic policy features and considered what is required in order to meet the policy’s claim definition and in order for an insurer to raise late notice as defense to coverage. As discussed below, Judge Davis’s analysis raises some important considerations about these both of these basic policy features. Judge Davis’s September 29, 2016 opinion can be found here. Continue Reading D&O Insurance: What is a Claim and When Does Late Notice Defeat Coverage?
First Monday in October: What to Watch in the Supreme Court’s New Term
October 3, 2016 is the first Monday in October, and that means that on that date the U.S. Supreme Court, as it has on the first Monday of every October since 1917, will begin its new term. While the Court will begin its term this year as it traditionally has in the recent past, it will also be operating on an unusual basis. For the first time in almost 30 years, the Supreme Court will begin its new term will only eight justices. Continue Reading First Monday in October: What to Watch in the Supreme Court’s New Term
More and More Frisbee Photos
Summer has given way fall, and that means that it is time for another round of readers’ Frisbee photos, this time including a harvest of great pictures taken overseas. Readers will recall that in connection with The D&O Diary’s recent tenth anniversary, I offered to send out a D&O Diary Tenth Anniversary Frisbee to anyone who requested one – for free — but only if the Frisbee recipient agreed to send me back a picture of the Frisbee and a description of the circumstances in which the picture was taken. I have already published several rounds of Frisbee Photos (all of which can be found here), and now it is time for the next round. Continue Reading More and More Frisbee Photos
Guest Post: ERISA-Regulated Benefit Plans Not “Affiliates” for Securities Class Settlement Purposes
In the settlement documents prepared in connection with securities class action settlements, the documents typically specify that certain groups are excluded from the settlement class. Among the groups typically excluded are “affiliates” of the class action defendant company. In a recent decision (here), the Second Circuit examined the question whether an ERISA-regulated benefit plan that the defendant company sponsors is an “affiliate” of the company and therefore precluded from sharing in the settlement proceeds. In the following guest post, members of the Paul Weiss law firm take a look at the Second Circuit’s decision and discuss its implications. I would like to thank the Paul Weiss attorneys for their willingness to publish their article on my site. I welcome guest post submissions from responsible parties on topics of interest to this blog’s readers. Please contact me directly if would like to submit a guest post. Here is the Paul Weiss attorney’s guest post. Continue Reading Guest Post: ERISA-Regulated Benefit Plans Not “Affiliates” for Securities Class Settlement Purposes
Six Things to Know Now About the SEC Whistleblower Program
One of the signature features of the Dodd-Frank Act was its creation of an SEC Whistleblower program. Under the program, the SEC can award whistleblowers a bounty of between ten percent and thirty percent of any recoveries the SEC makes in excess of $1 million as result of the information whistleblower provided. The program went into effect in 2011, and the agency immediately began receiving a huge volume of whistleblower reports. Over time the agency has made a number of awards, including the September 2014 award of $30 million, which is still the largest award under the whistleblower program.
While the program has been in operation now for several years, it recently kicked into high gear and the program has passed a number of important milestones. The trend lines suggest that the SEC whistleblower program is going to be an increasingly important part of the corporate liability landscape, and for that reason there are a number of important things to keep in mind. Continue Reading Six Things to Know Now About the SEC Whistleblower Program
Thinking About Exceptions and Alterations to the Insured vs. Insured Exclusion
Among the terms and conditions typically found in a D&O insurance policy is the so-called “Insured vs. Insured” exclusion, which precludes coverage for claims brought by one insured against another insured. The exclusion often figures in D&O insurance coverage disputes, as I have frequently noted on this blog. While the exclusion broadly precludes coverage for an entire category of claims, the exclusion often also has exceptions that preserve coverage for certain types of claims that would otherwise be excluded.
In a recent case in the Northern District of California, a D&O insurance policyholder tried to argue that the underlying claim came within one of the standard coverage carve-backs typically found in this type of exclusion, a provision preserving coverage for derivative claims. In a September 26, 2016 order (here), Northern District of California Judge Haywood S. Gilliam, Jr., applying California law, held that the Insured vs. Insured Exclusion applied to preclude coverage and that the underlying lawsuit did not come within the coverage carve-back. The parties’ dispute and the court’s ruling provide a useful backdrop to think about the exclusion and alternative wordings that are sometimes available in the marketplace. Continue Reading Thinking About Exceptions and Alterations to the Insured vs. Insured Exclusion
The Continuing Question of Morrison’s Applicability to ADR Transactions
One of the practical effects of the U.S. Supreme Court’s 2010 decision in Morrison v. National Australia Bank is that, as a result of the decision, it is more difficult to bring a class action in a U.S. court under the U.S. securities laws against a company based outside the U.S. The Court rejected earlier standards allowing U.S. courts to consider securities suits against non-U.S. companies if conduct relating to or effects of an alleged fraud took place in the U.S. Instead, the Court said that U.S. securities laws apply only to “transactions in securities listed on domestic exchanges, and domestic transactions in other securities.”
At the time of the Morrison decision, the expectation was that the number of U.S. securities class action lawsuits filed against non-U.S. companies would decline. As it has turned out however, the number of securities lawsuits filed against non-U.S. companies in each of the years since Morrison has been greater than the number filed in the years prior to the decision. Indeed, for the past several years, non-U.S. companies have been likelier to get hit with a securities class action lawsuit than domestic companies. Continue Reading The Continuing Question of Morrison’s Applicability to ADR Transactions
D&O Insurance: Consent Judgment Including Covenant Not to Execute Constitutes “Loss”
In order to try to resolve litigation pending against them, policyholders sometimes enter a settlement in which they agree to the entry of a consent judgment against them and to the assignment to the claimants of their rights under their insurance policy, subject to the claimants’ agreement not to execute the judgment against them. The question that often arises is whether, in light of the covenant not to execute, the policyholders have suffered a “Loss” as required to trigger policy coverage.
In a September 16, 2016 ruling in connection with a coverage dispute involving one of these types of settlement arrangements, Eastern District of New York Judge Arthur D. Spatt, applying New York law, rejected a D&O insurer’s argument that because of the assignees’ agreement not to execute on the consent judgment, the insured persons had suffered no “Loss.” The court’s determination of these questions raises some interesting issues. Judge Spratt’s September 16, 2016 opinion can be found here. Continue Reading D&O Insurance: Consent Judgment Including Covenant Not to Execute Constitutes “Loss”