A federal district court, applying California law, has held that the insurers must advance “potentially covered” subpoena-related expenses to the post-merger entity and that the Change in Control Exclusion did not preclude advancement. The coverage decision raises some interesting issues. And, as discussed below, it raises also raises concerns about the policy language, as well. A copy of the Northern District of California’s February 12, 2024, decision can be found here. A February 26, 2024 post on the Wiley law firm’s Executive Summary blog can be found here.

Continue Reading Insurers Must Advance Subpoena-Related Expenses Despite Change in Control Exclusion
Yelena Dunaevsky
Teresa Milano

As readers of this blog well know, SPAC transactions have been a frequent target of corporate and securities lawsuits. In the following guest post, Yelena Dunaevsky, Esq., Senior Vice President at Woodruff Sawyer, Executive Editor, SPAC Notebook and Teresa Milano, Esq., Vice President at Woodruff Sawyer, take a detailed look at the SPAC litigation and enforcement activity so far, including some interesting observations about recent trends. A version of this article was previously published on the SPAC Notebook (here). I would like to thank Yelena and Teresa 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 the authors’ article.

Continue Reading Guest Post: SPACs Poised to Turn a Corner in 2024: Annual Risk Update

Warren Buffett’s annual letters to Berkshire Hathaway’s shareholders have a huge following. The letters, written in Buffet’s direct and often humorous style, are closely read by investors, journalists, academics, and others seeking insight into the performance and key trends of markets and of the economy. This year’s letter, published on Saturday, February 24, 2024, as part of Berkshire’s 2023 annual report, is distinguished by its opening tribute to the company’s late Vice Chairman, Charlie Munger, who died in December 2023 at the age of 99. The letter itself covers a number of topics that will be familiar to students of Buffett’s past letters, but it also includes a few interesting (and arguably even surprising) topics as well, as I discuss below. Full disclosure:  I own BRK.B shares, although not as many as I wish I did.

Continue Reading Thinking About Warren Buffett’s Latest Letter to Berkshire Shareholders

In any discussion these days of emerging directors’ and officers’ risks, the conversation inevitably turns to the topic of Artificial Intelligence (AI). There is a general perception that while AI presents significant opportunities, it also involves significant liability risks. The contours of the risk that AI represents have yet to develop, largely because the claims have yet to emerge. That is, until now.

Earlier this week, a plaintiff shareholder filed a securities class action lawsuit against the AI-enabled software platform company, Innodata. The plaintiff claims the company misrepresented the extent to which the company’s products and services actually employ AI technology and also the extent of the company’s investment in AI. As discussed further below, as far as I know, this case represents the first AI-related securities class action lawsuit to be filed. A copy of the plaintiff’s February 21, 2024, complaint can be found here.

Continue Reading First AI-Related Securities Suit Filed

   

I think we all recognize that the disruptions from the COVID pandemic continue to reverberate through the economy. Many industries and many companies are still trying to get back to equilibrium. The pandemic continues to impact companies, their operations, and their financial results. A new lawsuit filed against the sporting goods retailer Dick’s Sporting Goods(DSG)  illustrates how the pandemic-related factors continue to affect companies and translate into securities litigation. DSG was one of the companies that prospered at the outset of the pandemic; when conditions normalized, the company claimed it would be able to keep the positive momentum going. However, after the company announced disappointing results, its share price declined, and now a shareholder plaintiff has filed a securities class action lawsuit, in the latest in a series of COVID-related securities suits. A copy of the February 16, 2024, lawsuit against the company can be found here.

Continue Reading COVID-Related Results Lead to Securities Suit    

One of the perennial D&O insurance coverage issues is the question of whether two or more claims are or are not interrelated. Under the operation of provisions typically found in most D&O insurance policies, if two or more claims are interrelated within the meaning of the policy, they are deemed to be a single claim first made when the first of the claims was filed. This seemingly technical determination can have important implications for the determination of which of the two potentially related insurance programs applies to a claim.

These recurring issues arose in connection with a dispute over which of two potentially applicable D&O insurance programs apply to the securities class action lawsuit filed against Alexion Pharmaceuticals. Insurers in the different towers argued over whether an earlier SEC subpoena, issued to Alexion during an earlier policy period, was related to the later securities suit, which was filed during a later period. In an interesting February 15, 2024, opinion (here), Delaware Superior Court Judge Paul R. Wallace, applying Delaware law, held that, despite some overlap, the subpoena and the securities suit were not related.

Continue Reading Prior SEC Subpoena and Later Securities Suit Held Not to Be Related

Readers undoubtedly are aware that late last week the judge presiding over the New York civil fraud trial against Donald Trump, the Trump Organization and related entities, and various Organization’s executives (including two of Trump’s sons) entered a post-trial verdict against the defendants that, together with pre-judgment interest, exceeds $450 million in value. In making the award, the judge concluded that Trump and the other defendants had fraudulently misrepresented the Organization’s and Trump’s financial condition to banks, insurance companies, and public officials. Of interest to readers of this blog, among the allegedly fraudulent acts was the procurement of D&O insurance, as well as surety insurance, through alleged misrepresentations. As discussed below, there are several interesting things about the insurance part of the court’s verdict. A copy of the February 16, 2024, Decision and Order of New York (New York County) Supreme Court Justice Arthur F. Engoron can be found here.

Continue Reading The Insurance Part of the Massive Trump Civil Fraud Verdict
Priya Huskins

On January 30, 2024, Delaware Chancellor Kathaleen McCormick issued a 200-page post-trial opinion voiding the $55 billion compensation package that the Tesla board had approved for the company’s CEO, Elon Musk. In the following guest post, Priya Huskins, Esq., Senior Vice President at Woodruff Sawyer, takes a detailed look at Chancellor McCormick’s opinion and considers the opinion’s practical implications. A version of this article was previously published in the D&O Notebook. I would like to thank Priya 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 blog’s readers. Please contact me directly if you would like to submit a guest post. Here is Priya’s article.

Continue Reading Guest Post: Lessons from the Rescission of Elon Musk’s $55.8B Option Grant

The D&O Diary was on the road again this week, albeit this time for domestic travels only. The main event this week was a stop in Nashville to attend Arch Insurance’s Executive Assurance Division’s 2024 Offsite Meeting. At least by contrast to some of my recent international travel, this was a quick trip; because it was such a quick trip, I didn’t get a chance to see much of Nashville itself, but the trip was still a lot of fun.

Continue Reading Nashville

A frequently recurring insurance claims handling challenge is the problem of “too many insureds, not enough insurance.” Different insureds can have competing and even incompatible interest in the limited insurance funds. As a recent insurance coverage dispute in the Southern District of New York showed, these problems are magnified when the competing insureds also have conflicting interests in the underlying claim. Judge Jennifer Rochon’s February 8, 2024, opinion rejecting one insured’s attempt to block the competing demands to the insurance proceeds of another insured can be found here. Paul Curley’s February 11, 2024 LinkedIn post about the decision can be found here.

Continue Reading One Insured Can’t Block Insurance for Another Insured’s Settlement Based on Consent Clause