Breach of Fiduciary Duty

As I have noted in prior posts (most recently here),over the last several months plaintiff shareholders have filed numerous SPAC-related securities class action lawsuits. In an interesting variant of SPAC-related litigation, a claimant has filed a post-merger SPAC-related class action lawsuit in the Delaware Court of Chancery against the former directors of a SPAC and against the SPAC’s sponsor, in which the claimant alleges the defendants breached their fiduciary duties to the pre-merger SPAC shareholders. The lawsuit has a number of interesting features, as discussed below. A copy of the plaintiffs’ August 4, 2021 complaint in the action can be found here.
Continue Reading SPAC-Related Class Action Breach of Fiduciary Duty Lawsuit Filed in Delaware Chancery Court

Coverage for the corporate entity under public company D&O insurance policies is limited to claims that constitute “Securities Claims” as that term is defined in the policy. A coverage dispute between Calamos Asset Management and its D&O insurer involved the question of whether an underlying breach of fiduciary duty claims alleged in connection with the company’s take-private tender offer meet the policy’s “Securities Claim” definition.

In a February 19, 2021 opinion (here), District of Delaware Judge Maryellen Noreika, applying Delaware law, ruled that the breach of fiduciary duty claims do not fall with the policy’s definition of “Securities Claim” and granted summary judgment for the insurer, largely in reliance on the Delaware Supreme Court’s 2019 decision in the Verizon case, notwithstanding the fact that the definition of the term “Securities Claim” in the Calamos dispute express referred to the “common law,” while the definition in the Verizon dispute did not.
Continue Reading Breach of Fiduciary Duty Claim Not a “Securities Claim” Under D&O Policy

Most public company D&O insurance policies provide coverage for the corporate entity only for “Securities Claims.” But what constitutes a “Securities Claim”? That is the question the Delaware Supreme Court addressed in a recent appeal of an insurance coverage dispute in which a bankruptcy trustee had sued Verizon for breach of fiduciary duty, unlawful payment of a dividend, and violation of the uniform fraudulent transfer act. The trial court had entered summary judgment for Verizon, ruling that the bankruptcy trustee’s claims represented “Securities Claims” within the meaning of the policy. In an October 31, 2019 decision (here), the Delaware Supreme Court reversed the lower court, ruling that the bankruptcy trustee’s claims were not Securities Claims within the meaning of the policy. As discussed below, the decision raises some interesting issues.
Continue Reading Delaware Supreme Court: What is a “Securities Claim”?