When SEC Chair Gary Gensler expressed concerns last December about the possibility of reporting companies engaging in “AI-washing,” he was referring company disclosures that overstate or mislead investors as to their true AI capabilities or the extent to which the company has incorporated AI into their operations or products. Since the time of those remarks, there have in fact been several AI-washing based SEC enforcement actions (as discussed, for example, here), and even several securities class action lawsuits based on AI washing allegations (for example, here). Late last week, In the latest example of an AI- washing-based securities class action lawsuit, a plaintiff shareholder filed a securities class action lawsuit against Israeli-based cosmetics internet platform Oddity Tech Ltd., based on allegations that the company overstated the extent to which AI processes and tools enhanced its delivery of consumer services. A copy of the July 19, 2024, complaint can be found here.

Continue Reading Cosmetics Platform Hit with AI-Washing-Related Securities Suit

Readers may have seen the news this past week that WTW has filed an appeal to the Fourth Circuit of the district court’s holding that the bump-up exclusion in its D&O insurance policy precludes coverage for the settlement of the post-closing lawsuit filed  the company’s merger with Towers Watson. This appeal is in fact the second time this coverage lawsuit has made its way to the Fourth Circuit. This appeal will be closely watched not only because of the parties involved, but also because, as discussed in a recent memo from the Cooley law firm, issues surrounding the bump-up exclusion increasingly have been the source of litigated coverage disputes, and indeed questions concerning the exclusion are increasingly common. For reasons discussed below, I think there are important issues about this exclusion that the D&O insurance industry should be discussing.

Continue Reading The Bump-Up Exclusion and Coverage for Post-Close M&A Lawsuits

The pandemic officially ended well over a year ago, but the pandemic’s effects continue to ripple through the economy and affect company’s operations and financial results. Moreover, these effects continue to translate into securities class action litigation. The latest example is the lawsuit filed earlier this week against the Canadian defense software company CAE, Inc., which was sued after the disruptive effects of the pandemic caused certain of its fixed-price long-term contracts to be more costly and less profitable, notwithstanding the company’s assurances that it was managing the “ongoing challenges posed by the pandemic.” A copy of the July 16, 2024, complaint in the lawsuit can be found here.

Continue Reading Defense Firm Hit with COVID and Supply Chain Disruption-Related Securities Suit
Nessim Mezrahi

In the following guest post, Nessim Mezrahi reviews the ways in which the current surging stock market affects the potential exposures of publicly traded companies and the implications for the D&O insurance industry. Nessim is co-founder and CEO of the data analytics firm SAR LLC. SAR previously published a version of this article as a client alert. I would like to thank Nessim for allowing me to publish this article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to the site’s readers. Please contact me directly if you would like to submit a guest post. Here is Nessim’s article.

Continue Reading Guest Post: Securities Litigation Exposure Increases During Bull Stock Market  
Daniel Aronowitz

On June 28, 2024, the U.S. Supreme Court issued its decision in Loper Bright Enterprises v. Raimondo, in which the court overruled the so-called Chevron doctrine, pursuant to which courts had deferred to agency interpretations of ambiguous statutes. In the following guest post, Daniel Aronowitz, President of Encore [formerly Euclid] Fiduciary, provides his views of the Court’s decision in the Loper Bright Enterprises case and discusses its implications. A version of this article previously was published on Encore Fiduciary’s Fid Guru blog. I would like to thank Dan for allowing me to publish his article as a guest post 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.

Continue Reading Guest Post: The Overreaction to the End of Chevron Deference

Artificial Intelligence (AI) has for months been the hot story in the securities marketplace, with share prices of companies with AI connections soaring. In a new lawsuit with several unusual twists, short sellers have filed a securities class action lawsuit company against electronic component power company Vicor Corporation, alleging that the company misleadingly suggested that it had entered a substantial contract with an existing customer for delivery in an AI power platform. The company’s share price surged, and the short sellers were forced to cover their positions at a significant loss. When the company allegedly later tried to walk back the story about the supposed significant customer contract, its share price plunged. The claimants seek to recover damages on behalf of similarly situated short sellers. A copy of the plaintiffs’ July 11, 2024, complaint can be found here.

Continue Reading Short Sellers File AI-Related Securities Suit Against Electronic Power Company

D&O insurance provides coverage for individuals to the extent they are acting in their capacities as directors and officers of their companies. The policies do not provide coverage when the individuals are acting in other capacities. A recent decision from a New Jersey appellate court highlights the coverage questions that can arise when individuals are alleged to be acting in multiple capacities. The court concluded that coverage was entirely precluded for an individual who was acting multiple capacities. As discussed below, the decision raises interesting questions.

Continue Reading D&O Insurance Coverage Precluded for Individual Acting in Dual Capacities
Nelson Kefauver
Kilauren McShea

In the following guest post, Nelson Kefauver and Kilauren McShea review the considerations they believe in-house counsel should take into account in connection with their professional liability insurance arrangements. Nelson is the Head of Profin, North America and Kilauren McShea is the President of Management Liability at Intact Insurance. I would like to thank Nelson and Kilauren for allowing me to publish their article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is Nelson and Kilauren’s article.

Continue Reading Guest Post: Key Factors General Counsel Should Weigh Before Choosing Malpractice Coverage
Lawrence Fine

As discussed here, in its April 2024 decision in Macquarie Infrastructure Corp. v. Moab Partners, the U.S. Supreme Court held that a failure to disclose information required by Item 303 of Regulation S-K cannot support a private claim under Rule 10b-5 in the absence of an otherwise-misleading statement. The upshot is that so-called “pure omissions” cases are not actionable, meaning that omissions are only actionable if they make an affirmative statement materially misleading. In the following guest post, Larry Fine, Management Liability Coverage Leader for WTW, takes a closer look at the Macquarie decision and considers its implications, particularly with respect to future cases based on alleged omissions. A version of this article was previously published as a WTW client alert. I would like to thank Larry for allowing me to publish this article as a guest post 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 Larry’s article.

Continue Reading Guest Post: The Additional Pro-Defense Benefits of the Macquarie Decision

In my recent review of the 1H24 securities class action litigation filings (here), I noted that SPAC-related securities suits were less of a factor in the overall number of suit filings during the year’s first six months than they had been in recent years. However, even though the peak of the SPAC frenzy was several years ago now, SPAC-related securities suits are continuing to be filed. The latest example is the SPAC-related securities suit filed late last week against SeaStar Medical Holding Corporation, which is the product of a 2022 SPAC merger. The new lawsuit has several interesting features, as discussed below. A copy of the July 5, 2024, complaint in the lawsuit can be found here.

Continue Reading Medical Device Company Hit with SPAC-Related Securities Lawsuit