In the following guest post, Jeremy Salzman and Kylie Tomas of Sompo International and Ommid Farashahi and Jonathan Cipriani of BatesCarey LLP discuss a recent series of Delaware court decisions in which the courts applied Delaware law in addressing insurance coverage disputes. In their article, the authors question Delaware law appropriately should have been the law applied in those cases. I would like to thank the authors 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 the authors’ article.
Continue Reading Guest Post: No Choice of Law in Delaware Coverage Disputes?

As discussed in prior posts, after the Delaware courts evinced their distaste for the type of disclosure-only settlements that had until then typically resolved merger objection lawsuits, the plaintiffs’ lawyers changed their game. They began filing their merger objection lawsuits in federal court rather than in state court, and then rather than settling the cases, agreed to dismiss their cases in exchange for supplemental proxy disclosures, after which the plaintiffs would seek to recover a so-called “mootness fee.” At least one federal judge recently questioned this “racket,” but the question remained whether more courts would take steps to scrutinize this process and discourage what has become nothing more than the plaintiffs’ lawyers’ extraction of a “go away” payment.

In a positive sign suggesting that court may indeed become more involved in policing this process, a District of Delaware judge recently rejected merger objection lawsuit plaintiffs’ mootness fee petition on the ground that the plaintiffs failed to carry their burden of showing that the supplemental disclosures produced a substantial benefit for the acquired company’s shareholders.
Continue Reading Delaware Federal Court Rejects Merger Objection Plaintiffs’ Mootness Fee Request

In a recent decision, the Delaware Superior Court, applying Delaware law, held that two of Pfizer’s excess D&O insurers are on the hook for their portion of costs the company incurred in defending and settling a securities class action lawsuit, despite the excess insurers’ arguments that the claim was interrelated with an earlier securities suit and that coverage was therefore precluded under their policies’ Specific Litigation Exclusion. The critical determinant in the court’s ruling may have been its decision that Delaware law governed the coverage dispute, but there are still a number of interesting elements about issue of claims relatedness. The Delaware Superior Court’s July 23, 2019 decision can be found here.
Continue Reading D&O Insurance: Specific Litigation Exclusion Does Not Preclude Coverage for Subsequent Securities Suit

Between 2010 and 2016, the number of shareholder appraisal actions filed in Delaware courts increased every year, but in 2017 and again in 2018, the number of appraisal actions declined, according to a recent report from Cornerstone Research. The decline arguably is a result of recent Delaware Supreme Court decisions in which the court reversed lower court rulings holding that the fair value exceeded the deal price and instead indicated that the deal price should be given substantial weight, at least where the sales process was “robust.” The report, entitled “Appraisal Litigation in Delaware: Trends in Petitions and Opinions, 20016-2018” can be found here. Cornerstone Research’s February 13, 2019 press release about the report can be found here.
Continue Reading Cornerstone Research: After Years of Increases, Number of Delaware Appraisal Actions Decline

As I noted at the time (here), on December 19, 2018, Delaware Vice Chancellor Later held that under Delaware law, a corporate charter provision specifying that liability actions under Section 11 of the Securities Act of 1934 must be brought in federal court are invalid and ineffective. A copy of Laster’s opinion in Sciabacucchi v. Salzburg (referred to below as the Blue Apron decision) can be found here. In the following guest post, Paul Ferrillo, Robert Horowitz, and Steven Margolin of the Greenberg Traurig law firm take a look at the Blue Apron decision and examine whether or not Congress will act to eliminate concurrent state court jurisdiction for state court claims. The authors also examine the steps companies should take now in light of the possibility of facing litigation in both state and federal court. I would like to thank the authors for their willingness to allow me to publish their article as a guest post. 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 an article. Here is the authors’ article.
Continue Reading Guest Post: Section 11 Claims May Remain in State Court; How Will Companies and D&O Carriers Respond?

One idea circulating since the U.S. Supreme Court held in Cyan that state court Section 11 actions are not removable to federal court is that companies could avoid state court actions by adopting a federal forum bylaw or charter provision. Indeed, a number of companies recently have adopted these provisions prior to going public. Late last year, a shareholder of several IPO companies filed an action in Delaware Chancery Court seeking a judicial declaration that the companies’ Federal Forum Provisions are invalid. On December 19, 2018, Vice Chancellor Travis Laster issued a memorandum opinion agreeing with the plaintiff and holding that under Delaware law, Federal Forum Provisions are invalid and ineffective. A copy of Laster’s opinion can be found here.
Continue Reading Delaware Court Holds Charter Provision Designating a Federal Forum for Section 11 Claims is Invalid

One of the basic requirements in order for coverage to be triggered under a directors’ and officers’ liability insurance policy is that the misconduct alleged must have been undertaken by insured individuals in an “insured capacity” – that is, in their capacities as directors or officers of the insured entity. In a recent insurance coverage ruling, the Delaware Superior Court held that because the allegations against the insured individuals “arose out of” their involvement with entities other than the insured entity, there was no coverage for the individuals under their bankrupt company’s D&O insurance policy. The ruling underscores the importance of capacity issues in determining D&O insurance coverage and highlights the ways in which allegations of misconduct undertaken in multiple capacities can lead to complicated coverage questions. The Delaware Superior Court’s November 30, 2018 decision can be found here.
Continue Reading D&O Insurance: No Coverage for Alleged Misconduct Not Undertaken in an Insured Capacity

One idea that resurfaces from time to time is the suggestion that companies ought to adopt bylaw or charter provisions mandating the arbitration of shareholder claims, including claims under the federal securities laws. The current SEC Chair, Jay Clayton, has said that he does not consider the issue to be a top priority, seemingly shelving the idea for the time being. But various contending parties have continued to agitate on the issue.

In a recent white paper issued by a consumer advocacy group and signed by a number of prominent securities law professors, the professors state their view that Delaware law does not permit federal securities law claims to be resolved in arbitration or in any specific forum. The white paper is sure to stir the pot. As discussed below, it could also have an impact on a case currently pending in Delaware state court that could dictate whether or not Delaware companies may designate a federal court forum for the resolution of claims under the federal securities laws.
Continue Reading Delaware Law and Mandatory Shareholder Claim Arbitration Provisions

Marc Casarino
Doug Greene

In the following guest post, Marc Casarino, a partner in the White & Williams law firm, and Doug Greene, the National Practice Leader of BakerHostetler’s Securities and Governance Litigation Team, take a look at the special litigation committee process and examine the ways in which the SLC process can be “robust, successful and efficient.” I would like to thank Marc and Doug for their willingness to allow me to publish their 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 Marc and Doug’s article.
Continue Reading Guest Post: Back to Basics: Board and Special Litigation Committee Investigations in Shareholder Derivative Litigation

Paul Lockwood
Arthur Bookout

Among the most crucial issues in the world of directors and officers liability are the related questions of indemnification and advancement. Since so many companies are incorporated in Delaware, the laws of indemnification and advancement in Delaware are particularly important with respect to scope of protection available for directors and officers. In the following guest post, Paul Lockwood and Art Bookout of the Skadden, Arps, Slate, Meagher & Flom law firm take a look at these issues, with a particular focus on limitations under Delaware law on indemnification and advancement rights. A version of this paper previously was published as an AIG White Paper. I would like to thank the authors and AIG for allowing me to publish this article as a guest post. 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 Paul and Art’s article.
Continue Reading Limits on Indemnification and Advancement for Delaware Corporations