In a recent post, I noted that while companies may face investor and regulator pressure to address ESG-related issues, ESG-related actions can also entail operational and financial risks — and litigation risks, as well. In the latest example of a company whose ESG-motivated actions went awry, leading to securities litigation, Wells Fargo has been sued in a securities class action lawsuit after media reports that its efforts to diversify its work force led to fake job interviews, allegedly contrary to the company’s disclosures concerning its diversity efforts. A copy of the June 28, 2022 complaint against Wells Fargo can be found here.
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Further SPAC-Related Securities Litigation Filings Likely in the Months Ahead?
According to a new report about SPACs and SPAC-related securities litigation, even though the market for SPAC IPOs may have cooled in recent months, SPAC-related litigation has “yet to heat up.” Indeed, according to the report, litigation involving the 977 SPACs that completed IPOs during the period January 2019 and April 2022 “may continue to grow over the next few years.” The report, which is entitled “SPAC Federal Securities Litigation Analysis” and was written by David P. Abel, Managing Attorney, U.S. Market Advisors Law Group PLLC, can be found here.
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Derivative Suit Alleges SPAC Merged with Company Outside the Targeted Industry
In an article published last month, the Wall Street Journal chronicled the difficulties that many of the SPACs launched during the SPAC IPO frenzy in late 2020 and early 2021 are having trying to identify a suitable merger target. Many of the SPACs, the article suggested, might be forced to liquidate; still others, the article suggested, could “pursue low-quality companies” as the SPAC sponsors seek to “stave off possible losses.” I had occasion to recall the Journal article as I read the allegations in a newly filed SPAC-related shareholder derivative suit. The new lawsuit illustrates the one of the types of litigation risk some SPACs could face as they mull last minute mergers before the approaching end of their 24-month search period.
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The Growing Challenge of Identifying COVID-Related Securities Suits
In the now more than two-and-a-quarter years since the initial COVID-19 outbreak in the U.S., a significant number of COVID-related securities class action lawsuits have been filed. What is surprising is not that the suits have been filed; rather, it is that even at this late date, the COVID-related suits continue to be filed. As time has gone by, however, it has become increasingly challenging to say with clarity whether a particular lawsuit is or is not “COVID-related.” The securities class action lawsuit filed late last week against online information platform, Yext, illustrates the increasing difficulty of making the COVID-related categorization, as discussed below.
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Can ESG-Motivated Company Actions Lead to Corporate and Securities Litigation?
ESG is a hot topic. There is a general perception in certain circles – including the D&O insurance community — that ESG awareness and activism are essential attributes of good corporate citizenship. There is even a perception in certain parts of the D&O insurance community that strong ESG credentials makes individual companies better D&O risks. However, as the securities class action lawsuit recently filed against U.K consumer products company Unilever shows, activism on ESG issues can, in fact, lead to D&O claims. The complaint in the Unilever action, which makes for interesting reading and arguably has important implications, can be found here.
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Business and Litigation Risk in a Challenging Operating and Economic Environment
Businesses currently face a host of challenging operating circumstances: supply chain issues; labor shortages; economic inflation; the war in Ukraine; and the continuing disruptive effects of the pandemic. As a new securities class action lawsuit filed this week against the consumer product company Tupperware shows, these kinds of operating conditions not only create business and financial risk for many companies, but these conditions can also translate into litigation risk, as well. A copy of the securities lawsuit complaint filed recently against Tupperware can be found here.
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Will Companies’ ESG Goals Lead to Shareholder Litigation?
I was struck by the recent statements of Chubb CEO Evan Greenberg quoted an insurance industry publication that a colleague circulated to me last week. In the article, Greenberg said that when it comes to ESG commitments, many companies – particularly insurance companies – may be over-promising. What made Greenberg’s remarks particularly interesting to me was his suggestion that companies’ commitment to net-zero goals and other lofty-sounding climate aspirations could lead to shareholder lawsuits. It is worth thinking about this litigation possibility in the context of current regulatory action focused on so-called “greenwashing” in the investment fund industry. In both cases, the concern is that companies may tried to take on an ESG aura that the actual facts may not support.
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Dismissal Denied in SPAC-Related Securities Suit Alleging Supply Chain Misrepresentations
As I have noted in recent posts (here, for example), SPAC-related securities suit filings continue to accumulate and represent a significant current securities litigation phenomenon. But while the number of suits continues to mount, relatively few of these cases have yet reached the dismissal stage. In a recent ruling, however, the defendant company’s motion to dismiss in a SPAC-related securities suit was substantially denied as to the company itself and its top executives. In particular, the claims based on allegations that the company, Romeo Power, and its senior officials made supply chain misrepresentations were sustained, though the related claims against three former executives of the SPAC with which Romeo had merged were dismissed. A copy of the June 2, 2022 opinion in the case can be found here.
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Quantum Computing Company Hit with SPAC-Related Securities Suit After Short-Seller Report
In the latest SPAC-related securities class action lawsuit filing, a plaintiff shareholder has filed a securities suit against IonQ, a quantum computing company that became a publicly traded company in September 2021 through a merger with a publicly traded SPAC. As is the case with many of the SPAC-related securities suits, the new lawsuit against IonQ follows the publication of a critical short-seller report about the company and its technology. A copy of the complaint, filed on May 31, 2022, can be found here.
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Cardinal Health Opioid-Related Derivative Suit Settled for $124 Million
In what is one of the largest ever shareholder derivative settlements, the parties to the Cardinal Health opioid-related shareholder derivative litigation have agreed to settle the suit for $124 million. The Cardinal Health settlement, which is subject to court approval, is the latest massive settlement of opioid-related derivative litigation. It also represents another example of a massive settlement of a breach of the duty of oversight claim. The settlement is to be funded entirely by Cardinal Health’s D&O insurers. A copy of the plaintiffs’ May 25, 2022 unopposed motion for preliminary approval of the settlement can be found here.
Continue Reading Cardinal Health Opioid-Related Derivative Suit Settled for $124 Million