One of the basic exposures that corporate directors and officers face is the risk of a shareholder derivative lawsuit. In the following guest post, Greg Markel, Giovanna Ferrari, and Sarah Fedner, all of the Seyfarth Shaw law firm, take a look at the basic features of shareholder derivative suits and conclude with ten basic takeaways for boards and others. 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 site’s readers. Please contact me directly if you would like to submit a guest post. Here is the authors’ article.Continue Reading Guest Post: Derivative Litigation: Board Lessons and Takeaways
In my round-up of top D&O stories from 2021, I cited the recent rise of U.S. derivative lawsuit filings against the boards of non-U.S. companies as one of the year’s most important D&O liability and insurance stories. I was not alone in identifying this trend as a key development. Allianz identified the threat of these kinds of U.S. derivative suits against non-U.S. companies’ boards as one of the “five D&O mega trends companies should watch for and guard against in 2022.” However, recent developments could be interpreted to suggest that the threat from these kinds of lawsuits may turn out to be something less than feared.
As Alison Frankel noted in a January 4, 2022 post on her On the Case blog (here), “last week, two Manhattan state-court judges called off the revolution.” In the final week of 2021, two New York state judges granted motions to dismiss in separate derivative lawsuits filed in N.Y. courts against the boards of two non-U.S. companies. As discussed below, these two rulings potentially could spell the end for these kinds of lawsuits; at a minimum, it could mean that the threat may turn out to be significantly less than was feared – although as also noted below, there could yet be more of this story to be told.
Continue Reading Do Derivative Suit Dismissals Signal End of Non-U.S. Companies’ U.S. Liability Threat?
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