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Michael J. Biles
In the following guest post, Michael J. Biles of the King & Spalding law firm takes a look at the analysis of the materialization-of-the-risk issues in the Fifth Circuit’s September 8, 2015 decision in the BP Deepwater Horizon securities class action lawsuit. As Michael asserts below, the Fifth Circuit’s decision opinion essentially removes the risk of materialization-of-the-risk cases in the Fifth Circuit.

I would like to thank Mike for his willingness to publish his article on my site. I welcome guest post submissions from responsible authors on topics of interest to readers of this site. Please contact me directly if you are interested in submitting a guest post. Here is Michael’s guest post.

 

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Materialization-of-the-risk cases are a favorite of the securities class action plaintiffs’ bar.  The basic theory of fraud in these cases is that a company misrepresented or withheld information, causing the market to miscalculate the company’s exposure to a particular risk.  Every company is susceptible to risks, whether it be natural or man-made disasters, competition, labor disputes, technological obsolescence, currency fluctuations, supply-chain disruptions, etc. –the risks are endless.  When a company’s stock price declines following a disclosure that you-name-the-risk has materialized – as every company must do on occasion – plaintiffs’ lawyers will scour the company’s prior disclosures concerning the risk and allege (with the benefit of hindsight) that the company and its executives did not accurately explain the company’s exposure to the risk.  The damages in such cases are usually easy to calculate – plaintiffs say that the stock was inflated by the amount of the share price decline following the revelation of the risk.  And if the case is certified as a class action, the damages typically run in the hundreds of millions, if not billions.

The securities class action filed against BP plc following the 2010 Deepwater Horizon explosion and oil spill is a classic materialization-of-the-risk  case.  Before the spill, according to plaintiffs, BP touted the company’s safety plans and procedures as being more advanced on paper than they were in practice.  These pre-spill statements lulled the market into believing that BP was a safer company than it actually was.  According to plaintiffs, BP thus understated the risk of the Deepwater Horizon catastrophe, and when that risk materialized, investors were damaged by the full value of the decline in BP stock caused by the materialization of the risk of the spill.  The Fifth Circuit recently affirmed the district court’s order denying class certification of plaintiffs’ materialization-of-the-risk claims.[1]  Ludlow v. BP, PLC, — F.3d —, 2015 WL 5235010 (5th Cir. Sept. 8, 2015).  This opinion essentially removes the risk of materialization-of-the-risk cases in the Fifth Circuit. Continue Reading Guest Post: The Fifth Circuit Takes the Risk Out of Materialization-Of-The-Risk Cases

phoneThe Telephone Consumer Protection Act (TCPA) has proven to be a fruitful source of consumer class action litigation. Plaintiffs’ lawyers are attracted by the potentially lucrative recoveries under the statue, and indeed several recent settlements in TCPA class action lawsuits have run into the millions of dollars. The volume of litigation under the statute and the potential damages associated with the claims has inevitably led to insurance coverage questions. In the past, defendants in TCPA lawsuits looked to their Commercial General Liability (CGL) policies for their defense of these kinds of claims. However, CGL carriers increasingly are expressly excluding coverage for TCPA lawsuits, which has led other companies seeking insurance for TCPA claims to look to other coverages for possible insurance protection, including their D&O insurance policies. As discussed below, carriers may contend that standard D&O insurance policy exclusions preclude coverage for these kinds of claims, but courts continue to sort out the issues. Continue Reading D&O Insurance: The Question of Coverage for TCPA Claims

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Daniel Tyukody

Almost every securities class action lawsuit that is not dismissed eventually settles; very few of the cases actually go to trial. However, there have been the rare cases that have gone to trial and there are some important lessons to be learned from these cases. In the following guest post, Daniel Tyukody of the Goodwin Procter law firm takes a look at recent cases in which the plaintiffs prevailed at trial, and the ways that in the post-trial phase, the defendants were able to reduce the damages that the plaintiffs were able to secure. The lessons from these cases have important implications for negotiations in the many securities class action lawsuit cases that settle.

 

I would like to thank Dan for his willingness to publish his article on this site. 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 Dan’s article.

 

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Introduction

 

Securities class actions that reach verdict are rare, but these rare events provide valuable insights for negotiating the roughly half of all cases that result in settlement.[1]  This article describes techniques for minimizing class damages following a judgment for plaintiffs, focusing upon two recent trial victories by plaintiffs, namely In re Vivendi Universal Sec. Litig. (Vivendi) [2] and Jaffe Pension Plan v. Household Int’l, Inc. (Household),[3] as well as the author’s experience defending an issuer with a final, nonappealable verdict in its post-judgment claims process, which resulted in a settlement and the vacating of the fraud judgment.[4] Continue Reading Guest Post: Winning the Securities Litigation Damages Battle After Losing the Liability War

doj1The U.S. Department of Justice released a directive last week restating and reinforcing the agency’s commitment to targeting corporate executives in cases of corporate wrongdoing. The cornerstone of the agency’s new policies is the specification that in order for a company to qualify for any cooperation credit in connection with a DoJ investigation, the company must provide the agency with all relevant facts about the individuals involved in the misconduct. As discussed below, the agency’s new directive could pose added challenges for companies involved in DoJ investigations, and it could represent a significant new threat to the executives of the companies involved. As also discussed below, the directive raises some important D&O insurance issues as well. Continue Reading Thinking About the Justice Department’s New Policy Directive Targeting Corporate Executives

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Arkady Bukh

In the following guest post, Arkady Bukh, founding partner of Bukh Law Firm, takes a look at the U.S. Supreme Court’s 2014 decision in Loughrin v. United States (here) and examines how the Court’s holding with respect to the federal bank fraud statute could reach far beyond the realm of bank fraud to reach the securities fraud arena.

 

I would like to thank Arkady for his willingness to publish his article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to readers of this blog. Please contact me directly if you would like to submit a guest post.

 

Arkady’s guest post follows below. The Bukh Law Firm is dedicated solely to criminal defense. You can contact Arkady at Bukh Law Firm, P.C., 14 Wall St, New York NY 10005, (212) 729-1632, https://www.nyccriminallawyer.com

 

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Resolving a Four Way Split

The federal bank fraud statute provides: “Whoever knowingly executes, or attempts to execute, a scheme or artifice – (1) to defraud a financial institution; or (2) to obtain any of the moneys, funds, credits, assets, securities, or other property owned by, or under the custody or control of, a financial institution, by means of false or fraudulent pretenses, representations, or promises; shall be fined not more than $1,000,000 or imprisoned more than 30 years, or both.” 18 U.S.C. § 1344. Continue Reading Guest Post: How the Supreme Court’s Loughrin Decision May Narrow the Scope of Securities Fraud

homedepotIn early 2014, when plaintiffs initiated data breach-related derivative lawsuits against the boards of Target Corp. (here) and Wyndham Worldwide (here), there was some speculation that these cases might be the first of what could become a wave of data-breach related D&O lawsuits. But then the Wyndham Worldwide case was dismissed (refer here) and no new data breach-related D&O lawsuits followed, even though there were several high profile data breaches after that time (including Sony Entertainment, Anthem and Home Depot). Although many predicted that more D&O lawsuits were to come, the suits themselves did not materialize. There were, however, some suggestions that a lawsuit against Home Depot might eventually arrive, as a plaintiff initiated a books and records action in Delaware Chancery Court against the company.

 

The wondering and waiting about whether or not there will be a Home Depot data breach-related D&O lawsuit is now over. A Home Depot data breach-related shareholder’s derivative lawsuit has been filed in the Northern District of Georgia. On September 2, 2015, a plaintiff shareholder filed a redacted complaint in a lawsuit against Home Depot, as nominal defendant, and twelve Home Depot directors and officers, alleging that the defendants breached “their fiduciary duties of loyalty, good faith, and due care by knowingly and in conscious disregard of their duties failing to ensure that Home Depot took reasonable measures to protect its customers’ personal and financial information.” The redacted version of the plaintiff’s complaint can be found here. (Please see below for further explanation about the timing of the filing of the plaintiff’s lawsuit and the redactions to the complaint.) Continue Reading Data Breach-Related Derivative Lawsuit Filed against Home Depot Directors and Officers

lookoutEvery year just after Labor Day, I take a step back and survey the most important current trends and developments in the world of Directors’ and Officers’ liability and D&O insurance. This year’s survey is set out below. Once again, there are a host of things worth watching in the world of D&O. Continue Reading What to Watch Now in the World of D&O

wywoSeptember is here. Labor Day has come and gone. That can mean only one thing – time to put away the surf boards, bungee cords, fencing foils, pogo sticks, nunchuks, hula hoops, light sabers, and unicycles, and get back to work. Yes, it is time to answer all those emails and return all of those phone messages. And most important of all, it is time to catch up on what has been happening in the world of directors’ and officers’ liability and insurance. Here is what happened while you were out. Continue Reading While You Were Out

2015-08-30 12.32.59.aThere are those who prefer to live in warmer climates, where the cold winds of winter never blow. During the last two exceptionally  frigid winters back home in Ohio, I certainly daydreamed about what it might be like to live in a place without ice and snow. But while I can see the appeal of living in a land of eternal summer, there is something about the change of seasons that I know I would miss. When you have spent the summer months in Northern Michigan walking on the shores of a vast body of water like Lake Michigan, you experience the season vividly – and you sense the season drawing to a close as well. The angle of the sun and the shortening days, the changing colors of the tree leaves and dune grass, even the movements and behavior of the animals all signal that the season is coming to an end. Continue Reading Season’s End Serenade

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Micah Skidmore

As I discussed in a recent post, on July 20, 2015, the Seventh Circuit issued its opinion in the Neiman Marcus consumer data breach class action lawsuit. In its opinion (a copy of which can be found here), the appellate court ruled that the district court erred in concluding that the plaintiffs’ fear of future harm from the breach was insufficient to establish standing to pursue their claims. The court held that the impending injuries alleged were sufficient to support Article III standing.

 

In the following guest post, Micah Skidmore of the Haynes and Boone law firm takes a closer look at the decision and discusses some important insurance coverage issues that the court’s ruling about future injuries may present.

 

I would like to thank Micah for his willingness to publish his article on my site. 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 Micah’s guest post.

 

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The recent Neiman Marcus decision from the Seventh Circuit has lowered the bar for plaintiffs suing in the wake of a data breach.  In addition to actual injury, future “impending” injuries substantiated by an “objective,” “substantial risk of harm” and actual costs incurred to prevent or mitigate “imminent” harm are sufficient to support Article III standing.  While the Neiman Marcus decision may provide some clarity regarding standards of pleading and liability (at least for plaintiffs), for those defendants reliant on network security/privacy liability insurance to protect against data breach claims, the opinion prompts an urgent question: does my policy cover liability for future injuries and preventive measures? Continue Reading Guest Post: Coverage for Future Injuries: Is Your Cyber Policy Up To The Neiman Marcus Challenge?