Director and officer liability

James R. Lane

As I have noted in prior posts, securities class action litigation represents a significant part of the corporate liability landscape in Canada. In the following guest post, James R. Lane, a founding partner of the Toronto law firm of Bersenas Jacobsen Chouest Thomson Blackburn LLP, takes a look at a recent important decision by the Ontario Court of Appeal addressing director and officer liability issues under the Ontario Securities Act. A version of this article previously was published as an alert to the law firm’s clients. I would like to thank Jim for his willingness to allow me to publish his 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 Jim’s guest post.
Continue Reading Guest Post: Directors and Officers Must Defend Secondary Market Misrepresentation Claim

Those of us immersed in the world of directors and officers could not imagine becoming involved in any sort of business organization without the protection and benefit of D&O insurance. Just the same, I have fairly regular conversations with officials and executives at closely held companies who see no need for the insurance, on their belief that without outside investors, their company faces no risk of incurring a D&O claim. However, long experience tells me that D&O insurance should be a part of every organization’s insurance program, regardless of its ownership.
Continue Reading The Importance of D&O Insurance for Private Companies

qualcommThere is no private right of action under the Foreign Corrupt Practices Act. However, a company’s announcement of an FCPA investigation or enforcement action frequently will draw a follow-on civil lawsuit in the form of a shareholders’ derivative lawsuit, in which a shareholder plaintiff alleges that the company’s board failed to prevent the company from committing these violations. But while these kinds of lawsuits arise frequently, they are less frequently successful, as illustrated most recently in a Delaware Chancery Court shareholders’ derivative lawsuit involving the telecommunications equipment company Qualcomm.
Continue Reading FCPA Follow-On Civil Actions: Frequently Filed, Less Frequently Successful

fdicAs we approach what will be the eighth anniversary of the peak of the global financial crisis, many of the effects of the crisis have subsided. But while the crisis and many of the worst of its effects have largely faded into the past, a number of litigated matters related to the crisis have continued to grind through the courts. Among other things, the wave of failed bank lawsuits – that is, lawsuits filed by the FDIC against the former directors and officers of banks that failed in the wake of the crisis – has continued to roll along. However, at this point, it looks as if the failed bank litigation has just about played out. Now that the litigation is winding down, it may be time take a retrospective look at the failed bank litigation wave.
Continue Reading As the Failed Bank Litigation Wave Winds Down, A Look Back

dojIn a September 9, 2015 memo from Deputy Attorney General Sally Yates, the U.S. Department of Justice described a new policy focused on individual accountability for corporate wrongdoing. The keystone of the policy embodied in the Yates memo is that for companies to receive any cooperation credit, they must completely disclosure “all relevant facts about individual misconduct.”  According to an interesting May 26, 2016 memo from the U.S. Chamber of Commerce’s Institute for Legal Reform entitled “DOJ’s New Threshold for Cooperation” (here), the agency’s new threshold for cooperation credit is “likely to have a number of unintended consequences.” Among other things, the report notes, the new policy risks alienating personnel whose cooperation is essential to the investigation, and indeed may motivate individuals to seek individual counsel. These and other potential unintended consequences may mean that the agency’s new policy may have a counterproductive impact on corporate cooperation.
Continue Reading Will the Yates Memo’s Emphasis on Individual Prosecution Have A Counterproductive Impact?

stanfordsealIn the world of corporate governance, there are a number of common presumptions about board structure and practices. However, according to a recent paper, many of these presumptions may in fact represent corporate governance “myths.” In their September 30, 2015 paper entitled “Seven Myths of Boards of Directors” (here) Stanford Business School Professor David Larcker and Resercher Brian Tayan examine several “commonly accepted beliefs about boards of directors that are not substantiated by empirical evidence.”
Continue Reading The “Myth” of Outside Director Liability and the Critical Importance of D&O Insurance

doj1The U.S. Department of Justice released a directive last week restating and reinforcing the agency’s commitment to targeting corporate executives in cases of corporate wrongdoing. The cornerstone of the agency’s new policies is the specification that in order for a company to qualify for any cooperation credit in connection with a DoJ investigation, the company must provide the agency with all relevant facts about the individuals involved in the misconduct. As discussed below, the agency’s new directive could pose added challenges for companies involved in DoJ investigations, and it could represent a significant new threat to the executives of the companies involved. As also discussed below, the directive raises some important D&O insurance issues as well.
Continue Reading Thinking About the Justice Department’s New Policy Directive Targeting Corporate Executives

del1In a detailed May 4, 2015 opinion (here), Vice Chancellor Travis Laster of the Delaware Chancery Court extensively reviewed the rights of an insolvent company’s creditors to pursue derivative claims against the company’s directors. As Francis Pileggi put it in a May 6, 2015 post on his Delaware Corporate and Commercial Litigation blog

scrutiny2Federal banking regulators have stepped up their interactions with and scrutiny of bank directors, according a recent Wall Street Journal article. The March 31, 2015 article, entitled “Regulators Intensify Scrutiny of Bank Boards” (here) details the ways in which regulators are “zeroing in on Wall Street boardrooms as part of the government’s intensified

paA question that frequently recurs when I am speaking to directors and officers of non-profit organizations is why – given that their firms have no shareholders – they need to bother with D&O insurance. The reality is that even though officials at non-profit firms don’t have to worry about the possibility of shareholder claims, non-profit