In prior posts on this site (for example, here), I have noted the phenomenon of directors’ and officers’ liability claims arising in the wake of antitrust enforcement actions. These follow-on civil actions arguably represent one part of an increasing trend toward trying to hold individual directors and officers accountable for their companies’ antitrust violations. According to a recent paper, as a result of trends in relevant doctrines and enforcement policies, the risk to directors and officers from these developments is “likely to continue rising in the foreseeable future.” In his February 12, 2020 paper entitled “D&O Liability for Antitrust Violations” (here), University of Arizona Law Professor Barak Orbach details the developments contributing to these trends and reviews the implications for director and officer liability. Professor Orbach’s paper raises a number of interesting considerations, particularly from an insurance perspective, as discussed below.
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In a long line of cases, the U.S Supreme Court has grappled with the question of who can be held liable under the federal securities laws for fraudulent misrepresentations. Most recently, in the Janus Funds case, the Court has said that only a “maker” of a misrepresentation can be held liable in a private securities lawsuit. On June 18, 2018, the U.S. Supreme Court granted a writ of certiorari to examine whether a person who did not “make” a misrepresentation can nevertheless be held liable under the securities laws on a theory of scheme liability.

The case involves an SEC enforcement action in which the defendant, Francis Lorenzo, sent prospective investors emails at the direction of his boss and with content that he had not created. Lorenzo’s actions were held insufficient to support fraudulent statement liability because he did not “make” the misrepresentations, but Lorenzo nevertheless was held liable for the misrepresentations on a scheme liability theory. The case presents an interesting opportunity for the Court to consider the requirements to establish scheme liability and in particular to determine whether a financial misrepresentation alone is sufficient to support a scheme liability claim. The Supreme Court’s June 18, 2018 order granting the writ of certiorari can be found here.
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dojAmong the many questions surrounding the new incoming Presidential administration is the question of what direction the Trump administration will go with criminal and regulatory enforcement. And among the many specific questions under that topic heading is the question of whether or not the Department of Justice will continue the current agency policy of giving priority to holding individuals accountable for corporate wrongdoing. Based on early signs, all indications are that the current policy, embodied in the so-called Yates Memo, will continue under the new administration.
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dojIt has now been over a year since the U.S. Department of Justice released the so-called Yates Memo, in which the agency stated its policy focused on individual accountability for corporate wrongdoing. As attorneys from the McDermott, Will & Emery firm noted in an October 11, 2016 post on the Harvard Law School Forum on Corporate Governance and Financial Regulation blog (here), since the Yates Memo went into effect, observers have been watching for “telltale signs of whether the Yates Memo is really changing the way federal enforcement does business.” According to the blog post, two recent False Claims Act settlements that required corporate executives to make substantial monetary contributions to resolve civil enforcement actions filed against them may suggest that the anticipated Yates Memo-related change has arrived.
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doj1It has now been seven months since the U.S. Department of Justice announced — in the form of a September 9, 2015 memo from Deputy Attorney General Sally Yates — that it was adopting a policy focused on individual accountability for corporate wrongdoing. The keystone of the policy embodied in the Yates memo is that for companies to receive cooperation credit, they must completely disclosure “all relevant facts about individual misconduct.”  As discussed below, the Yates memo is having an impact in a number of ways. However, according to an April 22, 2016 publication from the Clifford Chance law firm (here), the Yates memo may be having unintended consequences – it may actually be deterring companies from divulging information.
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sec sealLast September, amidst considerable fanfare, the U.S. Department of Justice released a new directive – now universally known as the Yates Memo – in which it restated and reinforced 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. This same focus on individuals has been echoed by top SEC officials, including the SEC’s current chair. With several months’ of experience now under the new directive, it seems worth asking how the SEC renewed focus on individuals has translated into practice and what the implications are for corporate directors.
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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.
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