In the latest sign that coronavirus-related securities class action lawsuit filings will continue into the New Year, on January 20, 2021, a plaintiff shareholder filed a COVID-19-related securities suit against the Chinese Internet social media company Lizhi, Inc. The lawsuit relates to the coronavirus outbreak now more than a year ago in China, and to the company’s January 2020 U.S. IPO. A copy of the plaintiff’s complaint can be found here.
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A “New Era” of Caremark Claims?
One of the more noteworthy recent developments in corporate and securities litigation has been the resurgence of Delaware law “duty of oversight” claims, as I noted in my recent annual round-up of D&O liability issues. Delaware courts have sustained several of these kinds of “Caremark duty” claims, which until recently were distinctly disfavored – which raises the questions of why these claims are now proving viable, and whether the renewed risk of duty of oversight claims is here to stay? In a December 2020 paper entitled “A New Caremark Era: Causes and Consequences” (here), Professor Roy Shapira of IDC Herzliya Radzyner Law School identifies what he believes to be the causes of the recent revival of duty of oversights, and presents his view that the changes are here to stay. Professor Shapira’s views are summarized in a January 18, 2021 post (here) on the Harvard Law School Forum on Corporate Governance.
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Aggregate Securities Class Action Settlements Grew Substantially in 2020
Driven largely by several mega-settlements (that is, settlements of $100 million or greater), the aggregate value of global securities class action settlements in 2020 totaled 61% more than in 2019, according to a new report. The report, entitled “2020 Securities Related Settlements Exceed $5.8 Billion,” and published in a January 18, 2021 post on the Harvard Law School Forum on Corporate Governance, was written by Jeff Lubitz of ISS Securities Class Action Services. The report can be found here.
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Diagnostic Testing Company Hit with First Coronavirus-Related Securities Suit of 2021
In what is the first coronavirus-related securities class action lawsuit filed in 2021, and in what is also as far as I know the first coronavirus-related securities suit filed following the filing of an SEC enforcement action against the same company, a plaintiff shareholder has filed an action against diagnostic testing company Decision Diagnostics Corp., relating to the company’s claims during the period March to June 2020 that it had developed a finger-prick test that could detect COVID-19 in less than one minute. A copy of the plaintiff’s complaint can be found here.
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Guest Post: The State of the D&O Market: 10 Reasons to Be Cheerful
In the following guest post, Francis Kean provides us with ten reasons to be cheerful notwithstanding the current D&O insurance market. Francis is a Partner, Financial Lines, at McGill and Partners. A version of this article previously was published Insurance Day. 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.
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GDPR-Related Securities Suit Against Nielsen Holdings in Part Survives Dismissal Motion
In prior posts on this site, I have identified privacy-related issues as a potentially important source of future D&O claims. In making these projections, one thing I had in mind was the possibility of claims as a result of the enforcement of the EU’s General Data Protection Regulation, which went into effect in May 2018. There have in fact already been GDPR-related securities class action lawsuits filed in the U.S., including the securities suit filed in August 2018 against U.K.-incorporated media tracking company Nielsen Holdings. In a January 4, 2021 opinion, Southern District of New York Judge Jesse Freeman granted in part and denied in part the defendants’ motion to dismiss the Nielsen Holdings lawsuit. Of significance to the questions concerning privacy-related claims, the plaintiff’s allegations concerning defendants’ statements after GDPR went into effect about the GDPR’s impact on the company survived the dismissal motion. A copy of Judge Furman’s opinion can be found here.
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Post-SPAC Merger Company Hit with Post-Transaction Securities Suit
In my recent survey of key 2020 D&O developments I highlighted the surge of SPAC IPOs last year and conjectured about the possible increase in the number of D&O claims that might arise following the transactions in which private companies merge into the public traded SPACs ( the so-called de-SPAC transaction). A securities suit filing this week demonstrates how these claims might well arise and does suggest we could indeed be in for an influx of securities suits and other D&O claims filed following de-SPAC transactions.
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SolarWinds Hit with Securities Suit Based on Third-Party Governmental Actor Cyber Attack
In my round-up of the Top D&O Stories of 2020, which I published earlier this week, I noted that the recent massive state-actor hack of U.S. government agencies and technology companies underscored the fact that cybersecurity represents a significant operational and management risk for organization of every type. I also noted that cybersecurity-related issues represent an ongoing D&O claims risk. As if to confirm these propositions, the first securities class action lawsuit of the New Year was filed against Solar Winds, the network infrastructure management company whose breached software is believe to have contributed to the recent massive hack. As discussed below, the newly filed complaint highlights the fact that cybersecurity represents a significant potential source of management liability risk.
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The Top Ten D&O Stories of 2020
The directors’ and officers’ liability environment is always changing, but 2020 was a particularly eventful year, with important consequences for the D&O insurance marketplace. The past year’s many developments also have significant implications for what may lie ahead in 2021 – and possibly for years to come. I have set out below the Top Ten D&O Stories of 2020, with a focus on the future implications. Please note that on Wednesday, January 13, 2021 at 11:00 AM EST, my colleague Marissa Streckfus and I will be conducting a free, hour-long webinar in which we will discuss The Top Ten D&O Stories of 2020. Registration for the webinar can be found here. I hope you will please join us for the webinar.
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Securities Suit Filings Declined in 2020 But Remained Above Historical Levels
The number of federal court securities class action lawsuit filings declined in 2020 relative to the most recent prior years, largely due to short-term filing lulls during the second and fourth quarters of the year. Though the number of filings last year was below the record-setting levels seen during the years 2017 to 2019, the number of 2020 filings was still well above historical annual averages.
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