merger-related litigation

The liability environment for directors and officers is always in a state of change, but 2019 was a particularly eventful year in the D&O liability arena, with important consequences for the D&O insurance marketplace. The past year’s many developments have significant implications for what may lie ahead in 2020 – and possibly for years to come, as well.  I have set out below the Top Ten D&O Stories of 2019, with a focus on the future implications.
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One of the most significant corporate litigation phenomena over recent years has been the rise of merger objection litigation, as result of which nearly every public company merger objection transaction has drawn at least one lawsuit. According to the latest study of merger litigation from Cornerstone Research, this phenomenon continued in 2018, with the same percentage of merger transactions as in 2017 attracting at least one lawsuit – in 2018, as in 2017, 82% of public company merger transaction valued over $100 million drew at least one lawsuit. The Cornerstone Research report, entitled “Shareholder Litigation Involving Acquisitions of Public Companies: Review of 2018 M&A Litigation,” can be found here. Cornerstone Research’s September 17, 2019 press release about the report can be found here.
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Gillon_Peter_16988_bio
Peter M. Gillon
Alex Hardiman - Counsel - Litigation
Alexander Hardiman

One of the most distinctive corporate and securities litigation phenomena over the last several years has been the rise in merger objection lawsuits. We are now to the point that virtually every M&A transaction attracts at least one lawsuit. These suits present a number of challenges, including, among other things, questions arising in connection with D&O insurance coverage for the companies and individuals named as defendants in the lawsuits, particularly with respect to the price change exclusion, sometimes referred to as the “bump up” exclusion.

In the following guest post, Peter M. Gillon and Alexander Hardiman of the Pillsbury Winthrop Shaw Pittman LLP law firm take a look at the insurance coverage issues that frequently arise in these types of cases and offer some practical advice about the ways that insureds can maximize their insurance coverage when these claims arise, particularly in dealing with issues involving the bump up exclusion. Peter is a Partner and Alex is Counsel at the Pillsbury law firm. A version of this article was recently published as a Pillsbury client alert.

I would like to thank Peter and Alex for their willingness 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 blog’s readers. Please contact me directly if you would like to submit a guest post. Here is Peter and Alex’s guest post.

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With the explosion of “merger objection” lawsuits being filed by the plaintiffs’ securities bar in the last decade, policyholders seeking coverage under their directors’ and officers’ (D&O) liability insurance for those suits have increasingly been bumping heads with their insurance carriers over the application of the “price change exclusion” (also referred to as the “bump-up” exclusion).  This has been a major source of frustration for companies reasonably expecting their policies to respond fully to merger objection suits – especially shareholder suits claiming breach of fiduciary duties by the target company’s Board of Directors in approving the sale of the target.  Many companies and their securities defense counsel have capitulated in the face of their carriers’ declinations of coverage.  But, as this note explains, it is critical to consult with coverage counsel on these matters as insurers’ assertion of the price change exclusion is often misplaced. 
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dukeenergyOne of the hot topics in the world of corporate and securities litigation in recent years has been the rise of M&A-related litigation. Among the many themes that are part of the discussion of this topic has been the fact that the M&A lawsuits often settle for the defendant company’s agreement to additional disclosures about the merger, with no cash payment to shareholders. The disclosure-only settlements continue to be a concern, but at the same time there recently have been a number of merger-related lawsuit settlements in which there has been very significant cash components.
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