arizonaThough the Insured vs. Insured exclusion is a standard D&O policy provision, it seems to generate a disproportionate number of D&O insurance-related coverage disputes. The exclusion precludes coverage for claims brought by one Insured Person against another Insured Person. Among the host of recurring issues are the questions surrounding the exclusion’s preclusive reach when the claimants suing an Insured include both individuals who are Insured Persons and other individuals who are not Insured Persons.

 

These questions arose in a coverage dispute involving a series of lawsuits brought against the board of U-Haul International Inc. parent Amerco. One of the lawsuits had been brought by a former Amerco board member (who was also related by family to the company founder) but the rest of the lawsuits had been initiated  by other shareholders who were not Insured Persons under Amerco’s D&O insurance policy. The various actions were consolidated by court order. The company’s D&O insurer denied coverage for the board’s defense expenses based on the Insured vs. Insured exclusion. In a June 6, 2016 opinion (here), the Ninth Circuit affirmed the district court’s holding that the exclusion precluded coverage for all of the claims. Continue Reading D&O Insurance: Thinking About the Insured vs. Insured Exclusion

brazilAs a result of scandals, investigations, and even an environmental catastrophe, there has been a wave of securities lawsuit filings in the U.S. against Brazilian-domiciled companies whose securities are listed in the U.S. This filing trend began in late 2014 with the first lawsuit filing against Petrobras and certain of its directors and officers, which was in turn followed by lawsuits against other companies caught up in the corruption scandal. In recent weeks lawsuits related to a separate regulatory investigation in Brazil have emerged, bringing the total number of securities lawsuits pending in the U.S. against Brazilian companies to six. These developments, along with events in Brazil itself, have roiled the D&O insurance marketplace in Brazil, particularly for Brazilian companies with securities listed in the U.S. Continue Reading Onslaught of Securities Suits Against Brazilian Companies Continues

cfpbUntil now, the primary federal agency regulating data security has been the Federal Trade Commission. Indeed, in August 2015, the Third Circuit in the Wyndham Worldwide case affirmed the FTC’s regulatory enforcement authority against companies failing to take appropriate action to protect consumer financial information. However, other federal regulatory agencies are now increasing asserting their authority with respect to data security issues, including in particular, the Consumer Financial Protection Bureau (CFPB), which recently brought its first data security enforcement action. These developments underscore the fact that companies face a growing regulatory exposure relating to cybersecurity issues. The specific recent developments also highlight the expectations regulators are asserting with respect to board responsibility for cybersecurity issues and establish that companies can face data security enforcement action even if the companies have not themselves experienced a data breach. Continue Reading Federal Agencies Joining the Data Security Enforcement Action Bandwagon

sec sealThe SEC promulgated Rule 10b5-1 nearly 16 years ago to allow executives (whose wealth often is entirely locked up in company shares) to trade in their company’s stock without incurring possible liability under the securities laws. The Rule provides an affirmative defense against allegations of improper trading. In many cases defendants have  relied on the existence of a Rule 10b5-1 trading plan in order to have the securities claims against them dismissed (for example,  here and here). However, the Rule has also been subject to criticism, and some have questioned whether corporate executives are abusing their plans in order to shield questionable trading.

 

A recent academic study corroborates the view that the plans “are being abused to hide more informed insider trading.” The study, by Gothenburg University Professor Taylan Mavruk and  University of Michigan Business School Professor H. Nejat Seyhun and entitled “Do SEC’s 10b5-1 Safe Harbor Rules Need to Be Rewritten?” (here) concludes that “safe harbor plans are being abused to hide profitable trades made while in possession of material non-public information.” The authors suggest a number of revisions to the Rule in order to “prevent further abuse.” The authors summarized their findings in a short June 2, 2016 post on the CLS Blue Sky Blog (here). Continue Reading Does Rule 10b5-1 Need Revision to Prevent Improper Insider Trades?

paul weiss largeOn May 23, 2016, in an interesting development in one of the more high profile lawsuits to arise out of the financial crisis, the Second Circuit reversed the $1.27 billion civil penalty that Southern District of New York Judge Jed Rakoff  imposed on Countrywide and several related defendants in a case involving the company’s sale of mortgages to government sponsored entities. A copy of the Second Circuit’s opinion can be found here.

 

In the following guest post, attorneys from the Paul Weiss law firm take a look at the Second Circuit’s decision and discusses its implications, particularly with respect to the government’s use of the the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) to prosecute financial institutions’ alleged to have committed financial misconduct. Continue Reading Guest Post: Second Circuit Strikes Down Imposition of $1.27 Billion FIRREA Penalty

priya
Priya Cherian Huskins

One of the more interesting current issues in the securities litigation arena is the question of whether or not the concurrent jurisdiction provisions in the ’33 Act continue to afford state court jurisdiction for Section 11 securities class action lawsuits, or whether the Securities Litigation Uniform Standards Act of 1998 (SLUSA) superseded these provisions. As I noted in a recent post, a corporate defendant recently filed a petition for writ of certiorari with the U.S. Supreme Court to try to get the Court to take up this question. In the following guest post, Priya Cherian Huskins, of Woodruff-Sawyer & Co. examines three different “solutions” that have been proposed to address the ongoing question regarding concurrent state court jurisdiction for Section 11 class action lawsuits. One of the three proposed solutions in the cert petition recently filed with the U.S. Supreme Court, while the other two suggested solutions involve different alternative approaches, including one suggested by Stanford Law Professor Joseph Grundfest. Continue Reading Guest Post: The State Court Section 11 Problem: Three Solutions

alaAny time a civil lawsuit settles for a combined total of $310 million, it is noteworthy, if for no other reason than the sheer size of the deal. But a $310 class action settlement recently preliminarily approved in Jefferson County (Alabama) Circuit Court is noteworthy not just for its size, but also for the nature of the allegations involved.

 

In the recently settled case, the plaintiffs alleged that in connection with the 1999 settlement of the MedPartners Securities Litigation, the defendant company and its primary D&O insurer had misrepresented the amount of insurance available in connection with the litigation, and more particularly, failed to disclose that the company had obtained a post-litigation “unlimited” excess insurance policy (known as an “LMU”) from the primary D&O insurer. After the details of the LMU came to light in subsequent unrelated litigation, a plaintiff from the prior securities lawsuit class filed a new lawsuit alleging misrepresentation in connection with the securities lawsuit settlement. The details of the plaintiffs’ allegations in the misrepresentation lawsuit — most of which the defendants dispute — make for some interesting reading.

 

The plaintiffs’ class motion for preliminary approval of the settlement of the misrepresentation lawsuit, to which the parties’ stipulation of settlement is attached, can be found here. The Alabama Court’s June 1, 2016 order preliminarily approving the settlement can be found here. The settlement is subject to the Court’s final approval. Continue Reading The Interesting Story Behind a Recent $310 Million Class Action Settlement

floridaIn recent years, one of the most important developments in litigation in the U.S. has been the rise of the litigation funding industry. Indeed, the industry’s rise has more recently been fueled by increasing investor interest, even as the industry itself has diversified into lawsuit portfolio investing (as opposed to individual-case investing). The industry’s rise and increasing importance already had attracted scrutiny and criticism, but nothing compared to the deluge of attention that has followed revelations that Hulk Hogan’s privacy litigation against Internet scandal site Gawker was funded by Silicon Valley mogul Peter Thiel. The news about Thiel’s financial involvement has produced a cascade of commentary about litigation funding, which in turn has arguably put the litigation industry on the defensive. The news has also fueled a debate about whether there should be more transparency about litigation funding, and even whether there should be other litigation funding industry regulation, as discussed below. Continue Reading After the Hulk Hogan Lawsuit Funding Flap, Is it Time for a Look at Litigation Financing Regulation?

GaRegular readers know that one of my hobby-horse issues is the way that some D&O insurers try to deny coverage for claims in reliance on an overbroad assertion of the professional services exclusion typically found in most private company D&O insurance policies. A D&O insurer’s sweeping assertion of exclusion’s preclusive affect can be a particular challenging for companies in services industries, because just about everything a services company does involves its services. When applied this way, the professional services exclusion exerts a preclusive reach that potentially could operate to swallow up the coverage available under the policy.

 

A recent decision from the Northern District of Georgia addressed these issues in a coverage dispute in which a private company D&O insurer had relied on the professional services exclusion to deny coverage for an underlying claim against a real estate listing Service Company. The Court concluded in its opinion granting the policyholder’s motion for summary judgment that because the underlying claim did not claims relate to the real estate listing service company’s “specialized knowledge,” the professional services exclusion did not apply. A copy of the March 22, 2016 opinion in the case can be found here. A May 26, 2016 memo from the Phelps Dunbar law firm about the decision can be found here. Continue Reading Professional Services Exclusion Not Triggered Where Allegations Did Not Involve Specialized Knowledge

paul weiss largeAmong the important legal issues that arise in connection with securities class action litigation is the question of impact of the filing of a complaint on the running of the statutes of limitation and the statutes of repose. In analyzing statute of limitations issues, one of the tools that the courts have used is the so-called American Pipe tolling doctrine, named after the U.S. Supreme Court’s 1974 decision in American Pipe and Construction Co. v. Utah. A recurring question has been whether or not American Pipe Tolling applies to statutes of repose. In the following guest post, attorneys from the Paul Weiss law firm take a look a recent Sixth Circuit decision holding that American Pipe tolling doctrine does not apply to the federal securities laws’ statutes of repose. Continue Reading Sixth Circuit, in Agreement with Second Circuit, Holds American Pipe Tolling Doesn’t Apply to Statutes of Repose