In prior posts on this site (for example here), I have expressed my concern that the current hot topic of ESG has a fundamental underlying flaw in that the term lacks definition and that this lack of precision has led to a great deal of sloppy thinking. A recent post on the Harvard Law School Forum on Corporate Governance provides a good examination of these ESG-related concerns. In an October 14, 2022 post (here), Douglas Chia of Soundboard Governance LLC, shows, using cybersecurity as an example, that one of the “biggest flaws” of ESG is “the subjective open-endedness of what counts as E, S, or G.”
Continue Reading ESG’s “Biggest Risk”?

In an interesting and unusual development, the victims’ trust that was created as part of the Pacific Gas & Electric (PG&E) bankruptcy has reached an agreement to settle the trust’s assigned claims against PG&E’s directors and officers for $117 million. According to the parties’ settlement agreement, the settlement is to be funded entirely with proceeds from PG&E’s D&O insurance program. As discussed below, there are a number of interesting aspects and implications to this settlement A copy of the Fire Victim’s Trust’s September 29, 2022 press release about the settlement can be found here. A copy of the parties’ settlement agreement can be found here.
Continue Reading Wildfire Victims Reach $117 Million Settlement with PG&E Executives for Assigned Liability Claims

Readers of this blog are well aware that “ESG” (whatever that term may mean) is one of the hot topics in the financial and business sectors. Companies face scrutiny and pressure to show that they are making progress on ESG goals. The SEC has established an ESG task force and proposed climate change disclosure rules. Now, as if all of that were not enough, political reaction is giving rise to an ESG backlash. As detailed in two recent memos from the Morgan Lewis law firm (here and here), as many as 17 states have now adopted “anti-ESG” state legislation that would limit the ability of state governments, including public retirement plans, to do business with entities “boycotting” industries based on ESG criteria or considering ESG factors in their investment processes.
Continue Reading And Now, The ESG Backlash

The hot topic in the financial press, the corporate world, and the legal arena these days is “ESG.” This portmanteau expression – ESG — is meant to encompass a plethora of diverse and unrelated concepts, ideas, and concerns. The reality is that it is hard to say simply what “ESG” means; and not just “ESG,” but each of the three pillars, E, S, and G, are subject to the same definitional imprecision. Yet everyone continues to act as if “ESG” is a known, specific, and identifiable thing, that can be measured and assessed. The result is a false sense of precision, and a great deal of very sloppy thinking.

These issues are well-discussed in Cydney Posner’s August 8, 2022 post on the Cooley law firm’s Pubco blog, entitled “What’s Wrong with ESG Measures?” (here). Posner’s article discusses in the detail the recent research paper issued by the Rock Center for Corporate Governance at Stanford University entitled “ESG Ratings – A Compass Without Direction” (here).
Continue Reading Zeroing In On The Problem With “ESG”

Among the significant constraints in the current business and financial environment is the continuing disruption of corporate supply chains. The disruption is a side-effect of the pandemic that has been exacerbated by weather events and other developments. I have been concerned that supply-chain disruption could not only interfere with ongoing business operations but could, for companies experiencing significant setbacks, lead to D&O claims, including securities class action lawsuits. There have in fact been prior securities suits filed this year arising out of supply chain issues.

The latest securities suit to reflect this phenomenon is the securities class action lawsuit filed on December 14, 2021 against bed and mattress manufacturer Sleep Number Corporation, whose supply sources for mattress foam was disrupted by the Texas winter storms earlier this year. This latest lawsuit illustrates how supply chain issues can translate into D&O claims. As discussed below, this new lawsuit raises a number of interesting questions about possible future claims.
Continue Reading Supply Chain Disruption Leads to Securities Suit Against Mattress Manufacturer

President Biden’s nominee to head the SEC, Gary Gensler, faced a grilling today before the U.S Senate banking committee as his nomination  proceeds through Congress. Although the outcome of his nomination technically remains uncertain, his eventual confirmation seems likely. With that possibility in mind, it seems timely to look ahead at some of the issues the agency may address and initiatives the agency may advance under the new administration.  As it is, because of some initiatives that already underway, it is possible to project where we might be headed, at least to a certain extent.
Continue Reading What’s Ahead at the SEC?

Eric C. Scheiner
Jennifer Quinn Broda

The long-standing and traditional view is that corporations’ objectives should be to maximize shareholder value. More recently, a variety of commentators and observers have argued that corporations have larger social responsibilities. However, as discussed in the following guest post from Eric C. Scheiner and Jennifer Quinn Broda, efforts by companies to fulfil corporate social responsibilities may involve their own risks and even result in D&O claims. By the same token, failing to take action could result in claims as well. These trends have important implications for insurers and for policyholders alike. Eric is a Partner and Jennifer is Of Counsel in the Chicago office of Kennedys. I would like to thank Eric and Jennifer 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 blog’s readers. Please contact me directly if you would like to submit a guest post. Here is Eric’s and Jennifer’s article.
Continue Reading Guest Post: Potential D&O Risks Arising from Corporate Social Responsibility

In a lengthy and detailed post-trial opinion, New York (New York County) Supreme Court Justice Barry Ostrager has ruled that the New York Attorney General failed to establish that ExxonMobil Corporation made material misrepresentations in its public disclosures concerning how the company accounted for climate change risk.  As discussed below, there are a number of interesting features to Justice Ostrager’s ruling. A copy of Justice Ostrager’s December 10, 2019 opinion can be found here.
Continue Reading Court Rules Against NYAG in ExxonMobil Climate Change Disclosure Trial

The Northern California wildfire known as the Camp Fire – reportedly the deadliest and most destructive wildfire in California history – has finally been fully contained. But while the fire has been doused, the fight about the fire has only just begun. Investigators will now undertake to determine the fire’s cause. And the inevitable lawsuits will now get rolling as well.

As I noted last week, investors already filed a wildfire-related securities class action lawsuit while the fires were still burning. And now a shareholder has filed a shareholder derivative lawsuit in federal court against the board and certain officers of PG&E Corp., and its regulated utility operating company, Pacific Gas and Electric Company, relating to the companies’ alleged role in causing the Camp Fire. As discussed below, this recent lawsuits may represent examples of the kinds of lawsuits we may expect to see in increasing numbers as a result of climate change-related effects. The derivative lawsuit complaint, filed in the Northern District of California on November 21, 2018, can be found in two parts here and here.
Continue Reading Further Wildfire-Related Management Liability Litigation: Harbinger of Things to Come?

As I noted when it was filed in 2016, the securities class action lawsuit investors filed against ExxonMobil and certain of its executives represented something of a milestone as it was the first securities class action lawsuit of which I am aware based on climate change-related allegations. In an August 14, 2018 opinion, Northern District of Texas Judge Ed Kinkeade largely denied the defendants motion to dismiss. The opinion contains a number of interesting features, including in particular in its discussion of the plaintiff’s climate change related allegations. Judge Kindeade’s opinion can be found here.
Continue Reading Dismissal Motion Denied in ExxonMobil Climate Change-Related Securities Suit