In an action the SEC’s two Republican Commissioners sharply criticized in a separately-issued statement, the SEC has filed settled charges against business communications services provider R.R. Donnelly & Sons (RRD) relating to the company’s disclosure and accounting controls in connection with cybersecurity incidents the company suffered in late 2021. The company, which the SEC credited for its cooperation and remedial measures, agreed to pay a $2.125 million civil penalty and voluntarily adopted corrective processes and procedures. The settled action provides strong indications of the measures and controls the agency expects reporting companies to adopt and implement with respect to cybersecurity.

Continue Reading SEC Files Settled Charges Based on Alleged Cybersecurity-Related Control Deficiencies

In a recent decision, an intermediate California appellate court affirmed a trial court’s holding that the professional services exclusion in a healthcare records software provider’s D&O insurance policy precludes coverage for the company’s $118.6 million settlement with the U.S. Department of Justice (DOJ) of kickback payment allegations. As discussed below, the appellate court’s decision raises questions about the appropriate wording for professional services exclusions in D&O insurance policies. A copy of the court’s June 21, 2024, opinion can be found here. Geoffrey Fehling’s July 2, 2024, post in the Hunton Andrews Kurth law firm’s Legal Updates blog about the court’s decision can be found here.

Continue Reading Professional Services Exclusion Bars D&O Coverage for $118 Million DOJ Settlement
Sarah Abrams

As I noted in a post at the time (here), last Thursday, the U.S. Supreme Court issued its decision in SEC v. Jarkesy, striking down the SEC’s use of in-house courts in enforcement actions seeking monetary penalties. Then on Friday, the Court issued its decision in Loper Bright Enterprises v. Raimondo, in which the court wiped out the so-called Chevron doctrine, in which courts deferred to agency interpretations of ambiguous statutes. In the following guest post, Sarah Abrams, Head of Claims, Baleen Specialty, a division of Bowhead Specialty Underwriters, takes a look at these two decisions and examines some of the decisions’ implications from a D&O insurance perspective. I would like to thank Sarah for allowing me to publish her 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 Sarah’s article.

Continue Reading Guest Post: Regulatory Coverage Impact on D&O Insurers Post-US Supreme Court Decisions in Jarkesy and Loper

The number of federal court securities class action lawsuit filings in the year’s first half reflected a filing pace that projects year-end numbers ahead of last year’s full-year totals.

Continue Reading 1H24 Securities Suit Filings Project YE Totals Ahead of Last Year’s Pace

The United States Supreme Court has held that that, in light of the Seventh Amendment’s right to a jury trial, the SEC must pursue enforcement actions seeking civil penalties in a jury trial proceeding in federal court rather than in an action before an administrative law judge. The Court’s 6-3 ruling could have significant consequences for the many SEC enforcement actions now pending in the agency’s administrative tribunals, as well as for the agency’s pursuit of future enforcement actions. The Court’s ruling could also have important implications for other federal agencies’ use of administrative tribunals as well. A copy of the Court’s June 27, 2024, opinion in SEC v. Jarkesy can be found here.

Continue Reading Supreme Court Strikes Down SEC’s Use of Administrative Law Judges in Civil Penalty Actions

Just weeks before trial in the case was scheduled to being, the parties to the Under Armor securities class action lawsuit have agreed to settle the case for $434 million, according a company SEC filing. The case had recently survived the defendants’ motion for summary judgment. According to the lead plaintiffs’ counsel, the settlement represents the second-largest securities suit settlement in the Fourth Circuit. The settlement is subject to court approval. A copy of the company’s June 21, 2023, filing on Form 8-K can be found here. Plaintiffs’ counsel’s June 21, 2024, press release about the settlement can be found here.

Continue Reading Under Armour Securities Suit Settles for $434 Million

Regular readers know that a recurring topic on this site is the question of the proper scope of the contractual liability exclusion found in many professional liability and management liability insurance policies. In prior posts I have argued that insurers sometimes apply the exclusion over-broadly so as to exclude matters I believe should otherwise be covered under the policy. 

A recent Second Circuit, applying New York law, again examined the scope of the contractual liability exclusion’s preclusive effect, rejecting a policyholder’s claim that the exclusion did not apply to an underlying declaratory judgment claim,  one of several claims asserted against the company in the underlying action. Although I often disagree with courts’ conclusions about the reach of the contractual liability exclusion, in this case the appellate court appears to have gotten it right, given the policy language at issue, in affirming the district court’s exclusion precludes coverage for the declaratory judgment claim. A copy of the Second Circuit’s June 17, 2024, opinion can be found here. (Hat tip to Paul Curley of the Kaufman Borgeest & Ryan law firm, for his June 21, 2024 LinkedIn post, here, about the decision.)

Continue Reading Contractual Liability Exclusion Precludes Coverage for Declaratory Judgment Claim

As AI becomes an ever-more present component of many companies’ strategies and operations, one concern is the extent to which this technological shift could affect companies’ litigation risk exposures. One risk companies may face is that in seeking to promote their adoption of AI strategies, companies may be susceptible to allegations that they overstated their AI capabilities or the extent to which the strategies will actually improve results.

Continue Reading Robotic Automation Company Hit With AI-Related Securities Suit