As D&O maven Dan Bailey noted in a recent memo (here), ERISA class action litigation represents a significant and growing liability exposure for benefit plan fiduciaries. With the recent addition of the $70.5 million settlement in the Tyco ERISA class action lawsuit (about which refer here) and the $55 million settlement in the Countrywide ERISA class action lawsuit (refer here) to the long and growing list of significant ERISA class action settlements, it is clear that the these ERISA class action lawsuit represent an increasingly important area of potential liability exposure.

 

In light of the increasing prevalence of these significant ERISA class action lawsuits, it seems to me that the time has arrived for a more systematic tracking of significant settlements.

 

Accordingly, I have prepared a list of the largest ERISA class action settlements of which I am aware. The list, in the form of a Word document, can be found here.

 

This list is comprehensive, but it likely is incomplete. I suspect strongly that there may be other similarly significant ERISA class action settlements of which I am unaware that should be included in order for the list to be complete. I would be very grateful if any readers who are aware of any specific settlements that I omitted from the list but that should have included would please let know so that I can incorporate them into the list and make the information available to all readers.

 

In any event, as new ERISA class action settlements arise in the future, I will add them to the list, and I will indicate on the top of the Word document the most recent date on which the list was updated. I encourage readers to let me know about any significant ERISA class action settlements of which they become aware.

 

On July 30, 2009, Eastern District of New York Judge Thomas C. Platt entered an order (here) preliminarily approving the settlement of the securities class action lawsuit that had been filed certain directors and officers of American Home Mortgage Investment Corporation. The total value of the settlement is $37.25 million, which alone makes the settlement significant. However, the settlement is also significant because it appears to be the first subprime-related securities lawsuit settlement to which the target company’s auditors and offering underwriters contributed toward settlement.

 

As reflected in greater detail here, plaintiffs first initiated the lawsuits in July 2007. Because American Home itself had filed a voluntary petition for bankruptcy under Chapter 11, the company itself was not named as a defendant. In addition to the individual directors and officers, the defendants named in the case included the company’s outside auditor, Deloitte & Touche LLP, as well the investment banks that had acted as offering underwriters in connection with the company’s August 9, 2005 and April 30, 2007 public offering of its securities. Deloitte issued reports as to the company’s financial statements that were incorporated into the offering documents.

 

American Home had been a real estate investment trust that engaged in the investment in and origination of residential mortgage loans. The complaint (which can be found here) essentially alleged that the company was experiencing an increasing level of loan delinquencies. The complaint alleged that this was due to the company’s shift from higher quality loans to higher risk subprime loans, though the company allegedly continued to represent that it was not a subprime lender. As a result of the decline in loan quality, the company allegedly was experiencing increasing difficulties selling its loans, which compelled the company to reduce prices, reducing profits and margins. The company allegedly was also failing to write-down the value of certain loans and mortgage-backed assets in its portfolio. As a result of these developments, the plaintiffs alleged, the company was overstating its financial results.

 

The plaintiff filed a motion for preliminary approval of the settlement (here) on July 7, 2009. According to the document, the settlement was reached while the motions to dismiss were still pending and as the result of formal mediation as well as settlement discussions. As reflected in the document and its attachments, the $37.25 settlement is actually a reflection of three separate settlement stipulations: a settlement of $24 million with ten individual defendants; a settlement of $4.75 million with Deloitte; and a settlement of $8.5 million with the seven underwriter defendants. (The details of the settlement are summarized here, see paragraph 8.)

 

According to the individual defendants’ stipulation of settlement, the company’s D&O insurers (who are named in the stipulation) "agreed to pay the Settlement Amount on behalf of the Settling Defendants."

 

While the settlement is noteworthy in and of itself, it is significant because the settlement includes significant monetary contributions from the offering underwriters and the company’s outside auditors. So far as I am aware, this is the first subprime-related securities class action lawsuit settlement in which either offering underwriter or audit firm defendants have made a monetary contribution toward settlement. These defendants’ settlement contributions are all the more noteworthy given that the motions to dismiss in the case had not even been heard in the case.

 

Many of the subprime and credit crisis related securities suits name offering underwriters or audit firms as defendants. Whether or to what extent these parties will find themselves contributing toward settlement in these other cases remains to be seen. But if they are required to participate in settlements in significant amounts as was the case in the American Home suit, the overall costs of litigation for these firms could quickly mount to some truly impressive aggregate figures.

 

The D&O insurers’ contribution toward the individuals’ settlement is also a reminder that these cases could wind up being collectively very expensive for the D&O insurance industry. There are still only a handful of settlements but the ones have been entered so far include some sizeable settlements, and if the settlements so far are representative, there could be some huge claims payments ahead.

 

Even the few settlements that have been entered so far would seem to be starting to have their impact on the insurers – for example, the recent $32 million settlement in the RAIT Financial subprime-related securities case (refer here) and the recent $22 million settlement in the American Home Lenders subprime-related securities case (here) were also entirely funded by the D&O insurers. If these settlements are any indication, the industry’s overall claim loss exposure from the subprime and credit crisis-related litigation wave could be enormous.

 

I have in any event added the American Home settlement to my list of subprime and credit crisis-related lawsuit resolutions, which can be accessed here.

 

While we wait to see whether the U.S. Supreme Court will grant the pending petition for a writ of certiorari in connection with the Second Circuit’s recent landmark opinion in the Morrison v, National Australia Bank case, the lower courts must continue to wrestle with questions regarding the extraterritorial application of the U.S. securities laws, particularly with respect to the claims of so-called "f-cubed" or "foreign-cubed claimants" – that is, foreign domiciled investors who bought their shares in foreign companies on foreign exchanges.

 

In an interesting August 13, 2009 decision in the C.P. Ships Ltd. class action securities lawsuit (here), the Eleventh Circuit distinguished the Second Circuit’s holding in Morrison and concluded that in that case the district court had properly exercised jurisdiction over the claims of the f-cubed claimants under the circumstances presented. The decision illustrates how these jurisdictional issues can arise in a surprisingly broad variety of procedural contexts and also shows how the cases continue to raise complex jurisdictional and policy concerns as well.

 

Background

C.P. Ships Ltd. is a Canadian company with its headquarters in the United Kingdom that also conducts "crucial headquarters activities" (that were central to the alleged fraud) in Tampa, Florida. The company’s shares trade on the New York and Toronto Stock Exchanges.

 

In 2004, the company transitioned to a single accounting platform. Later, the company disclosed that the transition had caused it to understate its operational costs. The company’s share price declined and investors initiated lawsuits in the both U.S. and Canadian courts. Background regarding the U.S. action can be found here.

 

On April 5, 2007, the district court dismissed the U.S. securities lawsuit (refer here), and the plaintiffs appealed. While the appeal was pending, the parties agreed to settle for $1.3 million. The settlement class included claims of some foreigners but, the Eleventh Circuit stated, it "specifically excludes the claims of Canadian citizens who purchased CP stock" on the Toronto exchange.

 

A Canadian investor who bought his shares on the NYSE, Allen Germain, objected to the settlement on behalf of Canadian investors who, like himself, bought their shares on the NYSE, as well as on behalf of other foreign investors who purchased their shares on the Toronto exchange. Among other things, Germain asserted that the district court lacked subject matter jurisdiction over these investors’ claims. The district court overruled Germain’s objections and approved the settlement. Germain appealed.

 

The Eleventh Circuit’s Opinion

Even though Germain bought his shares on the NYSE and therefore lacked standing to represent the interests of foreign investors who bought their shares on the Toronto exchange, the Eleventh Circuit addressed the jurisdictional issues of both groups of foreign claimants, "because of our obligation to examine our jurisdiction sua sponte,"noting that there do not in any event appear to be many of the latter group of investors.

 

After observing that the ’34 Act is "silent as to its extraterritorial application," the court reviewed the two jurisdictional tests for transnational securities frauds, the "conduct" test and the "effects" test, the court concluded that the Complaint "alleges ample facts sufficient to establish subject matter jurisdiction under the ‘conduct text’ over unnamed foreign class members who purchased" their shares on the Toronto exchange, and therefore it did not need to address the "effects" test.

 

In arguing that the district court lacked subject matter jurisdiction over the foreign investors’ claims, Germain sought to rely on the Second Circuit’s holding in Morrison, in which the court there had found that because the principal activities supporting the alleged fraud had taken place in Australia, rather than at the company’s Florida-based subsidiary, the district court in that case lacked jurisdiction. Germain argued that the U.S.-based activities alleged in the C.P. Ships case were merely preparatory, and that the alleged misrepresentations appeared in connection with the company’s overseas release of its financial statements that were prepared overseas.

 

The Eleventh Circuit concluded that the Morrison case was "distinguishable," because in Morrison case, "all of the executives bearing responsibility to present accurate information to the investing public, and all the actions in supervising and verifying the information, occurred in Australia."

 

By contrast, in the CP Ships case, where the company’s CEO was based in Tampa, the Eleventh Circuit said "not only did the manipulation and falsification of numbers occur in Florida, the executives with responsibility for ensuring the accuracy of the accounting data operated from Florida." The court also found that the chain of causation in the CP Ships case between the conduct in the U.S. and the alleged fraud "was direct and immediate," by contrast to the Morrison case.

 

Based on its conclusion that the Morrison case was distinguishable due to the difference in factual allegations, the Eleventh Circuit found that the district court properly exercised subject matter jurisdiction. The court further concluded that the district court had properly overruled Germain’s objections to the settlement, and accordingly the Eleventh Circuit affirmed the district court’s approval of the settlement.

 

Discussion

Even though the Second Circuit held there was no subject matter jurisdiction in the Morrison case itself, its holding (and in particular its rejection of the "bright line" test urged by some parties and amici) expressly recognized the possibility that under certain circumstances it would be appropriate for U.S. courts to exercise subject matter jurisdiction over the claims of "f-cubed" claimants. The CP Ships case provides an example where a court concluded that such a jurisdictional exercise is held to be appropriate.

 

The implication of these cases is that these jurisdictional issues are very fact dependent and must be decided on a case by case basis. By the same token, the Eleventh Circuit’s careful analysis of the difference in the allegations between the CP Ships case and the Morrison case in effect provides a road map for plaintiffs seeking to establish U.S. court jurisdiction for the claims of f-cubed claimants.

 

This analysis is all very pragmatic and measured, but still it arguably disregards the larger policy question of whether or to what extent U.S. courts should be implementing what is in effect the extraterritorial application of U.S. securities laws. It is worth reflecting that in addition to the U.S. court action involving CP Ships, a separate action involving the same issues was pending in Canadian courts. The Eleventh Circuit’s decision says remarkably little about the significance of this parallel proceeding and how its existence ought to affect the U.S. court’s exercise of jurisdiction over the claims of foreign claimants.

 

These questions about the extraterritorial application of U.S. securities laws matter, because, as analyses of the 2008 securities class action lawsuit filings all show (refer for example, here), foreign-domiciled companies increasingly are the targets of U.S. securities class action lawsuits.

 

Moreover, while most of these cases involve companies whose shares trade on U.S. securities exchanges, some do not. For example, EADS, whose shares do not trade on the U.S. exchanges, is the target of a U.S. securities lawsuit (about which refer here)

 

Indeed concerns about these extraterritoriality issues clearly have influenced at least some courts to decline to exercise jurisdiction over the claims of foreign domiciled investors (refer for example here, with regard to the case involving AstraZeneca).

 

Perhaps if the U.S. Supreme Court grants the writ of certiorari in the Morrison case, these larger policy concerns will be addressed.

 

But in the meantime the Eleventh Circuit’s opinion in the CP Ships case demonstrates that even after the Second Circuit’s ruling in Morrison, there are circumstances where courts will conclude that their exercise of subject matter jurisdiction – even with respect to the claims of f-cubed claimants – is appropriate.

 

This possibility creates an obvious liability concern for potentially affected companies outside the U.S. It also presents a challenge for D&O underwriters, who must factor into their risk analysis of companies outside the U.S. the possibility of those companies facing securities liability exposure under the U.S. securities laws. And as the EADS case shows, this exposure may not even be limited to companies whose shares trade on the U.S. securities exchanges – the exposure potentially could extend even to companies whose shares trade only on exchanges outside the U.S.

 

One thing that is clear is that in an increasingly global economy, the question of the cross-border application of domestic securities laws is a serious and growing concern.

 

The "Ultimate Solution" to Securities Fraud?: According to an August 6, 2009 Associated Press article entitled "China Executes Two for Defrauding Investors" (here), China executed two business people for defrauding hundreds of investors out of about $127 million, calling the scam "a serious blow to social stability."

 

The article reports that Du Yimin, a beauty parlor owner, collected more than $102.5 million from hundreds of investors promising them monthly returns up to ten percent, from investments in beauty parlors, real estate and mining businesses. She spent most of the money on houses, cars and luxury items. The second defendant collected $24 million from 300 investors in a separate scam by saying they could received interest up to 108 percent.

 

Bernard Madoff’s 150-year prison sentence looks positively restrained by comparison.

 

Special thanks to a loyal reader for the link to the AP story.

 

I hate to sound like a broken record a broken record, but as the third quarter securities lawsuit filings continue to come in, certain definite trends are clearly emerging. As I previously noted (here), the most recent filings are characterized by a high number of new lawsuits against companies outside the financial sector and by proposed class period cutoff dates in the distant past. Last week’s new filings reflect these previously noted trends, which I think both explain the second quarter filing "lull" and suggest what we might expect for the balance of the year.

 

The following table shows the filing date for four of the new class action securities lawsuits filed last week (each of the company names in the table below is hyperlinked to a web page providing further information about the respective lawsuit):

 

 

 

Recently Filed Securities Class Action Lawsuits
Company Filing Date Class Period End Date
Flotek Industries 8/10/09 1/23/08
Align Technlogy 8/11/09 10/24/07
MIND C.T.I., Ltd. 8/13/09 2/27/08
Sturm, Roger & Company 8/13/09 10/29/07

 

 

As shown in the table, each of these new lawsuits has been filed against companies outside the financial sector and each of them has a proposed class period cutoff date well over a year and a half ago.

 

These latest filings, taken together with the filings noted in my prior post on this topic (here), represent growing data supporting my theory that during the run-up in securities lawsuits against financial companies in connection with the subprime and credit crisis litigation wave, the plaintiffs’ lawyer accumulated a backlog of cases against companies outside the financial sector, and they are now starting to work off that backlog.

 

Indeed, even with respect to recent filings that have a more recent proposed class period cutoff date, the filings are largely with respect to companies outside the financial sector, as reflected in the new lawsuit recently filed, for example, against Huron Consulting (refer here); Repros Technology (here); Textron (here); and Allscripts-Misys Healthcare Solutions (here).

 

All of which leads me to a number of conclusions: the filing "lull" noted in the second quarter is over; part of the reason for the lull was that plaintiffs’ lawyers hit a logjam because of credit crisis and Madoff-related litigation activity, as a result of which they accumulated a backlog of cases against companies outside the financial sector, that they are now starting to work off; and as a result we are seeing a rush of new lawsuits against companies outside the financial sector.

 

Furthermore, I strongly suspect that this observed third quarter trend of new lawsuit filings against companies outside the financial sector will continue for the balance of the year, and many of these new lawsuits will be characterized by proposed cut-off dates approaching the two-year period of the statute of limitations. Notwithstanding the second quarter filing lull, by year end the annual rate of new filings for 2009 will be consistent with, if not slightly above historical norms.

 

In support of this final point about likely year end filing levels, I note not only the conjectured lawsuit backlog discussed above, but also the recent heightened level of SEC enforcement activity and the marketwide run-up in share prices since March, which could position some individual companies for the kind of sudden and conspicuous share price decline that attracts the unwanted attention of the securities class action plaintiffs’ attorneys.

 

Another Trend Noted: The lawsuit noted above that was filed last week against MIND C.T.I. Ltd. also represents another securities lawsuit filing trend I have described previously (refer for example here) – that is, the investor lawsuit regarding a company’s balance sheet exposure to auction rate securities.

 

The typical ARS-related lawsuit is brought by an ARS purchaser against the firm that created or sold the security. However, in contrast to this more typical ARS lawsuit, the suit filed against MIND alleges that the company misrepresented or failed to fully disclose the company’s balance sheet exposure to ARS investments. That is, rather than suing the ARS seller, the type of suit filed against MIND is brought against the ARS buyer.

 

As I noted in my most recent post (here) about auction rate securities litigation, numerous public companies continue to face surprisingly large balance sheet exposures to ARS, and some of them may be potentially vulnerable to this type of investor over the companies’ ARS-related disclosures.

 

It is interesting to note that MIND’s auction rate securities investments included investments in the infamous Mantoloking CDO, about which I previously wrote here. As I noted in my prior post, this single CDO has spawned an enormous amount of litigation, including even (as I noted in the prior post) a FINRA arbitration initiated by MIND against the creators and sellers of the Mantoloking CDO.

 

Insolent Sprat: When I told my then 15-year old son that he sounded like a broken record, he said "What does a broken record sound like?"

 

In prior posts (refer here), I have observed that the D&O insurer’s consent to settlement really is required. An August 10, 2009 decision by the Delaware Supreme Court (here) confirms that not only is the insurer’s consent required, but the D&O insurer may under certain circumstances reasonably withhold its consent to settlement. The Court, applying Missouri law and observing that the excess carrier in the case had been "cut out" of the settlement process, affirmed the jury’s verdict that the excess carrier had not unreasonably withheld its consent.

 

Special thanks to Francis Pileggi of the Delaware Corporate and Commercial Litigation Blog (here) for providing me with a link to the opinion. Pileggi’s blog post on the opinion can be found here.

 

Background

Payless Cashways was insured under three different layers of insurance from three different carriers, a primary carrier and two excess carriers. The first level excess insurer is referred to in this post as the excess insurer.

 

In 2003, Hilco Capital and another entity sued Payless’s directors and officers alleging that in connection with certain loans Hilco made to Payless the defendants had misrepresented the value of Payless’s inventory.

 

Prior to trial, the parties scheduled a mediation session. The primary carrier’s representative attended the mediation, but because the defense counsel (Shay) and the primary carrier valued the case within the primary insurer’s $10 million limit, and because Shay told the excess carrier’s representative that he would rather try the case than settle for more than the the primary limit, all parties agreed that the excess carrier’s representative should not attend the mediation, but rather  be available by telephone.

 

After the mediation’s first day, the mediator proposed mediation of a single issue – whether the defendants were aware that a Payless employee had falsified the company’s inventory numbers. He further proposed a "high-low" outcome, whereby the primary insurer would pay Hilco $5 million immediately, and then if Hilco lost the single issue mediation, it would keep the $5 million, but if it won the mediation, it was also get the remaining limits of the primary policy (about $3.7 million) — and in addition approximately $7 million under the excess insurer’s policy.

 

Unfortunately, it was 10:00 P.M. by the time the mediation parties agreed to this proposal, and they couldn’t get the excess insurer’s representative on the phone. As the Delaware Supreme Court later put it, "rather than wait until the next morning," the parties finished the deal that night by agreeing that the individual defendants would not be liable for the settlement and would assign their rights under the excess policy to Hilco.

 

Upon reviewing the memorandum of understanding (MOU), the excess insurer’s representative rejected the proposed settlement, among other grounds on that a "straight" settlement would be lower than the high-end number in the high-low settlement.

 

The excess carrier asked the mediation parties to withhold finalizing the MOU until after a January 5, 2005 settlement conference, but they did not. The mediation parties later mediated the single issue, and Hilco prevailed. The primary insurer paid its remaining limit. The excess insurer denied coverage for the settlement, asserting a breach of the policy’s consent to settlement requirement.

 

Coverage litigation ensued. The trial court granted summary judgment for the excess insurer on certain legal issues, and the coverage action then went to trial. The jury found for the excess insurer on three issues: that the individual insureds had breached the policy before the excess insurer withheld consent; that the excess insurer did not unreasonably withhold its consent; and that the excess insurer was not permitted to reasonably associate in the negotiation. Hilco appealed.

 

The Delware Supreme Court’s Opinion

One of the issues on which the trial court had granted summary judgment was whether or not the excess insurer had breached the covenant of good faith and fair dealing under Missouri law. The Court affirmed the trial court’s ruling but on alternative grounds, holding that even viewing the record in the light most favorable to Hilco, the excess insurer was entitled to judgment as a matter of law.

 

In reaching this conclusion, the Court noted that "all agreed" that the excess carrier’s representative should not attend the mediation because it would "send the wrong message," so, the Court concluded, there was no breach in the excess carriers’ failure to attend the mediation. And, the Court noted, it was the mediation participants "who refused to wait until the next day to discuss the proposal" but instead "effectively cut [the excess carrier] out of the process by agreeing that the Insureds would assign their rights to Hilco."

 

Hilco argued that while the MOU was being negotiated, the excess insurer "was willing to negotiate" but that the "straight settlement" it sought required the primary insurer to tender its limits. The Supreme Court noted that the primary insurer refused to tender its limits "because the MOU gave it a better deal," under which, at worst it would pay its limits, but "at best "it would save approximately $3.5 million.

 

The excess insurer’s "only recourse" under the circumstances was to object to the settlement at the January 5 settlement hearing, but the "mediation participants mooted that effort by executing a definitive settlement agreement the day before the conference." Thus, the Court said based on these circumstances, "in sum, there is no record of a breach of good faith claim against [the excess insurer]."

 

The Court also ruled in the excess carrier’s favor on other legal grounds and held as well that even if the trial court erred in excluding certain evidence at trial, it "did not deny Hilco a fair trial."

 

Among Hilco’s evidentiary objections was that the trial court had allowed Shay to testify that the excess carrier "had a reasonable basis to withhold settlement." The Court noted that Shay testified that "he believed it was more likely than not that the Insured would win if the case went to trial and that Hilco had grossly overstated its damages." Shay also testified that he "believed a ‘straight’ settlement could have been negotiated for less than the ‘high’ end …of the high-low agreement."

 

The Court found that given his testimony "it was obvious" that Shay thought the excess insurer "had a reasonable basis to withhold its consent," so his testimony on that question "did not deny Hilco a fair trial."

 

The Court reached similar conclusions regarding Hilco’s other evidentiary objections and concluded that because the jury found the excess carrier had "a reasonable basis to withhold its consent," it did not need to reach the jury’s other rulings, and affirmed the jury’s verdict.

 

Discussion

There are two sides to every story, and there may well be a side to this story that does not appear from the face of the Court’s opinion. Perhaps the information in the excluded evidence paints a different picture.

 

All of that said, though, the only surprising thing to me about this case is that it went all the way to the Delaware Supreme Court. Pretty clearly, the settlement looked like a set up deal to the jury, and that seems to be the way the Supreme Court saw it too.

 

Whatever else might be said in defense of the settlement process, it is undeniable that the mediation participants’ actions managed to eliminate any possibility that the process would later appear to have been fair to the excess insurer. Their repeated actions to, as the Supreme Court put it, to "cut out" the excess insurer, make it appear as if their goal was to keep the excess insurer from upsetting a settlement that they clearly found advantageous for themselves, even if objectionable – for obvious reasons – to the excess insurer.

 

The details of the settlement that the Supreme Court chose to emphasize in its opinion are telling. The Supreme Court twice noted that at the mediation (a mediation "all agreed" the excess carrier’s representative should not attend to avoid "sending the wrong message"), the mediation participants decided not to wait until the following morning to discuss the proposed settlement. Instead, the Court observed, they cut the excess insurer out of the deal, with the assignment of rights and the agreement that the inidividuals would not be liable.

 

The Court also noted that the mediation participants, having refused even to wait until the next morning to discuss the deal with the excess insurer,  refused to forebear from finalizing the settlement until after the January 5 hearing, depriving the excess insurer of its only means of objecting to the settlement.

 

In addition to the obvious question of fairness of a process that appears to have been calculated to cut out the excess insurer but that nonetheless exposed its interests, there are the further questions of the fairness of the amount of the settlement and the burden it imposed on the excess insurer, given Shay’s trial testimony about the trial prospects of the underlying case and the appropriate settlement valuations at the high end.

 

The interesting thing about the outcome of this case is its suggestion that absent a reasonable opportunity to consider a settlement, a D&O insurer may reasonably withhold its settlement consent. The further implication is that a set up deal that deprives a D&O insurer of a reasonable opportunity to consider a proposed settlement may represent a sufficient basis for the insurer to withhold its consent. Perhaps with an awareness of this possibility, other settlement participants might think twice about taking steps that later could be portrayed as cutting an insurer out of the process.

 

About Those Late Night Settlement Demands: 10 P.M. seems to be a popular time to send D&O insurers unexpected settlement demands. As I noted in a prior post (here), former Globalstar CEO Bernard Schwarz sought his company’s D&O carriers’ consent to a $20 million at 10 P.M. on a Sunday night before his Monday morning trial testimony.

 

In that case, by contrast to the one discussed above, the Second Circuit held that the insurers’ did not reasonably withhold consent to Schwarz’s settlement. However, the critical difference between that case and the case discussed above is that in connection with his settlement, Schwarz accepted personal liability and in fact funded the settlement out of his own assets while seeking coverage from the carriers. This willingness to assume responsibility for the settlement deprived the carriers of the ability to argue that the amount of the settlement was unreasonable and by extension that their action in withholding consent reasonable.

 

In other words, the difference between the two cases is that in the case discussed above the deal looked like a set up. That seems to be how the jury saw it and how the Delaware Supreme Court saw it. That is why I say I am surprised the case went all the way to the Supreme Court. It is hard to argue that someone else wasn’t reasonable when your own conduct can be portrayed as unreasonable.

 

Earlier this year, when the auction rate securities lawsuit against UBS was dismissed (refer here), the obvious question was whether the dismissal signaled the end of the auction rate securities litigation. Certainly, the growing number of companies that, like UBS, had entered regulatory settlements (the basis of the UBS dismissal) or otherwise agreed to redeem the ARS seemed to suggest that the auction rate securities lawsuits pending against other financial companies would suffer the same fate as the UBS suit.

 

But while this anticipated effect is now being realized in some cases, the end of at least a major chunk of the auction rate securities litigation may be nowhere near.

 

There are recent significant developments regarding the possibility that the ARS regulatory settlements and repurchase agreements may mean further auction rate securities lawsuits dismissals. Along those lines, on August 6, 2009, Southern District of New York Judge Victor Marrero granted the defendants’ motion to dismiss in the Northern Trust auction rate securities lawsuit. Judge Marrero’s opinion can be found here. Background regarding the case can be found here.

 

In granting the motions to dismiss, Judge Marrero ruled, citing the decision in the UBS auction rate securities lawsuit dismissal, that the plaintiff had "not alleged recoverable damages," owing to the fact that the plaintiff had "already received compensation for losses suffered as a result of the alleged misstatement or omissions." (In December 2008, the plaintiff had "received par value" for his ARS investments under Northern Trust’s ARS repurchase program.)

 

The UBS and Northern Trust dismissals do seem to suggest that the auction rate securities litigation could be coming to an end — at least for companies that have entered regulatory settlements or repurchase agreements.

 

But not all of the targeted firms have agreed to repurchase the ARS.

 

For example, as reflected in an August 1, 2009 New York Times article (here), Raymond James Financial is "among the holdouts." According to the article, the firm’s clients currently hold approximately $800 million (presumably, par value) of illiquid securities that the first sold them. The firm is working to try to reduce these investor holdings, primarily through issuer redemptions. However, the article, reports that the firm has stated in its disclosure documents that it does not "at present" have the "capacity" to redeem all of the securities.

 

As reflected here, Raymond James is the subject of a pending auction rate securities lawsuit in the Southern District of New York. However, without having made a redemption offer, Raymond James will not be in a position to seek dismissal on the same basis as did UBS and Northern Trust.

 

In addition to the firms that have not redeemed securities, there are the investors whose securities have not yet been redeemed.

 

For example, many of the regulatory settlements either do not extend to institutional investors or only provide for the redemption of institutional investors securities at a later date (in some cases, a much later date.) As a result of the continuing illiquidity of these investors’ securities, many of these investors have filed and are continuing to file lawsuits against the firms that sold them the securities.

 

A very recent example of this type of suit is the lawsuit filed on August 5, 2009 – the day before the Northern Trust dismissal – in the Southern District of New York, by Teva Pharmaceutical Industries and affiliated companies against Merrill Lynch and related entities. The complaint, which can be found here, alleges that Teva purchased CDO action rate notes and other auction rate securities that Merrill Lynch structured and underwrote. The complaint alleges that as a result of the failure of the ARS market, the plaintiffs now holds ARS for which it paid $273 million that now have a market value of less than $10 milllion. (Among the CDO auction rate notes in which Teva invested is the infamous Mantoloking CDO, about which I wrote here.)

 

Nor is Teva alone in its predicament. Teva is just one of several public companies cited in a July 15, 2009 CFO Magazine article entitled "Buyer’s Remorse" (here), which describes the continuing woes of many companies that invested in auction rate securities. Among other things, the article cites a source as saying that nonfinancial public companies still have $24 billion (par value) of ARS on their books. Many of these companies, like Teva, have sued the firms that sold them the securities. A prior post in which I discuss other recent examples of institutional investor auction rate securities litigation can be found here.

 

But a lawsuit by the company against the firm that sold them the securities is not the only litigation possibility involved here. As I previously noted (here), some public companies have been hit with lawsuits by their own investors who claim they were misled about the companies’ exposure to auction rate securities in which the companies had invested.

 

If nothing else, the recently filed Teva lawsuit signals that we may be nowhere near the end of the auction rate securities litigation, even if some of the cases (like those against UBS and Northern Trust) are dismissed. The continuing illiquidity of the securities, the complexity of the transactions and the sheer quantity of dollars involved suggest that at least some of the auction rate securities litigation could and probably will go on for some time to come.

 

I have in any event added the Northern Trust dismissal to my running register of credit crisis-related lawsuit resolutions, which can be accessed here.

 

An Interesting Note: According to his official biography, Judge Marrero filed the seat on the Southern District of New York previously occupied by the newly confirmed Supreme Court Justice, Sonia Sotomayor, prior to her appointment to the Second Circuit.

 

In a noteworthy subprime-related litigation development, on August 5, 2009, the parties to the Countrywide ERISA action filed a stipulation of settlement (here), together with a request for preliminary court approval. Under the stipulation, the case is to be settled by a payment of $55 million, to be funded entirely by Countrywide’s fiduciary liability insurers.

 

The plaintiffs first filed their complaint in September 2007. As reflected in the plaintiffs’ Corrected Second Amended Complaint (here), the case was brought on behalf of participants in the Countrywide benefits plan who made contributions to the plan between January 31, 2006 and July 1, 2008, and whose individual plan accounts were invested in Countrywide stock.

 

The plaintiffs’ complaint alleges that the plan fiduciaries "allowed the imprudent investment of the Plan’s assets in Countrywide’s equity," even though they knew or should have known that such investment was unduly risky," because of the company’s "serious mismanagement, highly improper and potentially unlawful business practices," particularly with respect to subprime loans. The plaintiffs alleged that the defendants breached their fiduciary duties to plan participants.

 

The Countrywide ERISA action joins the Merrill Lynch ERISA case as high profile subprime-related ERISA lawsuits that have resulted in significant settlements – as noted here, the Merrill Lynch ERISA action settled for $75 million. The Countrywide settlement may be particularly noteworthy given that the entire $55 million settlement amount is to be funded by the company’s fiduciary liability insurers. While the Countywide case may be particularly notorious, the ERISA action settlement size may represent an ominous sign for fiduciary liability insurers whose policyholders are involved in subprime-related ERISA litigation.

 

There have been a variety of estimates of the insurance industry’s overall prospective loss exposure due to the subprime meltdown and the credit crisis. Though the magnitude of many estimates is impressive, most of these estimates have largely been based on a series of conjectures about likely D&O and E&O losses. Potential fiduciary liability losses were not a prominent part of the calculation. But if the Countrywide ERISA action settlement is any indication, fiduciary liability insurance losses could prove to be a significant factor in the overall insurance industry exposure from the subprime and credit crisis events.

 

In any event, I have added the Countrywide ERISA action settlement to my roster of subprime and credit crisis-related lawsuit resolutions, which can be accessed here. The ERISA cases can be found in Section III of the roster.

 

State Street’s Subprime Litigation Contingency Reserve Too Small?: In a development that underscore both the massive scale of the subprime litigation exposure and the extent to which that exposure may largely be uninsured, on August 10, 2009 State Street Corporation filed its Form 10-Q (here), in which among other things the company reported that the approximately $625 million reserve it established in January 2008 (for the fourth quarter of 2007 reporting period) may not be sufficient in the event that regulators currently investigating the events were to bring an enforcement action. Details about the initial reserve can be found in a prior post, here.

 

State Street reports that as of June 30, 2009, $193 million of this initial reserve remains. But the filing goes on to note that on June 25, 2009, the SEC has served the company with a "Wells notice" and the SEC staff has recommended the initiation of enforcement proceedings. If the SEC or other regulators were to pursue enforcement actions, the report states, then, "depending upon the resolution of these governmental proceedings, the remainder of the reserve established in 2007 may not be sufficient to address ongoing litigation, as well as any such penalties or remedies."

 

The astonishing erosion of this massive reserve certainly highlights the expense involved in this type of litigation, and the company’s warning that the remaining reserve may not be sufficient, stresses the seeming boundlessness of the exposure. The fact that it is the company’s own reserve that is being eroded suggests that this exposure is largely or entirely uninsured, which shows that no matter how great the insurance industry’s exposure may be from the subprime and credit crisis-related litigation wave, the overall exposure, including uninsured liabilities and amounts, may be many multiples greater.

 

In a move that recapitulates a classic dispute that has been brewing in bankruptcy court for years, the Stanford Financial Group receiver has asserted that the proceeds of Stanford’s D&O insurance policies are "receivership assets" and that his right to the proceeds "supersedes" the rights of insureds under the policy. Moreover, he has specifically threatened the insurer with "contempt" if it were to advance the individual insureds’ defense expenses. This sequence raises some fundamental issues about the D&O insurance structure and coverage and could highlight the importance of certain policy provisions that have recently become prevalent. It also raises some questions about some coverage structures.

 

Let me just say at the outset that I am not involved in this case and I do not intend in this post to express my opinions on the merits of the parties’ respective positions. Rather, the purpose of this post is simply to note the parties’ dispute and to make some observations.

 

According to a June 30, 2009 motion filed in the Stanford Financial SEC proceeding pending by former Stanford CEO Laura Pendergest-Holt (here), Stanford’s D&O insurance carrier had advised her that it would begin advancing her defense expense, subject to a reservation of its rights to deny coverage under the policy, on July 1, 2009. However, on June 25, 2009, the receiver sent the carrier a letter claiming that the D&O policy proceeds are "Receivership Assets" and that the receiver’s right to the proceeds "supersedes" the right of the other insureds under the policy. The carrier has withheld payment.

 

Pendergest-Holt’s motion seeks clarification that the receivership order does not apply to the D&O policy proceeds, and alternatively seeks authorization for disbursement of the D&O policy proceeds for payment of her defense expense. A host of other individuals claiming also to be insureds under Stanford’s D&O policy have sought to join in Pendergest-Holt’s motion, as reflected, for example, in the August 6, 2009 motion (here) filed by two former Stanford brokers. UPDATE: The receiver’s response to Pendergest-Holt’s motion can be found here. Special thanks to a loyal reader for providing a copy of the response.

 

The question of ownership and entitlement to D&O policy insurance proceeds is a long-standing question in the bankruptcy context. This recurring question became even more troublesome after so-called "entity coverage" was added to most D&O policies in the mid-90s. This coverage extension provides liability protection for the company itself. In public company policy’s, the coverage is limited just to securities claims. However, for private companies, like Stanford, the entity coverage is usually more extensive.

 

As reflected in a memo (here) by my friend Kim Melvin of the Wiley Rein firm, courts have continued to struggle with these issues in bankruptcy, with some courts finding that the policy proceeds are not a part of the bankruptcy estate and therefore not subject to the stay in bankruptcy, and others reaching a contrary conclusion.

 

But these questions may take on a different light in the context of the question of the advancement of defense expenses subject to a carrier’s reservation of rights. In these circumstances, policy funds are advanced without a final determination of coverage (one that might, in fact, never come, if the claims are compromised). When it comes to the entitlement to advancement of defense expense, it could be argued that, all else equal, the various insureds’ rights — including the bankrupt company’s rights – under the policy could be regarded equivalent.

 

These issues could be even further complicated where, as here, the bankrupt company faces a likelihood of its own third-party liability claims, in which the company will likely incur its own defense expense.

 

One critical element of this dispute may be the question whether Stanford’s policy has a priority of payments provision, which predetermines the order of payment under the policy. This type of provision has become fairly standard in recent years. These provisions generally specify that payment of loss will first be made under the policy’s A Side coverage (which provides individual protection in the event the corporate entity is unable to indemnify them due to insolvency or legal prohibition). These provisions confirm the parties’ intent that the D&O policy serves primarily to protect the individual directors and officers.

 

Whether Stanford’s policy has this type of provision, and if so how the court will interpret and apply it here remains to be seen. The court’s interpretation of this provision (assuming it is in the policy) could be determinative of the parties’ dispute.

 

While the outcome of this dispute remains to be seen, the receiver’s position caused me to reflect on an auxiliary D&O insurance policy that many insureds have acquired in recent years, the so-called Excess Side A/DIC policy. The "difference in condition" coverage extension under this type of policy provides that the policy will "drop down" and provide first dollar coverage under certain circumstances.

 

Although these policies vary significantly, one of the relatively standard features of the DIC coverage is a provision specifying that the policy will "drop down" and provide first dollar coverage if the insured company is in bankruptcy and the proceeds of any traditional underlying insurance cannot be paid because the proceeds are subject to the automatic stay.

 

The circumstances of the dispute involving the Stanford D&O insurance policy present a situation where the individual insureds might well find themselves unable to access the protection of a traditional D&O insurance policy, at least if the receiver’s current efforts are successful. However, even if Stanford Financial D&O insurance program included a Side A/DIC policy, the typical Side A/DIC policy would not appear to provide drop down protection to the individual insureds in this circumstance, because their inability to access the policy proceeds is not as the result of the initiation of an action under the U.S Bankruptcy Code and not as a result of the automatic stay in bankruptcy.

 

The apparent nonapplicability of the drop down coverage to these circumstances under the typical Excess Side A/DIC policy made me reflect that there could be a need for an extension of the DIC coverage’s drop down protection to circumstances like this one where the proceeds of the traditional D&O insurance policy may be unavailable for the individual insureds’ protection for reasons other than the operation of the U.S. Bankruptcy Code. There may well be some DIC policies out there that might respond in this situation, but the typical Excess Side A/DIC policy likely would not.

 

The Stanford Financial insurance dispute will be interesting to watch, although it is an extremely unwelcome situation from the perspective of the individuals involved. In any event, the specifics of the situation suggest a possible (and arguably necessary) extension of the DIC coverage in the typical Excess Side A/DIC policy.

 

I know that many readers may have much more experience with the coverage issues involved in the receiver’s actions in the Stanford Financial case, and many readers may also have views about the extent and limitations of the typical Excess Side A/DIC policy. I encourage readers to share their views with others using the blog’s "Comment" feature.

 

Quelle Surprise: The Lawyers Want to Be Sure They Will Be Paid: Among other things, the receiver’s asset freeze together with the dispute of over the D&O policy proceeds may have left the various individuals’ lawyers wondering when and how they will be paid. R. Allen Stanford’s new criminal defense lawyers want assurance they will be paid before they will take any actions.

 

As reflected in an August 10, 2009 Texas Lawyer article entitled "Stanford’s Lawyers Want Assurance on Pay" (here), Stanford’s erstwhile new legal defense team has entered an appearance in the criminal proceeding against Stanford – solely for the limited purpose of determining "whether Mr. Stanford will be granted access to monies to pay for his legal fees and expenses."

 

"Private Companies Need D&O Insurance, Too": The Stanford Group case may represent an extreme example, but it does illustrate that private companies can become involved in serious claims for which D&O insurance is required. But many private company officials remain unconvinced of the need for D&O insurance, particularly when it comes to closely held companies.

 

A recent memo by Shannon Graving and Thomas H. Bentz, Jr. of the Holland & Knight law firm entitled "Private Companies Need D&O Insurance, Too" (here) takes a look at this recurring question about private companies and D&O insurance. As the article shows, private companies and their directors and officers may be susceptible to a wide variety of claims, as a result of which, the companies – even family owned businesses – would be well advised to secure D&O insurance protection.

 

More Madoff-Related Coverage Litigation: As I noted in a prior post (here), Madoff-related coverage litigation has started to arrive, and there undoubtedly will be more to come. Along those lines, Bloomberg reported today (here) that Madoff feeder fund Tremont Group Holdings and its related organizations have filed an action in Delaware Chancery Court against its insurers for denying coverage for Madoff-related claims.

 

According to the article, Tremont is owned by OppenheimerFunds, a unit of Mass Mutual Financial Group. The article reports that the complaint alleges that Mass Mutual’s D&O insurers and its bond insurers "have ignored repeated requests to pay defense costs." The complaint apparently contends that MassMutual’s D&O insurer has taken the position that the company’s bond insurer should pay a portion of the defense expense, but that "the primary bond underwriters have refused to pay any portion of the joint defense expense." The complaint seeks a judicial declaration of coverage under the applicable policies.

 

I don’t yet have a copy of this complaint, but I will post a link as soon as I get a copy. I would be grateful if any reader that has a copy of the complaint would forward a copy to me (anonymously, of course, if necessary), so that I can post the link. UPDATE: A copy of the complaint can be found here. Special thanks to a loyal reader for providing a copy of this complaint.

 

Special thanks to a loyal reader for sending me a copy of the Bloomberg article.

 

My suggestion (here) that the apparent second quarter securities lawsuit filing lull was due in part to the fact that plaintiffs’ lawyers have a backlog of cases outside the financial sector has proven controversial. All I can say that there is an increasing amount of evidence consistent with the backlog hypothesis. Specifically, a significant number of recently filed securities lawsuits propose class period ending dates that are well in the past, in many cases well over a year in the past. Three cases filed this past week reinforce this observation.

 

To cite the most recent example, on August 7, 2009, plaintiffs’ lawyers initiated a securities class action lawsuit in the Southern District of Texas against Flotek Industries and certain of its directors and officers. As reflected in the plaintiffs’ lawyers’ August 7 press release (here), the ending date of the proposed class period in their complaint (which can be found here) is January 23, 2008, well over a year and a half before the complaint was filed.

 

Similarly in the class action securities lawsuit filed in the Southern District of New York on August 6, 2009 against Conseco, Inc. and certain of its directors and officers, the proposed class period ending date is March 17, 2008, as reflected in the plaintiffs’ lawyers August 6 press release (here).

 

And, to cite another example just from among the complaints filed during this past week, the ending date for the class period proposed in the lawsuit filed on August 4, 2009 against Allscripts-Misys Healthcare Systems (refer here) is February 13, 2008.

 

These cases join a large number of other recently filed cases in which the proposed class period cutoff date is well in the past. Thus, the purported class period in the July 30, 2009 securities class action lawsuit filed against International Game Technology (refer here) ends on October 30, 2008. The proposed class period ending date in the lawsuit filed on July 22, 2009 against Accuray (refer here) is August 19, 2008.

 

An even more noteworthy example is the class period proposed in the securities class action filed on July 17, 2009 against Bare Escentuals (about which refer here), in which the proposed class period end date is November 26, 2007. Similarly, in the securities class action lawsuit filed on July 14, 2009 against Ambassadors Group and certain of its directors and officers, the proposed class period end date is October 23, 2007 (refer here).

 

Other recent cases in which the class period cutoff date is at least six months prior to the filing date include the lawsuit filed on July 10, 2009 against Tronox (refer here).

 

These cases were all filed during July and August, though every single one of them might have and could have been filed earlier. The seeming delayed timing of the filing of these cases might be due to any number of factors. But at a minimum, the seeming delay alone could account for the supposed class action lawsuit filing "lull" observed during 2Q09. The rapid accumulation of these cases during the third quarter suggests that the supposed lull is over. It also suggests that when all is said and done by year’s end, the 2009 securities lawsuit filings levels will likely be consistent with historical norms.

 

Another thing these lawsuits have in common is that, with the exception of the Conseco case, they all involve companies outside the financial sector. It is generally recognized that for some time going well into last year, securities lawsuit filings have been largely concentrated in the financial sector. This noteworthy recent accumulation of seemingly dated cases against companies outside the financial sector strongly suggests that while lawyers were racing to the courthouse over the past couple of years to file lawsuits against financial companies, they were also building up a backlog of cases against companies outside the financial sector, and that they are now actively working off that backlog. Indeed, this process may have started earlier this year (refer here), but it now appears to be picking up considerable momentum.

 

For D&O underwriters, the possibility of lawsuits over long past events may pose a particularly difficult underwriting challenge, as it makes it particularly tricky to determine when a company that has experienced problems is "out of the woods." Compounding the difficulty is the fact that while the D&O insurance market for financial sector companies has "hardened" as a result of economic and related litigation developments, the market for companies outside the financial sector remains competitive, and underwriters may face pressures to compete even for a company with past problems, not withstanding these underwriting uncertainties.

 

It would be all to easy, based on a review of the various recently released mid-year securities litigation reports, to conclude that securities class action lawsuit filing activity is both concentrated in the financial sector and declining. As I have suggested before (here), it is premature to conclude that overall securities litigation activity is in some sort of secular decline. By the same token, it would be incautious to conclude that the securities litigation threat is largely confined to the financial sector. The recent lawsuit filings in fact confirm that companies outside the financial sector continue to face considerable securities litigation exposure.

 

D&O Insurance in Troubled Times: An August 7, 2009 post on the Harvard Law School Forum on Corporate Governance and Financial Regulation blog (here) incorporates a memorandum from the Wachtell, Lipton law firm summarizing the critical D&O insurance issues in the current era of "historically significant dislocation." The memo provides a good but brief summary of critical issues, emphasizing the importance of Side A excess insurance, as well as considerations relating to the financial condition of insurers.

 

Among other things, the memo notes that "it may make sense to spend more for coverage from insurers that appear well-capitalized and financially strong."

 

Apologies for Service Issues: In recent days, some readers may have experienced problems attempting to access some documents to which I have linked on this site. In a sequence of events characterized both by lack of foresight and poor communications, the web address for a server I was using to host some documents for this site was changed without my knowledge, breaking the link to the URLs I used to link to the documents. I have fixed the most important links, but it will take a while to fix all of them. Readers may experience broken links on some older pages on this site for the next week or ten days while I fix the problem.

 

I encourage anyone who needs a particular document that they are unable to access as a result of this problem to contact me directly and I will provide you with a .pdf of the document. I apologize for this service glitch. I also note that anyone who thinks it would be easy to maintain a blog isn’t reckoning, among other things,  with the infinite potential for other people to radically screw things up.

 

Another Subprime-Related Securities Lawsuit Dismissal: In yet another subprime-related securities class action lawsuit decision in defendants’ favor, on July 29, 2009, District of Connecticut Judge Stefan Underhill granted the defendants’ motion to dismiss in the securities lawsuit pending against CBRE Realty Finance and certain of its directors and officers. A copy of the opinion can be found here. Background regarding the case can be found here.

 

As reflected in Alison Frankel’s July 30, 2009 article about the decision in The American Lawyer Daily (here), the court’s order in the CBRE Realty case may be particularly noteworthy because the plaintiffs’ complaint asserts claims under the ’33 Act, in connection with which the plaintiffs would not have to plead scienter or even loss causation in order to survive a motion to dismiss — they only need to plead a material misrepresentation or omission.

 

In his July 29 order, Judge Underhill found that the plaintiffs had not adequately pled that the alleged misrepresentations or omissions were material. The plaintiffs had alleged that in connection with company’s IPO, the company’s offering documents had not adequately disclosed the risk of default in connection with two Maryland condominium conversion projects known as Triton. Judge Underhilll concluded that plaintiffs had failed to allege that there was not sufficient collateral to back the $51 million loan to Triton.

 

Judge Underhill’s ruling does not indicate whether or not it is with or without prejudice; however, he did order the court clerk to close the file.

 

I have added the CBRE decision to my register of subprime and credit crisis-related lawsuit dismissal motion outcomes, which can be accessed here.

 

Still More Bank Failures: In case you missed it, this past Friday night, the FDIC closed five more banks, bringing the year to date total number of bank failures to 69. The FDIC has taken control of 32 banks just since June 19, 2009. An August 1, 2009 Bloomberg article detailing the latest bank closures can be found here.

 

The most recent round of bank closures continues the trend concentration of recent bank closures within the community banks. Four of the five latest bank closures involved institutions that had assets of under $1 billion. Of the 69 banks that have closed this year, 59 have had assets under $1 billion.

 

The signs are that the bank closures will continue for some time to come. The July 31, 2009 Wall Street Journal reported (here) that banking regulators have already entered at least 285 memoranda of understanding with banking institutions this year, on pace for nearly 600 by year end, compared with 399 for the full year last year. While the MOUs are designed to try to direct the institutions away from closure, the sheer number of agreements is a reflection of the difficult circumstances that many banking institutions are facing.

 

The FDIC’s complete list of banking institutions that have failed since October 2000 can be found here.

 

Another Madoff-Related Insurance Coverage Action: In an earlier post (here), I noted the arrival of the Madoff-related insurance coverage litigation and suggested there would be much more similar coverage litigation ahead. Another Madoff-related coverage lawsuit has now arrived.

 

On July 20, 2009, Blezak Black filed an action (here) in New Jersey (Camden County) Superior Court against its crime insurers. The plaintiff alleges to have invested over $13 million with Madoff, which it lost. The plaintiffs’ crime insurers have denied coverage for the claim. The plaintiff’s complaint alleges breach of contract and seeks a judicial declaration of coverage.

 

I have added this lawsuit to my register of Madoff-related insurance coverage litigation, which can be found in Table V of my register of Madoff lawsuits. The register can be accessed here.

 

Special thanks to a loyal reader for providing a copy of the latest Madoff-related insurance coverage lawsuit complaint.