A recent guest post on this site expressed the view that because of the volume of Section 11 litigation being filed in New York state court, New York’s courts “will have a major role in shaping the standards applied in Securities Act litigation going forward.” If that is the case, then the recent ruling by a New York trial court judge granting the defendants’ motion to dismiss in a state court Section 11 action could be significant. New York (New York County) Supreme Court Judge Barry Ostrager’s May 15, 2020 ruling in the consolidated Sundial Growers Securities Litigation can be found here.
Continue Reading Dismissal Granted in New York State Court Securities Class Action

In a very interesting development and one that will definitely be worth watching, a plaintiff shareholder has launched a shareholder derivative lawsuit in New York state court on behalf of Bayer AG against members of its supervisory board, certain managers, and other defendants, seeking damages from the defendants for alleged violations of their duties under the German Stock Corporations Act. The lawsuit basically alleges that the defendants violated their duties to the company for pursuing and completing Bayer’s disastrous acquisition of Monsanto. The lawsuit raises the question of whether shareholders of a company organized under the laws of and based in Germany can pursue German law claims in New York courts using New York court procedures.  As discussed below, the plaintiff’s attempt to pursue her claims in New York rather than Germany could face significant threshold hurdles. However, if her claims are permitted to go forward, this case could have very significant implications for the potential exposures of other non-U.S. companies to litigation in the U.S.  A copy of the plaintiff’s March 6, 2020 complaint can be found here.
Continue Reading Derivative Suit Against Bayer Board Alleging German Law Violations Filed in NY Court

D&O insurance policyholders sometimes bridle when the insurers take steps to try to rein in burgeoning defense expense. In that situation, the D&O insurers will often try to remind the policyholder that because defense expense erodes the limit of liability, it is in everyone’s interest for defense expense to be monitored closely. An unusual coverage action in the Western District of New York reversed the usual concerns about insurer defense cost control. The policyholder sued its D&O insurer for breach of contract, bad faith, and intentional infliction of emotional distress not for failing to pay defense costs or full defense costs, but rather for allowing the policyholder’s defense expenses incurred in an underlying criminal action to exhaust the applicable limit of liability. While it is hardly a surprise that a court concluded that an insurer that paid out its full limits cannot be held liable for breach of contract – much less bad faith or infliction of emotional distress –there are still a number of interesting aspects to this dispute and to the court’s ruling.  
Continue Reading News Flash: Insurer That Paid Full Policy Limits Did not Breach the Policy or Act in Bad Faith

As a result of  the U.S. Supreme Court’s March 2018 Cyan decision, in which the Court ruled that state courts retain concurrent jurisdiction over ’33 Act liability actions, companies issuing shares now face the risk of having to face parallel securities litigation in state and federal court. Among the many problems this risk poses is the possibility that, due to the differing pleading standards between state and federal court, Securities Act liability suits that would be dismissed in federal court might survive a dismissal motion in state court. New York is among the states where many post-Cyan securities suits are being filed and where differences in pleading standards might lead to a fewer state court lawsuit dismissals relative to the dismissal rate in state court. However, notwithstanding these concerns, a New York state court judge recently entered an order dismissing a post-Cyan securities suit, raising the possibility that defendants may be able to dismiss securities suits filed in New York state court after all.  
Continue Reading New York State Court Dismisses Post-Cyan State Court Securities Suit

In a series of rulings culminating in the January 2016 decision in Trulia (about which refer here), Delaware’s courts have evinced their hostility to the kind of disclosure-only settlement in which merger objection suits are frequently resolved. Since that time, plaintiffs’ lawyers increasingly have filed merger-objection lawsuits outside of Delaware, either in federal court or courts in other states. The question since then has been whether other jurisdictions’ courts would follow Delaware’s courts’ lead in rejecting disclosure-only settlements. Many courts have followed Delaware, but others have followed a different path. In particular, New York, in an intermediate appellate court decision in Gordon v. Verizon (about which refer here), set a lower standard than Delaware’s courts for accepting disclosure-only settlements.

However, the apparently more lenient New York standard did not stop New York Supreme Court Judge Shirley Werner Kornreich from rejecting a proposed disclosure-only settlement of a lawsuit challenging Martin Marietta’s 2014 acquisition of Texas Industries. In a scathing February 8, 2018 opinion (here), Judge Kornreich rejected the proposed settlement as “utterly useless to shareholders.” Her opinion shows that even under New York’s seemingly more lax standard, disclosure only settlements could face significant scrutiny and could be rejected where the additional disclosures do not provide benefits to shareholders.
Continue Reading New York Court Rejects “Utterly Useless” Disclosure-Only Merger Objection Suit Settlement