On Thursday, January 21, 2016, I will be participating as the speaker in a Professional Liability Underwriting Society (PLUS) webinar to discuss this past year’s top stories in the world of directors and officers’ liability and insurance. The webinar will be based on my recent blog post, The Top Ten D&O Stories of 2015. This webinar, which is free for both PLUS members and non-members, is a lead-in for the 2016 PLUS D&O Symposium, to be held February 3-4, 2016, in New York. The webinar will begin at 11 am EST and last one hour. Information about the webinar, including registration instructions, can be found here.
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Report: SEC Filed a Record Number of Enforcement Actions in FY 2015, Aggregate Fines and Penalties Declined
The SEC filed a record number of enforcement actions during FY 2015, but the aggregate value of fines, penalties, and disgorgements the agency collected during the fiscal year was well below the prior year’s total and long term averages, according to a detailed January 12, 2016 report produced in cooperation between the NYU Pollack Center for Law Business and Cornerstone Research. The report, which can be found here, is entitled “SEC Enforcement Activity Against Public Company Defendants: Fiscal Years 2010-2015,” is based on date collected in the Securities Enforcement Empirical Database (SEED), which is an online resource the two organizations sponsor and that provides data on SEC actions filed against public companies traded on the U.S. exchanges. The January 12, 2016 press release that accompanied the report can be found here.
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Delaware Courts’ Rejection of Disclosure-Only Settlements Results in Fewer Merger Objection Lawsuit Filings
In my recent survey of the top stories in 2015 in the world of D&O, I noted that one of last year’s most important developments was the signal that several of the judges on the Delaware Court of Chancery sent in a series of rulings that they would not longer routinely approve the kind of “disclosure-only settlement” that frequently resolves merger objection lawsuits. According to Liz Hoffman’s January 11, 2016 Wall Street Journal article focused on Delaware Vice Chancellor J. Travis Laster and entitled “The Judge Who Shoots Down Merger Lawsuits” (here), after Laster’s October 2015 decision rejecting the proposed settlement in the H-P/Aruba Networks merger objection lawsuit, there were dramatically fewer merger objection lawsuits filed in Delaware, and in fact some previously filed lawsuits are being withdrawn.
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The Top Ten D&O Stories of 2015
It was an eventful year in the world of directors’ and officers’ liability in 2015. Many of the year’s key events significantly changed the D&O liability environment, while other developments during the year could alter the D&O insurance marketplace itself. Many of 2015’s developments have important implications for 2016 – and possibly for years to come. The list of the Top Ten D&O Stories of 2015 is set out below with an eye toward these future possibilities.
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U.S. Securities Class Action Lawsuit Filings in 2015 at Highest Level in Years
The number of securities class action lawsuits filed in 2015 rose to the highest annual level in several years. As detailed below, a number of factors contributed to the increase in securities class action lawsuit filings during the year, including in particular the number of lawsuits filed against IPO companies (owing to the fact that IPO activity has been up in recent years), as well as the elevated number of lawsuits against foreign-domiciled companies.
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Securities Litigation Filing Trends: Suits Against Foreign Companies Continue to Accrue
As we ease into the final two weeks of the year, it seems likely that just about all of the securities class action lawsuits that are going to be filed this year have already been filed. Sure, one or two more may slip in yet, so it is not quite time for the final analysis of the year’s filings. But with the year just about done, there are some trends that already seem clear. One is the increased numbers of IPO-related securities lawsuits, which I recently noted here. Another securities class action filing trend is the heightened level of securities suit filing activity involving non-U.S. companies. The number of securities suit filings against non-U.S. companies during the year was both above historical levels and disproportionately greater than the number of foreign companies whose shares are listed on U.S. exchanges.
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A Burst Dam in Brazil, a U.S. Securites Lawsuit, and a Heap of Current Litigation Trends
On December 7, 2015, in a complaint that reflects a number of current U.S. securities class action lawsuit filing trends, a plaintiff securityholder filed a securities class action lawsuit in the Southern District of New York under the U.S. securities laws against the Brazilian mining giant Vale, S.A. and two of its officers. The complaint relates to the massive dam failure that occurred on November 5, 2015 near Mariana, in the Minas Gerais state, in Brazil. The failed dam is the property of Samarco Mineração, S.A., a joint venture between Vale and BHP Billiton. The securities suit plaintiff claims that the Vale defendants made misleading statements about the company’s safety and environmental standards and risk management, as well as about the spill itself.
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2015 YTD Securities Suit Filings Reflect Increased Numbers of IPO-Related Lawsuits
Though the number of IPOs completed so far this year is below the elevated levels evidenced during 2014 and 2013, IPO activity still remains above 2008-2012 levels. As a direct reflection of the higher number of IPOs completed during the period 2013-15, we are also now seeing an increase in the numbers of IPO-related securities lawsuit filings. IPO-related suits were an important part of the 2014 securities class action lawsuit filings, and they represent an even more significant part of 2015 YTD securities suit filings.
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Litigation Funding Firm to Close Its Doors
One of the most significant recent developments in the commercial litigation arena has been the recent rise of litigation funding. Though it remains controversial in some quarters, litigation funding is, in the words of a recent Above the Law post, “here to stay.” One reason that litigation funding is likely to remain an important factor in the litigation environment is that litigation funding in general has proven to be a lucrative investment, as I have previously noted (here). But while litigation funding in general may be profitable, that does not mean that investment success is assured. Indeed, while there are several very successful litigation funding firms, other firms have stumbled.
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Delaware Merger Objection Lawsuit Filings Decline in Response to Chancery Court’s Rejection of Disclosure-Only Settlements
As I have noted in recent posts, several members of the Delaware Court of Chancery have made it clear that they are increasingly skeptical of disclosure-only settlements in merger objection lawsuits. It now appears that the Chancery Court rulings are starting to have an impact at the supply end of the food chain; according to a recent analysis by The Chancery Daily, the number of new merger objection lawsuit filings in the Delaware Chancery Court has begun to drop in response the Chancery Court’s rulings. The publication reported what it observed to be during October and November 2015 a “pronounced decline in the number of class action complaints filed compared to prior months in the year 2015.” The Chancery Daily’s November 13, 2015 blog post discussing its analysis can be found here. Alison Frankel’s November 16, 2015 post on her On the Case blog discussing the recent filing trends can be found here.
Continue Reading Delaware Merger Objection Lawsuit Filings Decline in Response to Chancery Court’s Rejection of Disclosure-Only Settlements