The current disruption to normal business operations across the country means that many businesses will soon be under significant financial pressure, if they are not there already. As their companies edge toward insolvency, directors are going to have to make significant decisions about the companies and their operations. Boards may be concerned, as they make critical and difficult decisions, that creditors or others may later attempt to claim that they violated their legal duties. This concern in turn leads to the question about exactly what duties directors face as their companies approach insolvency.
Continue Reading Cash-Crunched Companies Face Insolvency; Will Directors Face Claims?
U.S. Supreme Court: ERISA Plan Fiduciaries Have Continuing Duty to Monitor Investments
ERISA plan fiduciaries have a continuing duty to monitor selected plan investments and to remove imprudent investment selections, according to the U.S. Supreme Court’s unanimous May 18, 2015 opinion in Tibble v. Edison International. Although the Court affirmed the fiduciary duty to monitor, it otherwise left the development of the duty’s contours to be delineated
U.S. Supreme Court Rejects “Presumption of Prudence” for ESOP Fiduciaries
On June 25, 2014, in an unexpected development at the end of its current term, the U.S. Supreme Court held in Fifth Third Bank v. Dudenhoeffer that ESOP fiduciaries are not entitled to a “presumption of prudence” in connection with their decision to invest in or maintain investments in employer stock. In a unanimous opinion
U.S. Stepping Up Scrutiny of ESOPs
According to a June 23, 2014 Wall Street Journal article entitled “U.S. Increases Scrutiny of Employee-Stock Ownership Plans” (here), the federal government is “stepping up scrutiny of how U.S. companies are valued for employee-stock ownership plans.” This increased scrutiny includes increased litigation activity, often alleging that ESOP share valuations are flawed. The targets
U.S. Supreme Court to Consider Presumption of Prudence in ERISA Stock Drop Case
The U.S. Supreme Court has already taken up a case this term that potentially could alter the way private securities cases are litigated. The Court has now granted cert in a different case that could have a significant impact on ERISA stock-drop litigation. On December 13, 2013, the Court granted the petition of defendant Fifth
First Circuit: Private Equity Fund Liable for Bankrupt Portfolio Company’s Pension Obligations
On July 24, 2013, in a case the court said was one of “first impression,” the First Circuit held that, due to the nature of its involvement in the management of its portfolio company’s operations, a private equity firm was potentially liable for the portfolio company’s pension obligations. The decision has significant implications for the
The List: ERISA Class Action Lawsuit Settlements
As D&O maven Dan Bailey noted in a recent memo (here), ERISA class action litigation represents a significant and growing liability exposure for benefit plan fiduciaries. With the recent addition of the $70.5 million settlement in the Tyco ERISA class action lawsuit (about which refer here) and the $55 million settlement in
Countrywide Settles Subprime-Related ERISA Lawsuit
In a noteworthy subprime-related litigation development, on August 5, 2009, the parties to the Countrywide ERISA action filed a stipulation of settlement (here), together with a request for preliminary court approval. Under the stipulation, the case is to be settled by a payment of $55 million, to be funded entirely by Countrywide’s fiduciary
Defense Prevails in Tellabs ERISA Stock Drop Case
A frequent securities class action lawsuit accompaniment is a companion ERISA stock drop lawsuit brought on behalf of employee participants in the defendant company’s benefit plan. These ERISA lawsuits have in recent years resulted in a string of impressive settlements, although the plaintiffs have not fared as well in the few cases that have actually
The New Phase of Credit Crisis Litigation
The credit crisis recently entered a dark new phase, and this new darker phase has also already produced its own distinctive round of lawsuits. Like the ominous economic circumstances, the new litigation phase also seems darker and more threatening.
In the latest issue of InSights (here) — entitled "Has the Credit Crisis