In numerous recent posts, I have detailed how activist investors have been trying to use the courts to advance their ESG-related agenda, whether the groups’ goals are to advance or oppose ESG initiatives. For example, earlier this week I discussed the recent Delaware case in which activist investors sought to hold the Disney board liable for the company’s actions regarding Florida’s “Don’t Say Gay” legislation. A high-profile example of litigation from the other direction, in which activists seek to hold board accountable for the company’s alleged insufficient actions on ESG issues, is the claim brought in English courts earlier this year against the Board of Shell, alleging that the company’s actions to address climate change were insufficient.

As detailed in an excellent June 1, 2023, memo from the Shearman & Sterling law firm (here), earlier this year the High Court ruled that the plaintiff in the case against the Shell board had failed to state a prima facie case. Just like the Disney case I discussed earlier this week, the Court’s reasoning has significant implications for those who would seek to use the courts to advance ESG-related agendas.

Continue Reading English Court Rejects Climate Change Case Against Shell Board

In my recent mid-year review of the year-to-date securities lawsuit filings, I noted that certain factors that had contributed significantly to the number of securities suits filed in 2022 were less of a factor in the first six months of 2023. Among these diminished factors was the number of SPAC-related lawsuit filings. But while the number of SPAC-related suit filings has been down so far this year, SPAC-related suits are nonetheless still being filed. The latest example of a SPAC-related filing this year is the suit filed on July 6, 2023, against the Israeli company, Hub Cyber Security, Ltd., which became a Nasdaq-listed company following the February 2022 merger of its predecessor operating company with a SPAC.  The new lawsuit illustrates the ways in which litigation can arise against companies that are the product of completed SPAC mergers.

Continue Reading Israeli Firm Hit with SPAC-Related Securities Suit

As I have noted in prior posts, conflicting political views about ESG-related issues have put corporate executives in the crosshairs, a dilemma that has caused some companies to try to avoid ESG issues altogether – a phenomenon that has been described as “greenhushing.” Among other concerns troubling corporate officials about the entire ESG debate is that some politicians have publicly raised the possibility that the act of taking ESG considerations into account in decision-making could itself constitute a breach of fiduciary duty.

Continue Reading Disney, Fiduciary Duties, Business Judgment, and Corporate ESG-Related Actions

In a long-standing tradition, I have each July reprised on this site an essay I wrote several years ago about summertime at our lake house in Pentwater, Michigan. Actually, the tradition was that I re-posted the article over the July 4th weekend. This year, I was completely preoccupied during the July 4th holiday; I was so busy enjoying the experience of being in Pentwater that I completely forgot to re-post the article. However, since we are still in the month of July, it is not too late, and the essay’s themes remain as timely as ever. And so in a slightly belated completion of my annual ritual, I am now posting a link to the essay about Time and Summer – the essay can be found here. I hope everyone has a great summer and that each one of you is able to take some time to savor July while it lasts.

On June 30, 2023, the U.S. Supreme Court agreed to take up a case to consider the legality of the SEC’s use of in-house administrative tribunals, which the agency uses to enforce the federal securities laws. The agency sought Supreme Court consideration of a federal appellate court ruling that held the administrative courts to be unconstitutional. The case could significantly impact the way in which the agency enforces the federal securities laws. The court’s June 30, 2023 order in which the SEC’s petition for a writ of certiorari was granted can be found here.

Continue Reading U.S. Supreme Court Takes Up Case Concerning the SEC’s Use of In-House Court

The number of securities class action lawsuit filings in the year’s first half was up slightly compared to the number of filings in the first half of 2022, though roughly in line with the long-term average number of half-year securities suit filings. As discussed below, several factors contributed to the number of filings in the first six months of 2023, including the number of crypto and digital currency-related filings and the number of filings related to macroeconomic factors (such as interest rates, labor supply, and inflation). Concerns that drove securities suit filings in recent periods, including COVID-related suits and SPAC-related suits, were less of a factor in the year’s first half.

Continue Reading Securities Suit Filings Up Slightly in Year’s First Half

Claims under Professional Liability Insurance policies and Management Liability Insurance polices are often complex and notoriously expensive to defend. As a result, these policies are usually written on a “defense inside the limits” basis, meaning that the payment of defense expenses reduces the remaining limit of liability. Certain other lines of insurance, such as, for example, general commercial liability insurance, are often written on a “defense outside the limits” basis, meaning that the defense costs are paid by the insurer and do not erode the limit of liability.

In an interesting development, the Nevada legislature has passed, and the Nevada governor has approved, a Bill that prohibits insurers from issuing policies containing a provision that reduces the limit of liability by the costs of defense. I suspect that many in the liability insurance industry are unaware of this legislation prohibiting defense- inside-the-limits liability insurance. I also suspect that, for reasons discussed below, the new legislation will generate disruption in the professional liability and management liability insurance market in Nevada when it goes into effect on October 1, 2023.

Continue Reading Nevada Prohibits “Defense Inside the Limits” Liability Insurance Provisions

Many management liability exclusions contain contractual liability exclusions to clarify that the policy doesn’t provide coverage for contractual breach claims. However, as I have pointed out in prior posts, insurers, in reliance on the exclusion’s broad wording, often seek to apply these exclusions broadly, to apply to a wide variety of kinds of claims beyond contractual liability disputes. In a recent Fifth Circuit decision, the appellate court rejected an insurer’s attempt to apply a contractual liability exclusion to preclude coverage for an underlying breach of fiduciary duty claim. The reasoning of the Fifth Circuit in rejecting the insurer’s arguments provide policyholders with common sense reasoning on which to rely in seeking to avoid the application of the exclusion to noncontractual claims.

Continue Reading Contractual Liability Exclusion Does Not Bar Coverage for Fiduciary Duty Claim
Sarah Abrams

A host of economic factors — including most significantly the Fed’s interest rate increases (as part of The Fed’s overall money tightening policy sometimes referred to as Quantitative Tightening (QT)) – are putting pressure on companies, and the pressure is translating into increasing bankruptcy filings. In the following guest post, Sarah Abrams, Head of Professional Liability Claims at Bowhead Specialty, takes a look at these developments and considers the D&O insurance implications. I would like to thank Sarah for allowing me to publish her article as a guest post on my 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 Sarah’s article.

Continue Reading Guest Post: Is QT making D&O Policies a Liquid Asset? 

Over the course of several weeks from March to early May this year, three large U.S. banks failed in a sequence of events that has come to be known as the Banking Crisis of 2023. Fears arose at the time that the bank failures could become a contagion event across the banking industry. With the passage of time since the most recent failure, there seems to be a general perception that the banking crisis has subsided. But even though the situation may have calmed down, concerns remain that there could be more of the story to be told about the 2023 Banking Crisis. What should we be worried about, and what are the signs to watch for?

Continue Reading Where Are We Now With the Banking Crisis of 2023?