Regular readers will recall that last year and earlier this year, plaintiffs’ lawyers filed a series of shareholder derivative lawsuits against the directors of several companies alleging that the lack of diversity on the companies’ boards breached the directors’ fiduciary duties. In the latest ruling to address preliminary motions in these various cases, the court in the board diversity lawsuit filed against directors and officers of Oracle has granted the defendants’ motion to dismiss. As discussed in greater detail below, the plaintiffs’ track record on the board diversity lawsuits is not good so far; the ruling in the Oracle suit represents the third successive dismissal granted in these suits.
Continue Reading Dismissal Motion Granted in Oracle Board Diversity Lawsuit

An important recent litigation phenomenon that I have been monitoring on this site is the recent revival of the duty of oversight as a legal theory on which plaintiffs can try to assert claims against corporate boards. Delaware’s court have recently sustained several of these kinds of claims – often referred to as “Caremark” claims in reference to the 1986 Delaware Court of Chancery decision that first recognized the legal theory behind these claims – and indeed on recent federal court decision sustained a breach of the duty of oversight claim under Ohio law. In light of these developments, boards will need to anticipate the possibility that these kinds of claims can arise, which possibility in turn raises the question of what boards can do to protect themselves from these kinds of claims.
Continue Reading The Duty of Oversight and the Need for Regular Board Review of Corporate Risk

Andrew Milne

In a March 2021 paper entitled “Restoring trust in audit and corporate governance” (here), the UK government set out a number of proposed reforms in order to try to increase trust in corporate governance, including, among other things, proposed new company reporting requirements. In the following guest post, Andrew Milne discusses the potential implications for UK directors from the reform proposals under consideration. Andrew is a Senior Associate at the CMS law firm, and a co-author of the UK Chapter in Directors’ Liability and Indemnification. I would like to thank Andrew for allowing 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 blog’s readers. Please contact me directly if you would like to submit a guest post. Here is Andrew’s article.
Continue Reading Guest Post: UK Sarbanes Oxley?

Anyone reading the business pages know that SPAC IPO activity continues to surge; indeed, we have not yet even officially completed 2021’s first quarter, yet the number of SPAC IPOs completed and the amount of funding raised have both already exceeded the totals for the full year 2020. As I have already noted in prior posts on this site, all of this SPAC activity has already attracted some legal action. At the end of the last week, there were further signs that the legal activity could be about to pick up. As discussed below, news reports circulated late last week that the SEC has sent informal inquiries to Wall Street banks concerning SPACs, and, as also discussed below, a plaintiff shareholder has initiated a class action lawsuit against the directors and officers of a SPAC, among others, in Delaware Chancery Court presenting some alternative liability theories.
Continue Reading Is SPAC-Related Legal Action About to Heat Up?

Regular readers will recall that last summer and fall there was a series of lawsuits filed against the directors of several publicly traded companies that had no African Americans on their boards. For a time, it seemed as if this litigation outbreak had subsided, as no further lawsuits were filed after the end of September. However, the impression that this phenomenon had played itself out was dispelled in February, when a plaintiff shareholder filed yet another board diversity lawsuit against the directors of Micron Technology. Now, in the latest sign that the board diversity litigation movement may have even further to run, on March 5, 2020, a plaintiff shareholder filed yet another board diversity lawsuit, this time against Florida-based healthcare company, OPKO Health, Inc. The lawsuit against OPKO Health’s board can be found here.
Continue Reading OPKO Health Hit with Board Diversity Lawsuit

As I have noted in prior posts, there has been a recent renewed focus among observers of Delaware corporate case law development on breach of the duty of oversight claims (sometimes called Caremark claims in reference to the initial Court of Chancery decision elaborating on the duty of oversight). Indeed, at least one academic commentator has suggested, based on a series of Delaware court rulings during 2019-2020, that we have entered a “new era” of Caremark claims.

But though there have been a number of high profile cases in which breach of the duty of oversight claims have been sustained, a recent Delaware Court of Chancery decision underscores the fact that the pleading hurdles for these types of claims are still substantial, and, indeed, as discussed below, at least one set of commentators has suggested that this most recent decision raises the question whether the pleading bar for these types of claims has changed at all. The Delaware Court of Chancery’s December 31, 2020 decision in Richardson v. Clark can be found here.
Continue Reading Del. Chancery Court: Caremark Claims Against MoneyGram Board Not Sustained

Francis Kean

In the following guest post, Francis Kean takes a look at the possibilities for director prosecutions under the UK Fraud Act and explores the possible D&O insurance implications of future prosecutions. Francis is a Partner, Financial Lines, at McGill and Partners. A version of this article previously was published as a McGill client alert. I would like to thank Francis for allowing 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 blog’s readers. Please contact me directly if you would like to submit a guest post. Here is Francis’s article.
Continue Reading Guest Post: Fraud Act Prosecution of Directors: How Likely and What Are The D&O Implications

As readers know, directors and officers of both public and private companies face a number of sources of potential liability exposure that can in turn learn to claims against them. One area of potential D&O claims exposure that may not always be considered is the possibility that the individuals could face claims brought against them by their own company, as happened, for example, in the lawsuit that McDonald’s recently filed against its former CEO. The latest example of a case where a company has sued one of its former senior officials is the lawsuit filed earlier last week by General Motors against one of its former directors, based on allegations that the director leaked confidential information to a rival company and to the UAW, which, the company alleges, added billions to the company’s labor costs. The lawsuit, which is interesting in and of itself, also raises a number of interesting issues, as discussed below. A copy of GM’s complaint in the lawsuit can be found here.
Continue Reading GM Files Lawsuit Against One of Its Own Former Directors

Priya Cherian Huskins

Many readers undoubtedly have heard that, in lieu of D&O insurance, Tesla Motors CEO Elon Musk has personally agreed to protect the company’s board with an indemnification undertaking. In the following guest post, Priya Cherian Huskins discusses another situation in which a company official has agreed to indemnify the company’s directors in lieu of insurance, and discusses the issues and implications of this type of arrangement. Priya is a Senior Vice President and Partner at Woodruff Sawyer. A version of this article previously appeared in the D&O Notebook. I would like to thank Priya for allowing me to publish her 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 Priya’s article.
Continue Reading Guest Post: When a Wealthy Individual, Not D&O Insurance, Indemnifies Directors