The many travels of readers’ D&O Diary Tenth Anniversary Frisbees have continued, with stops in places both familiar and remote. The results are a variety of Frisbee photos taken on location in places both far and wide and accompanied by everything from beer to champagne. 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 three rounds of Frisbee Photos (here, here, and here), and now it is time for the next round. Continue Reading The Next Round of Frisbee Photos
Seventh Circuit, Citing Delaware Precedent with Approval, Overturns Deal Lawsuit Disclosure-Only Settlement
Cornerstone Research’s recent report on merger objection lawsuit filings showed what many of us expected to see – that in the wake of Delaware Chancellor Andre Bouchard’s rejection of the disclosure only settlement in the litigation arising out of Zillow’s acquisition of Trulia, there would be a decline in the number of merger objection lawsuits filed. The report also showed that the filing decline was particularly steep in Delaware, but not as sharp elsewhere. In other words, the plaintiffs’ lawyers still active in pursuing this type of litigation increasingly are filing their merger objection lawsuits outside of Delaware. With these kinds of cases now relatively more likely to be heard outside Delaware, the question of whether or not judges in other jurisdictions will follow the lead of Delaware’s courts in rejecting disclosure only settlements takes on relatively greater importance. Continue Reading Seventh Circuit, Citing Delaware Precedent with Approval, Overturns Deal Lawsuit Disclosure-Only Settlement
No D&O Insurance Coverage for Costs of Responding to Informal SEC Investigation
Among the most frequently recurring D&O insurance coverage issues is the question of the carrier’s obligation to pay for costs incurred in connection with an informal SEC investigation. Indeed over the years, numerous policy revisions have been adopted in various forms by various carriers to address certain aspects of this issue. Yet the issues continue to arise, as shown most recently in District of Colorado Judge Robert E. Blackburn’s August 4, 2016 opinion (here), in which he held that the D&O policy at issue did not provide coverage for the insured company’s expenses incurred in responding to an informal SEC investigation. The opinion raises a number of issues, as discussed below. Continue Reading No D&O Insurance Coverage for Costs of Responding to Informal SEC Investigation
Yet Another Brazilian Company Hit with U.S. Securities Suit
As I have noted in prior posts (most recently here), in recent months a number of Brazilian companies have been hit with a wave of U.S. securities class action lawsuits. These suits have followed in the wake of corruption scandals and environmental disasters in Brazil. Now yet another Brazilian company has been hit with a U.S. securities class action lawsuit, as aircraft manufacturer Embraer and certain of its directors and officers has been sued in a securities suit following allegations that of the company’s involvement in the payment of bribes to government officials in the Dominican Republic. In addition to being the most recent securities lawsuit filed in the U.S. against a Brazilian company, the new lawsuit also represents the latest example of a securities suit arising in the wake of a bribery investigation. Continue Reading Yet Another Brazilian Company Hit with U.S. Securities Suit
A Particular Vice: Job Titles, Indemnification, and Insurance
Individuals serving as corporate officers take on significant potential liability exposures in the course of their performance of their duties. As a result, most companies indemnify their officers for liabilities incurred while acting as corporate officers. A recurring issue is the question of who is entitled to indemnification. In particular, a particular issue that courts have grappled with recently is the question of whether an individual with the title of “Vice President” is entitled to indemnification. Continue Reading A Particular Vice: Job Titles, Indemnification, and Insurance
PLUS Regional Professional Liability Symposia in Hong Kong and Singapore
As part of its continuing efforts to extend educational and network opportunities to professional liability insurance professionals around the world, the Professional Liability Underwriting Society (PLUS) will hosting professional liability symposia in Singapore and Hong Kong in September. The first of these two events will take place in Hong Kong on September 6, 2016. The second of the two events will take place in Singapore on September 9, 2016. For many reasons, I want to encourage as many industry professionals in these regions as possible to attend these events, as discussed further below. Continue Reading PLUS Regional Professional Liability Symposia in Hong Kong and Singapore
Heavy Use of Non-GAAP Financial Metrics Represents an Accounting “Red Flag”
Investors, analysts, D&O insurance underwriters, and others responsible for identifying risks among public companies may want to pay close attention to the ways that companies report their financial results. According to a recent analysis, companies that make heavy use of non-GAAP reporting – such as tailored figures like “adjusted net income” and “adjusted operating income” – are more likely to encounter some kinds of accounting problems, such a restatements, than companies that stick to standard accounting measures. The research, by consulting firm Audit Analytics, is discussed in an August 3, 2016 Wall Street Journal article (here), and in an August 4, 2016 post on the Cooley law firm’s PubCo blog (here). Continue Reading Heavy Use of Non-GAAP Financial Metrics Represents an Accounting “Red Flag”
Why Corporate Executives Should Have a Separate Written Indemnification Agreement
Most companies’ corporate bylaws or articles of incorporation contain indemnification and advancement provisions. While these provisions provide important protection for corporate executives if the individuals become the target of claims relating to their action undertaken in their corporate capacities, these provisions alone may not be provide sufficient protection. The provisions in the corporate documents may not address all of the issues that can arise and may not provide sufficient protection for the individuals when there are indemnification or advancement disputes and may not protect individuals from changes to corporate bylaws after the individuals have left the company. For these and many other reasons, well-advised corporate executives will want to have their rights memorialized in a separate, written indemnification and advancement agreement with the company, as discussed further below. Continue Reading Why Corporate Executives Should Have a Separate Written Indemnification Agreement
Cornerstone Research: Since Trulia, Merger Objection Lawsuit Filings Have Plunged
One of the most distinctive recent developments in the litigation environment has been the rise of merger objection litigation, in which nearly every merger attracted at least one lawsuit challenging the transaction. Many of these cases settled quickly based on the defendants’ agreement to make additional transaction-related disclosures and to pay the plaintiffs’ attorneys’ fees. However, in a series of rulings culminating in the January 2016 ruling in the Trulia case, the Delaware Court of Chancery has shown its disapproval of the disclosure-only settlement model. It now appears that as a result of the Chancery Court developments that fewer mergers are attracting lawsuits and fewer lawsuits overall are being filed.
As detailed in an August 2, 2016 report from Cornerstone Research entitled “Shareholder Litigation Involving Acquisition of Public Companies: Review of 2015 and 1H 2016 M&A Litigation” (here), the percentage of merger transactions attracting litigation began to fall to the lowest levels in years during the second half of 2015, and the litigation dropped even further in the first half of 2016, as detailed further below. Cornerstone Research’s August 2, 2016 press release about the report can be found here. Continue Reading Cornerstone Research: Since Trulia, Merger Objection Lawsuit Filings Have Plunged
FTC Holds Private Information Disclosure In and Of Itself Sufficient Injury to Support Unfair Practices Claim
One of the recurring issues that has arisen as claimants and regulators have pursued cybersecurity-related claims against companies that have experienced a data breach is the question of what type or quantum of claimed injury is sufficient to sustain a claim. This issue has recurred in consumer cybersecurity-related damages actions and it has also arisen in regulatory enforcement actions as well. These issues were presented in a very interesting July 29, 2016 Opinion from the Federal Trade Commission (here). The Commission overturned a prior ruling by one of its own Administrative Law Judges, and held, contrary to the ALJ, that the release of private and sensitive information in and of itself was sufficient – even in the absence of alleged economic or physical injury — to support a claim against LabMD that its failure to prevent the information’s release constitutes an “unfair” practice. The FTC’s July 29, 2016 press release about the agency’s ruling can be found here. As the WSJ Law Blog noted in a July 29, 2016 post (here), the FTC’s ruling sets the stage for a “high stakes federal court battle” on the issue of what kind of alleged injury is sufficient to support cybersecurity-related unfair practices claim. Continue Reading FTC Holds Private Information Disclosure In and Of Itself Sufficient Injury to Support Unfair Practices Claim